Davos 2012: Soul searching at the World Economic Forum

Four years into a brutal recession that has left 200 million unemployed around the world, and with protest movements occupying public spaces in western cities, there is clearly some soul-searching going on.

Wednesday's programme in Davos began with a debate on whether 20th-century capitalism is failing 21st-century society. It notes that many of the indicators of economic and societal health are going in the wrong direction.

So, the good news in Davos is that the right questions are starting to be asked. Politicians, even right-wing politicians like Bismarck, eventually came to the same conclusion than Karl Polanyi: that capitalism in its pure, unadulterated form was unsustainable, and that it could only be made to work through deep-seated reforms.

The extent of the unease about today's toxic mix of unemployment and inequality was demonstrated in a straw poll of those attending the debate on capitalism showed that 40% thought it was failing 21st century society and 20% thought it wasn't.

The debate was somewhat one-sided: Sharan Burrow, general secretary of the International Trade Union Confederation was pitted against Brian Moynihan, chief executive of Bank of America, David Rubinstein, managing director of the private equity firm Carlyle, Ben Verwaayen, chief executive of Alcatel-Lucent and Raghuram Rajan, economics professor at Chicago University.

Burrow's view was that corporations have too much power, that capitalism was eating itself through high unemployment, the highest levels of inequality since 1930 and tax avoidance. The other panellists begged to differ. Verwaayen said corporations had too little power and that the key to the future was innovation and job creation rather than job security.

Rajan said globalisation and technological change was increasing the returns to talent. Moynihan said the banks reflected society, warts and all. Rubinstein, with a nod to Churchill, said capitalism was the worst system going, apart from all the others.

Conclusion: those running the global economy know there is a problem but, since they are doing well out of the system personally, lack the incentive to do anything about it.

Xabier