Delusional in Davos

Why the global business elite feel no remorse about the damage they've done.

Everything has to change in order for everything to stay the same, wrote the Italian author Giuseppe Tomasi di Lampedusa in his famous novel The Leopard. The novel is set in 19th-century Sicily, but Lampedusa could just as easily have been describing the 2009 World Economic Forum in Davos.

You notice it more in the corridors and the cafes of this exclusive Swiss hamlet rather than in onstage debates. Publicly, the discourse is all about the dangers of false market assumptions and the now-infamous financial engineering. (I seem to remember it being called financial innovation last year.) But offstage, top bankers, private equity bosses, and hedge fund stars keep chitchatting and socializing, just as if banks had not had $1 trillion write-downs, the financial markets had not lost $25 trillion, and up to 30 million jobs were not at risk around the world.

To achieve this state of mind, any human being probably needs to construct a formidable mental shield. A survey I personally conducted at Davos this year of 60 top central bankers, financial market regulators, fund managers, and industry opinion-makers gives an idea of what this shield looks like.

When participants were asked whether they think they have done something in their career which might have contributed, even in a minor way, to the financial crisis, 63.5 percent opted for a clear no; 31.5 percent went for a yes, often adding in the same breath that nobody in the industry can honestly claim otherwise; and 5 percent said maybe.

The yes people were then asked to explain what triggered their wrong decisions. They had three options: too much optimism (68.7 percent), I felt I had to keep dancing while the music was playing (31.3 percent), or greed (0 percent).

David Rubenstein, cofounder and managing director of the Carlyle Group, expressed surprise at the results. How strange, he said. I thought 100 percent of them would say they had nothing to do with it.

For all his wry humor, Rubenstein has a point. Psychological self-defense, a Darwinian instinct, is part of human nature, and Davos Man is no exception. Feelings of personal responsibility after a collective catastrophe are a matter for psychologists rather than World Economic Forum conversations, but the answers to the survey should come as no surprise.

For all the talk of the more somber mood at this year's event, there were about 100 more private jet movements at the Zurich airport last week than during last year's event. I'm not sure if the irony was lost on the organizers who handed out pedometers to forum participants, to encourage them to walk and reduce their carbon footprint.

The conflicting attitudes of contrition and denial were evident at a special event on the 36 hours in September, when Lehman Brothers collapsed and the world changed. Nassim Nicholas Taleb, author of the bestselling The Black Swan, a book about hard-to-predict events, gave a presentation. The participants enjoyed his talk, which was brilliant and provocative as usual, but as he spoke, one couldn't help wondering if what they were actually enjoying was the simplistic comfort that Taleb's message could provide.

The audience seemed to enjoy the idea that the current crisis is a Black Swan, a very unlikely, though possible, event. The alternative view is that of a train driven full speed into a wall. Thinking that way requires one to ask who was in the driver's seat, and just maybe recognizing one's own fingerprints on the wheel.



Why Benedict Has Hope

Despite a rocky start, the Vatican may have found a president it can work with in Barack Obama.

The first week of U.S.-Vatican relations under the Obama administration did not, on first glance, seem very promising. In response to an executive order by President Barack Obama overturning the Bush administration's Mexico City policy, which prohibited the use of federal dollars to promote abortion in overseas family planning efforts, a senior Vatican official slammed the administration's arrogance for presuming that basic human rights can be overturned by presidential fiat. If this is one of President Obama's first acts, I have to say, in all due respect, that we're heading quickly toward disappointment, Monsignor Rino Fisichella, who heads the Vatican's Pontifical Academy for Life, said in an interview published in the Italian newspaper Corriere della Sera.

Pope Benedict XVI's recent decision to lift the 20-year-old excommunication of four traditionalist Catholic bishops, including one who's a Holocaust denier, also reinforced the perception that he aims to move the church in a decidedly more conservative, traditionalist direction. Responding to wide international criticism, particularly from Jewish groups, Benedict swiftly stressed the importance of never forgetting the Holocaust and expressed full and unquestionable solidarity with the Jewish people.

The lifting of the excommunications was a victory for traditionalists within the church, but could also be seen as a prelude to a conflict with the progressive ex-community organizer who just moved into the Oval Office and enjoys overwhelming popularity in the very parts of the world where the church sees potential for growth.

Unexpectedly, however, the prevailing view in the Vatican leadership, even among Benedict and his conservative supporters, seems to be cautious optimism. These leaders seem to think they have more in common with the new U.S. president than most observers realize. That's because other aspects of Catholic teaching, which Benedict helped expound during his 24-year stint as the Vatican's top doctrinal official, seem fairly close to positions Obama expounded on the campaign trail.

Shortly before his death on Jan. 10, veteran Vatican diplomat Cardinal Pio Laghi, who served as Pope John Paul II's ambassador to the United States during the Reagan years, was surprisingly positive about the new president.

There are many points on which there will be agreement, Laghi told a Dec. 22 conference in Rome, pointing to poverty relief, healthcare, and immigration as areas where Obama's positions are in consonance with the social doctrine of the church. He also praised Obama for running a campaign in the spirit of national reconciliation of [Abraham] Lincoln.

To be sure, Laghi predicted tension over life issues such as abortion, but nonetheless, Laghi's optimism reflects what has been a broadly upbeat tone from the Vatican in response to Obama, which began with a Nov. 5 telegram from Benedict hailing his election as a historic occasion and expressing desire to collaborate in building a world of peace, solidarity and justice. That gesture was itself a notable tip of the cap because Vatican protocol usually dictates that popes do not address heads of state until they formally take office.

Benedict's overture was also a subtle contrast with Catholic bishops in the United States, who swiftly warned Obama about cultural war should his administration move forward with the Freedom of Choice Act, which would repeal all federal and state restrictions on abortion.

The pope, however, seems to be taking the long view. Although Benedict's doctrinal conservatism is certain to create major obstacles in relations with Obama on issues such as abortion, embryonic stem cell research, and gay rights, it might leave other doors open. At the top of the list would be global antipoverty efforts; during a 2007 trip to Brazil, Benedict said that the Catholic Church's preferential option for the poor flows from its faith in Jesus Christ, who was himself poor.

Other areas where Vatican officials perceive at least the possibility of a meeting of minds include disarmament, peacemaking, and environmental protection. They've also signaled that Obama might be better positioned to make a difference in two regions of the world where the Vatican has strong interests: the Middle East -- including Iraq, where it clashed with George W. Bush over the war -- and Africa.

The Vatican's desire to work with Obama is not only ideological, but eminently practical. For example, it's anxious to see the new administration move on immigration reform, not merely because of the justice issues involved, but because a massive share of the new immigrants in the United States are Hispanic and therefore Catholic. A recent Pew Forum study of religion in the United States found that the Catholic Church in the United States has a serious problem with retention, losing four existing members for every new convert it gains. Its share of the overall U.S. population is holding steady at 25 percent, however, due to the impact of immigration and higher-than-average Hispanic fertility rates.

Africa offers another case in point. It's the greatest growth market for Catholicism in the world; the Catholic population in sub-Saharan Africa went from 1.9 million in 1900 to 139 million in 2000, an increase of over 7,000 percent. If Obama can promote development on the continent, the Vatican calculates, he would inadvertently help the church consolidate these gains.

The drama of U.S.-Vatican relations in the Age of Obama is therefore likely to pivot on a tug of war between two forces: on the one hand, the basic cultural conservatism of Benedict's papacy and the tight focus of American bishops on life issues; on the other, the Vatican's humanitarian and practical interests in a whole range of social justice issues that Obama also advocates.

Whichever way things go, it should be a fascinating show to watch.

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