At The Economics Powwow, Bigwigs Talk Of Bipolarity

The mood is upbeat overall at the summit in Davos, Switzerland

A meter of snow (that's three feet to Americans) fell on Davos, Switzerland during this year's World Economic Forum powwow of corporate titans, political poohbahs, digital divas, and pushy pundits, but it couldn't bury the tone of guarded optimism that prevailed. Not even a street protest against the evils of the wired global economy--organized, ironically, over the Internet--or New Jersey Governor Christy Whitman's broken leg could change the mood (Hillary made it down the slopes in one piece last year, Clintonites noted).

The Americans were pumped up on high growth, Europeans clucked over their blessed euro, and even the Asians (minus the Japanese) were surprisingly upbeat about economic recovery.

Yet, a dark force did hover. There were the usual demons: hedge funds, market volatility, overcapacity, and emerging-market debt. But this year, it was the U.S. stock market that had everyone atremble. Here's the mantra: The market is a bubble that will burst, kill consumer spending, and send America into recession.

Americans in Davos could feel smug at learning anew that the Europeans still don't really get it--the high-tech thing, the productivity surge, the Internet, the budget surplus, entrepreneurialism. The bad news is that, well, it could be they're right about the bubble.

There were, as always, a passel of surprises. Vice-President Al Gore, long regarded as a stiff in public, gave a darn good speech about the evils of protectionism. Under Secretary of State for Economic Affairs Stu Eisenstadt, another reputed stiff, was out on the dance floor Saturday night as a band from Mauritius rendered YMCA. Scott McNealy lectured Netizens on compiling "consumer dossiers" on people and invading their privacy. Ted Turner gave a lecture on philanthropy. And Newt Gingrich admitted he was still mystified as to why his model for the past election failed. "Republicans need to look at Jesse Ventura's victory." O.K.

RUBIN'S REALISM. The antimarket rants of Malaysia's Prime Minister Mahathir Mohamad that sounded so extreme in the past have become conventional wisdom this year. The Europeans led a push for a new international financial architecture to curb the volatility that led to the Asian crisis. Treasury Secretary Robert Rubin, in a relentlessly analytical speech, threw cold water on the entire enterprise. Are hedge funds the bad guys? Naw. Capital flight from within countries starts financial crises. Are controls the answer? Nope. Getting domestic policy right is the way to go. Sure, there's a need for more transparency and safety nets. But "novel schemes" that try to curb short-term capital flows or tie currencies into zones are very difficult to do in real life. Funny, wasn't it Rubin's boss, President Clinton, who first called for a new international financial architecture?

So what were the key buzzwords at Davos? Deflation is out and reflation is in. That's another way of saying that IMF austerity policies are passe, unless you're Brazilian. Target zones are dead and bipolarity is in, not in the mental health sense but in a euro-dollar uber alles way.

Silicon Valley types talked about "channel cannibalization." Hewlett-Packard CEO Lewis Platt and Sun's Scott McNealy talked about the delicacy required in shifting to the Net because it threatens "physical" distribution--stores, to you.

A bit of "Davos fatigue" is setting in at this annual networking nirvana. Most hotels still have switchboards, so plugging into the Web is a nightmare. The panels seem to have the same faces with familiar spiels. And topics such as "Responsible Globality" boggle the mind. But where else can you talk to Yassir Arafat, Bill Gates, Jurgen Schrempp, Yevgeniy Primakov, and Warren Beatty in one day and still party the night away?

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