DAVOS, Switzerland — The World Economic Forum kicked off here Wednesday with a strong dose of pessimism over the global ramifications of the slowdown in the U.S. economy.
The tone was set before a day of wild swings on U.S. stock markets that ended with a surge of 2.5 percent, or 298.98 points, in the Dow Jones Industrial Average, which at one point dropped 326 points.
"This year we are experiencing doom and gloom as the world enters uncharted territory," Klaus Schwab, WEF founder and executive chairman, told delegates. "Irrational pessimism is as damaging for us all as irrational exuberance."
U.S. Secretary of State Condoleezza Rice, in a keynote address, said, "I know that many are concerned by the recent fluctuations in U.S. financial markets and by concerns about the U.S. economy. The U.S. economy is resilient, its structure is sound, and its long-term fundamentals are healthy...and our economy will remain a leading engine of global economic growth...so we should have confidence."
Views varied widely over the likely depth and duration of the U.S. downturn and how it will affect the rest of the global economy, especially emerging Asian powerhouses such as China and India.
Nouriel Roubini, chairman of Roubini Global Economics, told delegates the debate is not whether the U.S. will fall into recession, but the duration, predicting the decline would last as long as a year.
The Federal Reserve Board's decision to make an emergency interest rate cut of 75 percent basis points after sell-offs Monday in global markets was necessary, but came too late to do more than make the U.S. recession "slightly more shallow and less protracted" because of the depleted finances of American consumers and the severely stressed banking system, he said.
Rob Portman, former director of the U.S. Office of Management & Budget, said the slowing economy "will affect the budget deficit negatively."
Although Portman said in an interview the U.S. downturn "can be shaken off by the end of the year," he suggested that the subprime mortgage crisis would take more time to correct.
However, a former cabinet member in the Clinton administration, speaking on the condition of anonymity, said, "By 2009, we should see a turnaround. It's not going to last something like two to three years."The ex-government official said he did not expect the dollar to decline much further and stressed that China should allow its currency to appreciate more. He argued that China was likely to feel the impact of the U.S. slowdown more than neighboring India, which is not as export-focused as its neighbor.
In a similar vein, Kamal Nath, India's minister of commerce and industry, said in a news conference, "I don't see a major impact on India," adding that India's economy has been driven by strong domestic demand.
"In China, India and Southeast Asia, things are moving well," Nath said.
Earlier, Nath told an outlook session on the world economy that growth by developing countries could cushion the effect of the U.S. slowdown.
"If the argument is that the U.S. is going to drive all of the economies downhill, I wouldn't fully agree with that," he said.
However, Stephen S. Roach, chairman of Morgan Stanley Asia, based in Hong Kong, said hopes for a decoupling from the U.S. are a fantasy.
Meanwhile, a new report by the International Labor Organization on Global Employment Trends forecast that economic turbulence could spur an increase in global world unemployment in 2008 to 6.1 percent, resulting in 5 million additional people without jobs. In 2007, the number of people unemployed worldwide reached 189.9 million, or 6 percent.
The agency said it also expected the impact of the credit crisis this year "would result in an estimated 240,000 fewer jobs" in rich developed countries. Last year, the booming world economy created about 45 million new jobs.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews