Global chief executives gather in bullish mood

Business leaders have begun the World Economic Forum annual meeting in predictably buoyant mood. A global survey of chief executives published by PricewaterhouseCoopers here in Davos found that 90 per cent of respondents expect higher revenues this year and a similar number predict rising revenues for the next three years.

That sentiment was largely echoed by leading economists and policymakers here at the WEF meeting, though there were some notable dissenters. Laura Tyson, Professor of Economics at the University of California, Berkeley predicted another "Goldilocks" year for the world economy - not too hot, not too cold, but just right - and insisted fears of an economic slowdown in the US had been overdone.

Her views were echoed by Jacob Frenkel, vice-chairman of the AIG and a former head of the central bank of Israel. The doomsters had been proved wrong last year and would likely be proved wrong again, he insisted.

Continued strong growth in Asia, particularly China and India, is widely cited as the main reason for believing the world economy is no longer so dependent on the American locomotive as it used to be - a point of view which tunes with the conference's theme of "The Shifting Power Equation". A milestone was passed last year, Ms Tyson noted, as in real purchasing-power parity terms the emerging markets became more than half of the world economy.

Yet she also believed there was encouraging evidence of a healthy rebalancing within the US economy too. Consumption and housing were becoming less important, trade and investment more so.

This was not a view shared by Nouriel Roubini, chairman of Roubini Global Economics in the US. He predicted a hard landing for the US economy, with the housing downturn yet to run its full course, and eventually spilling out into construction, manufacturing and consumption. He also strongly refuted the idea that the world economy had "decoupled" from the US.

As evidence that a full-blown housing recession in the US was looming, Mr Roubini pointed to the fact that 16 sub-prime lenders had already gone under since the housing slowdown began. He predicted the process would end in a full-blown credit crunch.

Yet Mr Frenkel insisted the growing depth, size and sophistication of the financial markets, as well as improvements in economic policymaking, had brought about a new stability in the world economy, which countered the effect of shocks.

One theme likely to dominate discussion here was the growing inequality, both within nations and between nations, being brought about by globalisation.

One leading academic here, Robert Shiller, Professor of Economics at Yale University, thought the level of political discourse on rising inequality was "way too low". He believed the tax system had to become more progressive to avoid the possibility of a political backlash from those disadvantaged by globalisation.