Anti-Crisis HQ

The 39th World Economic Forum that opened on 29 January in Davos resembled an anti-crisis HQ. Maybe that's why this year's forum was the most representative in its history. It was packed with VIP participants: 41 heads of state, 36 finance ministers and some 20 central bankers. Of course, representatives of big business took part in the discussions too and there were around 1,400 of them. But the powerful of this world had to come up with a way out of the global mess. "Many feel that they are on the edge of the abyss. And we need to make the financial world secure, to put up fences so that no-one falls into the abyss," said the founder of the Davos forum, Klaus Schwab. Davos has an historic chance to be the launch pad for a new formula for the world's economic structure.

Remarkably, Russian Prime Minister Vladimir Putin opened the forum for the first time. Russian analysts think the West has realized that there is something to be learnt from the countries with developing economies, including Russia and China. A representative of the Russian Academy of Sciences' Economics Institute, Irina Platonova, thinks that the role of opening the forum was given to Vladimir Putin because Russia is conducting a sensible economic policy during the crisis. "The gold and foreign currency reserves and stabilization fund allow our government to regulate the speed of economic decline," she explained. Although it's not clear what can be learnt if the crisis has hit Russia just as hard as the West, the fact remains that the forum's organizers wanted to hear Russia first. Putin also reciprocated by not giving the traditional lecture to the West. He simply described the financial crisis as a "perfect storm" which has destroyed the existing system and consigned it to the dustbin of history. What should the new system be like? The Russian Federation prime minister called for an end to "virtual money", inflated reporting and dubious ratings. The Russian premier proposed a simple and elegant scheme to save the real sector of the world economy, which is formed by major companies - write off hopeless debts and toxic assets. At the same time he called on states to give up protectionism and excessive interference in the economy.

Chinese Prime Minister Wen Jiabao has a very similar vision of the way out of the crisis, but unlike Putin he did blame America for the economic downturn. But both Putin and Wen were optimistic and expressed their readiness to tackle common economic problems together with the West. 

Things are not looking good for China this year either. According to the World Economic Forum report, a significant slowdown in the rate of growth of the Chinese economy could seriously worsen the world crisis. This report, published before the Davos forum, lists the risks for 2009.  

The growing state deficits in the USA, Great Britain, France, Italy, Spain and Australia top the risk list. The authors of the report warn that increased government spending on support for financial institutions and attempts to revive economic activity only exacerbate the situation. They think that such measures make it more difficult to bring to light the roots of the crisis and the downturn will continue. 

But the economists think that it won't be so bad for everyone. Countries such as Azerbaijan and Turkey have conducted themselves very well during the raging economic crisis, the forum's founder, Klaus Schwab, told journalists. "These countries have shown that they were ready for the crisis and had prepared for it in advance. This is evidence that these countries will manage to emerge from the crisis with minimum losses," he said. At the same time, everyone with exception must be involved in the anti-crisis measures, he thinks. The authors of the report came to the same conclusion. They think that a lack of necessary coordination between states was the reason for the development of the crisis. 

It is still too early to say whether there will be any coordination of efforts after the Davos forum. But one conclusion from all this suggests itself: the global crisis has encouraged the world to form new, more effective international institutions. Klaus Schwab confirmed this indirectly himself. He reported that one of the aims of the current forum is to collaborate with the next G20 summit in April, which will consider reforms to the current architecture of world finance and give a positive boost to the global economy.