Work fast or new models of capitalism may win day

EUROPEAN leaders must work fast to overcome the current crisis or else new models of capitalism — such as that of China — may win the day, warns one leading American financial services figure.

David Rubenstein, the co-founder and managing director of asset management firm Carlyle Group, was not alone in stating that the West’s free markets are on trial at the World Economic Forum, which kicked off in the Swiss Alps yesterday.

Mr Rubenstein said: “As a result of this recession, that’s lasted longer than anyone predicted and will probably go on for a number more years... we’re going to have a lot of economic disparities.

“We’ve got to work through these problems. If we don’t do, in three or four years... the game will be over for the type of capitalism that many of us have lived through and thought was the best.”

His stark appraisal may have been an outlier, but there was a clear defensive posture among many participants on this opening day of the World Economic Forum in Davos.

There were numerous references to the need to innovate, the need to consult with employees and the realisation that power in the world is shifting from the West to the east. While the traditional industrial economies of the US and Europe have limped through the last few years, often from one crisis to another, many economies in Asia and Latin America have been booming.

As Ben Verwaayen, the chief executive of Alcatel- Lucent, said, there’s a “very different view” of capitalism in Brazil.

“This is a very different discussion depending on where you are.”

Many rejected the suggestion from Sharan Burrow, general secretary of the International Trade Union Confederation, that capitalism has lost its “moral compass” and needed to be “reset”. Still, representatives of the business community insisted they were learning from the mistakes that dragged the world into its deepest economic recession since World War II.

Bank of America CEO Brian Moynihan said the excesses of banks in the run-up to the banking crisis of 2008 reflected the economies they were operating in, so it was important that policymakers don’t overreact.

Moynihan, whose bank was forced to back down on plans to start charging a $5 debit card fee after protests by the Occupy movement and others, said banks have “done a lot” to reduce excesses. He noted that boom and bust cycles are part of the Western capitalist structure.

Many outside the confines of the Davos conference centre disagree, after years of crisis in which hundreds of millions of people have lost their jobs even as top executives have continued to reap huge pay packets.

— Associated Press