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Quest Means Business
Oxfam Says Richest 1 Percent to Get Richer; Obama Tax Plan Targets Rich; Lobbyist Pounces on Obama Tax Plan; Record-Breaking $100 Million Condo Sold in New York; Chinese Stocks Crop on Lending Curb; Inside China's Ghost Cities; How to Navigate New Global Context; Young Leaders at Davos
Aired January 19, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: The 1 Percent is getting richer. Oxfam warns of inequality.
The 1 Percent to be soaked. The US president has a tax plan.
The share shock in Shanghai. The market's down 8 percent.
I'm Richard Quest. We start a week together in Davos, where, yes, ha ha, I mean business.
And a very good evening to you from up the Swiss mountain in Davos. Tonight, there's a sharp, worrying, dramatic rallying cry on behalf of 99
percent of the population. Yes, Oxfam is calling for urgent action from the World Economic Forum on the world's stark and growing inequality. And
it wants Davos, this bastion of global elites, to be a forum not for the ultra-rich, but for all.
Delegates arriving here at this exclusive resort tonight are receiving this message, and it's stark: by next year, 1 percent of the world's
population will own more wealth than the other 99 percent combined.
It's Oxfam, whose executive director is one of the co-chairs of the forum. She says it's time our leaders took on the powerful, vested
interests that stand in the way of a fairer and more prosperous world.
There's another statistic which comes along with that. The top 80 people in the world earn more and own more than the bottom 50 percent.
Jeffrey Sachs is the economist and director of the Earth Institute at Columbia University. Jeffrey joins me now. Professor, I know that you are
not surprised by these statistics, but I wonder whether or not people here in Davos will be shocked by them.
JEFFREY SACHS, DIRECTOR, THE EARTH INSTITUTE, COLUMBIA UNIVERSITY: They should not be shocked in the sense that we've known this for years.
The wealth at the top is soaring. It's boomed in the last few years, and doubling of the number of billionaires.
The wealth of the world's 1,645 estimated by Forbes billionaires is about $6.4 trillion right now. It's absolutely staggering. It's a
combination of many, many things, but one of them is that our public policies, of course, have been owned by the rich in many countries and have
pushed that wealth even higher.
QUEST: The question of course is, the policies that were introduced post-2008, monetary easing, getting the system starting again. They were,
of course, policies that will put more money in the pockets of the rich. How do you reverse that policy?
SACHS: I think what many people are after, including President Obama, is the tax scams that have accompanied all of this. We know from the
Luxembourg leaks a couple of months ago, from the exposure of how the big IT companies -- Amazon, Google, and the rest -- have been putting their
money into the Caribbean.
We know that we have a massive global tax scam underway where the richest of the rich are able to hide their earnings, keep it offshore at
essentially -- in tax-free havens. And I think this is one of the targets.
And in the United States, it's absolutely shocking that by law, hedge funds managers and other super rich have a lower marginal tax rate than the
rest of humanity because they own a lot of the Senate, to put it bluntly.
QUEST: But Jeffrey, we're a business program, and unless you are about to waving the socialist flag, I assume you adhere in some shape or
form to the capitalist system. So, you're saying the capitalist system needs to be repaired?
SACHS: Yes, the idea of capitalism is that markets and the profit motive can lead to a lot of good things, no doubt about it. But the idea
of the democratic system is that people vote, not money voting. And that's what's gotten so out of kilter.
The next election cycle in the United States is estimated now to be a $10 billion campaign funding cycle. In other words, the rich own the
political system, they buy it, they pay for it --
QUEST: Right.
SACHS; -- but then they reap many times more in rewards. That's the problem. It's not markets.
QUEST: Sure.
SACHS: The problem is owning the politics.
QUEST: So, do you expect in Davos -- let's bring it back to Davos, because we do have -- we don't just have the 1 Percent. You have the 1
percent of the 1 Percent who are actually here in Davos over the next week. Do you expect that they will treat this with seriousness or with just tut-
tutting, something must be done?
SACHS: I think, actually, there is a considerable amount of soul- searching right now on many fronts. There's going to be a lot of discussion in Davos this week, as you know, about climate change. There's
going to be a lot about this tax shifting. These inequalities.
There is a lot of attention to the new agenda that's going to be adopted this year, these sustainable development goals which, after all,
call for a fairer world.
So, I do think that there is attention to this. There'd better be. But I do expect that there's going to be some serious discussions --
QUEST: OK.
SACHS: -- not only in the big halls, but actually behind the scenes, as well.
QUEST: Jeffrey Sachs, thank you for joining us, starting the program off for us tonight. And tomorrow night on this QUEST MEANS BUSINESS from
Davos, standing next to me will be the executive director of Oxfam. The issue of inequality is to be one of the most single important issues
throughout this year's World Economic Forum.
One possible solution -- it's been tried before, it's worked in some cases, it raises huge amounts of annoyance -- is to raise taxes on the rich
to provide tax relief either to the poor or the middle class. President Barack Obama is to announce a major overhaul of US tax policy on Tuesday as
part of the State of the Union.
His critics say the proposals are neither fair nor effective. The White House says it wants prosperity to extend to everyone.
(BEGIN VIDEO CLIP)
DAVID SIMAS, WHITE HOUSE DEPUTY SENIOR ADVISOR: As the economy finally, after six years, gets to a point where people are beginning to
feel it, we need to make sure that we lean in so that folks have a little bit more money at the end of the week.
And as importantly, that they have all the opportunities they have to get ahead. And so this why we call this middle class economics, and
that'll be the focus tomorrow night.
(END VIDEO CLIP)
QUEST: Now, the Oxfam report says that in the United States there's more lobbying on the budget and tax issues than any other, and one of those
lobbyists is Grover Norquist. He's president of Americans for Tax Reform, ATR. He's exceptionally influential with his anti-tax group, and he's
urging Republicans not to back the president's proposals.
He describes the president's plan -- even though we've not heard it -- as sinful. Grover Norquist is always very kind and joins us on QUEST MEANS
BUSINESS, and he does so now. Mr. Norquist, thank you for taking time. Let's begin. The statistic about Oxfam, the 1 Percent versus the 99
Percent, surely when it as indefensible as that, you can justify a certain raise in taxes, surely?
GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: Well, the obvious question is, are people earning the money that they have? And
certainly when people get money because they run a company called Solyndra and the government takes money from taxpayers and gives it to Solyndra,
that's crooked. That's corruption.
The goal isn't to tax corruption. The goal is to end corruption. In much of the third world, you have terribly powerful governments that
decides who's going to get rich and who's going to be poor.
QUEST: Right.
NORQUIST: They have very high taxes, and it hurts the people, and you don't have economic growth. China became significantly wealthier when they
reduced marginal tax rates dramatically on farmers. That's how they became a more successful country.
The United States -- we were paying 1 to 2 percent of income in taxes prior to the American Revolution.
QUEST: All right.
NORQUIST: We were a low-tax country and had tremendous growth and created a middle class. So, you don't tax corruption, you end it. And
that's why Obama's let-me-give-you-money-here-and-there and lending money to his friends and cutting special deals, that has to be ended. Not taxed,
ended.
QUEST: OK. But if the president's proposals, paid for in many ways by raising taxes on those absolute elites, those earning more than $2
million a year, if they provide benefits for a middle class, that surely is a worthwhile tax rise.
NORQUIST: Two things. You have to take a look at his proposals. He goes in and taxes present savings for parents who want to get their kids
into college. That's not taxing rich people, that's taxing the middle class.
There are eight taxes in Obamacare which directly hit the middle class. If the president wants to help the middle class, he can go into
Obamacare and take out those taxes that directly screw middle class Americans.
And so, you don't -- what he should be doing is having policies to create jobs. That's how you create a middle class and sustain it. The tax
policies he's put forward have made this recovery the weakest recovery in American history at least going back to 1960, where we keep statistics the
same way.
QUEST: Surely there is one valid point, and that is that the banking sector, the financial services sector, spends hundreds of billions,
millions a year on lobbying. It's an unequal battle, Mr. Norquist, because on the one hand, the financial services are paying Congress. On the other
hand, the middle class, the working class, the poor, they don't have any such lobbying clout.
NORQUIST: Well, certainly in the last set of elections, we've seen Obama got a great deal of money from Wall Street, and they threw a bunch of
money in both of his elections. I'm not quite sure why they did it, but they must have felt they were buying something of value.
I would like to see transparency, which the president said he would do when he was elected, and instead, we had the stimulus spending bill written
in secret, not online, as we were promised, for at least a number of days - - it should be weeks -- before they're voted on. The banking Dodd-Frank bill --
QUEST: All right.
NORQUIST: -- was written by the big banks, for crying out loud. That was Obama's idea. We ought not to be having these massive hundreds and
thousands of page bills written in secret with Obama's lobbyist friends putting them together, and then not letting the American people look at
them.
QUEST: All right.
NORQUIST: They should be online before they get passed.
QUEST: Mr. Norquist, I know that you and I will discuss this on QUEST MEANS BUSINESS once the president's plans are there, once the Republican-
controlled Congress has had a bash at them, and whatever comes out the other side, we look forward to hearing your views, sir.
NORQUIST: That'd be great.
QUEST: Thank you for joining us tonight.
Now, we're many thousands of feet up a mountain, and it's quite chilly, too, I can tell you. But in New York, talking about the rich and
the poor, a thousand feet above the 99 Percent on the streets of Manhattan, the highest price ever as been paid for a residence in New York City.
An unidentified buyer paid $100 million for just a -- $100 million for a two-floor penthouse. It's got breathtaking views of Central Park. It
is located on Billionaires' Row. Its 157 Tower There you see it. $100 million for a condo.
Now, when we return, it's a city modeled on the Big Apple, with a hollow core inside. We're going to take you inside China's ghost cities.
It's QUEST MEANS BUSINESS, and we're live tonight in Davos.
(COMMERCIAL BREAK)
QUEST: Welcome back to Davos. China's bull market run, it's been stopped in its tracks. The Shanghai Composite suffered its worst single
day drop in six years on Monday, down nearly 8 percent after Beijing moved to clamp down on risky share trading based on borrowings.
On Friday, the regulators banned the three largest brokerages from lending money to new clients for three months. Joining me now is our
emerging markets editor, John Defterios. Good to see you, sir.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Happy New Year.
QUEST: Happy New Year. Here we are again up a mountain.
DEFTERIOS: I know. And as you suggested, quite cold on the mountain. Compared to Abu Dhabi --
QUEST: Absolutely. Now, let's talk about this. What were the Chinese government aiming to do? And certainly they got more of a reaction
than they might have expected.
DEFTERIOS: Yes, in fact, the move by the market regulator came Friday. They investigated 45 different brokerage houses. They found three
guilty of extending margin lending for a period of six months, rolling over very bad loans.
The government's out to try to deflate the economy right now. The property sector in particular, some of the dark lending that's taking
place. And this in the stock market.
But one other point here: this is a market that was ready for pricking, if you will. It was the worst fall since the global financial
crisis in 2008. But this is the best performing market in 2014, up better than 55 percent.
QUEST: But -- is this -- really, what happened on Monday can only be judged when we see on Tuesday. In other words, if that fall continues, or
if there's a floor that's arrived underneath it.
DEFTERIOS: Yes, in fact, the market regulator came out to say this was not an intentional move to try to deflate the stock market. They
wanted to single out the marginal lending that's been rolling over. And they investigated 45 firms, though, Richard. They only picked out three to
ban them for three months. It's not a huge penalty going forward.
QUEST: The truth is, everybody is very concerned that nobody knows the real depth of bad lending in the Chinese real estate and in the Chinese
market.
DEFTERIOS: That's a fair point. And this is going to be shaken out in 2015, 2016 and 17. The World Bank last week when it reworked its
numbers for China right now suggested this is a very managed deflation of the economy going forward. They're trying to keep 7 percent growth for the
next three years.
Now, we'll find out a lot more tomorrow when the GEP figures come out. If the fourth quarters at 7.3 percent, it'll be the worst growth for China
in 24 years, going back all the way to 1990.
QUEST: We're going to have the premier in China -- of China here at WEF.
DEFTERIOS: Yes.
QUEST: I think he opens it on Wednesday.
DEFTERIOS: In fact, the first time that a Chinese is going to -- Chinese leadership is going to be opening the WEF --
QUEST: Right. What are we expecting to hear from him?
DEFTERIOS: Well, I think what he's going to suggest here is that this is not an economy that's broken. It's very interesting, people panic about
the Chinese economy when it slows down and gets close to 7 percent, 6.9 percent.
President Xi and Premier Li -- and as you suggested, Premier Li is going to be opening the forum tomorrow -- are suggesting we can manage
deflating the property market, not pricking it.
We need to get control of this marginal lending and this third-party lending that's been taking place in the region right now. But they're
suggesting we have our hands on the tiller. And they've been addressing corruption, as you know, for the last six months.
QUEST: Right.
DEFTERIOS: And this is starting to panic people because they don't know how deep it goes The second point is, they may be going to a US model
on global taxation on income. And again, this is something that's alarming those that live in China. It may force capital outside the country. They
want to see some of that money come out of the property market and deflate it over the next six months.
QUEST: John Defterios --
DEFTERIOS: Good to see you.
QUEST: One thing always disturbs me about John Defterios.
DEFTERIOS: You're not going to talk to me about my scarves, are you?
QUEST: I am!
(LAUGHTER)
QUEST: No matter what scarf I wear --
DEFTERIOS: Can I -- I'll tell you the truth.
QUEST: No matter what scarf I wear at Davos, this man always manages to wear something --
DEFTERIOS: I bought this one for you, actually. I was Christmas shopping in Rome. When I saw cashmere, Richard would like it.
QUEST: Yes, you bought it for me, but you're wearing it.
DEFTERIOS: I am.
(LAUGHTER)
QUEST: Is that the --
DEFTERIOS: I had you in mind. That's at least tender. We'll see you through the week.
(LAUGHTER)
QUEST: I feel scarf envy. Now, staying with China, it's a case of build it and they will come, although not in China. The government has
invested huge sums and put up new housing developments and business districts. The result is fully-built ghost cities with no people. It's
part of the shoddy lending, the dangerous state of affairs that exists, as Will Ripley looks inside.
(BEGIN VIDEOTAPE)
(CAR HORNS HONKING)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's a weekday morning at Yujiapu Financial District in the Chinese city of
Tianjin. The government's spent billions of dollars on this virtual replica of Manhattan. But look around this major intersection and see
what's missing: the people.
When construction began here in 2009, thousands of workers were building these skyscrapers, modeled after some of New York's most famous
buildings. Today, we see few signs of construction. And even the buildings that look finished sit empty.
The Chinese government denies reports that this project has run out of money. But like this bridge, there's a huge gap between their vision and
reality. China's real estate market is declining in some areas, leaving more and more ghost cities, often the result of wasteful construction, too
many buildings, and not enough tenants.
Because real estate has been fueling China's economic growth, a slowdown will affect along list of industries. This empty financial
district, just one alarming sign of bigger trouble for the world's second- largest economy.
Will Ripley, CNN, Tianjin, China.
(END VIDEOTAPE)
QUEST: Now, here in Davos, the theme this year is the new Global Context. I put it to the test, with the help of a sledding instructor and
an enormous amount of snow.
(BEGIN VIDEO CLIP)
(YODELING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
QUEST: Every year, the World Economic Forum comes up with a theme that people are supposed to discuss and debate here in Davos. Usually it's
a bit of highfalutin nonsense that no one knows anything about and everybody ignores.
This year, though, they went for a very interesting theme. It seems to make sense. Look around us in the world. Whatever the issue, we seem
to be living in a new Global Context.
(BEGIN VIDEOTAPE)
(DRUM ROLL)
QUEST: Context. The very word means seeing a situation as a part of a wider, bigger picture. And it's a word we're going to hear echoing
around Davos as they discuss the new -- global -- context!
(ECHO)
KLAUS SCHWAB, FOUNDER, WORLD ECONOMIC FORUM: We have to recognize that the world has fundamentally changed, and that's the reason why we have
given to these annual meetings the theme The New Context.
QUEST (voice-over): Low oil prices. Uneven growth. The specter of deflation. Some of the issues and risks challenging those at Davos. Blue
sky thinking, that's the answer. Because tackling these challenges will require new lessons, new techniques.
This means out with the familiar equipment. Time to try something new.
QUEST (on camera): Is this safe?
MARKUS WENDLER, MANAGER, RINERHORN MOUNTAIN: It's quite heavy.
QUEST (voice-over): I've never tried sledging before, and most of the policymakers here are dealing with risks they've never faced before either.
My teacher today is Markus Wendler, the CEO of the mountain.
WENDLER: You have to follow me, follow my instruction. When I say go right, you have to go right. Like this, huh? Pull! Push, huh?
QUEST: Being pulled in different directions is an undignified but necessary part of this.
(YODELING)
QUEST: The problem with learning anything new, whether it sledding or tackling deflation, the risk of catastrophe is only that far away.
WENDLER: Push! Push!
(QUEST GRUNTS)
WENDLER: Not so hard!
(QUEST GRUNTS)
QUEST: Catastrophe. Fear, discomfort, uncertainty. I'm beginning to understand how today's economic leaders feel.
WENDLER: Down there?
QUEST (on camera): Well, I can barely see without my glasses.
WENDLER: Yes, it's great! Perfect! Perfect!
QUEST (voice-over): However hard it gets, however narrow the bend, the trick for everyone is just keep moving forward.
WENDLER: Now pull! Pull, pull pull, don't push with the leg. Great! Great! Perfect!
QUEST: With the right equipment and the correct technique, we made it in one piece. But it's one thing we don't want to have to do all over
again.
(END VIDEOTAPE)
QUEST: And that's the new Global Context that they will be discussing, or one version of it. Karl Schwab, the chairman, says young
leaders hold the key to solving the world's challenges. Look around, I doubt you expect too many young leaders here.
Well, Adam Werbach is one of the WEF Young Global Leaders. Good to see you, Adam.
ADAM WERBACH, WORLD ECONOMIC FORUM YOUNG GLOBAL LEADER: Good to see you, Richard.
QUEST: Thank you for joining us here. He's also the co-founder of yerdle. It's a site that lets people exchange goods instead of selling
them to each other.
WERBACH: That's right, you've got to --
QUEST: What -- go on.
WERBACH: You go to the iTunes store, you download the app, and basically we let you post a pic of your unused stuff and you can shop for
free.
QUEST: It's barter.
WERBACH: Sort of. The idea is that we can reduce the number of new things we all have to buy by about 25 percent, because we have billions of
things just sitting in our closets in garages. Eighty percent of household goods are just not even used even once a month.
QUEST: So, why are you here in WEF. I mean, you're a young global leader. Which I often think sounds a very pretentious phrase.
WERBACH; It may -- may perhaps be, and I don't really -- I can't necessarily describe myself as such. But I can say that what we need is
young people coming in and speaking about the issues that matter.
The older folks can't just say, hey, the world is broken, sorry. The chance is for young people through a young global leaders' program to come
in and talk about issues like climate change, like debt, like social inclusion, and like using social business as a way to actually change the
world.
QUEST: Is anybody listening to you, or are they patting you on the head and saying there, there, yes, we'll have a listen to you later?
WERBACH: No, they gave us a really great space to meet with members of parliament, to meet with leaders of technology companies, to meet with
bankers, and to actually say the issues that matter to us. We try to represent --
(CROSSTALK)
QUEST: Well, what matters to you?
WERBACH: What matters to me is climate change. 2014 was the hottest year ever. I used to be the president of the Sierra Club, and I honestly
believe that social change will happen through business and social change leaders working together to try to find something.
QUEST: Do you think -- this is your first?
WERBACH: I've actually been here before.
QUEST: So, you're not a Davos virgin.
(LAUGHTER)
WERBACH: I am not.
QUEST: Right. Well, it's always useful to establish these things. The fact is, though, the amount of hot air, as former president of the
Sierra Club, the amount of hot air that you get in this congress, it could melt the snow on the mountain.
(LAUGHTER)
WERBACH: True enough, true enough. But that's why we need to pierce through it. We need to come in here with an agenda and say let's go get
something done. If I walk out of here after five days and nothing has changed, then I failed, and I should never come back. But if we can
actually --
(CROSSTALK)
QUEST: But nothing will change.
WERBACH: -- make a difference.
QUEST: Nothing will change.
WERBACH: Ah. Absolutely not. We're going to make an absolute difference on -- we're going to take the mission of actually radically
reducing the number of new things we all have to buy and we're going to move it forward this week.
QUEST: What changed between last year and this year, do you believe?
WERBACH: Well, we finally had a climate agreement with China and the United States, which was pretty -- hey, it's something we've been working
for for a long time.
QUEST: All right.
WERBACH: The world responded to Ebola, which was something that --
QUEST: Late. Late.
WERBACH: Late, but it did. But it did.
QUEST: Too little, too late.
WERBACH: And now, we actually have to go build the health infrastructure to continue the work going forward.
QUEST: Which I don't see any move towards. The president of the World Bank said -- I'm not trying to be unduly pessimistic here. Klaus
Schwab will tell us in a moment that there's too much pessimism, it's the zeitgeist. So, I'm trying to be positive here. But I'm also trying not to
be (inaudible) about it.
WERBACH: Well, if you're not disappointed or depressed right now, you're not awake. There's so many problems facing the world, unless we're
actually working them every day, we're not going to make any progress.
Are we going to do it all here? Well, not in the next three days. But we're darn sure going to do our best.
QUEST: Excellent! Give to have you with us, sir. Good to have you. Thank you for joining us tonight.
WERBACH: Thank you very much.
QUEST: As you can see, it is going to be a different, a lively Davos. It's a new year, and that means new risks. It's Ebola, it's war, it's
terrorism, all dominated the headlines last year. I'll show you what the problems the world leaders are likely to face in 2015. It's the World
Economic Forum. Good evening.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" live from Davos. In a moment, when we're going to speak to the man who runs
this entire event - he's Klaus Schwab, and he says the dangers of a global economy. You're going to meet the man whose hotel is hosting every chief
exec and it's just got clobbered by the Swiss Central Bank. But this is CNN, and before all of that on this network the news always comes first.
Ukraine's prime minister says Russian troops and military equipment have entered the country. Arseniy Yatsenyuk told state media the tanks and
rocket systems have been spotted which belong only to the Russian army. It follows fierce fighting in Ukraine. This drone video shows the remains of
the airport in Donetsk.
In Yemen, mountaintops surrounding the presidential palace are under Shiite rebel control after heavy fighting with Sunni government forces.
The ceasefire is now in effect. The palace itself remains under government control. A senior government official says that both sides will remain
where they are until a deal is signed.
A leading Argentine prosecutor has been found dead in his apartment hours before he was set to testify before a congressional panel. Alberto
Nisman had accused the country's president of obstructing an investigation into the bombing of a Jewish center in Buenos Aires in 1994. No cause of
death has been released. One local newspaper cites a presidential official as saying it appears to be suicide.
The European Union is teaming up with Arab nations in Turkey on a new initiative to fight terrorism. The E.U. foreign policy chief made the
announcement at a Brussels meeting. She says new policies will increase cooperation and share intelligence with countries as far away as Asia.
Correspondent Phil Black is live in Brussels. Phil, in the current environment any talks are useful, but how significant is this deal?
PHIL BLACK, CNN CORRESPONDENT: Well, Richard, these talks were already set to happen before the recent events in France and Belgium. They
were supposed to talk about things like Russia - they got to that eventually but obviously they had a very important issue to discuss at the
top of the agenda. And really what came out of it - not a lot of details so far - but I think a startling admission. The representative for the
European Union said for the first time these countries had a real awareness of the need to work together actively to deal with the common threat of
terrorism which suggests up until now they acknowledge they have not had sufficient awareness and the cooperation has not been sufficient.
So what they're talking about now they say is cooperating actively in a way that they have not done before. They're talking about sharing
information and intelligence and best possible practice in terms of intelligence and security. That's obviously important, but of course it's
the detail. Crucially though they also say that they will be sharing this not just among E.U. member states but also Arab partner countries and
countries within the Mediterranean region as well which shows an awareness that the problem is not isolated to Europe but it involves significantly
people traveling from Europe to these other countries and often using them as gateways to places like -
QUEST: All right -
BLACK: -- Syria where they're receiving the training, the experience which is potentially so deadly here in Europe. Richard.
QUEST: Is this intelligence or is it a fear that it might go further? Might there be troops or advisors - whatever the word we use these days -
that go to assist in all of this?
BLACK: Well, when they talk about best practice, you would certainly think that's got to involve face-to-face communication and indeed possible
training as well. If you're gone (ph) talking about getting certain countries raising their abilities, their skill levels to match the best
practice that exists in certain European countries, then yes you would certainly think so. But that level of detail has not been officially
announced or discussed. So it really -- what we're talking about here, it's not going to change things immediately. It's looking to the medium to
long-term how to prevent the sort of plots that Western Europe has seen in recent weeks.
QUEST: Phil Black joining us from Brussels. Thank you. Whichever way you look at it at this year's World Economic Forum, they won't be able
to ignore the issues of terrorism and global conflict. It's probably the number one risk that world leaders face this year and in the coming decade.
Topping the list for 2015, environment al and societal risks are also there. Leaders are concerned about water shortages, the spread of disease.
It's the first time since the financial crisis that economic issues are not at the top of the list. Geopolitical risks have moved up as supply chains
have gone global. Leaders have identified war and weapons of mass destruction as the top risks in that category. And on the economic front,
energy price shocks are more likely and it'll have a bigger impact this year than in the past.
It's all about the new global context, and I asked the WEF founder and German Klaus Schwab what is so concretely different this year.
(BEGIN VIDEOCLIP)
KLAUS SCHWAB, FOUNDER, WORLD ECONOMIC FORUM: Until now we tried to solve those challenges through collaboration and you had a world which
moved into action of globalization. But what we see now is everybody fights for himself. We have de-globalization. We get into a kind of
polarization and it ends up with all the ugly things we have seen, for example in Paris terrorism. We have to mix the world again together.
QUEST: A month ago when you were putting the Davos agenda, yes, Islamophobia might've been somewhere on the agenda, but it's risen up as a
result of Paris.
SCHWAB: Yes, but it's not singularly in Paris. Don't forget you have Boko Haram and all the atrocities which have been done in Nigeria, you have the
situation in the Middle East. So it's only the expression of something deeper which is happening in the world and which leads us into a wrong
direction.
QUEST: What is that deeper? Is it disaffection, is it a feeling of not belonging or is there something more fundamental going on?
SCHWAB: It's to a certain extent it's a search for identities in a globalized world. And it's also maybe a collapse of our system of nation
states.
QUEST: That's pretty serious.
SCHWAB: It is. It is -- because our old world in some way has to be reconstructed.
QUEST: You said in your video before the forum started that pessimism was the Zeitgeist of the world today.
SCHWAB: When we look at the direction of the world, it's our choice - we have it in our hands to go into a more positive direction. We have -
QUEST: What's there to be positive about? We've got deflation about to happen in large parts of the world, we've got Islamic terrorism -
extremism - in other parts of the world, we've got asymmetric growth, the ECB is just about to do quantitative easing which it should have done two
years ago.
SCHWAB: I fully agree, I fully agree. But if you want to move out of this mess, again I come back, we need more collaboration, otherwise you
cannot get out of it and we'll need something else. We have to reorganize the new global context. We are living in a new world, not in the old
world. We need new innovative solutions.
QUEST: Every year -
SCHWAB: Yes.
QUEST: -- we ask a question, like you do yourself, sir. This year we have a map of the world.
SCHWAB: How I'm (purist).
QUEST: A map of the world. Maybe you could just help me.
SCHWAB: Yes.
QUEST: Now, taking the red pen and putting a cross or the dot or whatever you like - which part of the world are you most worried about when
it comes to risk?
SCHWAB: Can you reduce the map to, well let's say, five inches to five inches?
QUEST: You want the whole map - you want the -
SCHWAB: I just want to hand to put my hand on the whole world.
QUEST: If you had to choose one area? One.
SCHWAB: Let's face it, we have three decisive powers in the world - one is here -
QUEST: Right. So we'll -
SCHWAB: -- where's Washington?
QUEST: Oh, Washington -
(CROSS TALK)
QUEST: -- (inaudible) in the middle you can see.
SCHWAB: (Inaudible). One is - let me see, Beijing -
QUEST: Right.
SCHWAB: -- it's - yes, yes. And one is - I would combine -
QUEST: Brussels or - no, Ireland.
SCHWAB: I would - I would say Brussels, Berlin and also London.
QUEST: You've had a lot.
SCHWAB: It is a lot. It is a lot.
(END VIDEOCLIP)
QUEST: Well I suppose since he's the founder of the World Economic Forum, we can align (ph) that. We're having to - unfortunately the red ink
didn't show that much, so we've got a map but I'm going to have to put Klaus' choice in. He wanted to go into Brussels which is (inaudible) -
that's one over there. He wanted Washington which is over here and he went for Beijing which is over here. So Klaus is the only one who gets a three-
go on the map. But over the course of the week, we will be asking - it's the risk map, and the concept is very simple, they can interpret it
themselves, -- where do they see the greatest risk in 2015? It could be economic, it could be geopolitical. Whichever it is, they will put it on.
And by the end of the week, a risk map. We'll have a full view of which is potentially the most dodgy and dangerous risk for us. The risk map.
Now, the economic landscape of Europe as we know it was - looked much different within a matter of days because two defining events are happening
this week. On Thursday, the ECB is holding a meeting and everybody is expecting some form of stimulus plan. Quantitative easing - over $500
billion. If they do not, there will be calamity in the market. On Sunday, there is the Greek elections - election in Cyprus and the anti-austerity
Syriza party wants to renegotiate the bailout. Ahead of Thursday's meeting, Mario Draghi's drawing criticism. Some say quantitative easing
isn't the best strategy to lift the economy. He's tried and failed with others. Maggie Lake now looks at how the ECB could hope that this latest
attempt will hit the mark.
(BEGIN VIDEOCLIP)
MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: The members of the New York City Dart League know a thing or two about
hitting their mark.
Male: It's about repetition and rhythm and also the bathroom (ph).
LAKE: Just like these committed players, ECB head Mario Draghi is also trying to hit the bullseye. His goal? To try to strengthen Eurozone
economies and boost inflation to the ECB's target of around 2 percent. So far Draghi has missed the target. Not only is there no inflation, but
prices in the Eurozone are falling, raising fears of deflation. Draghi racked up points in 2012 when he said he would do all it takes to save the
euro.
MARIO DRAGHI, ECB PRESIDENT: We act independently in determining monetary policy and the euro is irreversible.
Male: You go for the bullseye.
LAKE: But recent moves to boost growth have fallen flat. Quantitative easing now remains the big hope. Under QE, the ECB would
print money to purchase government debt. The goal is to force investors into riskier assets which could lift inflation and growth. But just
because QE had success in the U.S. does not mean it will work in Europe. The policy darts are sharp but the board looks different.
The Eurozone suffers from high debt and weak demand and Draghi has criticized European leaders for not offering fiscal stimulus.
DRAGHI: The ECB cannot replace governments or cannot replace the action that other institutions have to do on the fiscal side.
LAKE: Draghi has a difficult job. He has the darts in his arsenal, investors are hoping his policies finally hit the spot. (SCREAMS). Maggie
Lake, CNN New York.
(BEGIN VIDEOCLIP)
QUEST: If that was her dart, I'm the Archbishop of Canterbury. High expectations of the European Central Bank helped push the major markets up.
The Zurich SMI - now that was extraordinary - rose some 3.2 percent - the rebound after the currency peg was removed last week. The Xetra Dax is at
a record high. There's still a lot of gnashing and wailing of teeth here in Switzerland about the peg going and the cost going up.
The second item on the horizon for Europe is the elections in Greece, as an anti-austerity party looks like it's (cut the path). The country's
future in the European Union could be in question.
(COMMERCIAL BREAK)
QUEST: Minus 10 degrees Celsius in Davos at the moment. We had a little bit of snow. There should be a good dollop of snow later in the
week which of course is what you always want when you're up a mountain and it's got a ski resort. Now, with less than one week before the crucial
elections in Greece, the anti-austerity Syriza party is widening its lead in some polls. CNN's Jim Boulden now looks at how likely a Greek exit from
the Eurozone truly is.
(BEGIN VIDEOCLIP)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Teargas, riots, Greece on the verge of bankruptcy, and leaving the euro to go back to the drachma
or so it seemed to some in 2012. In reality, Greece held multiple elections, got a new prime minister, Antonis Samaras, and has largely stuck
to painful austerity measures forced upon it in return for loans - otherwise known as debt - totaling more than $370 billion. Now the economy
is growing and the opinion polls show Greeks are not looking to leave the euro.
KATE PHYLAKIS, CASS BUSINESS SCHOOL: At least 70 percent of the Greeks would like to stay in the Eurozone. And whoever I talk to, this is
what they say. I mean, even tie-lee (ph) sort of people at high positions, they definitely want to stay in the Eurozone.
BOULDEN: The next government, even if led by the left-leaning politician Alexis Tsipras of the Syriza party must get an extension to the
current bailout deal that expires at the end of February. A new deal, though, may be too hard for a new government to swallow. Hence the reason
for talk that maybe it would just be better for Greece to leave the Eurozone - a so-called 'Grexit' - not an easy decision.
ALAN CLARKE, SCOTIA BANK: I think what you would do is you'd be revisiting those dark (ph) data two or three years ago. Lots of
uncertainty, the banking system would be suffering. I don't think it'd be a soft (ph) option by any stretch of the imagination.
BOULDEN: What currency would Greece use? Who would fund the banks as the ECB would have to cut off euros? How would Germany get back the
billions it loaned to Greece?
VINCENZO SCARPETA, OPEN EUROPE: The official position of the European Union institutions is that you can only leave the Eurozone if you leave the
European Union all together. I still think that it can be possible to - if there is the political will to do so - it can be possible to find a way
around the legal obstacles.
BOULDEN: But let's say Greece stays - what next? Maybe less austerity for all of Europe since deflation and no growth are the realities
these days.
PHYLAKIS: I think there's austerity for everyone should be a good thing to aim for. Perhaps Greece is the - is the excuse, let's put it this
way, -- to further give more consideration to that. And I think Germany might be eventually convinced about that.
BOULDEN: But first, Greece has to pick the next prime minister, and that itself has been a messy business since the economic crisis began. Jim
Boulden, CNN London.
(END VIDEOCLIP)
QUEST: So, the euro Swiss franc peg has gone, prices in Switzerland have soared, the menus have gone completely out of control, and after the
break, I'll speak to the manager of the Davos Belvedere Hotel to find out if his business is still feeling the pain.
(COMMERCIAL BREAK)
QUEST: Every year it does look beautiful. If only the snow keeps falling it will remain looking beautiful. You can see there the cable car
over in the distance. Denmark's Central Bank is the latest to take evasive action as the world prepares for quantitative easing in Europe. Following
on from what the Swiss did and the Swiss went first - the deposit rate cut to -.2 tenths. It comes as a surprise - the bank traditionally moves rates
on Thursdays to align with any ECB meetings. Of course Denmark is firmly - - is part of a bedrock of economic policy tied and pegged to the euro.
Prices have skyrocketed in Switzerland for those of us coming from outside the country since the country decided with the Central Bank to let
the Swiss franc float freely against the euro again. Many of the chief executives will be staying at the five-star Belvedere Hotel just over
there. Well here is the menu from the Voila Restaurant, and let me tell you some of this sort of - the most expensive thing on the menu is the veal
escalope Vienna style - it's 54 Swiss francs. Well that's now gone up by about 7 Swiss francs so it's heading up towards 70 U.S. dollars just for
that. And if you fancy a glass of bubbly to start things off, well the L'Homme Perre (ph) Bleu, which is just a glass or two, the rose will cost
you 24 Swiss francs which of course now is nearly 27 or 28. Thomas Kleber is the hotel's general manager and he told me the Swiss Central Bank's
decision will impact business.
(BEGIN VIDEOCLIP)
THOMAS KLEBER, GENERAL MANAGER, GRANDHOTEL BELVEDERE DAVOS: If the currency exchange between the Swiss franc and the euro is staying like
this, it's going to be a difficult year, but not just for us, for the whole tourism industry in Switzerland. This is of course not good, but we have
to live with it.
QUEST: Have you had any indication from anybody that they're thinking twice - they're questioning the price, they're wondering what to do?
KLEBER: Not yet but I think we will have this discussions and I think we will get some calls from guests who are - have a booking with the hotel
- in our hotels here in Switzerland.
QUEST: Of course you're the upper end, the amount involved is greater, but they're not so price sensitive in terms of the consumer, are
they?
KLEBER: Yes, that's true, but in these days, every consumer is price sensitive - even in the five-star market. These guests will see, will have
look and will decide to which country they go and I'm sure that countries like Italy, France or Austria - especially for the winter season - they
will have advantages from that.
QUEST: Suddenly your competition is more competitive.
KLEBER: Absolutely, absolutely. And you have to consider that the Swiss have now more money, you know, the Swiss franc is stronger so even
for the Swiss people, it's cheaper now to go to a foreign country in the Euro (ph).
QUEST: So what are you going to do?
KLEBER: We have to work on the quality, we have to work on the friendly-ship, on the hospitality, you know. I always say quality is the
best recipe, so if you show your customers that you do whatever has to be done to give them a good time, to be the home away from home, I think we
will still have a lot of customers.
(END VIDEOCLIP)
QUEST: That's the general manager of the Belvedere Hotel. Every year I try and beg and grovel to stay there, and every year they say no.
Beautiful scene, we're in Davos.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment," - well very, very profitable for the top 1 percent of society. They will after next year own more than
everybody else put together. Is it a disgrace? Is it a scandal? And what can be done about it? If they're not discussing that at Davos, then they
really do need to wonder why they bothered coming up the mountain at all. And that's "Quest Means Business" for this Monday night. I'm Richard Quest
in Davos. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.
END
