With the worldwide financial system still on crutches, the 2011 global business outlook hinges largely on which economic advice Western nations turn into policy and whether countries worldwide can develop unprecedented levels of collaboration to jump-start aggregate demand.

That is likely to be a flashpoint for the conversations and hallway debates among business leaders and policymakers when the World Economic Forum convenes in Davos this week.

In the idling engine room of the global economy, chastened consumers in the United States have begun saving prodigiously, mirroring their counterparts in other Western countries, and businesses have not been investing much despite historically low real interest rates. State governments obliged to run balanced budgets have reduced spending and Washington is not moving to fill the gap. The picture looks similar now in many other Western economies.

John Maynard Keynes would certainly recognize the raging debates over the need for fiscal stimulus. Many political leaders talk of the imperative for governments to retrench. Yet economists see no evidence of a spike in interest rates. In fact, they are still close to zero. Among countries that control their currencies, governments can borrow at exceptionally low rates. Even Japan, which has the highest ratio of government debt to GDP, has no problem borrowing yen.

In the US, some argue that inflation remains low and that deflation, rather than inflation, appears to pose a greater risk for the time being. Yet oil and food prices are rising globally, creating conditions that can lead to unrest in some countries.

Meanwhile, many of the emerging market economies seem to be doing fine, particularly China. Or is it? Thanks to a huge government stimulus plan, China's economy has returned to rapid growth. But plenty of people in Davos will point out that China's current economic health depends on a massive trade surplus, principally with the US. That will not continue if the American economy remains depressed. To hedge its risk, China has been buying a basket of currencies besides the dollar and investing massively in mines and other natural resources worldwide. It has also been trying hard to suppress tremendous inflationary pressure. But China, too, will soon need some other source of aggregate demand and may have to turn to internal markets.

Another issue likely to come up at Davos that business leaders need to track is the convergence of two demographic challenges: the developing world's population is growing while the developed world's population is ageing. Japan and Western Europe are already reckoning with the effects, of course, but countries such as China can see it on the horizon. The politically uncontroversial answer is to encourage "more babies". But that has the obvious drawback of making global overcrowding worse. The real solution is labor mobility and the continuing integration of the global economy. That, however, poses formidable political issues, requiring some real leadership.

Business leaders are also beginning to realize that we are approaching a global water emergency. Indeed, today's water consumption gap is estimated at 300 cubic kilometers. That's 79 trillion missing gallons for a global population of about 6.8 billion. By 2050 that population could hit 10.5 billion, by some estimates. But there will be no more fresh water than today, and probably a lot less.

The world needs more than conservation to meet this crisis. Today there are few economic incentives for carefully managing irreplaceable water. As a result, the West is exporting a meat-eater's diet when a calorie of rice takes one sixth of the water requirement of a calorie of beef. Without an accurate cost, how can water be better allocated? Maybe some answers will start to emerge at Davos around low-cost technologies to capture more. But we also need the kind of global pricing mechanisms that govern another increasingly scarce commodity: oil.

Even though business leaders cannot control fiscal policies, demographics or resources, part of the job is to stay close to these issues and anticipate the necessary adjustments required of the business. As they prepare for an economic recovery, however, there is another set of decisions that senior executives can make now.

For instance, the cost of capital, especially debt capital, is historically low and many corporations are sitting on substantial reserves of cash. Every chief executive should have a clear and well-developed set of priorities for strategic investment and the right criteria to move quickly when the opportunity arises. As many studies have shown, those with the confidence to invest before their peers will do far better.

Another factor that businesses can manage is the risk of trade barriers rising. If you have demand for a product manufactured exclusively in another country, do not assume that you will be able to respond to that demand in the same way as you did in the past. Equally, companies need to build more robust supply chains with multiple paths. Business leaders must ask themselves what would happen if political considerations broke one of the links. What alternatives have you prepared? If the answer is "none", you have not been doing your job.

Given the uncertainty regarding exchange rates, leaders should also seek to manage a worldwide business so that value added is distributed in a way that reflects local shares of sales or profitability. In other words, companies should manage their currency footprint. To some extent this is a currency hedge. But, more important, it reduces the risk of becoming a political football in a place where a company makes a great deal of money but adds little to the local economy.

The biggest decisions affecting the recovery will be made, or not made, by governments. Business leaders need to be able to anticipate those choices and respond quickly to them as they unfold.

Orit Gadiesh is the chairman of Bain & Company.