World Economic Forum: Let’s just remember who caused these problems
The picturesque town of Davos is the place to talk about income inequality this year, but the incongruity has fooled few
For some of us, the belief that certain topics and beliefs are the preserve of particular groups is hard to shake. I was reminded about this reading a Financial Times article, on my way to the World Economic Forum (WEF) meeting in Davos, Switzerland.
The subject was inequality and the argument was premised on the idea that concern about inequality is the preserve of "the Left", though what that designation entails is never defined.
Discussions on the environment were likewise restricted to the margins. Those of us of a certain age will remember that on the university campus, the green agenda was a topic that a handful of "hippies" were interested in. Even at a place like Rhodes University three decades ago, these environmentalist types stood out.
And it has taken the world of finance a bit longer to catch up. This is a topic global elites in business and government were definitely not concerned about when they first convened at the Alpine resort town of Davos back in the 1970s. That was the era of the oil crisis and the Cold War. Mass movements at the time would have had no time to be arguing about if the Earth was 1°C warmer than in the previous century.
How things have changed for the easily caricatured champagne-swilling "Davos man". As the WEF marks its 50th anniversary, this year’s meeting has a different tone.
But the town, with its snow-covered mountains that cater to well-off skiers, doesn’t strike one as the place to talk about the evils of inequality. That’s especially so if you take the view that the type of people offering the cure belong to a class responsible for the spread of the disease in the first place. The WEF is the playground of CEOs who, over the past few decades, have paid themselves obscene amounts while their relentless push for profit has left the environment in a sorry state.
And then there are the fund managers who failed to exercise their stewardship role as shareholders. They played along as executive pay ballooned.
In that period, ordinary workers’ pay either stagnated or fell in real terms, sowing the seeds of the discontent that has brought us to the age of populism.
So it has come to pass that the concerns of "the Left" now dominate discussions among the richest and most powerful on earth.
On the eve of the meetings, which started on Tuesday, the WEF released its first social mobility report, which argues for a reduction in income inequality.
Inequality, says WEF founder and executive chair Klaus Schwab, has "profound and far-reaching" consequences. Among them, he lists a "growing sense of unfairness, precarity, perceived loss of identity and dignity, eroding trust in institutions, disenchantment with political processes and an erosion of the social contract."
For an explanation of what brought Brexit to the UK and the Trump presidency to the US, there’s no reason to look any further. And it was fuelled by bailouts for bankers who caused the financial crisis and gave the world an era of austerity. It could only lead to the sort of resentment that has upended the previously stale political order in the richer countries.
The perceived loss of identity Schwab alludes to may explain the new nationalism and hostility towards immigrants from people who feel left behind and who have borne the brunt of shifts caused by free-trade policies that facilitated a transfer of jobs to other countries.
That these trends have been beneficial overall — every survey points to fewer people living in poverty globally and record-low unemployment levels in rich countries — is forgotten in the midst of perceived and real injustices, and populists have exploited the gap.
So the move to "stakeholder" capitalism and other buzzwords that were the preserve of the "Left" can be seen as a reaction to this, though it’s couched in language that emphasises benefits to economic growth rather than redistribution of wealth for its own sake. Davos man isn’t becoming a Marxist just yet.
The WEF report, for example, argues that increasing social mobility by 10% could boost growth by nearly 5% in the next decade. It feels like a long way from the "Battle of Seattle" in 1999, when demonstrators disrupted the World Trade Organisation, sparking similar outpourings of anger whenever elites, or representatives of the Washington Consensus, gathered anywhere in the world.
Some of the proposed remedies are eye-catching too: greater emphasis on social spending; improving progressivity of tax systems; and paying "fair wages".
As welcome as the report may be as a shift in thinking away from a capitalism that’s only concerned about maximising short-term profits for companies and shareholders (and their well-paid CEOs), it makes for grim reading for SA.
Despite having one of the biggest education budgets among emerging markets, SA is close to the bottom in terms of access, quality and equity in education. It’s a terrible indictment of a country whose education minister spent two years fighting to keep undocumented children out of school.
The shocking state of schooling means SA’s status among the most unequal societies in the world will be entrenched. SA won’t be able to compete in a world in which technological change is emerging as a threat to workers with no skills.
And the SA delegation appeared to be out of tune with the mood in Davos, even before meetings began. Climate change never came up in the delegation’s pre-Davos briefing in Joburg.
Trade & industry minister Ebrahim Patel said it was already embedded in government policies and that the number of speeches made about it didn’t matter.
But in Davos, delegates don’t seem to want to talk about anything else. And this year the biggest attraction isn’t the president of the US but Swedish climate activist Greta Thunberg.
Even so, scepticism about Davos being the place to seek solutions to the world’s pressing problems is not misplaced. Donald Trump’s performance at Davos would have done nothing to quell that skepticism. Having spoken about the need to ensure the world does not reach a point where the climate crisis is irreversible only a few minutes earlier, Schwab was silent on the subject while the chief climate denier was on the same stage.
Even after Trump used the platform as an election stump where he took credit for the US economic boom and attacked climate activists as doomsayers, the WEF head didn’t take him on.