It was well past midnight in late January 2000 when an investment banking contact called my Davos hotel room to share the latest details on Vodafone’s hostile bid for Mannesmann. That was news, but the huge hostile takeover was no longer the largest deal in history. It had been displaced a few weeks earlier by the agreed merger of AOL and Time Warner. Such was the talk of the World Economic Forum. The great and the powerful had gathered together to celebrate the success of business and, especially, of finance.
Exuberance over technology and venture capital was almost limitless back in 2000, thanks to the seemingly limitless rise of the tech stocks. Dotcom startups were all the rage. When Japanese Internet mogul Masayoshi Son finished one panel, he was assailed by a gaggle of entrepreneurs waving business plans for him to peruse. In full disclosure, this columnist two weeks later signed up to establish the online financial commentary business that eventually became Reuters Breakingviews.
Coming back to this gathering 12 years later is a Rip Van Winklerian experience. The old world and its little worries look positively quaint. Back then, at what in retrospect proved to be the height of the Great Moderation, business was booming, the Nasdaq still had another 20 percent or so to climb, companies were merging like mad; everything looked rosy. President Bill Clinton parachuted in to give a victory lap. Even the demonstrations that took place against neoliberalism and world trade now look quaint. Defacing a McDonald’s is a far cry from overthrowing governments.
The economic moderation turned out to be built on financial excess. That AOL deal – hailed as visionary by all the delegates of 2000 – has become the poster child for foolish corporate finance. The Nasdaq is a third lower than 12 years ago (before adjusting for inflation). And the banks – what can I say? From triumph to tribulation.
The political world also looks much more treacherous. Geopolitics has not yielded to the irresistible forward march of free market capitalism, and peace no longer looks like something to be taken for granted. The 9/11 attacks spawned wars in Afghanistan and Iraq – the kinds of conflicts that in 2000 were supposed to be a thing of the past.
The World Economic Forum has changed with the times. The rise of the BRICs has brought greater diversity to the audience, which is a good thing. It has also brought many more people – so many, in fact, the organizers have expanded their caste system. There is now a dizzying number of different badges, each offering differing levels of access and status. It’s much easier to be here and still be excluded from the elite – much like the feeling of many of the world’s dispossessed.
The most striking difference, though, is in the increased complexity and severity of the questions confronting the collection of top business people, politicians, investors and academics. Europe’s sovereign debt crisis keeps trundling forward, bringing to the fore thorny challenges to sovereignty, the role of central banks and the solvency of nations. Instead of Clinton smiling from the podium, this year’s keynote address came from the troubled German Chancellor Angela Merkel, the leader with the most cards at the debt crisis table.
There are still scenes of the excess and celebrity that accompany a gathering including many of the superrich. Some members of the elite have lost out in the last few years, but there is still more than enough wealth at the top to provide good times. Still, the specter of nearly a quarter-billion people around the world without gainful employment keeps a lid on the festivities.
In retrospect, the tone of triumph was not merely unjustified – it was also harmful. Many of the seeds of the economic and financial crises that followed during the next decade were sown around that gathering. It would have been a struggle in 2000 to find any delegate arguing against the deregulation of the global financial services business. Then again, everything is easy to judge in hindsight – even for a Rip Van Winkle in the Swiss Alps.