World Economic Forum

Annual Meeting 2010

Improve the State of the World: Rethink, Redesign, Rebuild
Davos-Klosters, Switzerland 27-31 January

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)
The views expressed in this publication do
not necessarily reflect those of the World
Economic Forum.

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Contents
 Preface page 3

 Outcomes and Highlights page 4

 Strengthening Economic and Social Welfare page 6

 Creating a Values Framework page 10

 Ensuring Sustainability page 14

 Mitigating Global Risks and Addressing Systemic Failures page 20

 Enhancing Security page 24

 Building Effective Institutions page 28

 IdeasLab page 32

 Acknowledgements page 34

In my opening remarks at the 40th Annual
Meeting of the World Economic Forum,
I expressed deep concern that 2010
could evolve into a year of social crisis
following the financial crisis of 2008
and the economic crisis of 2009.
Governments in particular risk becoming
overwhelmed by domestic concerns
to such an extent as to limit the global
stewardship which is desperately needed
today. Such an outcome would also set
the stage for a future generational crisis
as fiscal burdens as well as political
cynicism would disproportionately
spread across the younger generation.
Therefore, the discussions at the
Annual Meeting in Davos were driven
by the realization that assumptions
about the future are changing at every
level of global society. But will they
lead us to better decisions, actions
and outcomes going forward? This
was the critical question at the top of
our stakeholders' minds at the Annual
Meeting 2010 of the World Economic
Forum. And this was why the Meeting
was organized under the theme
“Improve the State of the World:
Rethink, Redesign, Rebuild”.
As you read this summary of our 40th
Annual Meeting, I encourage you to
reflect on what will be the major global
challenges 40 years into the future as
Preface
the world’s population increases from The failure to reach a global solution to
6 to 9 billion people. How will existing climate change last year in Copenhagen
models of business, governance, is a grim reminder of the inertia and
development, employment, education interests to overcome in a world of 6
and corporate citizenship need to billion. The world of 9 billion will require
adapt and evolve? Will our children’s even greater leadership in creating
children be speaking of the G2, G7, innovative business models, new
G20 or G77 when discussing the technologies, reshaping consumer
management of global issues? behaviour and creating job
Improving the state of their world was opportunities that are driven by
what brought together leaders from sustainability. The 40th Annual Meeting
industry, government and civil society is just one milestone in the World
to rethink, redesign and rebuild in Davos. Economic Forum’s ongoing effort to
ensure that the world will be in a
Driving the rethink was the Network of better condition tomorrow than it is
Global Agenda Councils, comprised of today.
over 1,000 experts active in 76 Councils,
created to advance solutions to critical
global challenges. The councils met at
the Summit on the Global Agenda in
November 2009 and their
recommendations were integrated into
discussions in Davos. Redesign-
oriented sessions leveraged the work
of the Global Redesign Initiative Klaus Schwab
(GRI), an ongoing multistakeholder Founder and Executive Chairman
dialogue focusing on adapting World Economic Forum
structures and systems of international
cooperation to the challenges of the
21st century. The effort to rebuild trust
and confidence now extends beyond the
Annual Meeting via www.welcom.org,
a collaborative platform to build
knowledge and to share insights as an
online community throughout the year.
World Economic Forum Annual Meeting 2010 | 3
 Outcomes and Highlights
In his opening address at the 40th Annual
Meeting, President Nicolas Sarkozy of
France underscored that it will not be
possible to emerge from the global
economic crisis and protect against
future crises if the economic imbalances
that are at the root of the problem are
not addressed. “Countries with trade
surpluses must consume more and
improve the living standards and social
protection of their citizens,” he remarked.
“Countries with deficits must make an
effort to consume a little less and repay
their debts.” These twin challenges
were the focus of much debate in
Davos. President Sarkozy argued in this
4 | World Economic Forum Annual Meeting 2010
context for a new Bretton Woods and
pledged that France would place the
reform of the international monetary
system on the agenda when it chairs
both the G8 and G20 in 2011.
The leaders of Canada and the Republic
of Korea, current chairs of the G8 and
the G20 respectively, arrived in Davos
to build support for the global agenda
in 2010. “It is important that the G20
reach out to those not taking part, listen
to their needs and reflect them in our
discussions. Otherwise, it will not be
effective,” said Lee Myung-Bak, President
of the Republic of Korea; and host of
the 2010 G20 Summit. Stephen Harper,
Prime Minister of Canada and host of
the 2010 G8 Summit acknowledged
that world leaders disagree over climate
change, trade and measures to safeguard
the global financial system. In his view,
to square national interests with global
interests, it is necessary to recognize
first the legitimacy of the other’s point
of view.
Harper’s point reminded participants of
why the international community failed to
come to an agreement on climate change
in Copenhagen. In Davos, President
Felipe Calderón of Mexico stressed
that Copenhagen proves that “the
negotiation by consensus mechanism is
not working.” Mexico will host the 2010
United Nations Framework Convention
on Climate Change Conference of the
Parties in November. In this context,
Calderón remarked that “we have new
problems and we cannot tackle [problems
such as climate change] with instruments
that were created in 1945,” and he
added that “we need to create new
instruments for a new era.” In this spirit,
the Forum released two reports in Davos,
Green Investing: towards a Low-Carbon
Energy Infrastructure and Green Investing
2010: Policy Mechanisms to Bridge
the Financing Gap, to promote new
solutions for both government and
industry to work in partnership.
President Jacob G. Zuma of South
Africa, when reflecting on the failure to
conclude the Doha Development Round
and the pervasive poverty affecting the
majority of the world’s population,
observed that “we have structures that
were developed decades and decades
ago when circumstances were different.”
He added, “In the end, the majority of
the world does not have the right to
take decisions for themselves. We
have reached a point today when it is
time to rethink and redesign, including
decision-making processes of existing
organizations.” To this end, the World
Economic Forum will convene relevant
policy-makers and experts from its
Global Agenda Councils for a Global
Redesign Summit on 30-31 May in
Doha, Qatar. The aim will be to convene
experts from governments, international
organizations, universities and think
tanks to examine gaps in international
cooperation and develop proposals to
overcome these shortcomings.
The Annual Meeting in Davos also
highlighted issues of strong unity of
purpose among members of the
international community. First and
foremost was the humanitarian and
development challenge facing Haiti. In a
special session of the Annual Meeting,
former US President and current UN
Special Envoy to Haiti, William J.
Clinton made a strong call for
immediate aid and sustained
investment to assist Haiti as it
struggles to rebuild from the rubble of
the devastating earthquake of 12
January. Garnering support from the
international business community to
provide humanitarian and technical
assistance was an immediate priority in
Davos, but the longer term goal remains
increasing private sector involvement
to rebuild Haiti’s economy and to improve
the conditions for job growth. The
need to integrate the private sector to
bridge the gap between humanitarian
assistance and economic development
led to the creation of a Haiti partnership
between the Clinton Global Initiative,
the United Nations and the World
Economic Forum.
Participants were reminded of the
importance and impact of long-term
development commitments by celebrating
an important 10th anniversary linked to
the World Economic Forum Annual
Meeting. The idea for a Global Alliance
for Vaccines and Immunisation (GAVI)
was conceived in Davos 10 years ago.
GAVI has since saved over 4 million
lives and has immunized an additional
256 million children in the world's poorest
countries. In Davos this year, Bill and
Melinda Gates, Co-Chairs of the Bill and
Melinda Gates Foundation, a founding
partner of the GAVI Alliance, pledged
US$ 10 billion to vaccinate over 8 million
children in the next decade. Melinda
Gates also served as a Co-Chair of the
Annual Meeting.
The “spirit of Davos” was also
exemplified in another celebration –
South Africa’s World Cup Kick-Off – as
participants celebrated the arrival of
the world’s greatest sporting event on
the continent of Africa.
World Economic Forum Annual Meeting 2010
Additional programme highlights
from the 40th Annual Meeting of
the World Economic Forum are
accessible in multiple forms on our
website www.weforum.org
Readers interested in viewing the
major panel discussions are invited
to navigate a selection of webcasted
sessions at http://wef2010.unitec-
media.tv/index.html
In addition, 80 of the 220 sessions
of the Annual Meeting were posted
to YouTube and can be viewed at
http://youtube.com/
worldeconomicforum
Written transcripts of special
messages and selected panel
discussions can be downloaded at
http://www.weforum.org/en/events/
ArchivedEvents/AnnualMeeting2010/
Transcripts/index.htm
Summaries of various sessions,
workshops and sessions over
meals can be downloaded at
http://www.weforum.org/en/
knowledge/Events/2010/
AnnualMeeting/index.htm
The IdeasLab once again generated
some of the most creative and
innovative ideas from Davos and
over 50 presentations can be viewed
at http://www.weforum.org/en/
events/ArchivedEvents/Annual
Meeting2010/IdeasLab/index.htm
Over 350 pictures from the
Annual Meeting photographed by
Swiss-Image are available at
http://www.flickr.com/
worldeconomicforum
| 5
Strengthening Economic
and Social Welfare
As participants gathered in Davos for
the World Economic Forum Annual
Meeting 2010, one common sentiment
resonated: Now what?
Much has changed since the dark days
of early 2009. While many risks and
structural problems remain, economic
“Armageddon” has been avoided and
the financial system saved. Relief that
the worst is over quickly yielded to
deep uncertainty about what the future
holds.
6 | World Economic Forum Annual Meeting 2010
Top of mind were sweeping bank reforms
announced by the Obama Administration,
sovereign debt worries, inflation concerns
in China, unknowns regarding monetary
and fiscal exit strategies and ever-present
threats of social unrest and protectionism.
Rarely have world leaders had so
much on their plate.
How does the world chart a more
equitable and sustainable course for
global growth in 2010? How can
job creation and social welfare be
redesigned? How can long-term
economic growth be rebuilt on a solid
foundation? These questions were the
subjects of considerable debate.
A roadmap for sustainable
recovery in 2010
The global economy might be
technically out of recession, but
economists cautioned the recovery is
fragile and likely to be sub-par, with
slower GDP growth and higher
unemployment. The consensus for a
multi-speed recovery in 2010 was
captured by the acronym “LUV”: an L-
shaped recovery in Europe and Japan;
a U-shaped upturn in the US; and a V-
shaped revival in Asia. The debate
then focused on the size and speed of
the respective recoveries.
While countries such as China, India and
Brazil have proven remarkably resilient,
they are not the primary drivers of global
demand. A healthy and self-sustaining
recovery requires deficit countries
such as the United States and the
United Kingdom to revive their own
economies and address structural
problems. In turn, surplus countries –
China, Japan and Germany – must
reorient away from export-led to
domestic consumption-driven models.
There is no shortage of nervousness.
The increase in reserve requirements
on Chinese banks sent a shiver through
financial markets on fears this might
mark the beginning of a sustained
tightening phase.
Meanwhile, mushrooming government
debt is causing angst in developed
countries. A fiscal crisis has already
erupted in Greece, and investors
worry if Spain, the United Kingdom,
Japan or even the US could follow
suit, as evidenced by widening bond
spreads.
While outright default is seen as unlikely,
sovereign risk could translate into a
highly disruptive set of deleveraging
dynamics. Worse, inflation expectations
could return with a vengeance. Some
participants warned that the next crisis
would be sparked by a government “debt
trap” unless strong fiscal discipline is
exhibited as economies recover. Belt
tightening was seen as the only option.
All the fuss could be “much ado about
nothing” several optimists contended,
but risk aversion remains high and a
sharp correction in risk assets is
underway.
The more pressing worry and
uncertainty is the timing and scale of
withdrawal of the massive monetary
and fiscal stimulus. The potential for
policy error is high, and the world’s
economic leaders were urged to
tread warily so as to avoid tipping the
economy back into a disastrous
recession.
Creating jobs and
strengthening social welfare
“As we stand at a new historical
Job creation holds the key to a juncture, we must change the old
sustainable recovery. It still feels like way of inefficient growth and
a recession to many workers amid transform the current development
continued job losses and meagre, if model that is excessively reliant on
any, gains in disposable income. investment and export.”
Global unemployment has risen by
around 50 million while working Li Keqiang, Executive Vice-Premier, State
poverty increased by 200 million, Council of the People’s Republic of China
coming on top of a crisis in the quality
of employment – one-half of employees
globally remain in “vulnerable
employment”.
Without a return to growth in jobs –
which is expected in 2011-2013 – the
world risks political instability, populism
and destabilizing trade frictions. The
prospect of 10% growth in China and
10% unemployment in the US and
Consumption in emerging markets grew nearly five
percentage points faster than developed markets in 2008
Consumption in emerging and developed markets
8%
Real annual growth in consumption,
Emerging markets
national currencies, 2008 prices
6
4
Developed markets
2
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Note: Weighted average growth rates based upon country PPP weightings as a share of global GDP
Source: IMF International Financial Statistics database; Thompson Datastream; PricewaterhouseCoopers analysis
World Economic Forum Annual Meeting 2010 | 7
 Europe could prove to be a volatile Others proposed focused on the need
combination. Heading off backlash will for micro-measures such as tax breaks
require a sustained effort by both for small and medium businesses, the
government and business. most important source of new jobs.

Rebuilding sustained,
Achieving job recovery requires radical long-term economic growth
thinking. Some participants called
on the G20 to set up a multilateral Participants stressed that sustainable
task force on employment and social post-crisis growth requires a break
protection to focus on job retention, from the past. Three specific action
retraining trade-displaced workers and areas stood out. First, rethink trade
enhancing labour market flexibility. negotiations. A new trade paradigm
“If we don't have jobs, there is no is required that encourages structural
sustainable way of rebalancing the
global economy.”
Both the US and China are expected to grow faster than
other major economies
Sharan Burrow, President, International
Trade Union Confederation (ITUC) US and China growth forecasts

Forecast
China
9%

6
Annual GDP growth

US
3
Japan
Eurozone
0
UK

-3

-6
2008 2009F 2010F 2011F 2012F

Source: PricewaterhouseCoopers forecasts (November 2009)

A low carbon economy depends on China and the US

increasing their emissions reductions
US and China emissions reductions
0
Annual emissions intensity change

-1 2008-20
1990-2005 2005-08 required*

-2

-3

-4

-5%
China US
Pledged intensity cut Pledged absolute cut
2005-20: 40-45% 2005-20: 17%
* Estimated required cuts in emissions intensity in order to limit global warming to 2° C.
Emissions intensity" refers to emissions per unit of GDP

Source: "Do the numbers add up?" PricewaterhouseCoopers (December 2009).

8 | World Economic Forum Annual Meeting 2010

reforms within emerging economies
that open their markets (“aid for
trade”) along with a pragmatic
Rethink
“variable geometry” for the World in Davos
Trade Organization, with groups of
countries able to cut separate deals on “What we're seeing in the United
investment, climate change and States, and perhaps in some other
competition policy. Likewise, places, is a statistical recovery and
governments were called on to ratify a human recession.”
and implement the United Nations
Convention Against Corruption to Lawrence H. Summers, Director,
remove a major constraint on free National Economic Council (NEC), Executive
trade that costs more than 5% of global Office of the President, USA
GDP (US$ 2.6 trillion) each year.

Second, rebuild critical infrastructure.

An estimated US$ 2 trillion investment
is needed each year over the next two skills for the future. Apprentice programmes job creation and social welfare.
decades to improve water, road, ports and vocational training need an overhaul. Leaders were called on to heed the
and air traffic control systems around In the developing world, governments lessons from saving the financial
the world. Participants explored new should offer educational incentives to system: the urgent need for effective
financing mechanisms, new technologies capture the girl effect – that a girl’s and coordinated global action. Ring
and low-carbon infrastructure models. earnings rise by 20% with every year of fencing is no longer an option.
The International Monetary Fund’s plans schooling, and she is more likely than
for a US$ 100 billion Green Fund to a boy to reinvest that money in her family.
promote low-carbon economic growth are
also seen as an opportunity to create jobs. In the same way that 2009 saw the
exit from the global crisis, the hope is
Third, redesign education. Individuals that 2010 will mark the exit from long-
need to be prepared for multiple career standing global imbalances. There is a
changes as well as the creation of entirely unique window of opportunity to
new industries. Problem solving and rebalance globalization, rebuild
“learnability” are the two most relevant sustainable economies and invest in

More female participation in schooling or the labour force

could generate economic growth
Gender inequality's effect on GDP growth

0.2%
Estimated change in GDP growth rate,
developing Asia (percentage points)

0.1

0.0
10%
0% iincrease iin ffemale
l 1%
% iincrease iin ffemale
l
labour force participation rate* secondary school enrolment

* GDP-weighted average of seven panel countries in developing Asia

Source: Economic and Social Survey of Asia and the Pacific 2007, UN Economic and Social Commission for Asia and the Pacific

World Economic Forum Annual Meeting 2010 | 9

Creating a Values
Framework
Concern over the values driving
economic growth came to the fore
as some 34 million people lost their
jobs in the last three years and the
world’s strongest economies faced the
most severe recession in 70 years.
Driving the concern were the headlines
about banking sector bonuses and
massive government bailout packages
to mismanaged companies that were
“too big to fail.” Such contradictions to
the moral spirit of capitalism have eroded
public trust in the private sector and
10 | World Economic Forum Annual Meeting 2010
threaten the nascent recovery with a
more debilitating and intractable crisis
of confidence.
The consensus in Davos was
that trust is the bedrock of the
market economy and to restore it,
government, industry and civil society
leaders must build common values
into the recovery. Stakeholders must
enhance corporate transparency and
promote ethical leadership; address
global environmental and social
concerns; and harness science to
explain and grow common values.
Towards values-based
corporations
Debates over government intervention
have dominated headlines for the past
18 months, yet policing hinders trust, and
bailouts alone will not build a sustainable
recovery. Corporate executives are
considered by the public to be the
least credible spokespeople for their
companies (Edelman Trust Barometer
2009) – to reverse this trend, CEOs
must lead by example and make their
businesses transparent and socially
responsible. Various session discussions
underscored that incentives must
encourage success, but with the pay
gap widening between the shop floor
and the boardroom, corporate bonuses
have become an obstacle to confidence
in the private sector. Compensation
packages of chief executive officers
must be fair, logical and transparent,
and should be based not only on
profit-making, but also on corporate
citizenship. With top multinational
corporations wielding more economic
clout than most sovereign nations,
business’s role in society extends far
beyond creating jobs and wealth.
Gender inequality, another common
challenge, remains a glaring reality
even in the world’s most developed
economies and was at the top of the
agenda in Davos. In the United States,
women now comprise one-half of
all college graduates, but corporate
leadership is still a male-dominated
field; in the United Kingdom, women
earn 22% less than men. Breaking the
glass ceiling is not just about equity, it
is about good business. At least one-
half of all customers in most businesses
are women, and corporate leadership
that reflects the composition of the
general public will have an easier time
connecting with clients. Corporate
structures that encourage a work-life
balance are critical not only to achieving
gender parity, but to fostering a healthier
and more productive workforce.
Addressing global concerns
To ensure long-term recovery,
corporations must partner with
governments and civil society actors
to formulate sustainable solutions to
pressing human challenges.
Neglecting global concerns like
37% of directors believe their boards were ineffective
in responding to the economic crisis
Board effectiveness survey
Do you think your board's response Developing new strategies to
to the global economic turmoil has manage risk, take advantage
been effective? of new opportunities
Talent management
Yes
No Restructuring/divestment
Don’t know
Operational spending
Workforce size
Financing needs
M&A
Capital spending
0 10 20 30 40 50 60 70%
Percentage of directors who say the board
has been ineffective at addressing the area
Note: Survey included 186 d
directors;
irectors; 60% from North America or Western Europe
Source: Data excerpted from Exhibit 3 in Andrew Campbell and Stuart Sinclair, "The crisis: Mobilizing boards for change," mckinseyquarterly.com
(February 2009)
extreme poverty and gender inequality
will set the stage for political backlash
if fundamental economic goals are
perceived as divorced from basic
human values. In short, the basic
question of why economic wealth is
accumulated must be answered by
demonstrating its power to improve
the living conditions of the less fortunate
when we consider that over 1 billion
people survive on less than US$1 per
day; every year millions of children die
of preventable diseases; and global
food demand will double by 2050. “We are not asking ourselves
what we will replace capitalism
Rebuilding Haiti after it was devastated with, but what kind of capitalism
by the earthquake of 12 January is an we want.”
example where government, industry
and civil society can focus their energy Nicolas Sarkozy, President of France
and expertise for the betterment of
humankind. In a special session of the
Annual Meeting, former US President
and current UN Special Envoy to Haiti,
William J. Clinton made a strong call
for immediate aid and sustained
investment to assist Haiti as it struggles
to rebuild from the rubble of the
devastating earthquake. Garnering
support from the international business
community to provide humanitarian
and technical assistance was an
immediate priority in Davos, but the
longer term goal remains increasing
World Economic Forum Annual Meeting 2010 | 11
 Fewer than one in five people in the US, UK, France and
Germany find CEOs to be credible sources of information
Trust in CEOs

60%

feel information from a CEO about a company is

Brazil

“extremely credible” or “very credible”

50

Percentage of respondents who

China
Japan
40

30
US

20
UK/France/Germany

“The nature of capitalism is going 10

to change, whether it be
Capitalism 2.0 or 3.0… The focus 0

has to be on the stakeholder, not 2003 2004 2005 2006 2007 2008 2009
Note: Survey of "opinion elites" age 35-64
the shareholder and we have to
Source: Edelman Trust Barometer 2009 (January 2009)
marry performance and purpose.”

Indra Nooyi, Chairman and Chief

Executive Officer, PepsiCo; Member of the Trust in business fell late in 2008 in the US and France,
Foundation Board of the World Economic but has since rebounded
Forum
Trust in business

80%

70

60
Public trust in business
to do what is right

50

40

30

20
Jun 09
Jan 08
Jan 09

10

0
US
S UK France Germany India China
Note: Survey of "opinion elites" age 35-64; includes age 25-34 in June 2009

Source: Edelman Trust Barometer, Mid-year Report (August 2009)

12 | World Economic Forum Annual Meeting 2010

private sector involvement to rebuild
Haiti’s economy and to improve the
conditions for job growth. The need to
integrate the private sector to bridge the
gap between humanitarian assistance
and economic development led to the
creation of a Haiti partnership between
the Clinton Global Initiative, the United
Nations and the World Economic Forum.
At the 40th Annual Meeting, leaders
revisited the notion that capitalism, as
originally conceived by the 18th century
Scottish philosopher Adam Smith, was
based on the value of our common
humanity. The conclusion was that
today, economic recovery will not
happen unless it is shaped by a moral
recovery.

Harnessing knowledge to
understand and promote Technology is the most trusted business sector
values
Public trust by industry
If properly harnessed, the natural and 80%
social sciences can help advance
common values which was an emergent
Public trust in the sector

60
theme at the Annual Meeting. Physical
to do what is right

science has discovered hard evidence of

our common humanity: brain researchers 40

are beginning to understand the neural

bases of empathy and have already 20
determined that we are all basically
rational and, therefore, capable of
0
working through our differences.
Technology

Biotech/
life sciences

Health care

Automotive

CPG
manufacturers

Energy

Retail

Food

Pharma

Entertainment

Banks

Media

Insurance
Technology has dramatically changed
the way we interact, particularly for
those born in the last 30 years. Social Note: Survey of "opinion elites" age 35-64

network users are one-third less likely Source: Edelman Trust Barometer 2009 (January 2009)

to know their neighbours; mobile

phone users have a 12% larger circle
of close friends than do non-users.

The social sciences, too, must evolve

to better reflect our values which were
also underscored in Davos. Neoclassical
economics, focused narrowly on wealth
creation, no longer fully describes the
Rethink
rationale behind well-functioning in Davos
capitalism; and neoclassical economic
“Are transient shareholders,
models, built as they are on rational
speculators and game players
actors, have provided less and less
really the legitimate owners of
accurate predictors. In particular, the
publicly traded companies? In all
current financial crisis has cast new
decent societies, tourists don't vote,
doubt on Milton Friedman’s famous
and gamblers don't own the
theory that managers should exclusively
casino.”
seek to maximize shareholder profit.
Instead, executives must take a broad
Yvan Allaire, Chair of the Board of
view of stakeholder interest to encompass
Directors, Institute for Governance of Public
energy conservation, social justice and
and Private Organizations (IGOPP)
prudent economic principles.

World Economic Forum Annual Meeting 2010 | 13

Ensuring Sustainability
Fast, coordinated action by the global
financial community successfully
prevented last year’s global recession
from turning into a worldwide depression.
With much of the world now rebounding,
we are facing a new economic landscape.
A key question is how to return to normal
when nearly everything has changed.
How can the global community
re-establish sustainability?
Extraordinary efforts in an emergency
can provide temporary solutions, but if
left in place too long, they risk creating
their own potentially lethal problems.
14 | World Economic Forum Annual Meeting 2010
The threat of destructive inflation from
the stimulus packages that helped
hold off financial collapse is an example.
Leaders in Davos made it clear that
true sustainability requires new thinking
and a new approach to globalization.
The population explosion
The population bomb is at the root of
many of today’s problems. It took
50,000 years for the world's
population to reach 1 billion. Between
now and 2050, population will rise by
3 billion to reach 9 billion people on
earth – a 50% increase in less than 50
years.
While the populations of some wealthier
countries are declining, many of the
poorest countries are experiencing
bursts of population increases. For
example, Rwanda has an annual
birth rate of 5.5% compared to the
global average of 2.3%. The world is
experiencing population spikes that
strike countries that are least able to
cope. One solution is educating and
empowering women to take control
of their lives and family size. country's national legislation to limit
Changing cultural attitudes is also emissions. These differences will need
important and was highlighted in to be resolved in Mexico which will
related discussions. host the successor conference on
climate change after Denmark in 2010.
In many of the poorest countries, the
population is extremely young, requiring The emerging markets argue for
added investment in education, training reducing the growth rate of their carbon
and employment. Many people are emissions rather than absolute limits,
living longer thanks to improved health which will “turn back the development
and nutrition, thereby stretching social clock.” The consensus is that it will take
safety nets. The systems for dealing at least 30 years to make a transition
with retirement and health benefits, as to non-carbon-based energy. In the
well as attitudes towards the aged, meantime, fossil fuels will continue to “The world is sick, and we need to
must be adapted to these changes. provide 70-80% of energy requirements. fix it. It is the same in a family.
Current oil consumption is around You have some members of the
86 million barrels a day and accounts family sick, and you need to bring
Climate change, low-carbon for roughly 40% of the world’s carbon him or her to the doctor, and pay
energy, transportation and emissions. However, approximately the costs. And we need to pay the
construction 44% of the investment in low-carbon costs in order to fix the world.”
energy from 2000-2008 came from
The Copenhagen Conference may US oil and gas companies. Felipe Calderón, President of Mexico
have disappointed some, but it also
marked a turning point. The reality of At least US$ 500 billion a year is needed
the threat from climate change is now to make the transition to a low-carbon
almost universally accepted, although economy. Current investments are
there is considerable disagreement on one-third of that, roughly US$ 150 billion
how to solve it. Europe wants an a year. A recommendation is to use
international agreement with fixed available public money to leverage
limits for carbon emissions that can be private investment. By one estimate,
verified by an international body. The US$ 5 billion in public funds could
US and a number of emerging leverage US$ 45 billion in private
markets want a political commitment investment.
relying on the authority of each

Only 31% of companies have developed a business case

for addressing sustainability
Business case for sustainability survey

25%
Has your company developed Which internal challenges
a "business case" or present the most significant
"proven value proposition" roadblocks to addressing
for addressing sustainability? sustainability issues?
20

19% 15
31%

7%
10

43%
5

Yes
No 0
Have tried but too difficult to develop Outmoded
t d d Too many N
Nott N
Nott Incentives
ti Inability
bilit Don't
't k
know
perspectives competing pursuaded enough stalled by to assess most
Unsure on priorities of business resources recession trade-offs effective
sustainability case between ways to
long and take action
Note: Survey of 1,560 business leaders worldwide short term

Source: The Business of Sustainability, MIT Sloan Management Review (2009)

World Economic Forum Annual Meeting 2010 | 15

 Investments in clean energy will need to double
in the next five years to stabilize emissions
Clean energy investment requirements

$600 $590
$548
$502

Clean energy investments (US$, billions)

500
Annual investments required to
achieve "2020 Peak Scenario",
stabilizing emissions by 2019
400 $373

300
$264

200
$148 $
$155
“We are saying that those who
100 $93
are responsible for the emissions $59
should also be responsible for the
0
cleaning of the global 2005 2006 2007 2008 2010 2015 2020 2025 2030
environment.”
Source: New Energy Finance (2009)

Jakaya M. Kikwete, President of

Tanzania A glaring omission at the Kyoto and offsets as a stopgap measure during
Copenhagen conferences is the problem the transition away from fossil fuels,
of transportation, which accounts for some emerging markets caution that
nearly 50% of total carbon emissions. carbon offsets should not become a
The construction sector has also been pretext for continuing to pollute rather
relatively ignored. Buildings account than engaging in real conservation.
for 40% of energy use and 70% of Their argument is that alternative
carbon emissions in urban areas. Major energy will not be viable as long as
reductions are possible through advanced there are less expensive alternatives.
engineering and new materials.
The nuclear energy option looks
While many industrial countries favour increasingly attractive. Nuclear power
the idea of carbon trading and carbon provides 21% of the electricity in OECD
countries, and 14% worldwide.

There are 40% fewer species today Real sustainability, however, depends
than there were 30 years ago on a frank assessment of the full
lifecycle of any project or process.
The Living Planet Index, 1970-2000
Relating to nuclear power, this means
120 factoring in the costs of construction,
storing radioactive waste and
All vertebrate species (Living Planet Index)
100 dismantling outdated plants, and
disposing of radioactive debris.
Population index (100=1970)

Terrestrial species
Marine species
80
Freshwater species
Biodiversity, forests
60
and oceans

40 The decline in biodiversity – which is

closely linked to climate change – is
20
a serious threat. The rainforests hold
1970 1975 1980 1985 1990 1995 2000 one-fourth of the earth's carbon and
Note: The Living Planet index measures trends in populations of vertebrate species
absorb 15% of annual atmospheric
Source: WWF; UNEP-WCMC (2004)
carbon emissions. Despite their obvious

16 | World Economic Forum Annual Meeting 2010

importance, at least 12.5 million
hectares – an area roughly the size
of Greece – continue to be sacrificed
yearly. At the same time, deforestation
is responsible for 20% of all CO2
emissions.
Up to 70% of the world’s species face
extinction, including one out of eight
species of birds and one out of four
mammals. Three-fourths of the genetic
diversity in agriculture has been lost and
75% of the world’s fisheries are over-
exploited. The collapse of bee colonies
has cost US farmers US$ 15 billion
and threatens the pollination of a wide
variety of fruit trees.
Therefore, driving growth through
sustainability is fundamental for global,
national and business competitiveness
in the 21st century. The Annual Meeting
of the New Champions 2010 (“Summer
Davos”) will focus on the theme “Driving
Growth through Sustainability”. Taking
place on 13-15 September in Tianjin,
People’s Republic of China, the
Dryland systems cover 41% of the world's land mass
and are home to 2 billion people
Extent of dryland systems

Participants strongly recommended that

all future projects factor in the impact on
biodiversity with a view to preventing
more damage.

Urban Systems
Changing culture Built environments with
high human density
Dryland Systems
Lands where plant
productivity is limited by
Even without the financial crisis of water availability
Polar Systems
2008 and the global recession of High-latitude areas frozen
for most of the year
2009, current trends are clearly
unsustainable. Growth for the sake of
growth is not sustainable for markets Source: Millennium Ecosystem Assessment

or for the planet. Equilibrium must be

established with the planet’s capacity
to renew itself.

A key element in rethinking carbon programme will focus on how to

emissions, as with many of the other increase energy efficiency, lower carbon
problems discussed, is to take emissions, develop green technology
account of the full lifecycle costs of and rebuild basic infrastructure. It will
each project and each process. This also provide a systemic overview of key
requires a higher degree of awareness, economic, industry and technological
a more comprehensive vision and developments that will reshape business
greater frankness. A profound change and society for the foreseeable future.
in our attitudes and behaviour is
needed. The message that emerged
from the World Economic Forum
Annual Meeting 2010 is that if life
on the planet is to remain sustainable,
future generations can no longer
be expected to pay for the lack of
foresight today.

World Economic Forum Annual Meeting 2010 | 17

Improve
the State
of the
World:
Rethink,
Redesign,
Rebuild
18 | World Economic Forum Annual Meeting 2010
World Economic Forum Annual Meeting 2010 | 19
Mitigating Global Risks and
Addressing Systemic Failures
The world is characterized by a
disconnect between the nature of global
risks – fast-moving, interconnected,
cross-issue, cross-border – and the
capacity to manage them – slow-
moving, fragmented, narrowly focused.
Many global risks are variations on
an older theme: piracy, pandemics
and financial risk have been threats
to human welfare for centuries.
But their speed of transmission
and potential impact has been
enhanced by the interconnectedness
20 | World Economic Forum Annual Meeting 2010
of globalization. Managing these risks
is a global imperative if globalization is
to survive.
In addition to questions of management,
there are questions of ownership:
who should be responsible for the
global commons – the oceans, the
environment – and to what extent?
Without a sense of collective
ownership over the global commons,
the world may face an era of
disastrous irresponsibility.
Mitigating systemic global risks is as
much about overcoming the short-
term and narrow biases deep in
human psychology and structures, as
it is about new technologies or new
institutions.
In many cases, such as managing the
global water crisis, solutions exist but
implementation is lacking. In other
cases, such as managing pandemics,
the institutional frameworks are there
but have not yet been tested by the
most dangerous combinations of
morbidity and ease of transmission.
So far, the world has been lucky.
The response to the global financial crisis
provides some grounds for optimism.
Faced with a clear and present danger
of financial meltdown, a combination
of leadership, creative thinking and
radical measures headed off catastrophic
failure. But what steps can be taken
to avert crisis before it happens? Can
the same urgency be created for non-
financial risks: pandemics, climate
change, energy security and food
security? Will the financial crisis and
the emergence of new governance
mechanisms provide momentum for
dealing with other systemic failures,
or will short-term economic issues
crowd out long-term global risks, even
ones with potentially far more serious
consequences for global well-being?
As one participant put it: “Nature
won’t wait for humans to come up
with the answer.”
Six key messages emerged from the
Annual Meeting in Davos on how to
think systemically about how to solve
the global challenges ahead.
Recognize
interconnectedness
Global risks are interconnected – so
must be the measures taken to manage
them. Achieving energy security will be
meaningless if it hastens a climate
catastrophe. Policies that may help
boost energy supply but put additional
stress on water and land resources
may swap one global risk for another.
Dealing with interconnectedness means
avoiding unintended consequences
and negative feedback loops. It also
means identifying interconnected
mitigation opportunities. For example,
low-cost investments in drip-fed
agriculture techniques may help mitigate
water scarcity while reducing energy
demand. Mitigating climate change will
vastly reduce the scale of the risks to
food and water security.
Share information,
share assessments
Accurate, timely information is important
whether the challenge is managing the
spread of a pandemic or ensuring the
board of a company is sufficiently
informed of its risk exposure. Incomplete
or incorrect information can be costly.
Far greater investment in information
systems, early warning and foresight is
needed to equip the world to anticipate,
avert and manage systemic failures.
Common assessments and a common
operating language for global risks are
prerequisites for managing them.
The UN Intergovernmental Panel on
Climate Change has brought a common
scientific assessment of climate change
to policy discussions. Could a similar
global audit of scarce resources help
drive better common assessments of
the urgency of water and food scarcity?
Could more popular science on the
decline of global fisheries finally mobilize
Population is forecast to rise by 2.2 billion people by 2050
Global population growth
10 2050 population: 9.1 billion
Forecast
9
8
7
Global population*
2009 population: 6.9 billion
6
5
4
3
2
1
0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
* Forecasts are medium variant
Source: United Nations (2008)
World Economic Forum Annual Meeting 2010 | 21
 Earth orbits are more crowded after recent satellite
destructions and collisions
Space debris

16,000

14,000

Number of objects in Earth orbit

12,000
Total objects
10,000

8,000

6,000 Fragmentation debris

4,000
“We really do need to ensure that Spacecraft
2,000
we never again get into the Mission-related debris*
Rocket bodies
0
position that the financial world

1960
0

1970
0

1980
0

1990
0

2000
0

2010
0
put the real economy into in 2007,
* Includes objects and refuse released from spacecraft
2008, and 2009.”
Source: NASA (April 2009)

Stephen Green, Chairman, HSBC

Holdings public action to safeguard the food
source on which one-fifth of the world
depends?
Empower technology
Participants heard about new
technologies that could help address
global risks, such as the development
of proliferation-proof nuclear reactors
using alternative feedstock. They also
heard about the potential for far wider
application of older technologies, such
as low-till or no-till agriculture. But
Rethink
in Davos
over-reliance on single-shot technological
solutions is dangerous, whether achieving
energy security through nuclear power
or mitigating climate change through
geo-engineering. Some technologies
are unproven; others are not sufficiently
scaleable. Overemphasis on technology
tends to be linked to an under emphasis
on other more immediate mitigation
measures, such as conservation and
efficiency.
Technology can be empowering as
a tool in managing global risks, but its
usefulness needs to be qualified. New
technologies can also create new
vulnerabilities, such as cyber threats,
to which the world is only just waking
up, or the threats from biological
engineering.

“It is not only the Great Recession, I

think it is a bundle of crises, not
Get the incentives right
one crisis, in the same period. The
food crisis, the financial crisis, the
Top-down policy measures can be
global warming crisis.... All of
helpful in managing some global
these crises have emerged from the
risks, but setting the right frameworks
misinterpretation of human beings
of incentives can be far more powerful,
in the conceptual framework that
thereby unleashing the power of
we have built around us.”
markets, tapping into the wisdom
of crowds and releasing private
Muhammad Yunus, Managing Director,
finance.
Grameen Bank

22 | World Economic Forum Annual Meeting 2010

The first law of incentive structure should
be “do no harm,” but the opposite is Crop yields are rising, but not as fast as the global population
often the case. For example, the failure
Global harvest yields
to price water, deeply embedded in
current models of local economies and 220

of global trade, actively encourages Global population

200
the waste of water, and fails to provide
an incentive to conserve and recycle. 180

Index (100=1961)
160

Redesign global governance 140

Global harvest yields*

120
The demand for better global governance
has never been greater. But achieving 100
more effective governance might mean
80
changing the basis on which we measure 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006
legitimacy. Several participants noted * Index of global yields from 13 key agricultural crops
that the “negotiation by consensus Source: FAOStat (2009); UN Population Division (2006); PricewaterhouseCoopers analysis

mechanism is not working.” Instead,

there may be a need for more action-
oriented groups of countries taking the
Dryland systems cover 41% of the world's land mass
lead on specific global risks, which would and are home to 2 billion people
provide momentum for wider action.
Extent of dryland systems
Managing global risks requires flexible
geometry in place of hierarchy, engaging
collaboratively across stakeholder groups.

Match global solutions

with local implementation

For some global risks, the immediate Urban Systems

Built environments with
high human density
solutions to the problem are local. For Dryland Systems
Lands where plant
example, in the case of water scarcity, productivity is limited by
water availability
the solutions lie mainly in individual Polar Systems
High-latitude areas frozen
for most of the year
watersheds. For other global risks,
while global action may be necessary,
implementation locally is important. Source: Millennium Ecosystem Assessment
Without efficient local health systems,
managing global pandemics will be
difficult. Without local transparency, the
trust necessary for global agreements on
carbon will be absent. Without effective
local administrations, managing illicit
trade will be impossible.

World Economic Forum Annual Meeting 2010 | 23

Enhancing Security
Much of the security debate at the
Annual Meeting 2010 was shaped by
events in two fragile states: Afghanistan
and Haiti. Although traditional security
issues continue to dominate many of
the world’s current conflicts, the two
cases show that national governments
and the international community are
increasingly facing myriad non-traditional
security challenges that can pose
serious threats to global stability and
development. The roster of threats is
growing, expanding from humanitarian
crises to energy security to cyber attacks.
Yet many countries facing 21st century
security threats continue to follow
24 | World Economic Forum Annual Meeting 2010
20th century security paradigms.
In rethinking global security, the aim
should be to find new solutions based
on cooperation and inclusivity.
Political settlement
or zero sum game
Although ensuring security in Afghanistan
remains a priority, there is growing
realization that a comprehensive political
settlement, and not just force, will help
the country emerge from years of war
and civil strife. This was one of the
major outcomes of the January 2010
London Conference on Afghanistan
that took place during the Annual
Meeting 2010 in Davos.
Officials who attended the conference
and then participated in the Annual
Meeting to report their findings were
encouraged by a plan to end the conflict
in the country through development,
good governance and democratic
processes, including talks with the
Taliban. The most important element
of the roadmap is that the military and
civilian efforts be Afghan-driven, with
a supporting role for the international
community. This is a high-risk strategy
 NPT states still possess over 20,000 nuclear warheads

Global stockpile of nuclear weapons

Partial Test Ban Comprehensive N. Korea
Treaty signed Test Ban stages tests
Intermediate-Range Treaty
80,000 Nuclear Forces
Number of nuclear warheads, NPT signatories*

adopted
Nuclear Treaty signed by UN India
Non-Proliferation and Pakistan
70,000 Treaty signed France and stage last
China tests
conduct
60,000 last tests
by NPT
signatories
50,000

40,000

30,000

20,000
“I think you need to know, in my
10,000
opinion, given what they went
0
through, the people of [Haiti]
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
behaved magnificently in the
* Israel, India, Pakistan and North Korea could possess an estimated 200-300 additional warheads.
NPT states are signatories to the Nuclear Non-Proliferation Treaty.
aftermath of the most
Source: Bulletin of Atomic Scientists (2009); Carnegie Endowment (2009); press reports
unimaginable tragedy.”

William J. Clinton, Founder, William J.

Clinton Foundation; President of the United
given the uncertainty of all stakeholders Preparing for the next disaster States (1993-2001); UN Special Envoy to
buying into the plan, but it is a strategy Haiti
with potentially high rewards – peace Just as New York has become the
and reconciliation. symbol for the international campaign
against terrorism after 9/11, Haiti could
Although not featuring as high on the be the ground zero in the international
international agenda in recent years as campaign against poverty, disease
climate change, food security, global and despair.
health and nuclear proliferation, there
are other high-risk issues that continue Following the catastrophic earthquake
to pose real threats. With an estimated in Haiti that has claimed tens of
existing 23,000 nuclear warheads, the thousands of lives and destroyed
world cannot be complacent about much of Port-au-Prince, humanitarian
the scale of risk, especially with the and development agencies continue
contentious, unresolved nuclear to deliver much needed aid and are
programmes of Iran and North Korea. starting to plan rebuilding efforts. Better
cooperation and coordination among
State actors, international institutions governments, intergovernmental agencies
and technology innovators should and NGOs are needed to ensure security
engage in developing effective strategies and prepare for future natural disasters.
to contain nuclear threats. Ongoing
US-Russia arms reduction talks, These efforts should include the private
a review conference to strengthen sector, particularly multinationals, which
the Nuclear Non-Proliferation Treaty can bring unique value to developing
and a US-sponsored nuclear summit countries and fragile states like Haiti.
scheduled for later this year to enhance Through investment, companies can
international cooperation and expand bring much-needed revenue streams
the peaceful use of nuclear energy to the state, create jobs and revive
worldwide are signs that 2010 could local supply chains, which in turn can
be a year to start working towards a boost public services such as health
world without atomic weapons. and education.

World Economic Forum Annual Meeting 2010 | 25

 A comprehensive risk management
framework that involves business
working together with international
organizations, governments and local
communities in emergency response
and reconstruction measures is the
model to follow in Haiti and elsewhere
in the face of humanitarian challenges
and increasing natural disasters
expected in the years to come.
Defence spending trending higher over the past decade
Worldwide military expenditures
$1,300
(US$, constant 2005 prices and exchange rates)
Working towards
a sustainable energy future
Climate change is predicted to have
a significant impact on the frequency
and intensity of natural disasters, such
as floods, droughts and hurricanes.
However, climate change is not only
a challenge, but also an opportunity.
A paradigm shift to reduce greenhouse
gas emissions and move from a global
economy dominated by hydrocarbons
has the potential to drive forward the
next wave of technological innovation,
while at the same time to ensure
energy security.
The energy sector is the largest source
of emissions globally. At a rate of about

85 million barrels a day, oil consumption

1,200
is responsible for 40% of the world’s
World military expenditures

CO2 emissions. The best way to reduce

1,100 demand is through the greater use of
renewable energy sources and increased
fuel efficiency.
1,000

While the Copenhagen Conference

900
did not produce a new climate deal,
many countries did commit to emission
800 reduction targets, indicating that it is
1988 1993 1998 2003 2008
possible to pursue a low-carbon
Source: Information from the Stockholm International Peace Research Institute (SIPRI), http://www.sipri.org/
economy. But this is not a task for
governments alone. As the key delivery
agent of low-carbon investment,
Thirty-eight countries make the Fund for Peace’s innovation, products and services,
failed states “Alert” list business needs to have a voice. And,
Failing states with energy requirements set to
increase, especially in developing
countries, it will be increasingly
important to share technologies and
expand global partnerships.
Cooperation and governance are
important elements in finding solutions
to energy security problems.

Securing cyberspace

International cooperation is also needed

to investigate cyber crimes and identify
Failed States Index 2009
Alert Note: The Failed States Index rates nations on 12 social, economic, political, and the perpetrators. More than 2 million
Warning military indicators to determine their state vulnerability to collapse or conflict.

Source: Fund for Peace (2009)

viruses, worms and Trojans have
emerged over the past few years. The

26 | World Economic Forum Annual Meeting 2010

threats are constantly growing and
becoming more sophisticated, and are
being used as a weapon targeting
Rethink
home users, businesses, financial in Davos
markets and governments.
“I know that there's been this
In addition to criminal activity, companies concern that the dollar shouldn't be
and countries alike are also behind the standard currency in the world.
today’s cyber attacks in the form of Well, the Pentagon shouldn't be the
industrial and military espionage. At fallback military for the world.”
what stage does a cyber attack
constitute an act of war? How does Barney Frank, US Congressman from
a nation or corporation retaliate? Massachusetts (Democrat), 4th District,
Chairman, Financial Services Committee

Security for a new century

Traditional security concepts often actors such as NGOs, corporations

bring about insecurity, especially as and individuals. To this end, the World
policies are too often based on how Economic Forum will convene relevant
to manage rather than solve a crisis. policy-makers and experts from its
Global Agenda Councils for a Global
Rethinking security in the 21st century Redesign Summit on 30-31 May in
requires consolidating the shift from Doha, Qatar. The aim will be to convene
state to human security, moving experts from governments, international
towards cooperative security. There is organizations, universities and think
also a need to strengthen and evolve tanks to examine gaps in international
institutions to manage global change. cooperation and develop proposals to
This new global vision cannot be overcome these shortcomings.
confined to state actors, but to be
successful must include non-state “The best policy for development is
the fight against poverty. It is also
one of the best recipes for peace.”

Over two million viruses, worms, back doors or Trojans Celso Amorim, Minister of Foreign
have emerged over the past two years Relations of Brazil

Malicious code threats

1,750
Number of new malicious code threats* (thousands)

1,500

1,250

1,000

750

500

250

0
2002 2003 2004 2005 2006 2007 2008
* includes viruses, worms, back doors and trojans

Source: Symantec (April 2009)

World Economic Forum Annual Meeting 2010 | 27

Building Effective Institutions
Global governance institutions have been
hit by a perfect storm that has lasted
for two years. The storm started with
skyrocketing oil prices, increasing food
scarcity and hunger, and accelerating
climate change; it culminated in a global
financial crisis of epic proportions. For
leaders at the Annual Meeting 2010 in
Davos these cataclysmic events exposed
a harsh truth: our interconnected world has
become so complex that new rules are
needed for the governance of globalization.
Battered, but having survived, policy-
makers – together with citizens – need
to rethink 20th century institutions and
28 | World Economic Forum Annual Meeting 2010
redesign them to meet 21st century
demands. In redesigning mechanisms
of global governance, the international
community has been urged to adapt new
models of cooperation, moving away
from procedures that require unanimity.
An institutional “reboot” is needed.
The financial crisis, apparently in
remission thanks to short-term life
support measures, has pushed policy-
makers to a critical crossroad. Their
immediate challenge is to redesign
financial regulation. Their medium-term
challenge is twofold. First, they must
move away from one-size-must-fit-all
arrangements to pluralist solutions,
public-private partnerships and smaller
scale initiatives driven by regions or
cities. Second, such “variable geometry”
solutions must comply with overarching
regulatory frameworks that facilitate
international cooperation and
multilateralism.
Global cooperation is essential to
address the most pressing transnational
challenges of our time, including peace
and security, poverty, development,
human rights and the environment.
The trick is balancing national, regional
and global interests, while designing
“new instruments for a new era.” growth. Regulated entities call for
The fundamental ahead is rebuilding consistency and predictability, as well
public trust, restoring legitimacy and as for recognition that, while general
creating a world that is value-driven principles and global treatment may
and more inclusive, where citizen prevail, a regulatory regime must be
participation drives decision-making flexible to accommodate national
processes. differences.

Several participants called for an overhaul

Rebuilding the global of capitalism to create a moral, more
financial architecture cohesive capitalism and debated the
possibility of new metrics to replace
Participants grappled with myriad GDP to measure a society’s economic
challenges about the future of the global well-being. Others argued that reform “We cannot go back to practices
economy, how to rethink old paradigms of the international monetary system before the crisis: that would be
and how to redesign or create new must be part of a larger process of going forward into the past.”
business models. They agreed that change.
first and foremost, the risk of a systemic Doris Leuthard, President of the Swiss
failure must be minimized and the system Public anger over the bailout and out Confederation and Federal Councillor of
must be made more resilient. To avoid of control CEO compensation is not Economic Affairs
future meltdowns, an early warning system going away. Working people paid for
is needed, driven by transparency, the bailout and their representatives –
accountability and better communication. trade unions and civil society – must
be given a place at the table.
After Wall Street’s so-called “casino
binge” the sun has set on the era of
self-regulation. Representatives of Rethinking democratic
financial institutions fretted over too legitimacy
much regulation, while economists
and industry leaders warned that if The legitimacy of international institutions,
emerging economies follow the same such as the United Nations, is
reform and regulatory measures as undermined by the veto power of a
developed countries, it will choke few big nations. Critics view

In the midst of the crisis, fewer than half of executives

believed financial regulations would be globally coordinated
Prospects for financial regulation
75%
Ideal v. expected focus of new financial industry
regulation (percentage of all respondents)

50 Expected
Ideal
d l

25

0
Regulating Coordinating Regulating Regulating There should
existing troubled regulations new products basic operations be no new
products, globally of financial regulation
such as CDS institutions of the financial
industry
Note: Results of a global survey conducted 5-10 Nov, 2008 (n=906)

Source: "Economic conditions snapshot, November 2008", McKinsey Quarterly

World Economic Forum Annual Meeting 2010 | 29

 G7 net government debt levels rising

Forecast G7 government debt

Forecast

120%

Italy

Government net debt (percentage of GDP)

100

80 Japan

Germany
60 US
France

40
UK
“After what happened in 2008- Canada
2009, I believe that we will move 20

to a more multipolar world.

0
Power, influence, wealth will be
1989 1994 1999 2004 2009F
more distributed throughout the
Source: IMF (October 2009)
world. This is symbolized by, in a
sense, the G20.”

Tony Tan Keng-Yam, Chairman,
Government of Singapore Investment
Corporation
institutions such as the World Bank Global regulation-making has become
and the International Monetary Fund gridlocked and the void has been filled by
as tools that rich countries use to regional systems of law and a tendency
impose rules and policies on poor towards unilateralism. The failed 2009
countries. There were calls for a new, Copenhagen Climate Conference and
or at least retooled, Bretton Woods the stalled Doha Development Round
and a more inclusive G20. demonstrate the inadequacies of
consensus-based processes for
As one participant noted, the G20 is complex global issues.
a “nice organization” if a country is
a member of the club, but not such To meet urgent global challenges,
a nice organization for those left out, fundamental changes to decision-
which raises serious questions about making processes within international
its legitimacy. institutions are needed. But any redesign
of the international legal system should

Two-thirds of the global online population participate

in social networks or blogs
Participation in online member communities
80%
in "member communities"*, December 2008
Percentage of online users who participate

60

40

20

0
Brazil

Spain

Italy

Japan

UK

Global

US

France

Australia

Germany

Switzerland

* Member communities includes social networks and blogs. Japan not included in Global figure.

Source: "Global Faces and Networked Places" (March 2009), Nielsen Online, Netview, Home and Work Data

30 | World Economic Forum Annual Meeting 2010

involve a wide range of stakeholders
to ensure that it is responsive to the
new needs of the 21st century. In
Rethink
particular, the voices of developing in Davos
and emerging market countries must
be considered. “In Kyoto, all the countries there
agreed on reducing emissions and
setting a target for 2050 . . . but no
Scaling up successful models one agreed on setting a target for
2020. And I think the reason is
Not everything is broken. It is important because of the participants – none
to learn from those companies that will be around in 2050.”
properly align the interests of share-
holders, stakeholders, legislators and Lee Myung-Bak, President of the Republic
taxpayers. The World Trade Organization of Korea; Chair, 2010 G20 Summit
is one of the rare international
organizations that work as intended.
However, if Doha collapses again, its Leadership for tomorrow One way to overcome the obstacles is
legitimacy will be irreparably eroded. education. Institutions must do more to
The Global Alliance for Vaccines and The failure of heads of state to come inspire and train young people to serve.
Immunisation (GAVI) is a success story. to an agreement in Copenhagen in
Since its launch 10 years ago, GAVI December 2009 underscored the Education shapes tomorrow’s leaders.
has saved more than 4 million lives and weakness of existing models and A public-private partnership is needed to
has immunized an additional 256 million confirmed what many people believe: develop a new vision for the educational
children in the poorest countries. GAVI’s today’s global and national leadership sector that will inspire entrepreneurship
visionary public-private partnership is weak or missing. Young Global and meet the needs of the ever-changing
model leverages the skills of individuals Leaders – a group of talented young job market. An alliance similar to GAVI
and organizations in a united mission. people selected by the World Economic could create the synergies needed.
GAVI has already inspired the Global Forum – meeting in Davos pointed
Fund to Fight AIDS, Tuberculosis and out that while a vast majority of them
Malaria, which has attracted significant want to serve in the public service,
investment. The model is now being they are dissuaded by fraud, excess
replicated by a new public-private bureaucracy, lack of career options
partnership to tackle chronic diseases. and other obstacles.

Investments in girls’ secondary schooling yield over

18% total return to society
Returns on investment for education, by gender

20%
Return on educational investment

15

10 Men Women

0
Primary Secondary Higher

Source: Psacharopoulos and Patrinos, "Returns to investment in education: a further update", Education Economics (2004)

World Economic Forum Annual Meeting 2010 | 31

 The IdeasLab is a highly engaging session format designed
in collaboration with major universities and the Forum, where
powerful ideas, trends and concepts are presented by leading
intellectuals and entrepreneurs.

Following the Pecha Kucha style presentations, participants

chose a topic for further exploration and spent 20 minutes in
dialogue with the presenter. Each team shared the highlights
of their conversation with everyone in the IdeasLab.

Pecha Kucha presentations from the IdeasLab

may be viewed on YouTube. Go to www.
YouTube.com and search for Davos
2010 - IdeasLab.

32 | World Economic Forum Annual Meeting 2010

World Economic Forum Annual Meeting 2010 | 33
Acknowledgements
The World Economic Forum would like to thank its Strategic Partners for their valuable support of the World Economic
Forum Annual Meeting 2010.

ABB Fluor Corporation Sberbank

Abraaj Capital GE/NBC Universal Siemens
Accel Partners Goldman Sachs SK Group
Accenture Google The Standard Bank Group Limited
Adobe Systems Incorporated Hanwha Group Standard Chartered Bank
Agility HCL Technologies Swiss International Air Lines
Alcatel-Lucent Heidrick & Struggles Swiss Re
Alcoa Hewlett-Packard Company System Capital Management
Apax Partners HSBC Thomson Reuters
ArcelorMittal Huawei Technologies Troika Dialog Group
AT&T Hubert Burda Media UBS
AUDI AG IHS Inc. Unilever
Bahrain Economic Development Board Infosys Technologies VimpelCom
Bahrain Mumtalakat Holding Company Intel Corporation Visa Inc.
Bain & Company Investor Vision 3
Bank of America JPMorgan Chase & Co. Volkswagen AG
Barclays PLC KPMG VTB Bank
Basic Element Kohlberg Kravis Roberts & Co. WPP
Bill & Melinda Gates Foundation Kudelski Group Zurich Financial Services
Bombardier Lenovo
Booz & Company Mahindra Satyam
The Boston Consulting Group Manpower
BP Marsh & McLennan Companies (MMC)
BT McKinsey & Company
CA Inc. Merck & Co. Inc.
Citi METRO Group
Chevron Microsoft Corporation
Cisco Morgan Stanley
Clayton, Dubilier & Rice LLC The NASDAQ OMX Group
Clifford Chance National Bank of Kuwait
The Coca-Cola Company Nestlé
Credit Suisse News Corporation
Deloitte NIKE Inc.
Deutsche Bank Nomura Holdings
Deutsche Post DHL NYSE Euronext
Do u Group The Olayan Group
Dow Omnicom Group
Dubai Holding PepsiCo
DuPont PricewaterhouseCoopers
Ernst & Young Reliance Industries
Eskom Renault-Nissan
Etihad Airways Saudi Basic Industries Corporation (SABIC)

34 | World Economic Forum Annual Meeting 2010

Contributors
André Schneider is Managing Director and Chief Operating Officer and W. Lee Howell is Managing Director, Head of
Programming and Global Agenda Councils. Nadine Bonard is Associate Director, Events.

William Dowell, Charles Emmerson, Mark Schulman, Gareth Shepherd, Dianna Rienstra and E. Benjamin Skinner were the
report writers. Dianna Rienstra was the editor of the report and worked with Nancy Tranchet, Associate Director, Editing and
the Annual Meeting Programme Team.

The Annual Meeting Programme is prepared by Mireille Bertolini; Sebastian Buckup; Antonio Calvosa; Nathalie Chalmers;
Johanna Dousse; Anne-Sophie Duprat; Jessica Dyllick; Natalie Hendro; Emma Loades; Begona Martinez; Stephanie
Nassenstein; Nicolas Ruble; Tiffany West; and Victor Willi.

Editing: Nancy Tranchet, Associate Director

Design and Layout: Kamal Kimaoui, Associate Director, Production and Design

Photographs by swiss image 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 2010. Session summaries are available at www.weforum.org/annualmeeting/summaries2010

36 | World Economic Forum Annual Meeting 2010

 World Economic Forum
Annual Meeting 2010
Improve the State of the World: Rethink, Redesign, Rebuild
Davos-Klosters, Switzerland 27-31 January

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)