The boom in emerging economies explains presence of Chinese and Indian delegates

OLD DAVOS hands say the annual trek to the Swiss ski resort provides a glimpse in microcosm of the forces bearing down on the global economy. There may be reason to that, although simplification can be a perilous game.

The aftershocks of the 2008 blowout still reverberate. But as political and business leaders try to move on, a trend well entrenched even before the crisis shapes its aftermath.

This is the question of the two-speed global economy: a world in which vast emerging countries with abundant labour and low costs play catch-up fast with older, slower, richer countries in the developed world.

How to reflect that in simple terms? A session on Saturday morning heard stark figures cited not long ago by US Federal Reserve chairman Ben Bernanke, who noted that the world’s emerging economies have grown by 45 per cent in aggregate since 2005. The advanced economies, meanwhile, managed only a paltry 5 per cent.

This helps explain the presence here of dozens of Chinese, Indian and Latin American delegates, the unwavering focus on the euro zone debt drama and residual worry about the dynamics of the American recovery.

China’s ascent dazzles, its heady expansion a spur for the developed world and as the nominally communist system continues its affair with modernity.

Rui Chenggang, a super-confident Chinese television presenter, told how he has one million followers on Twitter and received 500 responses in a single minute to a recent posting on China’s image abroad.

But it is a nuanced picture too. Life in the business districts of the country’s most gleaming cities may now bear comparison with New York, but roughly 300 million Chinese still live without proper water supplies and 200 million live on less than a dollar a day.

Australian foreign minister Kevin Rudd said some Chinese still live “in caves”. At the other end of the spectrum, eminent Chinese economists such as Yu Yongding fret about real asset bubbles.

Common to leaders the world over is the necessity to deal with the age-old riddle of unemployment. Data suggest the global economy has lost more than 30 million jobs since 2007, three-quarters of them in advanced economies. Around the world some 213 million people are without work.

It was through this prism that many delegates read on their mobile phones news of mounting unrest in Egypt, something seen to herald a new wave of geopolitical risk.

Further spillover from the Tunisian revolution threatens to loosen the grip of authoritarian leaders around the Arab world.

For oppressed people this could bring with it the welcome promise of democratically accountable politics. But the turmoil carries the threat of violence – and any serious instability in the Middle East tends to ripple outwards. Oil prices are high, and inflation is already a concern in Europe.

Variations on this theme were heard throughout the week. American venture capitalists questioned the extent to which unemployed tech-savvy youth in north Africa might drive political change.

While many big beasts of American and European commerce networked like crazy with their emerging market counterparts, some western figures bemoaned the consequences of disinvestment and deindustrialisation in their home patch.

The only solution, said some, was to move up “the value chain”, an inherently Germanic concept that IDA Ireland never tires of promoting. Yet if education is key, reinforcing school and university systems is doubly difficult in an era of austerity. European governments are mired in the swamps of budgetary consolidation, and they are under pressure to do yet more. That was the message from German chancellor Angela Merkel, who sees fiscal rectitude as a defining task for her generation of European leaders.

Above all else, however, Davos is a networking extravaganza. People tell of meeting more key people here in five days than in weeks of travel. For that reason presumably, Greek prime minister George Papandreou came to promote his administration’s efforts to bring its beleaguered economy to heel. The markets remain unconvinced, but Papandreou relentlessly drove home the message that he is doing as he promised to his European and IMF sponsors.

In this context it was quietly noted that there was no one here from the Government in Dublin. That might be expected in the dying days of a jaded administration as it faces into a difficult election.

In a year’s time, however, it might be money well spent for the incoming administration to tell the world’s elite of its efforts to bring the public finances and the banks under control. It is, after all, a competitive world and Davos is like a window on that very panorama.

Larry Summers, former economic guru to Barack Obama, told an audience that Americans tended to see China in a “blur”. The same may be true whenever people think of places they do not know well.

As the drive to restore Ireland’s reputation and finances proceeds, it might be as well to seek help in the Alps to cut through the haze. That assumes there is substantial progress to report. If the dogged schmoozing at Davos shows anything, it is that the rest of the world will not wait for Ireland to get its act together. No time to lose.