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.
Supermodel @helenachristensen teamed up with longtime friend and designer @camillastaerk on a joint @paredeyewear collaboration. The lineup features three styles and 11 offerings, all of which embody a vintage feel. Get all the details on how they celebrated the collab on WWD.com. #wwdaccessories #wwdeye (📷: @slovekinpics)
“It’s a hard industry to keep motivated, as well, so finding different subjects and people is what makes it worth it – when you’re like, oh, I’ve met great people, I feel like I’ve done something good, and I feel proud of having done this,” said French actress Stacy Martin on being grateful for the variety of roles she’s take on. Read @ktauer’s full interview with Martin on her her latest film “Godard Mon Amour.” #wwdeye (📷: @danieldorsa)
After showing in front of the Eiffel Tower for his last two women’s ready-to-wear collection, it looks like @anthonyvaccarello may be heading to the Big Apple. Sources say the designer will stage his next @ysl show in NYC on June 6. Get all the details on WWD.com. #wwdnews #wwdfashion (📷: @aitorrosasphoto)
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
@theluxurycollection is officially launching a collection, tapping Sofia Sanchez de Betak for the capsule. Over 30 styles will be featured in the Chufy x The Luxury Collection, debuting next month at Bergdorf Goodman, The Webster, FiveStory and more. De Betak, known as “@chufy,” drew inspiration for the collection from her trips to Japan in the past year #wwdfashion
@lhd, founder and CEO of @thewebster, has teamed up with @lebonmarcherivegauche for the European launch of her ready-to-wear line, LHD. The launch will come with an exclusive pop-up opening today that’s set to run through May 20. Located on the second floor, it carries her debut Miami-themed resort collection, launched in November as see-now-buy-now. #wwdfashion