William Watson: Davos and the Great Man (or Woman) Theory of Economic Growth

Maybe it’s because I’ve never attended, but I’ve always had trouble understanding the purpose of the annual World Economic Forum, the 2016 edition of which is currently underway in Davos, Switzerland.

Yes, it must be fun to see and be seen with some of the richest and most famous people in the world. And who wouldn’t want to be lectured about Big Oil by such a noted expert as Leonardo DiCaprio? (Actually, a lot of people, judging by the reportedly lukewarm reaction to his remarks at a plenary session.)

Our own prime minister’s purpose in going is said to be to begin to re-brand Canada. “Canada is known for its resources,” he told the Davos men and women, “but I want you to know Canadians for our resourcefulness.” It’s a very nice line and his speech apparently was well received. George Soros declared “I liked him.” But in what way is any of this going to have even the slightest effect on Canadian economic activity, beyond the boon to our air travel service industry from sending over a large delegation? (My own boss, Principal Suzanne Fortier of McGill, was attending.)

Apart from rubbing shoulders with Mr. DiCaprio and Kevin Spacey (who, if he’s in his House of Cards character, Francis Underwood, could at least give the PM advice on realpolitik), Prime Minister Trudeau had lined up one-on-one meetings with Mary Barro, head of General Motors, and B. K. Goenka, of India’s steel and textile company Welspun.

The Great Man (or Woman) Theory of History holds that individual historical figures can make an important difference in human affairs, especially at what seem to be turning points. Think of Winston Churchill in 1940, Margaret Thatcher in 1979 or maybe even Pierre Trudeau in 1976, the year of Quebec’s first independence referendum. Is there any validity to the Great Man (or Woman) Theory of Economic Growth, to the effect that political leaders networking with business leaders and movie stars can help turn the course of economic development?

Forceful individuals can certainly help shape economic development. Think Steve Jobs or Bill Gates, who put their own stamp on retail computerization, even if changes in microprocessing power pretty much determined we’d have home computers starting in the 1980s. And serendipity’s role in human affairs can’t be denied. Trudeau’s speech may well cause people who heard it to take a second look at Canada.

But do you really think companies like General Motors or Welspun make investment decisions based on a speech they hear at Davos or a nice conversation they have with a country’s prime minister?

We may get that second look because of Trudeau’s presentation, but before putting big resources into a place, serious companies are going to do due diligence. Ms. Barro or Ms. Goenka may well want to hear directly from our prime minister just how much financial or other support his government is going to belly up to the investment bar with. But whether he’s a nice guy or a hard-nosed, no-B.S. plain-speaker (not to mention any names) won’t have much effect on what happens.

And that’s exactly how it should be. Shareholders in those companies wouldn’t want it any other way. But neither should the rest of us. In fact, pity those poor countries where currying favour with the top man is crucial and making nice is the only way in.