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Annual Meeting 2006 Closes With Pledges On The Economy And The Environment

29 January 2006 - Davos, Switzerland

The World Economic Forum ended its Annual Meeting 2006 with participants pledging to take action this year towards reducing the imbalances in the global economy and the global environment to assist in the smooth and continued rise of the developing world.

“We’re going through a phase in our planet that we’ve not known before,” noted James D. Wolfensohn, Chairman, Wolfensohn & Company LLC, USA; Quartet's Special Envoy for Gaza. “The world is changing around us and the issues – economics, poverty, social justice and environment – are …the key issues that we need to address.”

Participants began their five days of sessions and workshops with a plenary to discuss key challenges facing the world today under the theme “The Creative Imperative”. In addition to the emergence of China and India, the challenges included the changing economic landscape, the need for new jobs, for new mindsets, and the changing identities and struggles around the globe. Participants also discussed how to respond to these challenges by building trust in public and private institutions, fostering effective leadership and promoting innovation and creativity.

Several new initiatives emerged, including a discussion on cooperation between the Forum’s Member companies and the United Nations on disaster relief, an effort by Forum Member companies to alleviate hunger in Africa, and a plan to extend the Forum’s anti-corruption initiative in concert with multilateral development banks. The Forum’s Members also devised specific recommendations on how financial institutions can stimulate investment in the developing world and on how the Forum can cooperate with the UN Development Programme and various governments to expand the development of public-private partnerships.

The rise of the developing world, particularly of China and India, is reshaping the economic and political order. “The dominance of the US and the dominance of Europe – particularly Western Europe – is eclipsed,” declared Sir Martin Sorrell, Group Chief Executive, WPP, United Kingdom; Co-Chair of the Annual Meeting 2006. “What we’re witnessing is a sharp shift in wealth in a relatively short period of time from West to East.”

This shift is exacerbating imbalances in the global economy, notably the increasingly unstable relationship between China’s high rates of saving and the yawning US current account deficit. Among the recommendations that emerged from the Meeting was the need for new policies to stimulate savings in the US and promote consumption in China.

Sustaining more equitable and less pollutive growth in the developing world is also imperative to discourage further conflict and social unrest among populations whose aspirations are unfulfilled. “In the world, people are really fighting two battles,” observed Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries, India; Co-Chair of the Annual Meeting 2006. “The developed world is fighting a battle for peace and then there’s our part of the world, which is fighting a battle against poverty.”

Misunderstanding and resentment is by no means isolated to the developing world. Many Americans view China solely as a threat to their country’s power and economic well-being, said Laura D. Tyson, Dean, London Business School, United Kingdom. The risk is that this fear will give rise to protectionist policies in the US.

Economic imbalances are also creating an increasingly unstable labour market, from people losing jobs as work moves overseas to people migrating in search of jobs. Participants recommended that national social safety nets be improved to mitigate the impact of this increasingly fluid labour market.

Companies also need to better prepare themselves to adapt more quickly and effectively to major disruptions in the economy. In particular, corporations need to become more innovative and creative. “We still have many cultural and procedural antibodies within our organizations that prevent us from promoting creativity,” said Tim Brown, President and Chief Executive Officer, IDEO, USA. “It’s going to take really strong leadership from the chief executives and leaders of companies and institutions in order to directly support a growth in innovation.”

But paramount among the concerns participants shared in this year’s Meeting was the increasing environmental costs of development. “We are not the owners of the environment,” said Renato Raffaele Martino, President of the Pontifical Council for Justice and Peace, Vatican Government, Vatican City State. “We are the custodians, the stewards. The Creation is a gift to be transmitted to the next generation.” Participants recommended that resources, especially water, be managed more effectively. Water management initiatives need to be developed to address urban and agricultural use of water in developing nations.

In addition to the initiatives launched through the Forum, participants emphasized their responsibility to take independent action. “It is up to us afterwards to act individually to take on the issues that are the most relevant and then do something about them,” said Peter Brabeck-Letmathe, Chairman and Chief Executive Officer, Nestlé, Switzerland; Member of the Foundation Board of the World Economic Forum; Co-Chair of the Annual Meeting 2006. “What we want to achieve is to create global trusteeship. That is what we are missing in our world,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum. Schwab closed the Meeting by reminding participants: “Don’t forget your global identity, your global responsibility.”

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