The Globe and Mail, Friday, January 28, 1994
World checks economic sights
'All assumptions have collapsed'
By Madeleine Drohan
European Bureau
DAVOS, Switzerland -- When German Chancellor Helmut Kohl
mounted the stage at the World Economic Forum yesterday to
talk to the world's political and economic elite, he was
thinking of his appearance four years ago when the world
seemed an altogether different place.
The Berlin Wall had just fallen. German reunification
had not yet taken place. And although it was clear
communism was crumbling, the economic and political
assumptions developed during the Cold War were still the
guiding star by which the Western countries set their
course.
"The world has dramatically changed since then," Mr. Kohl
told his audience. What he didn't say but should have is
that it has changed in ways few of those who were present
four years ago had expected.
The end of the Cold war has not brought worldwide peace
and prosperity. In fact it's been accompanied by almost
global recession accompanied by soaring unemployment and the
type of bloody conflict Europeans never thought they would
see again. A reunified Germany has not become the engine of
growth for Europe. Japan Inc. is not triumphant as many
American had feared. The United States is not in permanent
economic decline as was predicted and the end of history has
not been reached.
"All the assumptions we made after 1989 have collapsed,"
said Michael Vlahos, project director at the Center for
naval Analyses in the United States. "Why were we so off
the mark?"
That's what the business people and political leaders
from more than 60 countries have decided to explore at the
annual talkfest in Davos, which started yesterday. The
official title is Redefining the Basic Assumption of the
World Economy, which in plain words is "Why aren't things
working out the way we thought they should?"
The German Chancellor was an inspired choice to kick off
the gathering. His rosy predictions of a painless, cost-
free German unification are coming back to haunt him in this
election year.
He focused in his speech on all the positive developments
in eastern Germany, as any politician on the stump would do.
There are 4.1 million phone line now where four years ago
there were only 1.8 million. More than 600,000 new
companies have been formed. And the environment, in his
words, "has improved considerably."
But even an optimist such as Mr. Kohl could not gloss
over some of the more profound changes he has witnessed not
only in German society but also in Western society as a
whole. "We have a loss of belief in our countries and
there's a great deal more angst," he said. "And there's a
lack of commitment by people now when it comes to the common
weal. There's been a considerable drop in their willingness
to do anything."
Unions were losing members, he said, church councils have
lost support and employers' organizations don't have the
same backing they used to. "People are backing down when it
comes to making their own contribution."
One U.S. businessman attending the meeting suggested the
malaise affecting Western democracies is the result of the
destruction of the institutions that used to instill values
in their members -- religion, the ;family, the company and
the nation.
"We lost God a long time ago," he said. The family unit
is breaking down in many Western societies, as is the idea
of a lifetime career or even a lifetime job with one
company. With countries moving toward regional
arrangements, like the European Community and the North
American free-trade agreement, the idea of the nation state
is now crumbling. In some cases this is not a bad thing,
but it does take government one step further away from the
people, leading to alienation.
While seemingly strange fare for a meeting of corporate
executives and politicians, the political and spiritual
turmoil is affecting economies which is why it is on the
agenda this year.
On exception is the economies of East Asia, many of which
are booming. Tommy Koh, director of the Institute of Policy
Studies in Singapore and a former high commissioner to
Canada, said East Asia doesn't have the same problems
because it has strong families and strong governments.
"Your Western governments are less able to govern and cater
to the basic needs of society, like jobs and personal
security," he said.
Klaus Schwab, president of the World Economic Forum and
chief organizer of the annual event, urged the participants,
who he said represented companies with total annual sales of
more than $3-trillion (U.S.), to find a way to change this.
"We cannot operate as if stuck in a time warp while today's
political, economic and social parameters are fast
developing in other directions. If we do, the discrepancies
between our perceived world and the real world will multiply
into chaos and disintegration."
Sid Shniad
