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Soft Talk, Writ Large

Each year, some 800 CEOs and senior executives trek to a remote village in northeastern Switzerland to participate in the …

Each year, some 800 CEOs and senior executives trek to a remote village in northeastern Switzerland to participate in the annual meeting of the World Economic Forum. They join some 200 cabinet-rank ministers, heads of state, and former political office holders, and an equal number of journalists and media leaders in a yearly ritual of soft public talk and hard private networking. The WEF is the brainchild of a somewhat socially stiff former economics professor, Klaus Schwab, who started it as a European response to what, in 1971, was perceived as American economic domination. Today, it is run with complete transnational disinterest. Unlike the IMF or World Bank, which seem to be vaguely uneasy with capitalism, the WEF embraces liberalized international trade and the art and science of global management.

When “pitchfork Pat” Buchanan excoriates the “new economic world order crowd,” one can’t help but wonder if he has Schwab’s mob in mind. But in the midst of all this global hand-holding were signs of economic nationalism. Russian Communist party leader Gennady Zyuganov feels that the best way to get back at “the corrupt bureaucrats” and his country’s disintegrating social system is to renationalize industry. If elected in June to succeed Boris Yeltsin, he promises to introduce “a mixed state and private system.” Zyuganov is the type of guy who, during his country’s transition from U.S.S.R. to the Russian Republic, never removed his autographed photos of Stalin from his wall. Talk about a Molotov cocktail.

Even the die-hard internationalists with the European Union were having a hard time. Both EU President Jacques Santer and Bundesbank Chancellor Tietmayer complained that if monetary union is not achieved by 1999, it might not be achieved at all. Wolfgang Schaueble, chairman of Germany‘s CDU/CSU and member of the German parliament, noted an “increasingly strong voice of skepticism” within his country about the Maastricht Treaty and its agreement for closer European unity. Keep in mind that the EU originated from the iron and steel agreements between France and Germany, both of which have been the EU’s traditional stalwarts.

One would think the late 1990s would be the belle époque of international trade and growth. To some extent, it is. In the 25 years that internationally minded business leaders and politicians have been coming to Davos, the Cold War has not dominated economics in the last five. Apart from Japan, no OECD country has had a serious recession in the last three years. But the growing, interconnected, global economy is hitting serious speed bumps. Change has highlighted the high price to Europe‘s economies of its social costs. German unemployment is more than 10 percent, a postwar high. An internationalized economy dislocates the old order.

Then there is this delicate business in India with a state government repudiating a power plant deal Enron thought it had worked out with the government. Just as that affair was patched up, another group in India chose to shut down a couple of KFC franchises on the pretext of finding two dead flies in one of their kitchens. Rioters then trashed the KFCs in question, shouting a slogan about “foreign domination.” One food company CEO (not PepsiCo) attending the meeting said to me privately, “Come on, have you ever seen what passes for sanitation in a commercial kitchen in India?”

Pat Buchanan is dead wrong about trade, but he may be right about one thing: We’re in a culture war. Issues that appear to be economic on the surface are, in fact, cultural. The first thing people seek from government is order-not some arbitrary, authoritarian order-but a rational, predictable order in which people can raise families, find jobs, make a living, and plan for the future without too much physical or emotional disruption.

The business leaders in Davos, and elsewhere, are beginning to see that the pace of change is not just taking a toll on individual companies that merge, restructure, or die, but on the societies on which all this massive “re-engineering” is writ large.

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.