It is easy to be cynical about the World Economic Forum (WEF) – indeed, many people would argue it is essential.
Davos, the Swiss mountain village where the summit is held every January, sounds like the surname of a mediocre Bond villain. It takes around 1,500 private jets to ensure that the world’s great and good can arrive in an orderly fashion to discuss the urgency of combating climate change. And then there’s the ever-present Bono, a semi-retired rock legend burnishing his image as the world’s greatest living humanitarian.
Yet even if the WEF is merely the world’s most expensive talking shop, at least people are talking about stuff that matters. Why is it, for example that, given the global consensus that preventing deforestation is essential, almost nine out of 10 companies that have committed globally to deforestation are based in Australasia, Europe and North America? As journalist Steve Zwick noted, some parts of the global supply chain are becoming more transparent, yet many others still lurk in the shadows.
It’s a pity that, for various reasons, Emmanuel Macron, Theresa May, Narenda Modi, Donald Trump and Xi Jinping were not at Davos this year, because the proposal that globalisation badly needs reinventing should, in different ways, resonate with all them.
The official theme of this WEF – ‘Globalisation 4.0: Shaping A Global Architecture In The Age Of the Fourth Industrial Revolution’ – doesn’t exactly roll off the tongue. If Davos is, as one participant suggested, effectively a party conference for the world’s guilty rich, you would expect a certain amount of jargon, but that doesn’t excuse talk of “multi-conceptual transformations” or delegates introducing themselves as “global shapers”.
It is true that, as Klaus Schwab, the German economist who founded and runs the WEF, says, the world needs to create a new kind of globalisation that is kinder and gentler to us, our societies and our planet. Schwab all but invented the idea that businesses are responsible to stakeholders, and not purely shareholders, in his 1971 book Modern Enterprise Management In Mechanical Engineering. (Snappy titles are not his forte.) And it is hard to disagree when Schwab argues that: “With advances in robotics and artificial intelligence in the context of ageing societies, we will have to move from a narrative of production and consumption toward one of sharing and caring.”
Such concerns were echoed by legendary American hedge fund manager Seth A. Klarman who argued, in a gloomy open letter, that: “It is not hard to imagine worsening social unrest among a generation that is falling behind economically and feels betrayed by a massive economic debt incurred without any obvious benefit to them.” Those who had capital to invest – said Klarman, whose personal fortune is estimated at $1.5bn – need social cohesion.
Many delegates at Davos would agree that it is in the enlightened self-interest of the wealthiest 1% to create a global economic system that does a better job for the other 99%. Yet to do that requires the kind of long-term thinking that, Time’s economic columnist Rana Foroohar writes, 21st century capitalism is increasingly not designed for: “Only 15% of the money washing through Wall Street these days actually makes it onto Main Street. The rest stays within the closed loop of finance in assets that are traded amongst the wealthy. And that trading happens faster than you can think, with 80% of it being done by high frequency algorithms designed to take short-term profits for the top 25% of the population who own most of the assets being traded.”
This inevitably creates, Foroohar argues, dangerously unbalanced economies. (The financial sector, which accounts for 7% of the US economy, and creates 4% of all US jobs, takes 30% of all US corporate profits.) The most sobering aspect of Foroohar’s analysis is that her suggested cures for these ailments are so bold and comprehensive it is hard to imagine any government being able to implement them.
Many CEOs were happy to lament the failings of government – Xi’s policies on intellectual property and state-owned enterprises were sharply criticised at a private function hosted by Chinese officials – but less willing to recognise their responsibility for the state we’re in.
No president ordered America’s CEOs to pay themselves 361 times as much as their average worker (compared to 20 times as much in the 1950s). And you don’t have to be a Nostradamus to understand that a global supply chain strategy based on achieving the lowest possible labour cost would undermine ‘social cohesion’ in countries where jobs vanish.
Every Davos produces its own star. In 2017, it was Canadian prime minister Justin Trudeau. Last year, it was French president Emmanuel Macron. This year, New Zealand prime minister Jacinda Ardern took centre stage, with her talk of the “economics of kindness”. As soppy as this sounds, her suggestion that governments should incorporate wellbeing into their budgets, rather than basing them purely on finance, found cautious support from the Financial Times, the self-appointed guardian of global capitalism, which said in an editorial that the world was crying out for “visionary thinking”.
Whatever you think of Ardern’s policies, she did at least convey hope, a commodity in short supply at this year’s Davos. The news that China’s economy had grown at the lowest rate since 1990 provoked further gloom. Yet this means that, in its worst year in 28 years, China’s output of goods and services still grew by more than the entire economy of Australia.
Sometimes, it pays to have a different perspective. The optimism that permeated Davos in 2018, fuelled by the sugar rush of Trump’s tax cuts, was overdone. Might the hand-wringing pessimism of Davos 2019 seem equally out of kilter in a year’s time?
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