World Economic Forum Gravity Themes

1. World Economic ForumGravity Themes Presenter’s name Presenter’s title or date

2. Annual Meeting 2002Gravity Themes • Restoring Sustained Growth • Achieving Security and Addressing Vulnerability • Reducing Poverty and Improving Equity • Re-evaluating Leadership and Governance • Sharing Values and Respecting Differences • Redefining Business Challenges

3. Restoring Sustained Growth • Predictions for Global Growth • Growth and Equity • U.S. Dominance • The Future of Europe • Japan’s Malaise • The Rise of China • Concerns about China • Emerging Markets • Wild Cards and External Shocks

4. Restoring Sustained Growth:Predictions for Global Growth • “A slump and recovery in Internet time,” Alan Greenspan • A “lazy L”, “V” or “W”-shaped recovery? • In 2002, the global economy is expected to grow between • 2.8 and 2.5 percent • The U.S. economy is expected to grow by 2.3 percent and • Europe by 1.8, while Japan’s will likely contract by • between 0.9 or 1.3 percent

5. Restoring Sustained Growth:Predictions for Global Growth

6. Restoring Sustained Growth:Growth and Equity • Sustainable growth “…meets the needs of the present without compromising the ability of future generations to meet their own needs.” • Principles for equitable growth: • equitable access to and use of production factors, such as land, capital, knowledge and labor; • market-driven, effective private sector development that beneftis the poor and free public resources for improving social development and reducing poverty; • socioeconomic development through regional and subregional cooperation without macroeconomic constraints such as inflation, tariffs and other barriers to trade

7. Restoring Sustained Growth:Parameters of Growth • Industrialised countries account for 70% of the global economic output • Increasing productivity leading growth: 8.6% more in 2001 • Growth also driven by increasing consumer confidence • China leads Asia’s recovery with 7.6% in the first quarter largely due to higher government spending and a 9.9% increase in exports • Unemployment rates are finally going down after steady increases over the last 12 months

8. Restoring Sustained Growth:U.S. Dominance • Stability of the dollar • World’s largest economy: 34% of global GDP • Highest market capitalization: 50% of global equities • Size of debt: $400 Billion in 2001 • Level of capital inflows: $150 Billion in 2001--down from $295 Billion in 1999 • Is U.S.-centric global growth sustainable?

9. Restoring Sustained Growth: The Main Parameters for Sustaining Growth in Europe • U.K. is driving growth while Germany is preventing the Eurozone from overtaking the U.S. • Lack of integration and liberalization despite the emergence of the euro • M&A capital flows are still largely Europe to U.S • Principles of the EU’s Lisbon Agreement: • open markets, rigorous competition policy and • targeted subsidies • invest in small businesses and public services • encourage a culture of risk-taking (e.g. venture capital) • facilitate innovation and greater R&D

10. Restoring Sustained Growth: Japan’s Malaise • Japan’s full decade of recession; government unwilling to act decisively due to lack of broad political coalition • Investment redirected from Japan to China • Danger zones of the Japanese economy: • banking sector--capped depositor insurance at $10 million • corporate bankruptcies--19,000 in 2001 • rising unemployment--1 million out of work • large public debt--130% of GDP • Priorities: yen depreciation; mergers with European and U.S. banks; write-off bad loans; pay down public debt

11. Restoring Sustained Growth: Japan’s Malaise

12. Restoring Sustained Growth:The Rise of China • $1,000 Billion GDP in 2001--8% increase from 2000 • First aggressive stage of reforms is complete: • privatization of state-owned enterprises • strengthening of patent laws and customs procedures • stabilized their exchange rate • Further reforms underway: • eliminating trade barriers and tariffs • privatizing telecommunications and financial services • reducing duplicative regulations at the local level • Received $400 billion in FDI (graphics) • Regional dominance in productivity

13. Restoring Sustained Growth:Concerns about China • Uncertainty about the political transition from pre- to post-reform leaders in the Chinese Communist Party • Mass unemployment due to liberalization, increased competition and restructuring of industry • Social stability in the interior among disenfranchised in primarily rural communities • Opposition to East Asian free trade zone (ASEAN countries + China)

14. Restoring Sustained Growth:Emerging Markets • Argentinean financial crisis chilling investment climate throughout Latin America and threatening the stability of neighboring South American economies • Emerging market bond insurance rates at record levels • Foreign Direct Investment only fell a small amount between 2000 and 2001 ($240 billion to $225 billion) • Proliferation of free trade areas • The Doha Round: importance of market access; reforming European CAP; increasing two-way competition

15. Restoring Sustained Growth:Wild Cards and External Shocks • Instability of Middle East oil producing countries and the impact of a widening regional conflict • Potential U.S.-led attack on Iraq as part of the “axis of evil” and source of regional instability • Breach in U.S.-Saudi relations • Russian oil production and price spike • Another major terrorist attack • Deepening blow to consumer confidence in response to the Enron scandal

16. Achieving Security and Addressing Vulnerability • Globalization of Vulnerability • Global Security Threats: Major Regional Conflicts • Global Security Threats: State Failure and Civil War • Global Security Threats: Asymmetric Weapons • Soft Drivers • Preventive Strategies • Risk Assessment • Cooperation between Business and Government

17. Achieving Security and Addressing Vulnerability:Globalization of Vulnerability • New era of geopolitical and social instability: proliferating actors cause uncertainty and rapid change • “Risk Society”: security is a higher priority across all industry sectors and regions • General uncertainty and the implications on the global economy, governmental decisionmaking, allocation of resources and social behavior • Co-existence of “hard security” threats (traditional threats of war between states, WMD, terrorism) and “soft security” issues (health, poverty, environment)

18. Achieving Security and Addressing Vulnerability:Global Security Threats -Major Regional Conflicts • Regional conflicts remain the greatest threat to • global stability: • China - Taiwan • Korean Peninsula • India - Pakistan • Arab world - Israel • Iraq - U.S.

19. Achieving Security and Addressing Vulnerability:Global Security Threats -State Failure and Civil War • Secessionist/Irredentist conflicts • Indonesia, Philippenes • Chechnya • Colombia • Sudan • Failed states can serve as safe havens for terrorists to “export” violence, illicit drug and arms trading • International community becomes heavily involved with massive costs for peace-keeping, reconstruction, refugee resettlement, humanitarian aid, institution-building

20. Achieving Security and Addressing Vulnerability:Global Security Threats -Asymmetric Weapons • Weapons of Mass Destruction: Nuclear, chemical, biological: • Increased availability of technology/material • Continued large nuclear weapons stockpiles; accident-prone arsenals in Russia, India, Pakistan • Communications technology empowers clandestine groups with global reach • Cyber-attacks capitalize on increasing dependence on computer technology • Manipulation of information and media channels allows for amplification of terrorist messages

21. Achieving Security and Addressing Vulnerability:Soft Drivers • Health: 13 million preventable deaths annually from 6 diseases causing social imbalance and economic stagnation • Poverty: Greater visibility of rich-poor gap encourages resentment and opportunistic violence • Environment: Access to fresh water; control of arable land; conflict over precious natural resources • Projections indicate by 2025, 3 billion people across 26 • countries may lack access to arable land and potable water • Drug trafficking: Growing strength of global organized crime; government manipulation and corruption

22. Achieving Security and Addressing Vulnerability:Preventative Strategies • Elimination of capabilities: International cooperation to prevent spread of weapons of mass destruction • Denial of motivation: Delegitimize global terrorism as a means of promoting a political or social agenda • Intervention: Early-warning systems and swift preventative action • Confront root causes: Social inequity, economic and political disenfranchisement, cross-cultural tension • International organizations: reassess their role and capabilities

23. Achieving Security and Addressing Vulnerability:Risk Assessment • Corporate strategy: • Scenario-planning for evaluating risks • Policies for protecting assets and personnel management • Sharing best practices across industry sectors • Re-allocate resources for substantive, long-term protection of critical assets and interests

24. Achieving Security and Addressing Vulnerability:Cooperation Between Business andGovernment • Western companies with investments abroad are likely targets of future terrorism • Public-private efforts to develop solutions: Customs, banking, critical infrastructure, emergency response • Cross-industry collaboration: Implementing stronger security guidelines • Regulation across borders: Comparable and compatible standards • Planning for protection of “critical infrastructure”

25. Reducing Poverty and Improving Equity • Poverty: Still the Number One Issue • Government and Accountability • Modernization and Technology • Access • Conflict and Violence • The Private Sector Role • The Business Case

26. Reducing Poverty and Improving Equity:Poverty - Still the Number One Issue • 2 billion people living in poverty • Poverty is the result of multiple hardships: Hunger, disease, oppression, conflict, lack of education, pollution, and depletion of natural resources • Income inequality between countries is declining, but rising within them • Developing countries still lack access to foreign markets for most competitive products • Developed economies spend US $ 350 billion annually on subsidies for agriculture (seven times the aid expenditures)

27. Reducing Poverty and Improving Equity:Government and Accountability • Government must support markets as well as protect against market failure • Government must create the legal structure and economic incentives to foster entrepreneurship • Lack of transparency in government decision-making is the biggest hindrance to foreign investment • Only democratic governments will be able to limit corruption and encourage development

28. Reducing Poverty and Improving Equity:Modernization and Technology • Integrate new technologies into infrastructure to leap-frog older technologies • New technologies: Health care, increased agricultural output and productivity, environmental protection and pollution control • Source of economic growth as developed countries outsource labour intensive product development to developing economies • IT as a cost-effective means for marketing local products to a global marketplace

29. Reducing Poverty and Improving Equity:Access • Sources of knowledge through free and open media and information technology tools • Transfer of the latest technologies and know-how • Provision of basic healthcare, housing, and education • Availability of credit and other means for entrepreneurship • Existence of capable, democratic institutions

30. Reducing Poverty and Improving Equity:Conflict and Violence • Armed struggle for scarce precious resources in poor countries, e.g. water, arable land, oil, diamonds • Expenditures o weapons instead of commodities and social development • Poverty and hunger breed desperation among the disenfranchised, enabling extremist opportunism • Conflict most affects the poor, old, women, and children

31. Reducing Poverty and Improving Equity:The Private Sector Role • Business is not a social delivery vehicle, but economic growth is the best-proven path to development and poverty eradication • The long-term value of sustainable and equitable economic growth far outweighs any level of government aid or corporate philanthropy • Poverty as a business opportunity

32. Reducing Poverty and Improving Equity:The Business Case • Healthy and prosperous communities create stable environments for business to operate and a more productive workforce • Employees look to companies to lead by example with good corporate citizenship • Consumers prefer products from companies that demonstrate a commitment to the public good; new evaluation criteria required to develop market rewards for socially responsible corporations

33. Re-Evaluating Leadership and Governance • Complex World Order • Pressures on the Global System: Haves vs. Have-Nots • Pressures on the Global System: Institutional Inadequacy • Global Public Goods • Models of Global Governance : Institutionalist Model • Models of Global Governance : State-Centric Model • Models of Global Governance : Global Market Model • Models of Global Governance : The Network Model • Emergence of Networks: Business • Emergence of Networks: NGOs

34. Re-Evaluating Leadership and Governance:Complex World Order • Improper management systems for more turbulent world; global governance architecture resistant to change without crisis • New shape of global governance must be determined despite prevailing uncertainty; leadership needed • Those who have knowledge lack power, those in power lack legitimacy, and those seeing themselves as legitimate lack knowledge and power (Gretschmann)

35. Re-Evaluating Leadership and Governance:Pressures on the Global System -Haves vs. Have-Nots • Information disenfranchisement • Cultural dominance • Access to sources of wealth and natural resources

36. Re-Evaluating Leadership and Governance:Pressures on the Global System -Institutional Inadequacy • Widespread sentiment that voices of citizens do not matter; decreased turnout in elections in democratic states • Globalization causes the erosion of sovereignty; overlapping communities and trans-border problems • Market forces create global economy, but it is managed by individual nation-states • Increasing influence on policymaking of unelected and largely unaccountable multi-national corporations

37. Re-Evaluating Leadership and Governance:Global Public Goods • How and by whom should public goods be managed? • Most powerful countries and companies have most impact • Business has a role to play both in defining and managing public goods • Increased regulation of the environment; but need for global regulation and supervision of monopolies in areas such as communications and healthcare, as they are increasingly regarded as public goods • Do self-regulation and private sector management of public goods serve the public interest?

38. Re-Evaluating Leadership and Governance:Models of Global Governance -Institutionalist Model • Continued emphasis on multi-lateralism • Strengthen the state and reform existing institutions • Create new institutions to handle cross-border problems and emerging areas, e.g. World Environment Organization

39. Re-Evaluating Leadership and Governance:Models of Global Governance -State-Centric Model • Interest-based coalitions, more frequently changing • Hegemony preserves global stability; Pax Americana; undemocratic • Transnational global issues not adequately addressed

40. Re-Evaluating Leadership and Governance:Models of Global Governance -Global Market Model • Economic dominance over politics • Companies subvert international standards through loopholes in treaties; MNCs benefit from discipline imposed by IFIs • Private global governance is the chief target of the anti-globalization backlash

41. Re-Evaluating Leadership and Governance:Models of Global Governance -The Network Model • Multistakeholder approach integrating states, private sector and international civil society • Identifying win-win opportunities for cooperation through harmonizing interests of various actors • Leveraging technology both to create and combat networks

42. Re-Evaluating Leadership and Governance:Emergence Networks - Business • Growing power of business in a state-centric world; leadership means recognizing responsibility • Increasing need for business to consider fundamental change in role without abandoning day-to-day responsibilities • Business must have a clear and common view of responsibilities, and sense of core values in developed and developing world

43. Re-Evaluating Leadership and Governance:Emergence Networks - NGOs • Macro: NGO emphasis on first principles - structure, power, values • Micro: UN-NGO partnerships necessary to impact situation on the ground, despite lack of macro-level reforms • Meso: New global policy-making processes involve NGOs • How to determine the democratic accountability of NGOs?

44. Sharing Values and Respecting Differences • The Role of Values • Globalization’s Values • Globalization’s Impact on Existing Value Systems • Transnational Values of International Cooperation • The Role of Religion • Responsibility, Justice and Conflict • The Communication of Values: Education and Media • The Communication of Values: Private Sector

45. Sharing Values and Respecting Differences:The Role of Values • Leadership increasingly needs to be networked along common values • Is there an evolving normative coherence, a set of values at the heart of governance? • Universal principles as basis for society: Democracy and rule of law, human rights and liberty, sustainable development, equitable access to opportunity • Education and media systems are mostly local, lacking global perspective; more communication required across borders

46. Sharing Values and Respecting Differences:Globalization’s Values • Belief in technological innovation; communications technology also a driver of cultural challenges • Meritocracy and competence; but the world is not a corporation • Birth of a common world; generational values emerging, especially youth • Respect, justice and equal opportunity promoted by both religious leaders and anti-globalization movement • Assumptions of security and superiority breed arrogance and lack of respect for differences

47. Sharing Values and Respecting Differences:Globalization’s Impact on Existing Value Systems • Clashes within civilizations result from conflict over response to other cultures • In the context of great structural inequality and unemployment, an explosion of cultural confidence • Criticisms of current form of globalization: • Cultural: under-globalized cultures not respected • Social:globalization not just disease, malnutrition, wealth distribution, education • Environmental: globalization does not dignify life; global warming, species extinction

48. Sharing Values and Respecting Differences:Transnational Values of International Cooperation • Common humanity: 21st century will be defined by decision to join in common humanity or emphasize differences (Clinton) • Diversity: Recognition of the “other” as an asset, enriching one’s own ideas and expanding dialogue • Accommodation: How to determine which value systems should be tolerated? • Individual responsibility: Empowerment of individual to serve collective good in accordance with universal norms

49. Sharing Values and Respecting Differences:The Role of Religion • Part of the problem and solution: self-contained value systems are dangerous in a globalized world • Major differences not between value systems, but how these values are expressed; leaders seek to protect their value systems against others • Religious responsibility needs to be emphasized like corporate social responsibility

50. Sharing Values and Respecting Differences:The Role of Religion • Non-secular ethics - all religions share three values: • Respect: the golden rule; see the world not as categories of people but as global village of 6 billion people • Justice: Equal opportunity for all • Dignity of life: The most basic value, intuitively shared by all • No religion or civilization is monolithic: All are pluralistic and divided