The World Economic Forum, Davos, 2009 in an Historical Context

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A Comment written by Rich Marino

While watching all the spectacular people speaking in Davos, Switzerland this week, I couldn’t help but think that I had heard all of this before. It was a very surreal, very bizarre experience!  So, I took the liberty of visiting the website of the World Economic Forum in Davos, and I went to their archives and retrieved their oldest annual report which dates back 10 years to 1999. In that light, please find the following overview of the forum which took place at their annual meeting in Davos between January 28th and February 2nd, 1999:

“The sessions of the annual meeting focused around the overall theme: Responsible Globality: Managing the Impact of Globalization. Crucial discussions were held to look at where globalization is taking us and how we can make it a more responsible process. In the midst of the Asia crisis, after the financial collapse in Russia and the Brazilian crisis, as the world financial markets were still reeling from the LTCM shock, it was clear that globalization and free markets left to themselves do not always produce the desired or necessary results for society at large. There was wide agreement that although a free market system is the best and most efficient, there are inequalities that government, in new partnerships with other sectors of society, need to address.  Senior political leaders participating in the annual meeting recognized the need for governments to evolve in order to respond effectively to the challenges posed by globalization and the growing backlash of large segments of the world’s population.

……..In all discussions, from Amarta Sen, Nobel Economic Prizewinner to Vice-President Al Gore,  the need to address the concerns of the individual facing the daunting challenges of globalization was clear. From the business world, governments, academia and the NGO community, there was a resounding momentum to create the necessary partnerships and new mechanisms to ensure that globalization has a human face.”

After reading the complete report, I realized that we haven’t made much progress in our efforts to understand the ramifications of globalization, and that once again, we have failed to learn anything important from global economic history. If the Forum chose to do so, they could very easily use their 1999 Annual Report this year, and save the time of  having to write a new one for 2009 because everything they said about globalization ten years ago could and should be said today.

Personally, I have doubts about the long range effects of globalization. History has proven time and again that globalization creates an uneven playing field. If the World Economic Forum wants to really address the problems associated with globality, they should take it upon themselves to create an even global playing field. Otherwise, every developing nation is at risk along with the industrialized countries whose respective economies focus on exports.

It would do us all well to remember that America’s greatest period of growth was from its Industrial Revolution (1800-1850) to the First World War, and it was also a time when the United States employed more protectionism than any other emerging market. At the onset of World War I, America had become an economic and military superpower and its tariffs gradually began to decline, but in 1930, Congress enacted the Smoot-Hawley Tariff Act which once again set the stage for higher tariffs and increased protectionism. This produced fodder for today’s American conservatives who make the erroneous claim that it was protectionism that prolonged the Great Depression in America. On the other hand, I can make the argument that the length of the Great Depression in America had nothing to do with Smoot-Hawley. It had more to do with capitalism than anything else. At the time, we expected more from the “free markets”. By contrast, Europe’s  economies regained momentum much faster than America because they implemented more social programs into their industrialized base.  In order to support the war effort, America’s entry into the Second World War inadvertently created a nationalized economy, and it was at that critical juncture that America finally put the Great Depression behind her.

4 Responses to The World Economic Forum, Davos, 2009 in an Historical Context

  1. Ben says:

    Thanks for the insight Rich, that ought to be what they call “longue durée”…

    Once more I don’t agree with you. The fact is the globalization does not produce an even and equal development for all wherever they are. But this would not be a problem if people could freely move from the least developed areas to the most advanced ones.

    Actually in this respect the USA before WWI were a great example. True, they did have protectionist policies but also opened borders which allowed basically every European and many of the Asians who wanted to try their luck in the US to come and “pursue happiness”.

    The fact that the US were protectionists and yet developed creates a sort of intellectual fog. Who is to say that the cost for the USA of protectionism was not high? Who is to say the world’s GDP would not be higher nowadays had the US not been protectionist? etc.

    I think the US would have developed no matter what policy had been followed. New England started industrialize before 1800. Geographic endowment was in this respect way more important than any policy, so was the availability of cheap labour.

    Actually, protectionism is very much like tossing a coin, it did work for Korea, not for India or Algeria… In the same way the 18th century mercantilists led to the rise of the East India Company and the VOC (arguably major successes) as well as a number of total failures in Portugal and France.

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