Davos as Animal House

Alan Greenspan isn't the only one to retrace his missteps of the past few years. Klaus Schwab, founder and executive chairman of the World Economic Forum - the organization that puts on the Davos conference - says that instead of heeding the concerns of participants like Robert Schiller and Larry Summers, the annual gathering was one big party for the rich and powerful. "We let it get out of control, and attention was taken away from the speed and complexity of how the world's challenges built up," he told Bloomberg. That’s the horrible aspect of the meltdown: It needn’t have happened, at least not this badly.

WEF Chief Operating Officer Kevin Steinberg says the vast sums of money that rolled in from Wall Street celebrities for marquee billing in Davos contributed to complacency among forum organizers and often obliged them to publicly massage the viewpoints, wishes and status of their superstar guests. "We catered to what the financial leaders wanted: solo speaking slots, luxury hotels and VIP treatment we wouldn't afford anyone else," Steinberg, 38, says. "We gave them a soapbox. It was all political. We try to minimize the politics, but can't."

There were, of course, plenty of warnings about the dangers of secretive hedge funds, giveaway mortgage loans, and uncontrolled globalization. Those dangers should have been seriously reviewed at a place like Davos. But, laments Schwab, "It was denial, total psychological denial."'

Each January, global financial titans and their entourages gathered in the Alpine hamlet. A band of fluegelhorns wandered in hotel lobbies, heralding the arrival of delegates such as Lehman Brothers Holdings Inc. CEO Richard Fuld Jr., Freddie Mac CEO Richard Syron and U.S. Treasury Secretary Henry Paulson, along with actresses such as Angelina Jolie and Sharon Stone. Bundled in cashmere coats and goose-down parkas, the WEF's 2,500 "global leaders" set off to attend a medley of 500 public and private sessions designed to isolate economic problems, clarify disturbing market trends and forge innovative solutions.

A quick Google search will capture the laissez-faire climate of recent conferences. This is from the Independent's scene setter for the 2007 gathering:

What's likely to be the key theme of Davos this year? For business it must remain the remarkable resilience of the world economy, which despite everything that can be thrown at it, continues to surge ahead. The present growth phase promises to break all previous ones. Yet though Davos bills itself as an agenda-setting event, it tends only to reflect the world as it is rather than what it will become. The last time the mood at Davos was as upbeat as this was in January 2000. With the delusions of the dot.com bubble still in full swing, business leaders began truly to believe that it really was possible to cure the world of all known ills and confidently predicted an age of never-ending prosperity. Within months, the bubble had burst and a serious business downturn had set in. Soon after came 9/11, the Enron scandal and the invasion of Iraq. Events have a habit of spoiling the party. But for now, Davos is in full swing.