Each year's annual meeting of the World Economic Forum in Davos begins with a series of what are ordinarily called "updates" - update on Latin America, update on information technology, and the Big Kahuna of all updates, the update on the economy. In recent years, the Time magazine editor Michael Elliott has done multiple tours of duty moderating these sessions, which set the tone for the entire meeting. This year, Time appears to have managed a marketing coup by taking over the entire session, complete with Time logos flashing on monitors and TV camera booms sweeping over the heads of the assembled participants.
These televised sessions, whether from by the BBC or CNBC, sometimes provide a bit of an entertaining respite from the monotonous format of the usual sessions. Yesterday's Time magazine session on "What Is the 'New Normal' for Global Growth?" broke with Davos convention not only by eschewing the "Update:" in the title, but also by seating its panellists in swivel chairs around a boardroom table instead of in a row of easy chairs facing the audience.
The undisputed ringer in Davos when it comes to the economy these days is Nouriel Roubini, the New York University Stern School of Business professor who these days is able to market his pessimistic prognostications as chairman of Roubini Global Economics. Mr Roubini predicted the global financial crisis and so enters the room wearing the equivalent of a heavyweight boxing title belt. He is always clearly the man to beat at the table. So it was fitting that Mr Elliott announced Mr Roubini in the style of a ring announcer as "The Cassandra of Washington Square Park". This week's mystery ingredient: global economic alphabet soup.
Mr Roubini opened his display with a blitzkrieg of reasons to be terrified about the global economy. We are in a U-shaped recession that is at risk of becoming a double-dip recession, he warned. Things might look good in the first half of this year, but watch out in the second half, when governments have to start curbing spending. When the tide of fiscal stimulus starts to recede, it will expose anaemic consumer spending and widespread industrial overcapacity, not only in the US and Europe, but also in China, Mr Roubini warned.
He then delivered a withering series of body blows to emerging-market optimism, reminding participants that China, however scary to western jobs, is not big enough to pick up the slack left by US consumers in driving global growth. David Rubenstein, the managing director of the private equity firm Carlyle Group, offered a game defence, joking that he would not want Mr Roubini along if he were trying to raise funds from investors.
He delivered a traditional argument for emerging-market optimism, youthful demographics and the like. He then attempted a sort of reversal by suggesting that the elderly population of the US would provide steady demand for services and products such as assisted care and plastic hips. Oh boy, now I'm really excited about the prospects for American innovation. Mr Rubenstein then unveiled what was undoubtedly his best defence, citing the poor record economists have on predicting economic crises, and saying that professional investors simply don't really rely on economists to guide their investment decisions.
But wishing Mr Roubini's pessimism away proved fruitless. Throughout his comments, Mr Roubini sat next to Mr Rubenstein wearing an expression that bordered on pity. Silly investors, he seemed to be thinking, always confusing asset prices with economic prospects. Does he not see the doom that awaits? He poured himself a glass of water and waited for Mr Elliott to set him up for the coup de grace. It came with a lob across the plate: is the optimism on emerging markets really justified?
With the big "overspending" countries such as the US and those in Europe cutting back, the "oversaving" countries such as China can no longer produce more than they spend and rake in money from selling surplus production. His main concern, Mr Roubini said, was that the world was simply going back to normal even as the global economy headed towards the next cliff, with bailed-out banks taking excessive risks - this time in emerging markets - and central banks printing money. Yes, there is a recovery, but it is "too much, too fast, too soon".
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