What Ails Global Capitalism?

Over 600 business leaders and 200 students: It can only be St Gallen - 38 years of gatherings organized by the students to discuss the challenges facing companies and communities.

Think Davos World Economic Forum with more intimacy and less Emma Thompson, Bono or Himalayan pipe music.

It's still a Swiss town, but substitute the showbiz for a president of Unilever, Kees van der Graaf, the head of Deutsche Bank, Josef Ackerman, and the turnaround chief at Daimler, Dieter Zetsche. These were just some of the 'names'.

So what was the zeitgeist this year? Well the agenda was a reworking of the business cliché ‘think local act global’. The challenge? How can global companies act in accordance with local values? Basically, the official topic was loose enough to allow the participants to bring their own axe and grind it loudly.

Away from the set-piece events we tackled a number of CEOs on their earnings visibility and outlook for the rest of the year. It’s looking less rosy according to Dr. Luca Majocchi, the CEO of Seat Pagine Gialli the Italian directory business. It's definitely looking tougher said Stine Bosse, CEO of Danish insurer Tryg Vesta. To top that Martin Wolf, chief economics commentator at the Financial Times thought equity markets haven't quite got to grips yet with a slower earnings outlook.

Don't let me leave you with the impression that everybody was gloomy. The president of China's mighty Citic group, Chang Zhenming urged me not to get hung up on one month’s industrial production data, which saw March come in much weaker than the year-on-year comparison. And yes, he thought the new central bank-imposed reserve requirement for Chinese banks was a bit high at 16.5 percent. But he wouldn’t confirm market rumor that Citic might be eyeing stakes in Rio Tinto or BHP Billiton. He did confirm though that they are looking at raising their investments in Macarthur Coal, but no decision has been made yet. No dent here in the outlook for Chinese growth.

The chairman of Indian conglomerate ITC was also reluctant to sound bearish. According to him, it’s business as usual for the fast moving consumer goods company, whose share price performance reflects that optimism. Are they sacrificing profits in India for market share in the personal care market I asked YC Deveshwar? He gave me a rye smile and suggested profits are less critical when the market is still being established. But isn't India's economy coming off the boil? Growth and inflation in the 7-8 percent rate this year suggests India's relative performance may be lower, but so far the country is still forecast to outperform most OECD countries.

The views we heard at St Gallen neatly reflect the ongoing debate about developed vs developing, and decoupling vs. recoupling.

The developing markets are either going to outperform the developed world by some margin over the next 18 months, or they are in denial about their place in the economic cycle and the cycle will get to them eventually. No consensus here - but good to hear the debate is alive and healthy.

Final thought for companies thinking about reducing costs in the face of weaker growth. Yoko Ishikura, Professor in International Business Strategy at Sophia University in Tokyo says don't just shed staff or products - innovate! As an after thought she suggested not following the timid policies of Japan's own domestic companies, which she argued succumbed to a downward spiral of job losses and retrenchment in the nineties.

If Japan is a relevant model for today - another hotly debated issue among stag-flationistas - then let's hope business leaders are ready for the challenge.

Your feedback always welcome - here.