This year’s World Economic Forum comes at a time of crisis, and presents a prime opportunity for the old guard of global capitalism to talk business with China and other emerging powers. Alex Katsomitris looks forward to what promises to be an intriguing summit…

Two things make the annual meeting of the World Economic Forum special: a snowy backdrop and a prestigious line-up of world leaders and businessmen. “Davos”, as the annual meeting is commonly known by the name of the Swiss town where it is hosted, is one of the most important events in world politics, gathering top-tier leaders and innovators from all walks of life. Organised by the non-for-profit foundation World Economic Forum, it has a lofty cure-the-world veneer that is not totally unnecessary at a time of economic turbulence.

China and the rest
This year’s meeting, which will be held on 25-29 January 2012, will serve as a truce in the midst of an economic and political crisis engulfing the U.S. and Europe. The theme of the event – The Great Transformation: Shaping New Models – highlights the intention of the organisers to stay focused on the big picture, as the world is currently witnessing a rapid transfer of power from West to East and from North to South.

This topic has been a Davos favourite, particularly after the outbreak of the crisis in 2008. Delegates have pondered before over the effects of the recession in Europe and the U.S. and the relative aloofness of Asia and Latin America. World-class economists such as Nouriel Roubini, also known as ‘Dr Doom’ for his early prediction of the credit crunch, partly owe their fame to fiery debates in Davos over the future of the eurozone and the role of China and India in world affairs.

But the 2012 meeting will be different. Nobody could predict a few years ago that the eurozone would be on the brink of collapse, or that the U.S. would lose their AAA credit rating for the first time in the history of the country. World leaders have come to realise that co-ordinated action is much needed before it’s too late. Some of them see Davos as an unofficial G20 summit, where important decisions can be taken.

That’s partly due to the inefficiency of the real G20 summit. Nicolas Sarkozy’s attempt in Cannes to lure China into buying bonds of European countries did not bear fruit. Europe and the U.S. desperately need to pump up their indebted economies with fresh cash, which currently lives in the periphery of old capitalism: China, India, Brazil and Russia. They have to convince the BRIC countries to increase domestic demand and give a boost to the global economy, probably by giving away votes in international organisations, such as the IMF and the UN.

Looking East
The current status of the Chinese currency will also be on the table. American and European exports have suffered from state-controlled depreciation of the Yuan (Renminbi), which does not float freely as other currencies. This is anathema for proponents of free trade on both sides of the Atlantic. As the American elections approach, playing the card of anti-Chinese sentiment will be hard to resist for both parties. Mitt Romney and other candidates for the Republican presidential nomination have already endorsed protectionist measures against China. That would trigger a relentless trade war.

So Davos 2012 could either be another brick in the wall between the U.S. and China, or a tipping point marking a positive shift in the relationship of the two countries.

A European affair
It will also be a good moment for European elites to discuss the future of their own continent. Talks about a two-speed Europe worry not only small countries that might find themselves at the margins of the EU, such as Greece, Ireland and Portugal, but also the UK and other non-members of the eurozone. Tighter financial regulation, most notably something that looks like a moderate version of the Tobin tax, is currently pursued by Germany and France, but meets fierce opposition from David Cameron. There will be no taxation without representation, say those who fear the prospect of a German Europe. But Britain desperately needs to have a say in the debate over financial regulation and a possible fiscal union, given the City’s significance for the British economy.

The world’s grandest focus group
Davos is an excellent place for high-minded discussions. The scenery of the Swiss Alps has inspired previous historic deals, such as the Rosneft-ExxonMobil partnership in the Black Sea, announced last year in Davos. Less secretive than the Bilderberg conference and more relaxed than the G8 and G20 summits, Davos is the “world’s grandest focus group” according to Lord Malloch-Brown, a former UN Deputy Secretary-General.

Diluting tension
However, gathering opinionated leaders in one room does not always produce the intended results. In 2009 Turkey’s Prime Minister, an infuriated Tayip Erdogan, blasted the Israeli President Shimon Peres over Israel’s military campaign in Gaza. 2010 was no better for the Turkish-Israeli relations, as nine Turkish activists were killed during a raid by Israeli troops on a flotilla approaching Palestine. The most recent row between the two countries regarded Israeli-Cypriot oil and gas drilling in a disputed area close to Cyprus. This year’s meeting will represent an ideal opportunity for Israel and Turkey to begin to build towards a more stable relationship. Regime change in Syria would be for the benefit of both, and certainly will be discussed in Davos. Israel is interested to have one enemy less in the region. The Arab Spring will also be discussed, and chances are that focus will be given on its economic side-effects. As the theme of the forthcoming meeting implies, transformation creates new opportunities for innovators who can see the future. Most of them will be in Davos.