Old model of capitalism is ‘coming to an end’, says top economist

Gstaad: Developed world approaches to business are fast becoming obsolete as investors are faced with a ‘new normal’ driven by emerging market practices, according to a former World Economic Forum director.

In the keynote address at Citywire Switzerland, economist and emerging market expert Dr Frank-Jürgen Richter (pictured), who is chairman of independent international organisation Horasis, said traditional investment models will have to adapt to a BRIC-led style.

‘The old model of capitalism, I call it the Anglo Saxon model, which is based on short term profit taking is coming to an end. It is no longer about looking at quarterly reports and stock prices going up and down,’ he said.

‘The main change in this post-crisis world is that this old world of free market liberal systems is also coming to an end. The future is very much based on a long-term approach, the Asian model.’

‘In Europe, we love to go the museums and look at lovely pictures and history. In the BRIC countries they are more focused on the future and for them it is only the future that really matters.’

Dr Richter – a self-proclaimed China bull – said he foresees an increased presence for China in the western world and a more central role than just being depended upon to power the global economy from afar.

‘The question now is what will the role of the BRICs be and what, within that, will the role of China be in a post crisis world?’ he said. ‘This leads us to ask what influence China will have, there could be a Chinese head of the World Bank or the head of the IMF perhaps being a Chinese national.’

There is a growing feeling of unease among Western investors about the rise of the BRIC nations but this, Richter said, is a two-way street with Chinese investors criticising the work ethic in Europe, for example.

Elsewhere in his speech, Dr Richter highlighted the positive impact that the 2008 credit crisis for western companies. ‘Even with all the doom and gloom in the US and Europe, our companies are still in pretty good shape.’

‘It could have actually been a blessing in disguise because companies are now getting more efficient and increasing productivity, because, simply, they have to and they are learning from the crisis,’ he said.

Richter's comments followed a poll of delegates at the event carried out by Citywire Global, which indicated a strong support for investing in equities at this time.