A feeling of fin de siecle

The past two years have brought shocks that were once inconceivable: the experts have been wrong

LAST SATURDAY evening, at about 11 o'clock, guests at the Davos World Economic Forum were serenaded in a small, smoke-filled room by an unannounced singer. His name was Yevgeni Primakov, the Russian Prime Minister. On stage with him were a few Russian bankers ("Of course I have to join in - he is my chief," said one), and at least one top US executive. No, I didn't take part, but Davos is the only place on earth where you could conceivably sing on stage with a former head of the KGB.

The Davos forum is extraordinary in that more of the world's leading politicians and business people gather there than on any other occasion. Brits include Gordon Brown and Princess Anne, who closes the event later today. From America came Al Gore and Robert Rubin. From Germany, there was Gerhard Schroder.

Virtually all the big names of geopolitics were there: Kofi Annan, Nelson Mandela, Yasser Arafat, Shimon Peres... Among the intellectual leaders there were so many Nobel Prize winners that the bookshop had a special section for them. The only corners that seemed to me to be under-represented were the sports and entertainment worlds, though Jane Fonda and Warren Beatty did come by.

This agglomeration of big names - the fact that so many of them should think it useful to come to Davos - raises two key questions. First, why do they come? And second, what are they saying that is new or that tells us something important about the state of the world?

There are, for the big-wigs, at least three reasons for being in Davos. It is, for a start, a tremendously efficient way of meeting people you need to see. The heads of multinationals can chat with a dozen or more economics ministers in the various countries in which they operate. That can open a door at the ministries for their staff to bring up any particular problems they may have. The more global the market economy, the more a business has to have these relations; and it simply would not be physically possible for the top brass to get around to all the people they need to meet.

Next, in a world where investment and currency flows dominate economies, the politicians need to meet business leaders to try to comprehend them. A young Russian banker explained how Primakov needed to understand how people from the private sector in the West thought, for he had no previous experience of that. Other politicians are more direct: they are trying simply to attract inward investment, making speeches about the excellence of their country and their stewardship of it.

Third, people come because of the club atmosphere of the event. The fact that people can meet informally and in private means that they don't have to commit themselves to any hard positions. If you disagree with a view, you don't need to get upset by it. I did not find that many of the bankers agreed with the attack on financial markets made by Mohamed Mahathir, Prime Minister of Malaysia, but in the club atmosphere of Davos people were prepared to be polite about his views. In any club there are always the club bores.

Of course, this can all seem terribly self-congratulatory, even self- indulgent. But to focus on that side of the event misses its significance. The world is a global market, and at the margin it can be made to run better if the different players can meet on neutral ground.

So what was new? Several middlingly important things and one big one. Among the middlingly important was the clear desire of Russia to get itself back into some sort of dialogue with the West. I believe the Primakov government had no inkling of the impact its effective default last summer would have on its relations with the West. Now it is trying to struggle back. It will be helped by the quality of the next generation of its elite: young, well-educated, thoughtful - thoughtful, that is, about the enormous scale of the tasks before them.

A clear age clash is taking place in Europe, with the present generation of leaders preening themselves about the success of the euro, and the next generation profoundly critical of European unemployment levels, its inability to reform its welfare system, and its lack of entrepreneurship. A paper by some younger European leaders, called Wake Up, Europe!, was dismissed by the senior panellists in one session, but aroused great interest among the younger business people.

Other aspects of the conference were predictable, but interesting nonetheless. As you might expect, there seemed to be fewer people from the emerging economies of East Asia, and fewer from Japan. Countries that are struggling with domestic economic problems tend not to want to ship out their top brass. Many more North American corporations were there (Bill Gates for starters), a sign of just how seriously US business is looking at opportunities in Europe.

But the really big new thing that I, at least, had not appreciated was just how concerned the US administration has become about the sustainability (or rather, non-sustainability) of global growth. Japan is heading on down, and growth in Europe is slowing. The only big country that is charging on is the US, and that is at the cost of a yawning current account deficit.

You might expect the US administration to be cheerful about the durability of the long American boom. But while its representatives have certainly been more cheerful than the Japanese, Al Gore, Robert Rubin and his deputy Larry Summers - all in different ways - came out with the same message: the US cannot continue to pull along the rest of the world economy. Something is going to give.

In one sense, this is encouraging: it was more worrying for the rest of us when the Americans were not worried. But there is a clear disconnection between the enthusiasm of the US financial markets and the concern of the US administration.

There is something even bigger here, a feeling of fin de siecle. Davos was the setting for Thomas Mann's The Magic Mountain: the world of bustling commerce, globalisation, and a Swiss TB sanatorium that was swept away by the First World War. Up in the Alps, in calm, prosperous Switzerland, it is hard sometimes to appreciate just how fragile the world economy may have become.

If you are part of the struggling middle class in many east Asian countries and have seen 10 years of your savings swept away in a few short months, you feel quite differently about the supposed benefits of being part of this single global economy. Indeed, there was a demonstration against the global economy in Davos on Saturday, though the main effect was simply to make the delegates walk around the town instead of taking their buses - the roads were closed and the demonstrators kept well away.

The people who go to Davos are at the top of the pile. Some display the arrogance that you might expect from people who take themselves very seriously. But many others seem uncomfortable about the future. Maybe it was the nagging concern that the world economy as a whole cannot prosper if large parts of it remain in recession. Maybe it is the perception that going global does not itself deliver an acceptable degree of social equality. Maybe it is simply that the past two years have brought shocks that would have seemed almost inconceivable: the experts have been wrong.

None of this means that there is necessarily a great catastrophe looming. But the more thoughtful people seem uneasy. As anyone who skis will recognise, there is something about being up in the mountains that makes you feel that the problems are all down at sea-level, and everything up here will be all right. This year there is a rumble of distant thunder to be heard - even in Davos.