Modern day business, with the exception of arm manufacturers and traders, most certainly cannot favour a war. They aught to be more cautious on the issue as the big business cannot afford to fall on the wrong side of the most powerful state. The World Economic Forum, however, could have better served its purpose had it made public the anxiety and concern expressed by participants behind closed doors at Davos. It could have highlighted the devastating economic impact of any major arms rattling by whosoever on the already sluggish world economy. It could also have made known the total loss it is expecting to the world business in case hawks in the world prevail and humanity is made to endure another war.
Though there was no joint communique new fears about the consequences of the attack on Iraq, reinforced the gloom in and after the meeting that provoked fresh fall in stock markets and dollar. As nervous investors moved to safe haven, gold prices rose. War speculation mounted pressure on oil prices. The world markets fell to record lows last week. In New York, the Dow Jones Industrial Average tumbled 1.56 per cent on Wednesday last after US President George Bush Senate speech that was translated to have pushed the world closer to war. The Nasdaq composite dropped 1.50 per cent. The Standard and Poor’s 500 slipped 1.19 per cent. In London the FTSE 100 fell to a seven-year low, while continental European markets also fell close to six-year lows. The dollar fell to three-year low against euro.
Business, trade and industry are primarily peacetime activities. They thrive and prosper in a secured nonviolent environment that they find more predictable. Drumbeats of war create anxiety and uncertainty that un-nerve business and drive it away from investment. This is in addition to losses that business incurs from direct destruction and fracturing of demand and supply lines. Don Evans, the US commerce secretary, admitted at the World Economic Forum that uncertainty over Iraq created extra risk for business. It is but natural that in the current geo-political situation the prestigious gathering of business leaders concluded in a sombre mood last week.
An economic newspaper commenting on the mood in the meeting reported, “Markets are not looking at what companies made in the fourth quarter, they are wondering whether companies will even be there in the second quarter”.
Shaukat Aziz, Advisor to Prime Minister on Finance, after attending the forum reportedly said that the bottom line of the conference was that the world economic community expressed its nervousness over uncertainty that they felt could prolong the period of economic slowdown.
Last year, the first meeting after September 11, was held in New York. There the tragedy glued all participants together. In 2003 though the venue was shifted back to Davos, Switzerland, spiritually it was again very much in the US as the whole exercise was focussed on the US response to percieved or real threats. Unlike last year, this time round the world is divided. There are clear indications of discord in the alliance put together to defend the world from terrorism.
The US hierarchy chose to use the forum to put their message through to the business community and to people at large. Mr. Colin Powell very clearly elaborated the US position on the situation. He said, “We will not shrink from war if it is the only way to rid Iraq of its weapons of mass destruction”.
As debate was centered on war the development issues confronting the world were pushed to sidelines. Though there were fewer discussions than usual pertaining to different aspects of trade and business some deliberations did take place. Participants of the meeting were alarmed that the bottlenecks in certain ports and a growing dependency on manufacturing in China have left the business more vulnerable to severe disruption. It was called on companies to start building up strategic supplies of components even though such a strategy may jeopardize efficiencies. The shipping companies were advised to build more flexibility in their delivery system.
Other issues that came under discussion were: agricultural subsidies in the advanced countries, availability of cheaper debt to cash starved developing countries and structural reform in developed countries. Mellowed response of elitist of elite forum of rich and mighty reflect the limitation of economic entities vis-a-vis political elite that is expressed in power of a state. It is still state that set the parameters within which business is allowed to operate. In this unipolar world it is the US that is calling the shots and business is not yet in a position to use its weight to suit its interests.