Davos Dispatch: Clinton's Biggest Worries

In my first dispatch from Davos, I observed that the atmosphere was upbeat. The business community is not worrying much about the dark predictions of the past year. There is, after all, still no collapse of the dollar despite the U.S. trade deficit; interest rates and inflation worldwide are low, and oil price increases are being easily absorbed. India and China are emerging as the new engines of growth and symbols of why market economies work.Since that first missive, there has been more talk of risks: the security threat in Iran, the avian flu, and then, from former U.S. President Clinton, who spoke to a standing-room-only crowd in the main hall: three big worries. Two of his three big worries are on our CGD agenda.FIrst, climate change. Clinton said the U.S. needs to focus on a clean energy future "to give China and India the growth they deserve". The President agreed (implicitly) with my colleague Bill Cline that there would be zero economic costs and large economic and social benefits to steps to curb greenhouse gas emissions (see Cline's Meeting the Challenges of Global Warming, (PDF), through such measures as conservation and tax incentives for R&D. (He did not refer to the unmanagemable burden on the poor in developing countries that climate change on the current trajectory will impose. But stay tuned to CGD for that assessment later this year.)Second, he argued that "the global world works to aggravate rather than mitigate inequality." It’s an argument I made about the global economy in a lecture at the World Institute for Development Economics Research (WIDER) (see: Rising Inequality in the New Global Economy) and in a an earlier CGD working paper (Asymmetric Globalization: Global Markets Require Good Global Politics). To paraphrase him: Voters see such grand issues as "democracy" through the prism of their own experience. For every anti-Israel vote for Hamas in Palestine, there were dozens who voted for the better opportunities they believe Hamas will bring them. "These guys will give us a chance." We could surely say the same about the election of Morales in Bolivia. People are voting for a chance, not for an ideology. (Clinton went on to say that the already fragile support for open markets in the U.S. will be lost unless we can do something at home about the perception that competition from India and China are behind the economic worries of many U.S. workers.)Clinton's third big worry was the failure up to now to reconcile religious and political differences in the world. We cannot, he said, have a global society and a global economy without some sense of global community.Later, saying others have called him a "bleeding heart cheapskate" about the international aid system, he said that the U.S. government spends $400,000 to put an AIDS Director in the field, and the Clinton Foundation $80,000. He was pointing out the benefits of private management of aid programs. He then called for serious analysis in every country of how public aid money is spent. More is needed, clearly, he said, but we also have an ethical obligation, to people who literally rely on aid to stay alive, to be sure that public money is well spent.Soros on the resource curseAt a dinner chaired by Moises Naim, a table with participants from around the world said the U.S. is surely pushing democracy for ulterior motives. George Soros said that in the case of his Open Society Institute, that is simply not so. He then made the following point about resource-rich countries without democratic institutions: They're as poor as the resource-poor countries, with worse governance. He called for "Revenue Watches" in resource-rich, democracy-poor countries.