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Marketplace Scratch Pad

Today’s oxymoron: Reckless Prudence

Scott Jagow Jan 26, 2010

The World Economic Forum’s annual meeting is about to get underway in Davos, Switzerland. Marketplace begins its extensive coverage tonight with Stephen Beard reporting from Davos on the power gathering of business leaders, politicos and intellectuals. I’ll kick things off, blog-style, with a question: Does the world need a financial Sheriff?

Investor George Soros called for a “global sheriff” ahead of the 2008 Davos convention, and in a case of impeccable timing, a month later, Bear Stearns nearly collapsed, foreshadowing our global economic nightmare. Soros joins us on the Marketplace Morning Report Thursday.

His dream of a global financial regulator still hasn’t come true. The New York Times’ Andrew Ross Sorkin asks, how about now? Would now be a good time for a sheriff?

Britain’s chancellor, Alistair Darling, argued for a more coordinated approach: “If everyone does their own thing it will achieve absolutely nothing,” he told The Sunday Times. “The banks are global — they are quite capable of organizing themselves in such a way that if the regime is difficult in one country, they will go to another one, and that doesn’t do anyone any good.”

So if the US limits the size of banks, the size of China’s banks might double, for example. Howard J. Davies, director of the London School of Economics and Morgan Stanley board member, says the various national responses need coordinating:

“If we add all the new proposals together — levies, Basel 3, leverage ratios, macroprudential capital requirements, Volcker rules, transaction taxes, systemic risk charges, etc., etc., we could move into an environment of reckless prudence.”

Reckless prudence. Excellent use of language.

The same cannot be said of the World Economic Forum’s literature. This year’s theme is painfully unoriginal and disingenuous sounding. Improve the State of the World: Rethink, Redesign, Rebuild

Improving the state of the world requires catalysing global cooperation to address pressing challenges and future risks. Global cooperation in turn needs stakeholders from business, government, the media, science, religion, the arts and civil society to collaborate as a true community.

Reuters blogger Felix Salmon just arrived in Davos. He says he’s not looking for that kind of lofty “save the world” rhetoric, but an apology from these people:

…there’s no indication whatsoever that anybody at the World Economic Forum actually Gets It. Davos is great at throwing a couple of archbishops onto a panel with Niall Ferguson entitled “Restoring Faith in Economics” (geddit?) — but what I see none of in the programme is an indication that much if not all of the crisis was caused by the arrogance of Davos Man and by his unshakeable belief that the combined efforts of the world’s richest and most powerful individuals would surely make the world a better, rather than a worse, place…

It’s not like CEOs and billionaires (and billionaire CEOs) need any more flattery and ego-stroking than they get on a daily basis, but Davos gives them more than that: it allows them to flatter and ego-stroke each other, in public. They invariably leave even more puffed-up and sure of themselves than when they arrived, when in hindsight what the world really needed was for these men (it’s still very much a boys’ club) to be shaken out of their complacency and to ask themselves some tough questions about whether in fact they were leading us off a precipice.

The Washington Post has a collection of viewpoints on Davos. David Rothkopf, author of “Superclass: The Global Power Elite and the World They are Making” writes:

if you think Davos is about anything other than status-seeking-behavior, then you have read too many of the press releases of the overly-earnest Swiss gnomes who put the meeting together. They describe themselves as being “committed to improving the state of the world.” They do have a variety of bloviatapaloozas during the course of the event at which the improvement of the globe is debated. But, of course, most of the people there share a common background — the emerging world, women and poor people are hugely under-represented.

So you have to conclude that what they really mean is that they are committed to improving the state of those aspects of the world that are important to CEOs and politicians and the journalists who share the appetizers with them at the receptions in the Belvedere Hotel…

Still, “the people’s anger” is real and seems to know no borders. Maybe this is the year Davos produces something meaningful. I don’t know whether a global financial sheriff would be effective or whether any concrete ideas like that will come out of the gabfest. But Felix Salmon is right. A pall of humility hanging over the Swiss Alps would be welcomed.

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