The concept behind this year's World Economic Forum could not be more relevant to Egypt, writes Samir Radwan* As if to compensate for the bitterly cold weather in the mountain resort of Davos, debate about the future of the global economy at this year's World Economic Forum (WEF), extending over five days (27-31 January), was extremely heated. World leaders were busy trying to find innovative answers to one question: How to improve the state of the world economy following what is now being called "the Great Recession of 2008" -- the most economic daunting challenge since the Great Depression of 1929-32. The annual meeting of the WEF last year addressed how to best navigate to a post-crisis world. The central question was the stimulus packages needed to get out of recession. This year, the meeting moved to consider action to improve the state of the world economy, encouraged by the green shoots of recovery in the OECD economies along with the resilience of emerging economies in the developing world. This soul-searching comes on the back of dangerously deteriorating living conditions that have threatened social cohesion in most societies. The lateral reach of the WEF 2010 discussion could be ascertained by its organising concept: "Improve the State of the World: Rethink, Redesign and Rebuild." Indeed, the global financial crisis has powerfully demonstrated the inadequacy of orthodox economic prescriptions. Unfettered deregulation of capital and labour markets led to the creation of hugely unrealistic financial bubbles that could not be sustained by the real economy. The meltdown that took place led to pressure to rethink economic ideas and policies. Keynesian economics that appeared as a saviour in the aftermath of the Great Depression are now being revisited to guide public policy. The excesses and greed of bankers and traders rekindled calls for a moral code of values to be part of badly needed regulation. As the prime minister of China put it during the Davos meeting, we talk about Adam Smith's "invisible hand" that guarantees the efficiency of the market economy; we should rather talk about Adam Smith's "visible hand" that calls for a healthy regard for moral ethics and values. There is also urgency to redesigning national and global policies. There is consensus that the ultimate aim of growth should be job creation, and there is a fear that the fledgling recovery may be largely a "jobless recovery". More than $3 trillion have been pumped into the global economy with little evidence that unemployment is showing any sign of receding. The relative roles of the state and the private sector have to be redesigned in such a way as to set the scene for employment-intensive growth. These fundamental changes can only gain the broad support of citizens, both at the national and the global levels, if serious attempts are made to rebuild trust in policymakers and policymaking. This is an essential prerequisite to regaining confidence and establishing the legitimacy of new ideas and new designs. Following the Davos meeting, and enjoying the warmth of Egypt, one cannot help but to reflect on how relevant the task is to "rethink, redesign and rebuild" -- indeed, more urgent today than ever before. Egypt has a lot going for it: its economy, thanks to recent reforms, has shown notable resilience in coping with successive crises; growth prospects are promising (five per cent in 2010, and regaining the pre-crisis rate of 7.2 per cent by 2012); regional and global demand is recovering as the global economy is expected to grow by three per cent in 2014 and in the MENA region by five per cent during the same year. This suggests that Egypt has a strong launching pad for the future, but progress requires much more than that. Five challenges need to be addressed urgently and simultaneously: regaining high growth (of seven per cent per year) that is essential to absorb new entrants to the labour market; defining the sources of growth by intensifying investment, especially in manufacturing for exports; confronting once and for all the problem of low productivity and skills of the labour force in a way to enhance employability and increase incomes; abandoning piecemeal approaches to poverty reduction in favour of bringing the poor to the mainstream of the economy through productive employment; and making the objective of improving the quality of life a conscious and central part of economic and social policies. This is not a wish list. The experience of those who succeeded in breaking the vicious circle of underdevelopment tells us that this is possible, and that "Where there is a will there is a way." * The writer is senior economic advisor to the Egyptian Financial Supervisory Authority (EFSA).
