The World seen by the Davos Economic Forum (January 23rd – 26th, 2018)

by  Jean-Pierre Vettovaglia*,   for Q Magazine Bucarest, Nr 215 

Davos is the place selected by the native of Baden Württemberg, Klaus Schwab then a young professor at the University of Geneva, to organize in 1971 the first European Management Forum. Two hundred industrialists and economics professors came to discuss American management methods. It was the era of the “American Challenge”. Almost half a century later, the World Economic Forum is host to nearly 3,000 people, including the bosses of the world’s top 1,000 companies and some 70 heads of state.

In addition to the 1,500 representatives of the largest Anglo-Saxon companies and the some 300 Swiss ones, can be found circa one hundred Indians, Chinese, Germans, French and Japanese, as well as close to sixty Russians, Arabs, NGOs and journalists. Individuals cherry-picked from the world’s decision makers.

What makes Davos the “Magic Mountain”, as Thomas Mann called it:

Davos is the capital, the temple one should say, of liberal globalization and unbridled capitalism. Essentially, there are only partisans of unhindered globalization, unrestrained economic activity and remorseless financial capitalism. Naturally, all the participants express the desire, “to build a common future in a fractured world” (the theme chosen this year). However, every business leader attending has the primary objective to maximizing the profits of their companies to match their shareholders’ expectations.   The remaining issues discussed are about remaining “politically correct”.

The slogan of Davos:

Davos’ stated mission is very loud and clear:  “Committed to improving the state of the world” … this is frankly “kitsch ” when we look at Goldman Sachs, Merril Lynch and other big banks to which must be added GAFAM (Google, Apple, Facebook, Amazon, Microsoft) all present in Davos. The fact that 82% of the world’s wealth in 2017 has been captured by the richest 1% of the world’s population, and that women are paying a heavy price of these growing inequalities, does not really bother them.  Just like the fact that the world’s 8 wealthiest individuals own as much as the poorest 3.6 billion. Klaus Schwab himself defends this: “The economic recovery that is spreading every day gives us an opportunity that we cannot afford to waste”.

But if Davos, like Versailles at the end of the 18th century, is not to be regarded in history as the tragic setting for the frivolity of the political and economic elite what is it about?

Around the world, hatred and violence are being unleashed against the current systems of government in place, against the constituted authorities, against our society and its values. Certainly, the expected figures of global growth (3.8% in 2018 and 2019) support this feeling of optimism and euphoria of the financial markets that have never reached such heights. Yet the stratospheric levels of the stock market in the United States and very low interest rates can form an explosive cocktail (a bubble) as can the very high levels of public and private debts. Are financiers and economists being too complacent? Is the collective euphoria too good to last?  In the meantime, no one has clear ideas on how the “cloud” or the bitcoin economy functions ….

 

WHAT IS THE ROLE OF STATES AND CORPORATIONS?

 

In Davos, all the Heads of State produce ultra-conventional speeches outbidding each other in their declarations of their approval of globalization. They call on everyone to invest in France (Macron) or India (Modi) or the United States (Trump). “Choose France”, “Choose India”, “Give us your money”, “Invest with us” … “. “The United States is the place to do business,” said President Trump. They all become the trade representative of their respective country.

It is understood that it is not in Davos will be found the solution to the climate issues (although generated by government policies and companies[1]), nor will the problem of migrants be solved (although generated by government policies and companies), or the problems related to unemployment and underemployment (although generated by government policies and companies) or those of growing poverty and inequality (although generated by government policies and companies), or those posed by the tax avoidance by corporations. Everywhere precedence over presentation rather than fact, and sound bites, and the priority given to communication, hides the truth that conceals the distress within many countries.

So, the question is simple: who will solve our problems?

There is overriding evidence, and Davos is no exception, that current governments do not know, are unable, do not have the financial resources to deal with future crucial issues such as pensions, building infrastructure, professional training, education, environmental protection and, of course, the digital revolution, robotisation[2] and artificial intelligence.

For their part corporations, and it is evident in Davos, demonstrate they do not concern themselves with the problems that undermine our societies and threaten our democracy and our freedoms. They exists to transform society to their advantage and to make every human a manipulable consumer.  So, who should reform society?

In France, President Macron, aware of these issues, can always dream: “We will change the corporate mission of companies, which can no longer be exclusively profits, without regard for working men and women, without regard to the resulting damage to the environment”). He wants to impose this evolution by modifying civil and commercial law. His speech regarding “the capitalism of stars who benefit from fiscal and technological domination ” will leave the planet’s CEOs completely indifferent to his proposals for “the grammar of the common good” and “a new contract for global regulation” (all this to fight against nationalisms, it is necessary to highlight).

Larry Fink, the boss of BlackRock, the world’s largest asset manager with $ 6 trillion (three times the amount of the French public debt), has another extremely clear message for business, that has not been considered for one second in Davos: “The general public expectations of your companies have never been higher. Society demands that both public and private enterprises serve the common good. In the long-term to prosper, each company must not only produce financial results, but also show how it makes a positive contribution to society. Companies must benefit all their stakeholders, including shareholders, but also employees, customers and the communities in which they operate.”  For him, a convinced liberal, this considerable evolution of companies’ responsibilities must involve each individual director and shareholders becoming aware of the stakes.  It is, he says, in the business interest to convert so as not to lose value. This speech, although perfectly logical, will probably not be repeated in the near future on the Magic Mountain.

 

SCENARIOS

 

The Davos Economic Forum has adopted the practice of entrusting consultants to carry out the preparatory work for its debates

Participants are offered four different scenarios of the future of the employment environment paralysed by the digital revolution. Hence the questions asked: will changes brought about by new technologies exacerbate existing inequalities? Or, on the contrary, will advances in automation and “intelligent” machines unlock the human potential for more noble tasks?

The problem is obviously fundamental and will have to be confronted in the near future.  We can guess what the answers will be, inevitably those of governments and business will differ.  The first two scenarios are judged to be the most credible and considered to favour the approach of the Anglo-Saxon business world.

The red scenario dictates innovation at all costs. Computer science, robotics, artificial intelligence, innovation replace progress. Thousands of engineers in the United States and China are working on the future quantum computing … The deregulation of the labour market will be so effective in the United States that the number of full-time and workers on long term contracts will only represent 9% of the active population in 2030 !!!

The blue scenario resembles it and is its corollary: it is characterized by the domination of companies that become increasingly influential to the point of becoming more powerful than the State. This is already the case for Google, Apple, Facebook and Amazon and many other multinationals for whom all means are good to boost their performance. The report also imagines an Indian company that increases its annual income by 24% in 2030 because it makes its employees take a drug boosting their cognitive abilities.

The last two scenarios look less likely and appear to reflect an idealism that is especially fashionable in Europe.  First, there is the green scenario of the citizen corporation, where responsibility and values are business imperatives (an idea currently taken up by Macron and Larry Fink, see above). The yellow scenario, the fourth, considers that man comes first and technology is put at the service of individual production.

Nevertheless, one thing is certain: the fourth industrial revolution (digitisation favoured by Davos, the third being the exploitation of the consumer) will certainly not only confirm the disappearance of the proletariat, but will dramatically impact the economy in all its strata and at all levels. Every industrial revolution has reshaped the world of work. The current one will go much further than we imagine today and will happen much sooner than we think.

 

THE RISKS

 

Marsh & McLennan Companies and Zurich Insurance Group, supported by Oxford, Pennsylvania (Wharton School) and Singapore universities, have synthesized the opinions of a thousand international business leaders, scientists and economists (“The Global Risks Report 2018 “) in a document articulated around the 2018 risk probability, which seems strangely out of sync when read by an European.

The most likely 2018 risk is primarily extreme weather (which cause businesses to lose hundreds of billions each year – losses of 307 ($?) billion in 2017).

The second risk refers to natural disasters (which cost hundreds of billions …).

The third identifies cybernetic attacks (current geopolitical frictions are contributing to a surge in the scale and sophistication of cyber-attacks, At the same time business is becoming ever more dependent on technology and their exposure to cybernetics is increasing).

The fourth relates to theft or data fraud.

The last overall risk is the incapacity or proven failure of policies to manage climate change (which obviously also has an impact on business). In summary three climate-related risks and two risks related to “Big Data” and cyber-war.  One wonders, once again, where have vanished disparities in income, unemployment and underemployment, large-scale migrations that were seen to figure prominently in the list of global risks in previous years, as were terrorism and interstate conflicts?

This analysis says quite a bit about the antagonistic philosophies of big corporations and states.

The priorities of the business world are not those of traditional geopolitics.

In Davos, the billionaire boom is a sign of a prosperous economy and not a symptom of the failure of the economic system. Davos is the epitome of the continuous decline of politics in the face of the overwhelming power of market forces and finance.

The discrediting of the state by governments themselves, their moral relativism and their trivialization of democratic values have paved the way for the hegemony of economic power.

The global economy thus benefits greatly a small minority and very little the vast majority. Can it reform itself, by taking responsibility?

The day has yet to dawn when shareholders will agree to see their dividends drop and CEOs reduce their salaries and bonuses, or companies give up the practice of tax avoidance or seeking ways to exempt their profits from tax (GAFA), all in favour of third parties.

Reducing the gap between the rich and the poor requires the upper hand of politics on the economy … just when in the West it has just lost it forever!

This is not the case of China, where the state (the party) keeps control over all its economy giants.

In Davos will we ever talk about the Chinese model, where one university is built every week (more than in Europe and in the United States together) and where in the last three years a total of 4.7 million students have been trained in science, technology and engineering (compared to 568.000 in the United States) ???

Let us conclude with the words of the late regretted philosopher, Ivan Illich: “it is the corruption of the best that generates the worst”.

So, in view of all this who will define and set the limits?

 

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*Jean-Pierre Vettovaglia is a former Swiss Ambassador, now international consultant, board member of a trading bank in Geneva and editorialist with Q Magazine. He is the author of several books dedicated to world conflicts (Prix Turgot) and numerous articles in peer reviews

 

  1. I have left the word “companies” but perhaps “corporations” is better conveying the idea of “big business”.
  2. Robotisation : the word does not exist but it is VERY expressive!

 

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