A continent still growing nowhere fast

FOR Europeans at the World Economic Forum in Davos this week, the 2012 theme – “the great transformation” – had a thoroughly gloomy ring to it.

The phrase harks back to Karl Polanyi’s account of the transformational and traumatic rise of the market economy in England.

But as Europe undergoes another epic transformation, it is not the ills of the free market that are weighing on the minds of business leaders.

For all the rhetoric about a “crisis of capitalism”, it is the unchartered political waters ahead that make executives quake in their boots.

Despite all the talk, it is still unclear whether European leaders are prepared to brave voters’ ire by signing away their fiscal sovereignty. But more fundamentally, businesses want to know if governments can boost the continent’s long-term competitiveness by demolishing parts of its overbearing regulatory apparatus.

On Wednesday, Prime Minister David Cameron took to the main stage to blast the EU for choking business with “unnecessary regulation… that can destroy jobs”. His rhetoric looked at first like little more than a red flag waved at the UK’s European rivals.

But between the lines the message is clear: “Come to Britain. We are not like sclerotic Europe. We support wealth creation” (a message that will raise eyebrows in the City).

Chancellor George Osborne took up the cause over the weekend, calling for a move “towards” capitalism.

But sweet words are not enough.

The problem is that politicians and business leaders alike are so fixated on the current crisis that many can’t lift their heads above the parapet long enough to plan the future.

“Clients know they have to look at Asia,” said one banker from the region. “But we don’t see real engagement.”

By way of example, he said “everyone wants a Chinese woman on the board – rather than genuinely the best person who knows Asian institutions”. It’s the appearance of action, rather than genuine strategising.

Unless Europe’s elites can shake off their lethargy, the only long-term solution to the debt crisis – growth – will remain a pipe-dream.