The lessons from Davos? No connection to reality
The rich and the powerful, who meet every year at the World Economic Forum (WEF), were in a gloomy mood this time. Not only because the day they met close to eight trillion dollars was wiped off global equity markets by a “correction”. But because no leader could be in a buoyant mood. German Chancellor Angela Merkel is losing ground because of the way she handled the refugee crisis. French President Francois Hollande is facing decline in the polls that are favouring Marine Le Pen. Spanish P?resident Mariano Rajoy practically lost the elections. Italian President Matteo Renzi is facing a very serious crisis in the Italian banking system, which could shatter the third economy of Europe. And the leaders from China, Brazil, India, Nigeria and other economies from the emerging countries (as they are called in economic jargon), are all going through a serious economic slowdown, which is affecting also the economies of the North. The absence of the presidents of Brazil and China was a telling sign. However this last meeting in Davos (20-23 January) will remain in the history of the WEF, as the best example of the growing disconnection between the powerful elite and the rest of us. The theme of the forum was How to Master the Fourth Industrial Revolution, a thesis that Klaus Schwab the founder and CEO of Davos expounded in a book published a few weeks before. The theory is that we are now facing a fusion of all technologies, that will completely change the system of production and work. The First Industrial Revolution was to replace, at beginning of the 19th century, human power with machines. Then at the end of that century came the Second Industrial Revolution, which was to combine science with industry, with a total change in the system of production. Then came the era of computers, in the middle of last century, making the Third Industrial Revolution, the digital one. And now, according to? Schwab, we are entering the Fourth Revolution, where workers will be substituted by robots and mechanisation. The Swiss Bank UBS released a study at the conference in which it reports that the Fourth Revolution will "benefit those holding more". In other words, the rich will become richer. It is important for the uninitiated to know that the money that goes to the superrich, is not printed for them. In other words, it is money that is sucked from the pockets of people. Davos created two notable reactions: the first came with the creation of the World Social Forum (WSF), in 1991, where 40,000 social activists convened to denounce as illegitimate the gathering of the rich and powerful in Davos. They said it gave the elite a platform for decision making, without anything being mandated by citizens, and was directed mainly to the interests of the rich. The WSF declared that “another world is possible,” in opposition to the Washington Consensus, formulated by the International Monetary Fund (IMF), the World Bank, and the Treasury of the United States. The consensus declared that since capitalism triumphed over Communism, the path to follow was to dismantle the state as much as possible, privatise, slash social costs which are by definition unproductive, and eliminate any barrier to the free markets. The problem was that, to avoid political contagion, the WSF established rules which reduced the Forums to internal debating and sharing among the participants, without the ability to act at the level of political institutions. At this Davos, the WSF was not a point of reference. But there was another in the shape of the international aid organisation Oxfam, which has been presenting a report on global wealth at every WEF. Those reports have been documenting how fast the concentration of wealth is creating a world of inequality at an obscene level not known since the First Industrial Revolution. In 2010, 388 individuals owned the same wealth as 3.6 billion people, half of humankind. In 2014, just 80 people owned as much as 3.8 billion people. And in 2015, the number came down to 62 individuals. And the concentration of wealth is accelerating. In its 2015 report, Oxfam predicted that the wealth of the top 1 per?cent would overtake the rest of the population by 2016. In fact, that was reached within ten months. Twenty years ago, the superrich 1 percent had the equivalent wealth of 62 percent of the world population. It would have been logical to expect that those who run the world, looking at the unprecedented phenomena of fast growing inequality, would have connected the Oxfam report with that of UBS, to consider the new and immense challenge that the present economic and political system is facing. Also because the Fourth Revolution foresees the phasing out of workers from whatever function can be taken on by machines. According to Schwab, the use of robots in production will go from the present 12 percent to 55 percent by 2050. This will obviously cause a dramatic rise in unemployment, in a society where the social safety net is already under threat. Instead, the WEF largely ignored the issue of inequality, echoing the present level of lack of interest in political institutions. We are well into the US presidential campaign, and if it were not for one candidate, Bernie Sanders, the issue would have been ignored or sidestepped by the other 14 candidates. There is no reference to inequality in the European political debate either, apart from ritual declarations: refugees are now a much more pressing issue. It is a sign of the times that the financial institutions, like IMF and the World Bank, are way ahead of political institutions, releasing a number of studies on how inequality is a drag on economic development, and how its social impact has a very negative impact on the central issue of democracy and participation. The United Nations has made inequality a central issue. Alicia Barcena, the Executive Secretary of ECLAC, the UN Economic Commission for Latin America, also published a very worrying report in time for Davos on the stagnation which the Latin American region is entering, and raising the issue of inequality as an urgent problem. But besides inequality, the very central issue of climate change was largely ignored. The leaders in Paris made a lot of hopeful declarations, stating that the solution will come from technological development, driven by the markets. It would have been logical to think, that in a large gathering of technological titans, with political leaders, the issue of climate change would have been a clear priority. So, let us agree on the lesson from Davos. The rich and powerful had all the necessary data for focusing on existential issues for the planet and its inhabitants. Yet they failed to do so. This is a powerful example of the disconnect between the concerns of citizens and their elite. The political and financial system is more and more self reverent but it is also fast losing legitimacy in the eyes of many people. All rights reserved: IPS
By Roberto Savio
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