Bush’s Shadow Hovers over the Debates

The 34th World Economic Forum on the Theme “Partnership for Prosperity and Security” was accompanied by peaceful disruptive actions of WEF-critics

By Luciano Ferrari, Davos

[This article originally published in: Tagesanzeiger.ch, January 22, 2004 is translated from the German on the World Wide Web, http:///www.tagesanzeiger.ch/dyn/news/print/wirtschaft/342089.html.]

With the “war against terror” and his extremely risky economic policy, George W. Bush’s shadow hovered over the debates of the World Economic Forum (WEF) in Davos. Corresponding to this year’s motto “Partnership for Prosperity and Security”, the meeting on Wednesday morning started with two high-ranking discussions on the themes growth and combating terrorism. The questions whether the recovery of the world economy was sustainable and whether the “war against terrorism” declared by Bush has made the world safer were central. The destinies of the international community are determined in Washington. This was clear in both discussions.

US Economy as a Motor

Concerning the world economy, the US is presently the motor of the emerging recovery… Jacob Frenkel, chairman of the board of the US investment bank Merrill Lynch seemed absolutely euphoric about the short-term prospects of the American economy and the world economy. Once again the US proved that it reacted far more flexibly to crises than Europeans. Europeans only tackled the necessary structural reforms very hesitantly. Therefore Europe lags behind the US development.

Frenkel referred to the great increases in productivity in the US. Productivity grew at an average pace of 2.7 percent between 1998 and 2002. The rate of increase was even higher in 2003. This shows, Frenkel said, that the upswing cannot only be referred back to the expansive monetary- and tax policy of the Bush administration. The US recovery stands on a firm footing.

On this point, Frenkel encountered vehement opposition from the chief economist of the rival bank Morgan Stanley, Stephen Roach and the rector of the London Business School, Laura Tyson. Both emphasized how much the US upswing is financed on credit. The US currently imports substantially more goods and services than it exports. The US government spends much more money than it collects. The upturn could soon collapse if the Asian countries, above all China and Japan, did not finance the enormous balance of payments- and trade deficits of the US.

“The spirit will simply run out of the US growth motor”, Roach said. In his address he pointed to the great danger starting from the high private indebtedness in the US since wage incomes stagnated through the past “jobless upswing”. Asia’s two representatives on the podium, Fu Jun, vice-rector of the University of Peking and the Japanese economics professor Takatoshi Ito, reassured the other discussants: China and Japan are not planning any change in their policies. The two countries can live very well with the present arrangement. They lend the money to the US with which the US buys goods and services from them.

Everyone agreed that this situation cannot be maintained in the long run. Even Frenkel had to admit at the end that “the greatest danger for the world economy” issues from the deficits in the US balance of payments and the economy. Ultimately only the US government can put things right through a change in policy. In the meantime, the falling dollar can temporarily deactivate the problem.

Complicated War against Terror

As in economic policy, the rest of the world is also dependent on decisions in Washington in the question of general security. This was clear in the second panel on the “war against terror”. All participants from the former Israeli Prime Minister Ehud Barak, the president of the International Crisis Group, Gareth Evans and the two US terror experts Kenneth Roth and Jessica Stern agreed that the struggle against terrorism has become harder after the attacks of September 11, 2001 and the US reactions.

Barak was the only defender of the US action against Islamically-involved terrorism. The other participants criticized Bush’s policy. The “war against terror” provokes even more terrorism as a reaction, Gareth Evans said. “Fundamental political problems” like the Middle East- or the Kashmir conflict were not tackled in any way with this crusade.

The invasion in Iraq that was not internationally supported has made it easier for al-Qaida to accuse the US of only humiliating the Arab and Muslim world, Jessica Stern declared. US expert Mahnaz Ispahani stressed that the US alone cannot win the battle against terrorism. Rather the US must support moderate Muslims all over the world. However Muslims see themselves encircled by the extremist demands of Islamists on one side and the undifferentiated US policy on the other side. Moreover Kenneth Roth and Sundeep Waslekar, president of the Indian think tank Strategic Foresight Group claimed that the US is not bound by any rules or international standards in its battle against terrorism. After fighting the Taliban in Afghanistan, Waslekar said, negotiations of the Afghan president Hamid Karzai with the same Taliban are allowed. The US promoted the “culture of terrorism” with this arbitrary policy according to Roth. A remedy in this question can only come through a change of policy in Washington.