Chastened leaders of the global business elite admitted Wednesday that the Western free-market model has come up short and faces being shoved aside by emerging power state capitalism.
Over four decades, the annual World Economic Forum in the Swiss ski resort of Davos has become an emblem of the triumphant market, but this year delegates warned that a new model must be found to kickstart growth and create jobs.
Five days of public debate and private networking began with a stark warning from a debating panel of experts that the historic motors of the 20th century global economy have been weakened by inequality and yawning deficits.
"I think we have three to four years in the West to improve the economic model that we have, and if we don't do that soon I think we've lost the game," warned David Rubenstein, managing director of the Carlyle investment fund.
The 62-year-old billionaire has done very well out of financial capitalism -- the US firm paid him a $134 million annual bonus this month -- but he warned the West needs to get its deficits under control and return to growth.
"If we don't do that soon, when we are here in three to four years ... the game will be over for the type of capitalism that many of us have lived through and thought was the best type of capitalism," Rubenstein said.
Global labour leader Sharan Burrow, general secretary of the International Trade Union Confederation, urged corporations and governments to work with employees to develop a new economic model -- and warned of a backlash.
"Let's get a seat at the table for the real economy. Will the real economy please stand up, because the financial markets are killing you," she said. "No-one will like the social unrest that will follow."
"We must redesign the model. We must reset it. Stop the greed. Unless employers and workers sit down with governments, the system will continue to fail," she said, calling for higher minimum wages to secure a consumer base.
But on the same panel, Professor Raghuram Rajan of the University of Chicago warned that, despite dominating the 20th century, the major Western economies had already failed to live up to their promises to rich world workers.
"Governments made a tonne of promises in the 1960s, when growth was very high. We had the welfare state across the industrial world, and then growth started falling off in the 70s, in the 80s," he said.
"Some countries, the UK and the US, tried to revive it through deregulation and managed for a while, but in general growth is too slow in the industrial world relative to the promises we have made," he said.
"The consumer goes to the grocery shop and buys globalisation and then he leaves the shop with his two bags full of globalisation and turns to the government and says: 'Protect me from the results of this'," he said.
"The uncomfortable truth is that we now have pockets of disillusionment and unfulfilled promises that we have to deal with," Verwaayen said, suggesting that capitalism can be revived through the energy of emerging markets.
"We talk about doom and gloom here in Davos. If you would go to Brazil today and you were to talk to young people about where the world is they would have a quite different view," he said.
Rubenstein admitted state capitalism is a more reliable creator of jobs than laissez-faire, but warned: "It is not going to create the kind of highly paid jobs with the kind of retirement security that we like in the West."
Some 40 heads of government will join 2,600 titans of commerce and industry in Davos to discuss everything from the eurozone debt crisis to Iran's nuclear programme and trends in science and the arts.
German Chancellor Angela Merkel was to deliver the first keynote address on Wednesday while British Prime Minister David Cameron, Canada's Stephen Harper and Mexico's President Felipe Calderon are due during the week.
They will join a new generation from countries such as Tunisia and Thailand which are trying to emerge from turmoil as well as African heads of state, including Nigeria's Goodluck Jonathan as his country grapples with crisis.
Klaus Schwab, the founder and organiser of Davos, acknowledged that the line-up is not so spectacular as in recent years, as many leaders battle economic and political crisis at home.
"The danger for the world is that the political leadership is overwhelmed," Schwab said as he welcomed the delegates, who braved chill temperatures and deep snow. "Maybe what we have here is a kind of burnout."
Source: AFP Global Edition