Together we shall beat the crisis

Together we shall beat the crisis
The Economic Times, February 3, 2009, Page 15

Beginning Made At Davos, Real Work Starts Now

THE economic crisis we are witnessing now is a transformational one. It will have fundamental effects on our globalised world. Here in Davos over the past five days we began the task of collectively shaping that transformation. Let me explain how.

One objective achieved was to give support to governments and governance institutions – particularly the G20. Davos is only the starting point of a long and difficult road ahead. But by bringing world leaders together over the past days, we have arrived at a better understanding of the origin of the economic crisis and what steps we need to take to re-launch the global economy. Hearing the perspectives of four G8 governments and supporting the dialogue of the G20 process in the run-up to the April summit in London were important first steps. By convening key trade ministers from 17 economies plus the 27-member EU to deter “beggar-thy-neighbour” policies we will also hopefully see the real implications of this spirit. And in bringing together the Chair of the G20, Prime Minister Brown, with heads of government of several G20 members from Africa, Asia and Latin America to address systemic risks in the financial system and how to stabilise the world economy, we have made the first steps in a collective global approach to the crisis.

But the past days have also convinced me more than ever that climate change must not only be tackled but can become at least a part of an economic revival. Business is starting to “hardwire” climate change into their plans going forward – green technologies can no longer be an “add on” or fringe industry. This is a very pertinent discussion for 2009. In December, a follow-on treaty to the Kyoto Protocol on climate change is scheduled for negotiation at the Copenhagen summit. The plans for world economic recovery linked to the jobs, skills, investment and technology opportunities that a global low carbon economy requires, must become a reality if climate change is to be managed successfully. Green technology can become a clean engine for renewed growth. Let’s not talk about “alternative” energy ever again – there is only sustainable energy that will fuel the economy of the future. To this end, industry executives in Davos agreed to move forward with half a dozen specific initiatives to accelerate the integration of sustainable practices into business.

One of the key outcomes from Davos was that despite the economic turbulence, people chose to come together in record numbers from industry, government and a range of other stakeholders to discuss the global challenges we face and to connect in order to respond together to such challenges. This willingness to work together, across geographies and across all sectors from business, politics and civil society is what will hopefully distinguish this current crisis from the 1930s. This collective sense of cooperation and determination that was visible in Davos is what gives me some optimism that can work our way out of the present crisis. It’s easy to dismiss this as wishful thinking but if we have learned one thing from the crisis of the last six months, it is that confidence and trust must be at the heart of any recovery when it finally comes.

Finally, we have noted that none of this is effective without an honest and deep review of our underlying values and ethics. Business needs to look deeply at their systems of remuneration and governance. Business people, policymakers, regulators, and consumers all have to consider the excesses of greed. In today’s highly interdependent world, short-term greed is not a sufficient driver of optimal decision-making. The systemic and inter-generational impact of our actions now are more important than they have ever been before - our ethical codes, as well as our governance or regulatory systems, must reflect this new reality.

These are just the beginning of solutions, but the real work starts now. We must come together to stop our world falling apart.

Klaus Schwab
(The author is founder and executive chairman, World Economic Forum)