Opinion Columns & Blogs

Trudy Rubin: What went wrong?

DAVOS, Switzerland -- This year's gathering of the world's financial and political elite at the World Economic Forum opened Wednesday in this snowy Swiss mountain village. It is here not to celebrate capitalism, but to ponder what went wrong.

I've attended 11 previous sessions at Davos, including those after the Asian financial crisis and the bursting of the tech bubble. But I've never seen such uncertainty among the movers and shakers of the financial world.

At a pre-conference cocktail reception at the upscale Belvedere Hotel, CEOs and government officials were asking each other questions like "Are we going over the edge?" and "Is it even worse than we think?" Heads of arts and philanthropic groups were discussing how hard their endowments had been hit. Journalists were comparing notes on how close their outlets are to the financial brink.

Several heavy-hitting Davos regulars were notably absent, such as Richard Fuld, former CEO of Lehman Brothers, and former Merrill Lynch CEO John Thain, who was forced to resign last week after handing out $4 billion in bonuses amid mounting losses and a government bailout.

There are fewer glitzy Davos parties being thrown by companies and governments this year.

Overall attendance at the conference is up, however, including 1,400 company CEOs and chairmen. Perhaps the CEOs want to share their troubles. Or the surge may reflect a need to exchange ideas about how to emerge from a downturn unlike anything anyone here has seen before.

The theme of this year's Davos is "Shaping the Post-Crisis World"; it is heavy on panels about why the markets imploded and what is to be done. Every panel and dinner on these gloomy topics is oversubscribed.

Topics include: "36 Hours in September: What Went Wrong?", a look at the political, psychological and market conditions that caused the meltdown. This dinner has a waiting list of nearly 200.

A heavily subscribed lunch session will discuss "The Death of the Washington Consensus," a reference to the harsh free-market medicine that U.S. and international organizations forced on East Asia and Russia when they underwent financial crises a decade ago. Today, prescriptions for the global crisis are totally different: government bailouts and stimulus spending.

A question running through the conference schedule is whether capitalism as we know it is in retreat and will be replaced by a system with more state intervention. Consider that the United States may be on the verge of nationalizing some banks.

The moral and psychological dimensions of the crisis are also under examination. One panel will examine "what ethical and moral concerns need to be addressed to avoid a greater backlash to market capitalism." Introspection is in vogue here.

Indeed, it will be fascinating to see whether this most unusual Davos produces any ideas that will have broader economic impact. More than 40 heads of state and government are at the meeting. Yet there is no one on the list who seems likely to pull the others together to revamp global financial institutions.

China's premier, Wen Jiabao, is present, but his country is hurting as the global downturn hits its exports and growth rate. Russian Prime Minister Vladimir Putin will give the opening address -- astonishing given his country's record of cutting off gas exports to Ukraine and thus indirectly to Europe. But Putin's hope to make petro-state Russia a major power has been hampered by falling oil prices.

German Chancellor Angela Merkel and British Prime Minister Gordon Brown will attend, but the members of the European Union can't even agree on how to handle the financial crisis.

The missing player is the United States. Everyone here is talking about President Obama. People keep congratulating me on America's choice of president and regretting that it was too soon after his inauguration for him to come to Davos. Obama's chief economic adviser, Larry Summers, and his national security adviser, Gen. James Jones, were to attend but backed off, supposedly because of urgent work at home. Obama aide Valerie Jarrett will be here, but that won't fill the palpable vacuum.

The yearning for Obama shows how much Davos leaders want a silver bullet to fix the global crisis, even as they realize there is none.

Reach Trudy Rubin at trubin@phillynews.com.