NEW MODELS TO DEAL WITH THE GLOBAL CRISIS

A PRELUDE TO DAVOS

Renee Horne –London 6 January 2012

Let’s face it, 2011 has been a tough year.  The optimist forecasted that there would be light at the end of the tunnel; the global economy would pick up.  However, all one saw was images of Greece in economic meltdown with other European countries following suit.  There was also a huge shock; the Arab Spring which saw uprisings in countries such as Tunisia, Egypt and a civil war in Libya which resulted in the fall of its governments.  One wonders, what’s in store for 2012? It’s not a good outlook, as experts are forecasting a double dip recession and more job losses.   But how do we reverse the economic crisis; or is it unstoppable? At the start of every year, the first international event trying to tackle global issues is the World Economic Forum (WEF) in Davos. Executive Chairman and founder Klaus Schwab states that “Over the last three years, the world has been engulfed by political, economic and, particularly, financial crisis management. We have lost sight of the fundamental transformation that the world is undergoing and of where conventional modes of decision-making have become outdated. What we clearly need are new models for global, regional, national and business decision-making”.  Schwab has outlined new models to reverse the global economic challenges. Could it be too late for new models as we are currently knee-deep in the crisis? 

THE THEME OF DAVOS 

Business and Political Heavyweights will converge for four days, kick-starting on the 25th January. The theme of this year’s Davos is ‘The Great Transformation: Shaping New Models’.  The selection of this theme is for leaders to ‘return to their core purpose of defining what the future should look like, aligning stakeholders around that vision and inspiring their institutions to realize that vision. It is an indisputable leadership challenge that ultimately requires new models, bold ideas and personal courage to ensure that this century improves the human condition rather than capping its potential’.  While the need for change is at the top of every leaders mind, the reality here is that change for business may not necessarily translate to change ordinary peoples’ lives. Yes, the new buzzword is social entrepreneurship, but the pessimist would say that making a profit precedes assisting communities. Ultimately, how can a business in the red assist communities by providing jobs?   

THE JOB CREATION MODEL 

While Davos will primarily focus on job creation, the forecast for 2012 appears to be more job losses.  In the United Kingdom, there’s a wave of store closures such as lingerie retailer, La Senza, shoe group, Barratts, which will see 20,000 retail job losses this year, however pundits argue that this could double due to the weak festive sales. The United States also faces a bleak year, “Job cuts in 2011 were dominated by the government and financial sectors. These two alone accounted for 41 percent of all the job cuts announced last year. The 183,064 government job cuts represent a record high for that sector, since we started tracking it in 2002. And, while the financial sector did not come close to its record high, annual cuts for the sector were up 165 percent from 2010. Unfortunately, these sectors are likely to continue to struggle in 2012. Washington is under immense pressure to cut spending and it looks like every deal to extend tax cuts, raise the debt ceiling and pass the budget will come with measures to cut spending, which can be expected to result in more job cuts.” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.   WEF has devised a “new” model to create jobs, “The key to mitigating a catastrophic situation is to provide young people with the capability to create their own jobs: to move from the pure concept of unemployment to the concept of micro-entrepreneurship. This will require fundamental changes in educational systems, nurturing a societal spirit of entrepreneurial risk-taking, allowing true gender equality – to integrate the other half of hidden talents – and making innovation and the support of innovation a key imperative in public and private life. The success of any national and business model for competitiveness in the future will be less based on capital and much more based on talent. I define this transition as moving from capitalism to ‘talentism’”, states Schwab.  Indeed you need talent to become a successful entrepreneur, but without capital your business will not take off the ground.  Entrepreneurship as the key to job creation is not a new concept, it has been uttered by politicians and the business world, also last year’s WEF highlighted this, but what inroads can leaders at Davos make to turn this concept into a reality?

NEWCOMERS, DIVERSITY AND GLOBALISATION

Schwab argues WEF will have to seek new models to address the critical challenges globally; there is “a need to account for the fundamental power shifts that have already and are continuing to take place. In the old world, it was hard power – hierarchical power – that was decisive. Then came soft power – the capability to have a convincing message. But today, we need to integrate empowered newcomers in what I call ‘collaborative power’ – the capability to exercise collaborative power will determine the future on the business, national, regional and global levels”.  Schwab states that the newcomers are diverse and in order to cultivate regional and global togetherness, a new model is needed one that acknowledges that we live together in a multicultural, multi-ethnic and multi-religious world.  Another model to be revisited is the social impact of globalisation, “We must rethink our traditional notions of economic growth and global competitiveness, not only by focusing on growth rates and market penetration, but also, equally – if not more importantly – by assessing the quality of economic growth” said Schwab. His adds, “The time has come to embrace a much more holistic, inclusive and qualitative approach to economic development, based on the “stakeholder” and not on a pure “shareholder” concept”.  Schwab’s “new” models for global change have been concepts discussed for some time with very little consensus on the way forward.  An optimist would argue that the Annual Meeting in Davos is the place where leaders can collectively take action on ways to reverse the global economic crisis, but the pessimists will persistently argue that business and political leaders coming to a consensus about global issues is questionable to say the least!   Have your say…..