G-20 where the twin issues of stimulus and regulation get much attention from governments, in Davos businesses and other non-government groups can play a full and transparent part in all deliberations.
Interestingly, while there seems to have been, and still is, a fair consensus on prolonging stimulus until the global economy has recovered more robustly, a similar consensus continues to elude the shape of a future global financial architecture that takes into account the flaws of the system as exposed by the financial crisis of 2008. Barack Obama has indicated a new-found resolve to crack down on banks, banning certain activities like proprietary trading and cutting the biggest banks down to size, quite literally. Davos presents the perfect opportunity for bankers to make an intellectual case for softer regulations than the ones Obama is proposing and many others, including European leaders, are now backing. The banks must persuasively argue that while mistakes may have been made in the run-up to the crisis, excessive government control that is not easy to enforce and which can easily go wrong, will be detrimental to the cause of faster economic recovery. The financial system for better or for worse is what drives the real economy. It is our considered view, already expressed in these columns, that shareholders, not governments are best at enforcing discipline on firms. That is an intellectual argument that must be reiterated in Davos. It is also likely that what we are witnessing now in the Westa visible recovery of finance without a recovery in the real economyis a temporary phenomenon: the real sector always recovers more slowly. The forum also presents a great opportunity for governments and businesses from emerging economies like India to make a strong pitch of their relative strengths. Trumpeting the safety of Indias financial system when compared with the fragility of the Wests, however, will be a mistaken showcasing of our achievements. In the financial sector, we are still too far behind even global second-best practices.