5. 3 | World Economic Forum Annual Meeting 2008
Participants in the World Economic Forum Annual
Meeting 2008 convened in Davos at a time of great
anxiety in the world. The turmoil in the financial
markets and the continuing conflict in the Middle
East were naturally of immediate concern.
Mounting awareness of the epochal challenge of
climate change and the looming threat of global
terrorism, two issues that were addressed in the
opening plenary session, heightened our shared
sense of urgency.
In such times of stress and disquiet, we truly
understand the value of the Davos Spirit of
inclusiveness, openness and commitment to
improving the state of the world. The Annual
Meeting theme – The Power of Collaborative
Innovation – was a fitting focus for two reasons.
First, it highlighted that a multistakeholder approach
is critical for any authentic and viable solutions to
global problems. The World Economic Forum has
underscored that, since the first Davos meeting 38
years ago, government, business and civil society
must engage each other to find effective
approaches to the most pressing issues. This year,
we placed particular emphasis on corporate global
citizenship, the principle that companies must be
involved in addressing the major challenges we
face today, aligning their engagement in society
with their business goals. This commitment is at
the core of what the Forum stands for.
The power of collaborative innovation was a most
apt theme for a second crucial reason. It served to
underline the need for new and imaginative ways to
mitigate global risks and the importance of
achieving tangible results or value. While some may
criticize us for our continued optimism amidst
gloom, we must never discard our positive attitude
for irrational pessimism.
We should be neither paralyzed by despair nor
casual in our concern.
This is a time for sincere pragmatism and a new
brand of collaborative leadership to address the
many priorities on the global agenda. We look
forward to continuing our collaboration with
Members and Partners at our regional meetings
and through the many Forum initiatives and
industry activities this year.
Klaus Schwab
Founder and Executive Chairman
Preface
“The Davos Man and Woman are aware of all
the challenges and, in a pragmatic way, they do
what they can to mitigate the risks and address
the challenges. They also see the opportunities
in the world. But if we don’t address the
challenges, even the greatest opportunities will
not be enough to guarantee the future of
humankind.”
Klaus Schwab, Founder and Executive Chairman, World Economic Forum
6. 4 | World Economic Forum Annual Meeting 2008
The Power of Collaborative Innovation
Executive Summary
Participants in the World Economic Forum Annual
Meeting 2008 focused on the tools for addressing
the many challenges emerging as a result of the
shifting power equations in the world. The Power of
Collaborative Innovation is arguably the last remedy
to the stresses of intense globalization that have
been evident in financial market volatility, widening
income disparities, and in conflict zones around the
world. As former British Prime Minister Tony Blair
observed in the closing plenary session:
“Globalization is forcing changes in how people
collaborate in a fundamental way.” Blair added: “If
we are interconnected and the world is
interconnected, the only way for the world to work
is to have a set of common values. We have no
option but to work together.”
Collaborative innovation is far from the norm in
international affairs, not least because the
structures of global governance have not evolved
for nearly three generations. Nation states, even
those working closely together, will not be able to
address future global challenges if business and
civil society are not engaged at the outset. In the
current context, the World Economic Forum
provides a unique platform for multiple stakeholders
to address a range of global, regional and industry
issues. Fostering collaborative innovation becomes
all the more critical in a time of heightened
uncertainty.
“In spite of the economic crisis, can we
look beyond that and view Davos as a
collection of minds to address issues
that can be addressed? My hope is that
we are here not only with a can-do
spirit, but with a must-do spirit.”
Indra K. Nooyi, Chairman and Chief Executive Officer, PepsiCo,
USA
“Globalization is forcing changes in how
people collaborate in a fundamental
way. You need stronger and stronger
collaborative political leadership. If we
are interconnected and the world is
interconnected, the only way for the
world to work is to have a set of
common values. We have no option but
to work together.”
Tony Blair, Prime Minister of the United Kingdom (1997-2007);
Member of the Foundation Board of the World Economic Forum
7. 5 | World Economic Forum Annual Meeting 2008
Among the outcomes of the Annual Meeting:
• Japanese Prime Minister Yasuo Fukuda unveiled
a five-year, US$ 10 billion fund to support efforts
in developing countries to combat global
warming – a move to ensure that top priority is
given to climate change at this year’s G8 Summit
in Hokkaido. In addition, Japan aims to create a
new multilateral fund with the US and the United
Kingdom to mitigate changes in the earth’s
climate as a result of global warming.
• The Bill & Melinda Gates Foundation announced
a US$ 306 million package of agricultural
development grants “designed to boost the
yields and incomes of millions of small farmers in
Africa and other parts of the developing world so
they can lift themselves and their families out of
hunger and poverty”.
• The World Economic Forum, Forum Member
companies and the United Nations launched
initiatives to facilitate broader and deeper private
sector support of humanitarian relief operations.
Among the programmes established: Agility, TNT
and UPS, three leading logistics and transport
companies, are joining forces to help the
humanitarian sector with emergency response to
large-scale natural disasters.
• The World Economic Forum launched a landmark
report on the interfaith dialogue between Muslim
and Western societies. Islam and the West:
Annual Report on the State of Dialogue was the
result of in-depth research and polling in more
than 40 countries. The report is intended to be
an annual global reference on the state of
dialogue among faiths that will increase interfaith
communication and strengthen efforts to deepen
understanding.
• The World Economic Forum released the first
part of the most comprehensive investigation into
private equity: The Globalization of Alternative
Investments Working Papers Volume 1: The
Global Economic Impact of Private Equity Report
2008. The study focuses on the demography of
global private equity deals, the willingness of
private equity-backed firms to make long-term
investments globally, and the impact of private
equity investments on the employment levels of
firms in the US and corporate governance in the
United Kingdom.
• The Forum’s Global Education Initiative (GEI)
designated Rwanda as the launch country for a
pilot programme of the initiative. In partnership
with the Education For All Fast Track Initiative
(FTI) under the banner of the Global Education
Alliance (GEA), the Forum will provide the
platform to combine the strengths of the private
sector and foundations to achieve education for
all in low-income countries.
“There is no time to lose in addressing
climate change. We have a readily
available means of taking action
without waiting for the agreement on a
post-Kyoto framework. It goes without
saying that aiming at the most efficient
use of energy is now an obligation
upon humanity.”
Yasuo Fukuda, Prime Minister of Japan
“I am optimistic about the future. The
question is if the economic growth of
India and China will slow down if the
global economy slows. I don’t think the
impact on China will be very big.”
Wang Jianzhou, Chairman and Chief Executive, China Mobile
Communications Corporation, People’s Republic of China
8. 6 | World Economic Forum Annual Meeting 2008
• Mayors, regional governors and the private sector
launched the World Economic Forum’s SlimCity
Initiative, an exchange programme between cities
and companies to support action on resource
efficiency in urban areas, focusing on energy,
water, waste, mobility, planning, health and
climate change.
• British Prime Minister Gordon Brown, Microsoft
Chairman Bill Gates, Irish musician Bono, H.M.
Queen Rania Al Abdullah of the Hashemite
Kingdom of Jordan, United Nations Secretary-
General Ban Ki-moon, World Economic Forum
Founder and Executive Chairman Klaus Schwab,
Nigerian President Umaru Musa Yar’Adua, and
Cisco Chairman and Chief Executive Officer John
T. Chambers issued a joint statement vowing to
make 2008 a turning point in the fight against
poverty. The world is facing a “development
emergency”, they said, pledging to “work
together to help the world get back on track to
meet the Millennium Development Goals.”
• The Forum conducted an innovative outreach
exercise with the online video website YouTube,
asking people from around the world to answer
“The Davos Question” – What one thing do you
think that countries, companies or individuals
must do to make the world a better place in
2008? More than 2 million people took part, and
business, government and civil society leaders
from the Annual Meeting posted replies. Among
those submitting video responses: President
Shimon Peres of Israel, President Abdoulaye
Wade of Senegal, President Hamid Karzai of
Afghanistan, former US Secretary of State Henry
A. Kissinger and Irish musician Bono. The
resulting global conversation may be viewed at
www.youtube.com/Davos
• Fourteen global CEOs and company chairmen
representing a range of industries and regions
issued a call to their peers to join collaborative
efforts to strengthen public governance
frameworks and institutions as a core element of
their approach to corporate citizenship.
The Annual Meeting agenda was organized under
five sub-themes – Economics and Finance:
Addressing Economic Insecurity; Geopolitics:
Aligning Interests Across Divides; Business:
Competing While Collaborating; Science and
Technology: Exploring Nature’s New Frontiers; and
Values and Society: Understanding Future Shifts.
“This is not a great year in the US for
far-sighted and imaginative economic
policies. We need to activate world
trade talks and strengthen the global
international system.”
Henry A. Kissinger, Chairman, Kissinger Associates, USA
9. 7 | World Economic Forum Annual Meeting 2008
Economics and Finance: Addressing
Economic Insecurity
The unfolding financial crisis should be viewed as a
chapter in a much larger, more profound story – the
rebalancing of global wealth away from the West
and toward the emerging economies of Asia and
the Middle East.
• The shift of economic power from West to East is
an epochal transformation that is taking place
faster than anticipated.
• The challenge to policy-makers and
businesspeople is how to address the more
dangerous side effects of global growth such as
widening income disparities, inflation and
environmental degradation.
• The decoupling of global growth from the US
economy is premature, but there is a new
dynamic with the rapid growth of China and other
emerging economies shortening and softening
the US downturn.
• Charting a more equitable and sustainable
course for global growth will require long-term
investments in human capital, education, health
and environmental protection.
• Greater coordination of macroeconomic policy,
beyond just the G8, is needed given the limits of
traditional monetary and fiscal policy in a global
economy.
Geopolitics: Aligning Interests Across Divides
Collaborative innovation is the framework to
address major global challenges linked to the
intensification of globalization.
• The legacy institutions of global governance are
not capable of tackling the many interconnected
and complex challenges of a multipolar world.
• Collaboration among nation states is not
sufficient to address pressing global problems.
The participation of business and civil society is
needed.
• Climate change is an immediate test of whether a
new brand of collaborative and pragmatic
leadership can lead to real and lasting results.
• The world is in transition. The US is too strong to
stand on the sidelines, but too weak to go it
alone. The state is no longer the most important
point of reference for many populations.
• There are global challenges that simply require
greater collaboration such as the Doha Round of
Trade negotiations and the Middle East peace
process. And there are those that will require
greater innovation to solve such as rapidly ageing
societies, urbanization and food security. But the
most pressing challenges for humankind, such as
climate change, terrorism and non-proliferation
will require both collaboration and innovation.
Ahead of the Annual Meeting, the World Economic Forum
created the first-ever global video conversation between
the general public and the world leaders who were
participating in Davos. By the last day of the Meeting, the
Forum reached a worldwide audience of over 7 million with
the Davos Question on YouTube.
In the run-up to the Annual Meeting the Forum had asked
the Davos Question: “What one thing do you think countries,
companies or individuals must do to make the world a better
place in 2008?” Nearly 300 people, including some of the
Forum’s Members, sent in personal video replies. The best
were shown during the opening and other selected plenary
sessions at the Annual Meeting 2008. The topics most often
included development, economics, education, environment,
climate change, energy, water, governance, human rights,
values and technology innovations. You can check out the
best replies on the following website:
http://www.youtube.com/profile_favorites?user=thedavosquestion
In Davos, the Forum set up a special Davos Conversation
corner where all participants were encouraged to reply to
these videos uploaded by the YouTube users, or to simply
answer the Davos Question. Over 110 participants, including
President Shimon Peres of Israel, President Abdoulaye Wade
of Senegal, President Hamid Karzai of Afghanistan, musician
Bono and actress Emma Thompson along with numerous
business leaders used the special video corner to record
their messages. Watch the best responses here:
http://www.youtube.com/view_play_list?p=749732FFD312CA7F.
“The Davos Question and the Davos Conversation video
corner were the embodiment of our Annual Meeting theme:
‘The Power of Collaborative Innovation’,” said Klaus Schwab,
Founder and Executive Chairman of the World Economic
Forum. The Forum is currently planning to continue the video
conversation with YouTube at some of its regional meetings.
World Economic Forum Reaches Millions with the Davos Conversation
10. 8 | World Economic Forum Annual Meeting 2008
Business: Competing While Collaborating
To survive and prosper in the rapidly evolving global
marketplace, companies must win the war for
talent and innovate rapidly but also, where
appropriate, collaborate - even with the
competition.
• As worldwide markets reward swift and agile
companies, mobile technology has become a
powerful tool for empowering consumers and
connecting customers and clients with product
and service providers.
• In addition to shifts in technology, the global
business climate continues to be profoundly
affected by shifts in power from developed
economies to emerging markets including Brazil,
Russia, India and China, which are spawning
multinational companies of their own that are
effectively competing against established
corporations from the West.
• Globalization is decentralizing power, while
demographic differentials are heightening the
fight for talent.
• Web collaboration is distributive; open source
results in robustness but not innovation. How to
innovate is less complicated than discovering
what to innovate.
• The practice of corporate global citizenship is
crucial for a company to succeed in this context.
Science and Technology: Exploring Nature’s
New Frontiers
Science and technology are progressing so fast
that advances are challenging our assumptions
about the human experience. While death remains
inevitable, when and how it happens is now less of
a mystery.
• Deeper understanding of the essence of our
individuality, DNA, may help us to be more in
control of our health and lifespan. Meanwhile, the
finality of paralysis is being challenged by
developments in neurotechnology and
regenerative medicine. In addition, advances in
genetics are providing new weapons against
cancer.
• These developments are changing the rules of
the labour force, the calculus of healthcare and
our concepts of age, equality and privacy.
• Highly bespoke diagnosis and treatment is
challenging the traditional assumption that each
person needs, and is entitled to, a common slate
of medical procedures. However, patients and
doctors fear that people with a genetic
disposition to disease will face discrimination and
that employers or insurers might reject them.
• While science may decrease our mortality, the
total cost of healthcare will rise.
• Businesses are fundamentally altering the way in
which they conduct research. They are
increasingly relying on collaborative research
rather than large-scale integrated research that
invents a new technology from top to bottom.
11. 9 | World Economic Forum Annual Meeting 2008
Values and Society: Understanding Future
Shifts
Globalization’s impact on cultures, societies and
values must be the subject of deeper, more
qualitative analysis. Increasing interconnectedness
has not always led to secularization or
homogenization. Often, in fact, it has exacerbated
divisions.
• The growth of economic opportunity as a result
of globalization must be combined with a sense
of values centred on the notions of justice and
freedom to ensure its sustainability over the long
run.
• Burgeoning urban populations place enormous
strains on existing infrastructure, particularly in
Asia and Latin America. Urbanization must be
made sustainable.
• While consuming less is a difficult message in
much of the world, developing market
consumers have the economic motivation to “get
more for less” which promotes demand for
energy-efficient products.
• It is not necessarily faith that brings people into
conflict but rather politics and the pursuit of
economic and military power, as well as the
manipulation of ideology, whether religious or
secular.
• To foster cross-cultural understanding, public and
private learning institutions must work to promote
empathy. The Internet can play a critical role in
education to bridge divides.
The Forum would like to thank the distinguished
Co-Chairs of the Annual Meeting 2008, who led
many sessions and provided valuable insights and
wisdom. They were:
Tony Blair, Prime Minister of the United Kingdom
(1997-2007); Member of the Foundation Board of
the World Economic Forum
James Dimon, Chairman and Chief Executive
Officer, JPMorgan Chase & Co., USA
K. V. Kamath, Managing Director and Chief
Executive Officer, ICICI Bank, India
Henry A. Kissinger, Chairman, Kissinger
Associates, USA
Indra K. Nooyi, Chairman and Chief Executive
Officer, PepsiCo, USA
David J. O’Reilly, Chairman and Chief Executive
Officer, Chevron, USA
Wang Jianzhou, Chairman and Chief Executive,
China Mobile Communications Corporation,
People’s Republic of China
12. 10 | World Economic Forum Annual Meeting 2008
Economics and Finance:
Addressing Economic Insecurity
It might be tempting to lay the blame for the
unfolding financial crisis at the feet of bankers like
Jérôme Kerviel, the young trader whose
misadventures have allegedly cost Société
Générale US$ 7.3 billion, to castigate the supposed
greed of investment banks or to demonize the
derivatives at the heart of the turmoil. But what
became clear during discussions at this year’s
Annual Meeting was that the sub-prime crisis roiling
global financial markets is but a dramatic and
costly chapter in a much larger, more profound
story - the rebalancing of global wealth away from
the developed economies of the West towards the
emerging economies of Asia and the Middle East.
“When this is over we will wake up and realize that
the issue is that the transformation of wealth and
information and industrial activity is taking place at
a pace none of us has ever experienced,” said
Michael S. Klein, Chairman and Co-Chief Executive
Officer of Markets and Banking at Citi. Or as
Kishore Mahbubani, Dean of the Lee Kuan Yew
School of Public Policy, put it: “We are entering a
completely new era of world history – the end of
Western domination. In the Industrial Revolution
there was a rapid increase in living standards of
50% in one lifetime. In Asia today in one lifetime
you will see an increase of 10,000%.”
It may not seem like it to those watching their
portfolios plummet, but this trend is not all bad
news. The rising prosperity of the East is lifting
millions out of poverty and is even spreading to the
poorest corners of Africa. The challenge to policy-
makers and businesspeople as the crisis subsides
will be how to alleviate the more dangerous side
effects of global economic growth – rising inequities
within nations and a worsening global environment.
Climate change has underscored the limits of
development: without dramatic advances in
resource efficiency and reductions in emissions,
universal prosperity is environmental suicide. “If
everyone tries to consume the way America has
consumed, the world is not viable,” said Nobel
Prize-winning economist Joseph E. Stiglitz.
Source: Thomson Financial; press accounts
Jan
2007
AAA
A
BBB-
* ABX series 06-2. The ABX are credit default swaps based on sub-prime mortgage securities.
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Largest
sub-prime
lender declares
bankruptcy Two bulge-bracket
hedge funds reach
creditor settlement
Central banks
coordinate
first liquidity
injection
Fed Funds
cut 25 bp
SWF’s begin
bail out
of banks
Bank
run on
Northern
Rock
Fed Funds
cut 50 bp
Banks
annouce
write-downs
US Mortgage-backed Securities
Value erosion
100
80
60
40
20
0
USsub-primemortgage-backedsecuritiesprices,byrating*
“If everyone tries to consume the way
America has consumed, the world is not
viable.”
Joseph E. Stiglitz, University Professor, Columbia University,
USA
13. 11 | World Economic Forum Annual Meeting 2008
One of the most remarkable features of the current
crisis is how widely it was predicted. “A year ago
we said there was an underpricing of risk,” recalled
European Central Bank President Jean-Claude
Trichet. Indeed, participants at last year’s meeting
warned of a bubble in the US housing market and
of a worrying proliferation of complex credit
derivatives.
Underlying the flood of money into mortgage-
backed securities was a tsunami of global capital,
fuelled by growing Asian export earnings that has
helped finance America’s swelling debt and kept
global interest rates and inflation low.
This so-called liquidity bubble was good for
emerging economies, providing them with cheap
capital to pay off their debts and finance
development and trade. The boom in global growth
and investment has surpassed the resource
industry’s ability to supply it, sending prices for
commodities soaring. Record prices for oil, metals
and food have been a boon to nations that export
them.
Booming markets and easy money also put
pressure on financial managers to take greater
risks, and borrow more money, in search of higher
returns. “If you are in a risk business, one of the
easiest ways to grow is to leverage up,” observed
James Dimon, Chairman and Chief Executive
Officer of JPMorgan Chase & Co. The industry
responded with innovative collateralized debt
obligations, or CDOs, that allowed lenders to sell
their risks on to investors searching for yields, the
quest for which fuelled a boom in lending to home
buyers with poor, or sub-prime, credit.
CDOs were repeatedly repackaged and resold to
investors paying with borrowed funds, creating a
mountain of leverage that is now collapsing. What
was a liquidity bubble has instead become a
liquidity crunch as holders of CDOs search in vain
for anyone willing to buy or lend. “It’s not mistrust
that other institutions will go bankrupt,” said Walter
B. Kielholz, Chairman of the Board of Directors at
Credit Suisse, “It’s mistrust that if I lend to them
they may not lend to me, so I’ll keep my money.
And that was something that I in my career had
never seen before.”
Source: World Economic Forum
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
Suez
Cuban
Missile
Crisis
Vietnam
Oil crisis 1
Oil crisis 2
Falklands
Gulf war 1
Average
Gulf war 2
9/11
Asian crisis
Dot-com
1987 Crash
Sub-prime
Equity Market Volatility
Crash of 1987 stands out as the most volatile S&P500 event over the past 55 years
0.023
0.021
0.019
0.017
0.015
0.013
0.011
0.009
0.007
0.005
0.003
S&P500volatility(12monthstddev)
15.90%
2.20%
5.70%
11.00%
18.10%
16.70%
4.40%
7.50%
18.50%
1. Recession in the United States
2. Greater Income Inequalities
3. Rise in Energy and Commodity Prices
4. Severe Global Credit Crunch
5. Mismanagement of Current Crisis
6. Broad-based Collapse of Confidence
7. Rise of Protectionism
8. Overreaction to the Threat of Recession
9. Lack of Coordinated Response/Leadership
Results of the World Economic Brainstorming
The Greatest Threat to Global Growth
14. 12 | World Economic Forum Annual Meeting 2008
Predictably, the sub-prime debacle has sparked
calls for regulatory reform, in particular the
harmonization of regulations internationally to
prevent banks from “regulatory arbitrage”.
“Regulation is fragmented,” said Malcolm Knight,
General Manager and Chief Executive Officer at the
Bank for International Settlements. “There has to
be more conformity in the way these regulations
are implemented across jurisdictions.”
The US Federal Reserve and other central banks
are also under scrutiny. Some argue that their
efforts to pump liquidity into money markets and
lower rates to stave off recession are critical to
keep the global financial system working. Others
say such moves only reward investors for their
excesses and encourage continued American
profligacy. “The Fed’s attitude is that they are here
to clean up after bubbles burst, not prevent them
from happening in the first place,” said Stephen S.
Roach, Chairman for Asia at Morgan Stanley. “This
is a dangerous and irresponsible and reckless way
to run the world’s largest economy.”
Now there are concerns that the sub-prime
mortgage crisis will spread to other credit markets
– areas dependent on cash-strapped US
consumers such as auto loans, as well as markets
for other exotic credit derivatives.
The billions in losses suffered by banks and other
investors could go so far as to reduce credit
available to corporations to invest. The real
question, however, is what impact falling housing
prices will have on US consumers and the global
economy. While policy-makers extolled the
resilience of the US economy, many economists
predict a US recession, which could lead to a
sharp slowdown in demand for raw materials and
manufactured exports and with it slower global
growth. If that happens, countries and regions with
stronger fiscal positions, like China, East Asia and
Latin America are likely to be able to cushion
themselves better than those with heavy overseas
debt, like Eastern Europe.
But a sharp debate took place between those who
say the world still depends on US demand and
those who believe that the emerging markets’
boom has produced enough momentum that,
combined with Europe and Japan, the world is less
reliant on the US. “When the US catches a cold,
maybe the rest of the world catches a sniffle, but
certainly not pneumonia,” noted C. Fred Bergsten,
Director of the Peterson Institute for International
Economics. On the contrary, Bergsten argued that
the world may experience its first episode of
“reverse coupling” in which reasonably rapid growth
in China and other economies softens and shortens
the US downturn.
Perhaps the best indication of the changing
balance of economic power, though, is the list of
who has been bailing out the big banks wounded
by the sub-prime fiasco. Swollen with revenues
from oil, electronics and public savings, sovereign
wealth funds have become the latest global
financial force, sparking concern that they may
have more than profits in mind as they buy up
strategic assets in developed countries.
Bankers point out that sovereign wealth funds have
been ideal investors, taking only small stakes and
serving as silent, long-term investors. Moreover,
their investments help ensure that some of the
money spent on oil and electronics finds its way
back to the US. Nonetheless, scepticism has
emerged about whether the funds’ owners –
particularly those that are non-democratic
governments – would refrain from interfering if their
national interests were at stake.
$700
600
500
400
300
200
100
0
Largest Sovereign Wealth Funds
Over US$ 2 trillion held by the largest SWFs
Source: Standard Chartered (2007)
Assets,2007(US$,billions)
UAE(AbuDhabi)-ADIA
Norway
Singapore-GIC
Kuwait
China-CIC
Russia
Singapore-Temasek
Qatar
US(Alaska)
Brunei
S.Korea
Malaysia
Venezuela-NDF
Canada(Alberta)
Taiwan
Kazakhstan
Chile
UAE(Dubai)-Istithmar
UAE(Dubai)-DIC
Oman
“We are entering a completely new era
of world history – the end of Western
domination. In the Industrial Revolution
there was a rapid increase in living
standards of 50% in one lifetime. In
Asia today in one lifetime you will see
an increase of 10,000%.”
Kishore Mahbubani, Dean, Lee Kuan Yew School of Public
Policy, Singapore
15. 13 | World Economic Forum Annual Meeting 2008
Ultimately, however, the wealth of exporters alone
will not solve the enduring problems confronting the
global economy. Charting a more equitable and
sustainable course will require long-term
investments in human capital, education, health
and environmental protection. Conventional models
of corporate investment and development are not
adequate. “The world is getting better, but it’s not
getting better fast enough, and it’s not getting
better for everyone. We have to find a way to make
the aspects of capitalism that serve wealthier
people serve poorer people as well,” said William
H. Gates III, Chairman of Microsoft Corporation. “If
we’re going to find a sustainable way to help those
who can’t pay, we have to use self-interest and
caring – capitalism and philanthropy – to direct
attention to people who have been left behind.”
Source: Standard Chartered (2007)
Top Sovereign Wealth Funds
StrategicConventional
Investmentapproach
Level of transparencyLow High
Perceived levels of transparency and investment approaches vary
UAE (Dubai)-DIC
UAE (Abu Dhabi)-ADIA
Brunei
Oman
Kuwait
Taiwan
Venezuela-NDF
Russia
Kazakhstan
S Korea
Singapore-GIC
Singapore-Temasek
Malaysia
Norway
US (Alaska)
Chile
Canada (Alberta)
UAE (Dubai)-Istithmar
Qatar
China
Algeria
Libya
Commodity fund
Non-commodity fund
Over US$ 500 billion
US$ 250-500 billion
US$ 100-250 billion
<US$ 100 billion
Assets (2007):
“When this is over we will wake up and
realize that the issue is that the
transformation of wealth and
information and industrial activity is
taking place at a pace none of us has
ever experienced.”
Michael S. Klein, Chairman and Co-Chief Executive Officer,
Markets and Banking, Citi, USA
The rising importance of sovereign wealth funds (SWFs)
received much attention at the World Economic Forum
Annual Meeting 2008, fuelling concern about their
potential political influence. Many agreed that the
growing financial clout of SWFs – government-
controlled funds estimated at US$ 2.5 trillion in assets –
should be welcomed, not opposed, by global policy-
makers because:
• SWFs represent a valuable pool of stable, long-term
capital, and have reduced, rather than increased,
capital market volatility.
• SWFs not only contribute to domestic economic
stability but to the stability of the global economy as
well.
• There is virtually no difference between going to a
SWF for investment capital and going to a state
pension fund in the US.
• If high oil prices continue to channel surplus funds
into the coffers of the major exporting countries,
sovereign investments could reach US$ 15 trillion
within the next five years. This growth will inevitably
make SWFs major players in the global capital
markets.
Sovereign Wealth Funds: A New Development
“So far as we can see, these investments
have been made on commercial, not
political grounds. We welcome that type
of investment, whether it is from an SWF
or anyone else.”
Robert M. Kimmitt, US Deputy Secretary of the Treasury.
16. 14 | World Economic Forum Annual Meeting 2008
Geopolitics: Aligning Interests Across Divides
Collaboration is most certainly the best way to
develop effective approaches to these many global
risks. But cooperation among nations will be
insufficient if the responses involve obsolete tools of
diplomacy and statecraft – commissions that report
but do not act, resolutions and declarations with no
bite, international protocols that major powers
refuse to sign, or multilateral organizations which
key nations can opt out of or undermine with a
veto or refusal of funding. The global governance
institutions that exist today are legacies of the post-
World War age and the cold war era. They are not
equipped to tackle the challenges of a multipolar
world, are simply too weak, or are hobbled by the
burden of lowest denominator consensus.
“The United Nations is often a bystander on
geopolitical issues,” said Nandan M. Nilekani,
Executive Co-Chairman of Indian IT group Infosys
Technologies. “The Security Council is still
structured with members from 60 years ago. The
G8 is still not ready to expand its membership to
include the new countries. The World Bank is
finding that its capital flows are dwarfed by private
capital and it’s time to find a new role in this world.
The IMF voting patterns are based on 60-year old
rules. The Doha Round of trade discussions has
been going on for the last 10 years. When we look
at every dimension of global coordination we find
that there is not enough coordination happening
and things are just falling apart.”
To prevent such a breakdown requires collaborative
innovation. In business, “innovation”, strictly
speaking, is the turning of a concept into
commercial value. Applying innovation in
geopolitics is the turning of an idea – a new policy
or approach – into valuable results, or viable
solutions. “The power of collaborative innovation,”
said former British Prime Minister Tony Blair in
advance of the Annual Meeting, “is the answer to
all the big global challenges we are facing.”
The linkages among issues means that any
effective approach to a problem will require action
across several fronts and by many actors including
business, civil society and citizens. Nobel Peace
“There is not one challenge in the
world today that will get better if we
approach it without confidence in the
appeal and effectiveness of our ideals –
political and economic freedom, open
markets and free and fair trade, human
dignity and human rights, equal
opportunity and the rule of law.”
Condoleezza Rice, US Secretary of State
17. 15 | World Economic Forum Annual Meeting 2008
Prize laureate Al Gore and Irish musician Bono
made this point as they underscored the
connection between climate change and poverty.
Gore argued that individual actions to conserve
energy were not enough to deal with the climate
crisis. “They’re important and making changes of
those sorts can build a political consensus,” he
explained. “But, in addition to changing the light
bulbs, it is far more important to change the laws
and the treaty obligations that nations have.”
Many government leaders at the Annual Meeting
including Blair stressed that the Israeli-Palestinian
conflict and the stability of the Middle East is not
simply a matter for politicians and diplomats. It
impinges on the rest of the world because of its
motivational link to global terrorism and its impact
on energy markets. The international business
community obviously needs to support the peace
process for it to succeed.
It was in the series of sessions on water,
particularly the WorkSpace session, that the urgent
need for collaborative and innovative approaches
was most evident. Ignorance of the many problems
associated with water supply in the world and
inaction are already having severe consequences –
conflict, malnutrition, displacement, disease and
death. “Water is today’s issue; it is the oil of this
century,” warned Andrew N. Liveris, Chairman and
Chief Executive Officer of Dow Chemical Company.
Added UN Secretary-General Ban Ki-moon: “Too
often where we need water we find guns instead.”
Per Capita Water Consumption Worldwide
Source: IFPRI and IWMI, "Global Water Outlook to 2025: Averting an Impending Crisis" (2002)
Cubicmetresperpersonperyear
Per capita water consumption rising in both developed and developing countries
60
50
40
30
20
10
0
Developed countries
1995 2025 1995 2025
Deveoping countries
“Water is today’s issue; it is the oil of
this century.”
Andrew N. Liveris, Chairman and Chief Executive Officer, Dow
Chemical Company, USA
18. 16 | World Economic Forum Annual Meeting 2008
But is the new brand of leadership – the kind that is
focused on finding collaborative and innovative
solutions – for real? To be sure, we have seen the
application of collaborative innovation in the past.
The creation of the UN peacekeeping forces, the
establishment of the International Criminal Court,
the conclusion of landmark conventions such as
the Law of the Sea and the global banning of
landmines were collaborative innovations in their
time. Today, it is critical to apply collaborative
innovation to even bigger geopolitical challenges.
Two immediate tests of whether this concept is
more than a Davos ideal are the challenges of
concluding a post-Kyoto international framework
for mitigating global warming and resolving the
Israeli-Palestinian conflict by the end of this year. It
is far from clear that these two goals can be
achieved. What is clear is that nations are
beginning to understand that business as usual is
simply unacceptable. “Globalization is forcing
changes in how people collaborate in a
fundamental way,” said Blair. “You need stronger
and stronger collaborative political leadership.” The
“good news” is this, he concluded: “If we are
interconnected and the world is interconnected, the
only way for the world to work is to have a set of
common values. We have no option but to work
together.”
At the Annual Meeting, geopolitical collaborative
innovation was very much on display in the ASEAN
session, with three heads of government, six
ministers and the organization’s secretary-general
on the Congress Hall stage. It was a bold
statement by 10 disparate countries that, while
they may have different cultures, traditions and
histories, and while they may have even fought
each other on the battlefield, they share a common
future. Indeed, they must – and not just because by
joining forces in an ever-closer union they become
a more powerful market or a more attractive
destination for foreign direct investment, but
because only by banding together can they fully
and effectively address the multiple risks that
threaten the future of their people.
And it is not just nation states that have to sit at the
table. In session after session, the message of
inclusiveness was clear: business and civil society
must join with government. The only way for the
ideal of collaborative innovation to be a reality – as
it must be – is for the international community to
set common values to underpin a globalization that
is fair and just.
A group photo in Davos said more than any of the
statements the assembled public figures gave in
support of the renewed push by the United Nations
19. 17 | World Economic Forum Annual Meeting 2008
to achieve the Millennium Development Goals
(MDGs). Together with UN Secretary-General Ban
Ki-moon stood Nigerian President Umaru Musa
Yar’Adua, British Prime Minister Gordon Brown,
H.M. Queen Rania Al Abdullah of Jordan, Microsoft
Chairman and global philanthropist Bill Gates, Irish
musician Bono and Cisco Systems Chairman and
CEO John T. Chambers. This creative coalition,
they declared, was necessary to reinvigorate the
international community’s flagging campaign. “The
goals look like they’re not going to happen, and the
G8 commitments made in 2005 look like they will
not come off,” Bono complained. “This is a
scandal.”
This unprecedented gathering to rally the
international community was emblematic of the
new geopolitics that globalization has spawned.
The greater interconnectedness of the world has
begotten a host of interconnected problems that
the old nation-state model was never meant to deal
with. Climate change, terrorism, regional conflict
and the rapid spread of infectious diseases are only
some of the modern global challenges that require
multiple approaches and the attention of multiple
actors. As the problems have expanded in scope,
so too have the number of players needed to
tackle them.
Cynics and devotees of zero sum diplomacy may
dismiss the idea of collaborative innovation as
simplistic or naïve. Certainly, the power of this
approach will be tested in a world where recidivism
lingers. At the Annual Meeting, formidable voices
spoke of the residual ills of colonialism and took a
hard line on the enmities of a bygone age. History,
of course, cannot be denied. But if the state of the
world is to improve, then those truly committed to
improving it cannot waste time eschewing the balm
of forgiveness for the false satisfaction of revenge
and the easy languor of dwelling on past injustice.
Instead, to forge ahead, as South Africa did after
the end of apartheid, they should pursue truth and
reconciliation – collaborative innovation at its finest.
Water emerged as one of the dominant themes at the World
Economic Forum Annual Meeting 2008. No individual, firm or
nation can escape the consequences of water scarcity.
“The challenge of securing safe and plentiful water for all is
one of the most daunting challenges faced by the world
today,” said UN Secretary-General Ban Ki-moon. He told
leaders in Davos that water stress poses a risk to economic
growth, human rights, health, safety and national security,
and that water shortages can lead to conflict, such as in
Darfur and other parts of the world.
Many participants, however, agreed that the water challenge
could be solved, using collaborative approaches, political will,
market mechanisms and innovative technology like those
which arose in response to global warming.
The resource is often wasted because it has no economic
value, despite being the most precious and scarce resource
of all, said Peter Brabeck-Letmathe, Chairman and Chief
Executive Officer, Nestlé, Switzerland. “If we allow market
forces to play a role in how to define the value of water, we
could take a big step forward.”
Efforts to extract more and alternative energy sources such
as shale oil or biofuels only speed the depletion through their
own requirements for water. But, it was suggested that
market forces could work well under a cap and trade
approach similar to those applied to carbon dioxide.
Securing Water for the Future
20. 18 | World Economic Forum Annual Meeting 2008
Business: Competing While Collaborating
French poet Paul Valéry might have been
forecasting for today’s multinational corporation
when he said that “the trouble of our times is that
the future isn’t what it used to be.” New mobile
communications technology and Internet
advertising are revolutionizing the way business is
done. Economic power is shifting away from the
West, and corporations in other parts of the world
are emerging as new champions. To survive and
prosper in the rapidly evolving global marketplace,
companies must win the war for talent, innovate
rapidly, but also, where appropriate, collaborate
effectively. Good corporate citizenship will also
attract customers, especially if such citizenship
underpins business models themselves.
In short, worldwide markets reward swift and agile
companies, and those that win the race for talent
and customers must be responsive to both. To be
truly responsive, corporations must be good as well
as great.
Mobile technology is changing the way businesses
interface with customers, and the way customers
interface with one another. In China, home to the
world’s largest mobile network, this is particularly
true. “On New Year’s Day, we had about 5 billion
SMS New Year’s greetings,” said the man who runs
the network, Wang Jianzhou, Chairman and Chief
Executive, China Mobile Communications
Corporation.
Worldwide, mobile phone owners total 3 billion and
may reach 4 billion in the next four years. “We’ve
been talking about the mobile Internet and mobile
stuff for a very long time. And it’s obvious that with
3 billion people and ... hundreds of millions of very
high-end mobile phones, that there’s going to be a
huge revolution,” said Eric Schmidt, Chairman of
the Executive Committee and Chief Executive
Officer of Google Inc.
A parallel technological revolution is taking place in
advertising, with Internet and mobile ads surging
“We’ve been talking about the mobile
Internet and mobile stuff for a very long
time. And it’s obvious that with 3 billion
people and hundreds of millions of very
high-end mobile phones, that there’s
going to be a huge revolution.”
Eric Schmidt, Chairman of the Executive Committee and Chief
Executive Officer, Google, USA
21. 19 | World Economic Forum Annual Meeting 2008
and traditional television ads waning. The future is
particularly bleak for old print advertising, but viral
marketing continues to grow as a cost-effective
alternative. Research is needed to determine what
types of Internet advertising work best.
In addition to shifts in technology, the global
business climate continues to be profoundly
affected by shifts in the location of power. The
emerging markets of Brazil, Russia, India and China
are drawing huge capital investments, and have
spawned innovative multinational corporations that
compete on an even footing with established
companies from the developed world. “We were
bold, we were passionate in what we believed, we
persevered, we were committed, and underpinning
all of that was a sound business strategy,” said one
such new champion, Aditya Mittal, Chief Financial
Officer of ArcelorMittal Limited and Young Global
Leader.
India in particular holds the potential for
tremendous growth. Since reorienting from a
command economy to one driven by
entrepreneurship, India has given birth to countless
innovations, and Indian corporations have scaled
up their research and development budgets
exponentially. However, for India to sustain its
growth over the long term, it must make sure that
the 550 million of its citizens under age 24 have
adequate skills training for the future. It must also
address the needs of the half of the Indian
population that survives on less than a dollar a day.
Globalization is decentralizing power, a trend visible
not just in the shift away from the West, but also in
the shift of influence away from CEOs and towards
customers and employees. To survive and prosper,
successful multinationals must be ready to
collaborate effectively.
The world is currently undergoing a demographic
shift that amounts to an earthquake for business.
With much of the planet experiencing a youth
bulge, rates of mortality and fertility are falling in the
developed world, with average life expectancy
projected to reach 100 by the end of the century. In
Europe, talent is increasingly mobile and thus tough
to retain: employees between the ages of 25 and
34 spend an average of just 2.9 years in a job. In
Africa, a surplus of workers is driving immigration to
the north.
To retain talent, management must demonstrate
empathy for its needs and create attractive
workplaces. Corporate boards must be diverse,
and CEOs must be able to manage across political
and cultural boundaries. Increasingly this means
recruiting leadership from countries outside of
Europe and North America.
22. 20 | World Economic Forum Annual Meeting 2008
Customers are also enjoying more clout than ever,
as businesses vie to learn from, and respond to
their needs. “There has been a massive shift in
power to the consumer,” said Mark G. Parker,
President and Chief Executive Officer of Nike. “And
the other thing that’s changed is the relationship
isn’t just a company like Nike just communicating
out to a consumer; it’s a dialogue.”
In an economy where a knowledge base is
increasingly replacing a manufacturing base, and
where the Internet is breaking down corporate
walls, collaboration also means sharing information.
“We have to fundamentally decide whether you
want closed networks or open networks: closed
Source: New York Times; London Chamber of Commerce and Industry; press reports; company websites
Foreign-born CEOs
35%
30
25
20
15
10
5
0
PercentageofCEOswhoare
foreign-born,asof12Dec2007
FTSE 100 (UK) CAC 40 (France) Fortune 100 (US)
One-third of FTSE 100 CEOs were born outside of the UK
Xetra Dax (Germany)
networks are islands,” said Schmidt, while “an
open Internet produces more content, more users,
more revenue, more competition, more choices,
more growth.”
The world’s top 1,250 companies spent 10% more
on research and development in 2006 than they
did in 2005; but most innovation now comes
through collaboration with employees, customers
and business partners. Still, the growing open
source community must not mean a total erosion of
intellectual property rights. Excessive IP regulation
will stifle growth; but forehanded policies that
nurture future innovation rather than protect past
methods will make happy shareholders.
Finally, shareholders also respond to prudential
corporate global citizenship, and companies that
succeed must be good as well as great. By
partnering with governments and civil societies and
working within core competencies, companies can
greatly benefit societies and improve their bottom
lines. One Edelman study of 5,000 consumers in
“There has been a massive shift in
power to the consumer.”
Mark G. Parker, President and Chief Executive Officer, Nike,
USA
23. nine countries found that 70% would pay more for
a socially or environmentally responsible brand. But
such responsibility must be integrated into the
essence of the companies - and emblazoned in the
hearts of its employees - for it to resonate with
consumers.
“It’s not what you do with your money after you’ve
earned it that matters,” said H.M. Queen Rania Al
Abdullah of the Hashemite Kingdom of Jordan, a
Member of the Foundation Board of the World
Economic Forum. “But it’s how you’ve earned the
money that determines your success and your
value added to society.”
Stakeholders' Impact on Corporate Responsibility
Source: Feb 2007 McKinsey survey of 391 CEOs whose companies participate in the UN Global Compact
CEO Survey: Which of the following stakeholder groups have/will have the
greatest impact on the way your company manages societal expectations?
Note: Respondents could select as many as three stakeholders
60%
50
40
30
20
10
0
Percentageofrespondents
Employees
Consumers
Governments
Local
communities
Regulators
Media/opinion
leaders
NGOs
Boards
Investment
community
Organized
labour
Suppliers
Now
Next5years
2008: “Make or Break” Year for
Doha Trade Talks
After more than six years of stop-start
negotiations, the Doha talks between members
of the World Trade Organization (WTO) have
ground to a halt. With less than a year before US
President George Bush leaves office and with
fears growing of a global economic recession,
time is may be running out for reaching an
agreement to reduce tariffs, subsidies and
promote freer and fairer trade.
Despite important progress on technical issues
over the past six months, trade experts at the
World Economic Forum Annual Meeting 2008
said that WTO members remain no closer to an
agreement. In particular, concerns persist among
developing countries that lower tariffs will unfairly
expose poor rural farmers to global competition
and jeopardize growth that would be a potential
buffer against a global slowdown. Not reaching a
deal in 2008 would “give the wrong signals to
the global economy. And this will be detrimental
to everybody, most of all the developing
economies,” said Celso Amorim, Minister of
Foreign Relations of Brazil.
Failure in the Doha Round would also likely
increase protectionist pressures around the
world and result in a rollback from the progress
already made towards freer global trade. Pascal
Lamy, Director-General, World Trade
Organization (WTO), Geneva, said a failure in the
talks could exacerbate the impact of a slowing
global economy and heighten geopolitical
tensions.
21 | World Economic Forum Annual Meeting 2008
24. 22 | World Economic Forum Annual Meeting 2008
Science and Technology:
Exploring Nature’s New Frontiers
We are born, we die. For the duration of our lives,
we share this assumption about our common
mortality. We plan our affairs and measure our
success against a traditional lifespan - career,
marriage, children, retirement. Our universal frailty
binds us, rich and poor, to the knowledge that at
some point we all get sick and perish. We just
don’t know how. Or when.
But in a series of off-the-record discussions with
top scientists, participants at the Annual Meeting
heard about how science is progressing so fast
that it is challenging our assumptions about the
human experience. Death remains inevitable, but
the when is being pushed out by advances in
medicine. The how, too, may now be less a
mystery than a probability. By unravelling the very
essence of our individuality, DNA, we may be able
to forestall the inevitable, cheat death and alter
what we once simply accepted as grim fate.
HIV/AIDS
Other
Heart disease
Cancer
Other
Tuberculosis
Diabetes
Major Causes of Death
Chronic diseases account for 60% of fatalities worldwide*
Source: WHO
Injuries
Chronic
diseases
* segment sizes indicate the share of world fatalities in 2005
Infectious
diseases
Malaria
In practical terms, these developments are sure to
have a profound impact, altering the rules of the
labour force, the calculus of healthcare, our
concepts of age, of equality and of privacy. They
will eventually force us to consider what the human
body is and what constitutes a full life. If nothing
else, science is outpacing the public’s ability to
understand its accomplishments and weigh the
implications.
The finality of paralysis, for example, is being
challenged by developments in neurotechnology
that link the brain directly to machines. Once, a
severed spinal cord was irreparable. But by
implanting electrodes in the brain, doctors have
been able to allow at least one paraplegic to
operate a robotic arm and surf the Internet with
only his thoughts. Cochlear implants can now
restore hearing in many people. Deep brain
stimulators are being used to treat epilepsy and
Parkinson’s disease. Retinal prostheses have been
used successfully to restore sight.
Such developments hold out the possibility that
robotic limbs could be controlled by the wearer’s
brain to restore natural motion. Advances in
bioengineering are already creating prostheses that
allow almost natural movement, and even let their
wearers regain the ability to feel pressure and
weight. Soon, artificial legs will not only allow
patients to walk on the beach, but to feel the sand
beneath their feet. New biomaterials could allow
doctors to regrow nerves entirely.
25. 23 | World Economic Forum Annual Meeting 2008
These developments hold out hope to accident
victims, paraplegics and amputees, as well as to
victims of diabetes and strokes. Some wonder,
however, how long it will be before synthetic body
parts become part of the cosmetic surgeon’s
arsenal, allowing us to enhance not only our
appearance but also our performance.
Advances in genetics, meanwhile, are providing
new weapons in the fight against cancer.
Biomarkers can now be used to identify individuals
at risk and treat them. By exploring the genome,
scientists expect to uncover the primary reasons
for virtually all common diseases within the next five
years. Using their understanding of the genome,
scientists are compiling a cancer genome atlas that
identifies which genes control susceptibility to
certain cancers. Researchers have already
identified genes that control the risk of adult-onset
diabetes, asthma, breast cancer, hypertension,
macular degeneration, prostate cancer and heart
disease.
Greater understanding of genetics promises to
revolutionize medicine, allowing doctors to develop
therapies that pinpoint afflicted areas - even
individual cells in the body. Genetics already make
it possible for physicians to compile treatments
tailored to each patient - “genomic medicine”. An
account of the medically significant genes in a
person’s DNA is now available for about US$
1,000.
Insurers and regulators expect that such
individualized treatments will save them money,
even though they are likely to cost individual
patients much more. Genomic medicine also poses
a challenge to the conventional model for drug
discovery and development: clinical trials for a
market of one are impossible and lack the scale
companies need to justify investing in developing
such treatments. Scientists say this is likely to force
profound changes to the pharmaceutical industry,
perhaps favouring smaller companies that can
Source: The Milken Institute, “An Unhealthy America: The Economic Impact of Chronic Disease" (2007)
Forecast Avoidable Costs of Chronic Disease
Avoidablecosts(US$,billions)
$500
400
300
200
100
0
Cancer
Note: Avoidable costs are those that could be eliminated by reasonable improvements in behaviour and treatment. Direct costs
are treatment costs. Indirect impacts are losses in output due to absenteeism, “presenteeism” and other productivity reductions
Heart
Disease
Hypertension Mental
Disorders
Diabetes Pulmonary
Conditions
Stroke
In the US, the avoidable indirect impacts (ie, productivity losses)
of chronic disease are four times as high as the direct costs
Indirect
impacts
Direct
costs
serve in a role akin to Hollywood producers,
assembling different scientific actors and specialists
to crack a specific medical problem.
The concept of personalized diagnosis and
treatment also challenges the traditional
assumption that each person needs, and is entitled
to, certain common medical procedures. They also
pose a problem for conventional healthcare
systems, which rest on democratic principles of
equality – the expectation that all citizens should be
treated the same. The value of genetic analysis lies
in the fact that one patient should not be treated
like another.
Patients and doctors fear that people with a
genetic predisposition to disease will face
discrimination, that employers or insurers might
reject them. Genetic revelations also present
another ethical dilemma: whether the knowledge of
a likely illness will improve one’s quality of life. Does
informing a patient they are likely to develop an
incurable and fatal disease within the next decade
help them? How will it affect their role in society?
Science may ensure our lives are longer, but will
they necessarily be fruitful? By decreasing our
mortality, the total cost of healthcare will rise. As we
are better able to prevent and bounce back from
acute injury and disease, health systems will need
to shift attention to the rising cost of chronic
diseases such as diabetes, obesity and other
lifestyle-related diseases like lung cancer.
Governments are already stepping in to limit factors
contributing to chronic disease: banning smoking,
for example, or unhealthy foods. New York City
monitors diabetics’ blood-sugar levels to reduce
treatment costs, while Japan plans to require yearly
medical checkups for citizens over 50. The burden
of chronic disease is so large, many say, that it
could alter cultural traditions about which
behaviours are private and which are the concern
of society at large. Medicine may become more
personalized, but your health will become a matter
of public interest.
16%
12
8
4
0
Public and Private Health Expenditures
Healthcare spending was over 15% of GDP in the US in 2004
Source: WHO
HealthexpenditureasapercentageofGDP,2004
China India Japan France US
PublicPrivate
26. 24 | World Economic Forum Annual Meeting 2008
Values and Society: Understanding Future Shifts
Shifts happen - but some shifts are easier to see
than others. We frequently study globalization
through such measurements as trade, capital flows
or labour movements. But globalization’s impact on
cultures, societies and values calls for a much
deeper, more qualitative analysis. While some argue
that the global marketplace tends to whitewash
regional differences, increasing interconnectedness
between cultures has not always lead to
secularization or homogenization. Often, in fact, it
has exacerbated divisions. For the next century to
be one of peace and prosperity, societies must
adapt to such trends as urbanization, and adopt
new paradigms for intercultural relations, education
and even nutrition.
The danger lies in a situation where this does not
happen, and “people see globalization as
something done to them rather than something
that, if it is guided by the right value system,
actually can bring about a more just world,” said
former British Prime Minister Tony Blair. “And so I
think you have got to combine this economic
opportunity with a sense of values that are around
notions of justice as well as notions of freedom.”
For many, principles continue to be defined by faith.
“You can’t really have modernization without
values,” said Theodore Cardinal McCarrick,
Archbishop of Washington DC (2001-2006). “And
where do the values come from? They come from
our religious traditions.” While some in the 20th
century predicted a secular future, today the
opposite is true, with adherents to Islam and
Christianity comprising over half of the world’s
population. And while strife in the Middle East
dominates headlines, war is not a necessary by-
product of religious pluralism. “Very often, it is not
faith which brings us into conflict,” said Abdullah
Ahmad Badawi, Prime Minister of Malaysia. “It is
politics and the pursuit of economic and military
power, and the violent reactions they produce. It is
often the manipulation of ideology, whether religious
or secular.”
To foster cross-cultural success, both public and
private learning institutions must promote empathy
and understanding. The Internet represents the
greatest change, and holds the greatest
educational potential, as an increasing number of
students in the developed world are graduating
with degrees from online programmes. The new
technology provides great hope for democratizing
access to education. But for the bottom billion
worldwide, with no access to the Internet, even
primary education is out of reach. Today, 800
million adults cannot read, and over 200 million
children toil in the workplace rather than study in a
school. Government, business and civil society
share a collective burden to ensure that no child,
anywhere in the world, is left behind.
“Very often, it is not faith which brings
us into conflict. It is politics and the
pursuit of economic and military power,
and the violent reactions they produce.
It is often the manipulation of ideology,
whether religious or secular.”
Abdullah Ahmad Badawi, Prime Minister of Malaysia
27. “There is no contradiction between
modernization and faith if they are
rooted in values.”
Mahdi Hadavi, Founder and President, Porch of Wisdom
Cultural Institution, Islamic Republic of Iran
25 | World Economic Forum Annual Meeting 2008
Worldwide, the most striking societal shifts are
happening around urban areas. Today, over half the
world lives in a city; by 2050, the fraction is
expected to top three-quarters. Making urban
environments safe and sustainable requires not only
enlightened leaders but also a supportive private
sector and mobilized citizenry.
Burgeoning urban populations place enormous
strains on existing infrastructure, particularly in Asia
and Latin America. “If we think the situation is bad
now,” said Terry Hill, Chairman, Arup Group of the
United Kingdom, “we should think about what is
coming. Every city we know is experiencing stress
on its infrastructure, yet everyone wants to live in a
city.” Public and private sectors must work together
to provide upgrades, understanding that a road is
not just a project but also a means to foster
accessibility, a hospital not just a cost but also an
investment in a healthy society.
Source: "Which are the largest city economies in the world and how might this change by 2020?",
PricewaterhouseCoopers
>US$1 trillion
US$ 500 billion - 1 trillion
US$ 250 billion - 500 billion
Estimated GDP (US$, 2005, PPP)
2005 2010 2015 2020
Eight cities join the ranks of urban economic powerhouses, half from the US and half from developing countries
City Economies in 2010
Urbanization must also be made sustainable. If the
world is to stem the effects of climate change, then
cities must lead the way. Already, 786 mayors have
signed a “local” Kyoto Protocol, pledging to reduce
carbon emissions by 20%. Some mid-sized cities
have outpaced megacities in their reforms. San
Francisco, for example, now boasts a recycle rate
of nearly 70% on all waste products. Other cities
are aiming to enhance public transportation and
have begun offering incentives for clean and
efficient energy sources.
Global food chains are also evolving in tandem with
the urban landscape. New tastes, menus and diets
are pushing local food manufacturers into
unsustainable monocultures. New consumer trends
burden not only national healthcare systems, but,
through its supply chain, ecological systems as
well. Certain distributors are partnering with small,
local farmers to provide healthy products through
sustainable agriculture. But consumers must vote
for those products with their forks, if they are to
make the new supply chains viable.
Overall, while societal shifts brought on by
globalization may seem beyond our control, we can
manage change by adhering to a common set of
underlying principles. “Globalization is a fact,”
concluded Blair, “but the values that govern it are a
choice.”
28. 26 | World Economic Forum Annual Meeting 2008
T h e W o r k S p a c e
The WorkSpace – the workshop with a difference – draws out the collective intellect and creative
capabilities of participants to explore concrete opportunities for improving the state of the world.
The WorkSpace put the Annual Meeting theme – The Power of Collaborative Innovation – into action. Participants collaborated
to find new ways of tackling some of the most critical issues on the global agenda for 2008.
29. 27 | World Economic Forum Annual Meeting 2008
Below are insights from just four of a series of sessions in the WorkSpace. To view all photos, graphics and summaries from
the WorkSpace at the Annual Meeting 2008, visit www.weforum.org/annualmeeting/workspace.
30. 28 | World Economic Forum Annual Meeting 2008
Acknowledgements
ABB
ABN AMRO Bank
Accel Partners
Accenture
Alcoa
AMD
American International Group
(AIG)
Apax Partners
ArcelorMittal
AT&T
Audi
Avaya
Bahrain Economic Development
Board
Bain & Company
Barclays Capital
Basic Element
Bombardier
Booz Allen Hamilton
The Boston Consulting Group
BP
BT
Burda Media
CA
Cerberus Capital Management
Chevron Corporation
Cisco Systems
Citi
Clayton, Dubilier & Rice
Clifford Chance
The Coca-Cola Company
Credit Suisse
Deloitte
Deutsche Bank
Deutsche Post World Net
Dubai Holding
Dubai World
DuPont
E*TRADE FINANCIAL
Electricité de France (EDF)
Emirates Group
Ernst & Young
Fluor Corporation
Forbes
Goldman Sachs
Google
Heidrick & Struggles
HP
HSBC
Infosys Technologies
Intel Corporation
Investor
JPMorgan Chase
KPMG
Kudelski Group
Lehman Brothers
Lenovo
McKinsey & Company
Manpower
Marsh & McLennan Companies
(MMC)
Merck & Co.
Merrill Lynch
METRO Group
Microsoft Corporation
Morgan Stanley
Mubadala Development
Company
NBC Universal
Nestlé
Nike
NYSE Euronext
The Olayan Group
PepsiCo
PricewaterhouseCoopers
Reliance Industries
Renault-Nissan
Reuters
Roland Berger Strategy
Consultants
Saudi Basic Industries
Corporation (SABIC)
Siemens
Silver Lake
SK Group
Standard Chartered
Swiss International Air Lines
Swiss Re
Travelport
UBS
Unilever
UPS
VimpelCom
Volkswagen
VTB Bank
WPP
Xenel Group
Zurich Financial Services
The World Economic Forum
would also like to thank Dogan
Holding, Dogus Group, Invest In
France Agency, Koç Holding,
Sabance Holding and Swarovski
for their support.
The World Economic Forum would like to thank its Strategic Partners for their valuable support of the World
Economic Forum Annual Meeting 2008:
32. 30 | World Economic Forum Annual Meeting 2008
Contributors
W. Lee Howell is Senior Director, Head of Asia and Global Agenda. Sheana Tambourgi is
Director, Head of Annual Meeting Team. Stephanie Janet is Director, Head of Annual Meeting
Operations. Stéphanie Nassenstein is Senior Team Coordinator, Global Agenda.
The report writers were Wayne Arnold, Alejandro Reyes and E. Benjamin Skinner.
The Annual Meeting Programme is prepared by Irene Casanova, Economics; Nathalie Cerutti,
Faculty Management; Agustina Ciocia, Global Competitiveness; Lena Hagelstein, Geopolitics;
Paola Hjelt, Values, Arts and Culture; Nour-Eddine Iguimdrane, WorkSpace; Jasmin Lamrani,
Partnering Against Corruption; Emma Loades, WorkSpace; Kali Galanis, WorkSpace; Dorothée
Ozzello, Public-Private Partnerships; Pearl Smandari, Global Competitiveness; Tiffany West,
Business; and Christian Zellner, Science and Technology.
Associate Director, Editing: Nancy Tranchet
Design and Layout: Kamal Kimaoui, Associate Director, Production and Design
Photographs by swiss image.ch and Richard Kalvar/Magnum
Special thanks to PricewaterhouseCoopers for their help in preparing data and statistics
underpinning this report.
The World Economic Forum would like to express its appreciation to the summary writers for
their work at the Annual Meeting 2008. Session summaries are available at:
www.weforum.org/annualmeeting/summaries2008
33. 31 | World Economic Forum Annual Meeting 2008
This publication is also available in electronic form on the World Economic Forum website at the following
address:
www.weforum.org/pdf/summitreports/am2008
The Report is also available as a PDF at: www.weforum.org/pdf/summitreports/am2008.pdf
Other specific information on the World Economic Forum Annual Meeting 2008 can be found on the following
links:
Annual Meeting www.weforum.org/annualmeeting
Annual Meeting Programme www.weforum.org/annualmeeting/programme
Davos Conversation www.weforum.org/davosconversation
Davos Question www.youtube.com/davos
Interviews www.weforum.org/annualmeeting/interviews
Knowledge Concierge www.weforum.org/annualmeeting/knowledgeconcierge
Open Forum www.weforum.org/openforum
Partners www.weforum.org/annualmeeting/partners
Photographs www.flickr.com/photos/worldeconomicforum/sets
Press releases www.weforum.org/pressreleases
Session Summaries www.weforum.org/annualmeeting/summaries2008
Webcasts, Podcasts & Vodcasts www.weforum.org/annualmeeting/webcasts
WorkSpace www.weforum.org/annualmeeting/workspace
34. The World Economic Forum is an independent
international organization committed to improving
the state of the world by engaging leaders in
partnerships to shape global, regional and
industry agendas.
Incorporated as a foundation in 1971, and based
in Geneva, Switzerland, the World Economic
Forum is impartial and not-for-profit; it is tied to
no political, partisan or national interests.
(www.weforum.org)
