‘Shaping a better world’, the theme for this year’s World Economic Forum meeting in Davos, Switzerland, was nothing if not ambitious. ‘I used to say it was a gathering of 2,500 big egos in a small town with bad hotels,’ joked one semi-regular attender, ‘but perhaps it’s more like Woodstock for CEOs.’ Davos is almost certainly the world’s best opportunity for high-level networking which is why the last five G20 presidents have addressed the Forum on their countries’ plans for global economic governance over the coming year. This year was Australia’s turn.
The first day of my visit started with a breakfast discussion of the eurozone (whose difficulties, it seems, are now chronic rather than acute) with the global heads of some of Switzerland’s biggest companies. My second day included a round-table discussion with the CEOs of companies employing almost 350,000 Australians plus a lengthy discussion with the new governor of the Bank of England, Canadian Mark Carney. My third day included a seminar with two other heads of government and 15 CEOs of international resources companies on policy to attract investment.
In between times, I crossed paths with the global head of the Red Cross, the director-general of the International Organisation for Migration, the US Trade Negotiator and Tony Blair. There was a casual photo opportunity with members of the Australian Winter Olympics team (who are in training) and the international launch of Andrew Forrest’s Walk Free campaign against modern day slavery. Alas, I missed out on meeting Matt Damon and Psy (the Korean rapper) but did catch up with Sheryl Sandberg, the 2IC of Facebook, role model for career women and author of the latest best-seller on how to succeed in business. She was kind enough to compliment the Liberal party on its use of social media during last year’s election campaign. Then there were formal meetings with Japanese Prime Minister Abe, British PM Cameron (the Chancellor of the Exchequer was there too), Dutch PM Rutte and Israeli PM Netanyahu. Oh, and the chance to hear the new Iranian president claim that he wanted to live in peace with all countries in the region — before adding the rider, ‘which Iran recognises’.
The G20 assumed its current form in response to the Global Financial Crisis. There’s little doubt that turning the finance ministers’ meeting into a leaders’ meeting of the world’s largest and most representative economies helped to persuade panicking markets that someone was in charge and had a plan. The G20 worked well as a response to the most serious economic challenge since the 1930s and helped to ensure that the GFC did not become another Great Depression. The challenge is to remain relevant in more normal times, especially as it involves an enormous commitment: four finance ministers’ meetings every year (with two in Australia in 2014 starting with Sydney in February) as well as the leaders’ meeting in Brisbane in November. Voters demand of their leaders more than meetings for meetings’ sake.
At last year’s G20 summit in St Petersburg, each country agreed to present a national growth plan with the aim of creating an economic action plan for the G20 as a whole. Sovereign nations’ readiness to submit their domestic economic policies to this kind of scrutiny is a rare opportunity to argue for prudent, orthodox policies which promote private sector-led growth, investment and employment. As well as promoting sound policy in each major economy, the G20 exists to deal with matters that are beyond the capacity of nation states to deal with on their own. Rather than try to solve every international problem and to address every member’s concern immediately (like a mini-UN), it’s important that the G20 focuses on a few areas at a time so that it can make a practical difference. A perennial is freer trade as this is fundamental to economic growth and prosperity throughout the world.
A key issue this year will be addressing the growing issue of transfer pricing’s impact on national tax collections — exacerbated by the digital economy and the problem of deciding just where transactions on the net have actually taken place. Taxes, after all, have to be fair — as well as simpler and lower — if free markets are to maintain their legitimacy. Then there’s the worldwide ‘infrastructure deficit’ estimated by the OECD to be $50 trillion by 2030. Governments have to attract more private investment into infrastructure projects, if the world’s cities are not to choke on their own traffic and suffer brown-outs; and that means, essentially, learning not to change the rules after the investment has been made. Still, the G20’s main concern is more prudent banking.
Davos was a chance to showcase Team Australia. Abroad, it seems, Australians are well regarded as ‘team players with initiative’ and Australia is seen as a country with many friends and few critics. We shouldn’t exaggerate our influence; nor should we underestimate our potential, especially to lead by example. In the keynote address, I sought to underscore the new government’s economic principles:
You can’t spend what you haven’t got. No country has ever taxed or subsidised its way to prosperity. You don’t address debt and deficit with yet more debt and deficit. And profit is not a dirty word because success in business is something to be proud of. After all, you can’t have strong communities without strong economies to sustain them and you can’t have strong economies without profitable private businesses… A strong economy is far less likely to be one responding to central control than one spontaneously generating its own growth… [because] government doesn’t create wealth; people do, when they run profitable businesses…Ultimately, the G20 is not about us in government; it’s about the people, our masters.