Davos Seems to have Lost a Lot of Steam
There is very little coverage of this year’s conclave in the major media in the US. Wonder why?
They’re talking about important things like Brexit and the Shutdown in the US.
Both are unprecedented breakdowns of the political systems in the two longstanding democracies, and it’s no wonder that they’re consuming lots of media cycles. But the news involving Brexit is mostly that nothing is happening. The clock is ticking, and people are slowly coming to admit that the Irish border problem is no more solvable than squaring a circle. In the US, the Shutdown is like nothing ever seen before. It's uncharted territory.
But this isn’t the first time since 1971 that other things besides the World Economic Forum are in the news. Look at old newspapers, especially from the last twenty years, and you’ll see journalists using whatever is going on at Davos as a way to frame conversations about the big global dramas of the day. But in 2019 that isn't quite as true.
And they’re talking about the environment.
The organizers recognize something that most of the political establishment in America refuses to: global warming is literally an existential crisis. The presentations and conversations on the subject this week are both well-intentioned and substantive. But still something is missing. That something would be the US. With the world’s largest single economy withdrawing from environmental agreements, the attitude both inside the US and in the world outside is that no significant action is going to be taken until 2021, when Trump is out of office. The environmental situation was already pretty hopeless. And now, making things worse, the global elite realizes that their conversations are, at least for the time being, just more hot air.
So even if the attendees in Davos are talking about important issues, nobody seems to care. Why aren't the media reporting on what they are discussing? Because it’s temporarily irrelevant. It’s not news.
But the era of billionaire worship is over.
Davos has historically been attended by four groups of people – government officials, interesting do-gooders, executives from the corporate sponsors, and the Global .01%. It used to be that general audiences were interested in what Bill Gates or Carlos Slim or Jack Ma had to say about the future of the world economy. They super-rich were seen as the innovators who could see the future more clearly because they were the ones making it happen. Now your run-of-the-mill billionaire needs to convince people that he’s not a lucky monopolist, a criminal oligarch, or an economically irrelevant hedge fund operator.
The billionaires are increasingly out of touch. In the US, newly elected congresswoman Alexandria Ocasio-Cortez has shocked the political establishment by suggesting that marginal (NB, not average) tax rates on the rich should be 70% or higher. That’s where they were during America’s post-WWII prosperity. And according to opinion polls, a majority of Americans agree with her.
The subject came up at Davos. Michael Dell was on a panel discussing whether digital globalization could be made more inclusive (well, that’s a mouthful), and he was asked what he thought of Representative Ocasio-Cortez’s proposal. He said, “No, I’m not supportive of that, and I don’t think it will help the growth of the U.S. economy. Name a country where that’s worked.” Dell, and most of the other billionaires he was rubbing shoulders with, would rather we not change the tax system.
The underlying problem is the demise of neo-liberalism.
For the last thirty years, the reigning economic orthodoxy has been what is now called neo-liberalism. The key elements of it were that market solutions were better than governmental ones, that capital should be free to go where it can be most profitably invested, that lower tax rates will stimulate growth, and that the creation of wealth will sooner or later benefit everybody. In some ways this theory has been successful. The percentage of the world’s population living in extreme poverty (defined as having less than $1.90 a day) has fallen from 35% to 11% since 1987. For this we should be thankful.
But in many of the wealthier countries -- first and foremost the US -- the skyrocketing growth of inequality has led to a drop in the standard of living for the median family. Overall GDP says the country is doing better. But a majority of people are feeling worse. This is one of the fundamental drivers of political storms in the US. This helped get Trump elected.
The economists and the high and mighty both made a bad assumption. The “laws” of economics told them that the gains from the growing world economy would benefit everybody, automatically. But the mechanisms for this to happen had been stripped out of the system. Marginal tax rates were no longer redistributive. The avenues for social mobility like affordable education were choked off. Wages for the working class disconnected from productivity growth. Exploding health care costs more than consumed any increase in the average family’s income. And, behind the scenes, the ultra-rich were able to grow their invested wealth more quickly than overall income growth, as Thomas Piketty showed.
What Davos has stood for doesn’t sound so good anymore.
Davos had come to represent the annual meeting of the One Percent. The intellectual underpinnings of the discussions once seemed unassailable: letting the free market make policy decisions sounded better than having to be held accountable for making hard and visible political decisions. Now there are unhappy electorates around the world who would disagree.
The well-intentioned fantasy that enlightened leadership from the top would lead to a better world for everybody was irresistible – at least for the guys at the top.
The big news from the Magic Mountain this year is that these people aren’t as important as they used to be. They aren’t calling all the shots, now that voters are changing the conversation in some countries, and populist/nationalist leaders are squelching the conversation in other ones.
The orthodoxy of neo-liberalism isn’t dead. But it’s no longer seen as inevitable, all-powerful, or even entirely desirable. The promises it was making didn’t hold up. The system was producing great benefits, but for a small number of people, as it turned out.
And since the Demigods of Davos are no longer the only people shaping the future, they aren’t as all-powerful as they used to be.
They’re certainly not as newsworthy.
They’re talking about important things like Brexit and the Shutdown in the US.
Both are unprecedented breakdowns of the political systems in the two longstanding democracies, and it’s no wonder that they’re consuming lots of media cycles. But the news involving Brexit is mostly that nothing is happening. The clock is ticking, and people are slowly coming to admit that the Irish border problem is no more solvable than squaring a circle. In the US, the Shutdown is like nothing ever seen before. It's uncharted territory.
But this isn’t the first time since 1971 that other things besides the World Economic Forum are in the news. Look at old newspapers, especially from the last twenty years, and you’ll see journalists using whatever is going on at Davos as a way to frame conversations about the big global dramas of the day. But in 2019 that isn't quite as true.
And they’re talking about the environment.
The organizers recognize something that most of the political establishment in America refuses to: global warming is literally an existential crisis. The presentations and conversations on the subject this week are both well-intentioned and substantive. But still something is missing. That something would be the US. With the world’s largest single economy withdrawing from environmental agreements, the attitude both inside the US and in the world outside is that no significant action is going to be taken until 2021, when Trump is out of office. The environmental situation was already pretty hopeless. And now, making things worse, the global elite realizes that their conversations are, at least for the time being, just more hot air.
So even if the attendees in Davos are talking about important issues, nobody seems to care. Why aren't the media reporting on what they are discussing? Because it’s temporarily irrelevant. It’s not news.
But the era of billionaire worship is over.
Davos has historically been attended by four groups of people – government officials, interesting do-gooders, executives from the corporate sponsors, and the Global .01%. It used to be that general audiences were interested in what Bill Gates or Carlos Slim or Jack Ma had to say about the future of the world economy. They super-rich were seen as the innovators who could see the future more clearly because they were the ones making it happen. Now your run-of-the-mill billionaire needs to convince people that he’s not a lucky monopolist, a criminal oligarch, or an economically irrelevant hedge fund operator.
The billionaires are increasingly out of touch. In the US, newly elected congresswoman Alexandria Ocasio-Cortez has shocked the political establishment by suggesting that marginal (NB, not average) tax rates on the rich should be 70% or higher. That’s where they were during America’s post-WWII prosperity. And according to opinion polls, a majority of Americans agree with her.
The subject came up at Davos. Michael Dell was on a panel discussing whether digital globalization could be made more inclusive (well, that’s a mouthful), and he was asked what he thought of Representative Ocasio-Cortez’s proposal. He said, “No, I’m not supportive of that, and I don’t think it will help the growth of the U.S. economy. Name a country where that’s worked.” Dell, and most of the other billionaires he was rubbing shoulders with, would rather we not change the tax system.
The underlying problem is the demise of neo-liberalism.
For the last thirty years, the reigning economic orthodoxy has been what is now called neo-liberalism. The key elements of it were that market solutions were better than governmental ones, that capital should be free to go where it can be most profitably invested, that lower tax rates will stimulate growth, and that the creation of wealth will sooner or later benefit everybody. In some ways this theory has been successful. The percentage of the world’s population living in extreme poverty (defined as having less than $1.90 a day) has fallen from 35% to 11% since 1987. For this we should be thankful.
But in many of the wealthier countries -- first and foremost the US -- the skyrocketing growth of inequality has led to a drop in the standard of living for the median family. Overall GDP says the country is doing better. But a majority of people are feeling worse. This is one of the fundamental drivers of political storms in the US. This helped get Trump elected.
The economists and the high and mighty both made a bad assumption. The “laws” of economics told them that the gains from the growing world economy would benefit everybody, automatically. But the mechanisms for this to happen had been stripped out of the system. Marginal tax rates were no longer redistributive. The avenues for social mobility like affordable education were choked off. Wages for the working class disconnected from productivity growth. Exploding health care costs more than consumed any increase in the average family’s income. And, behind the scenes, the ultra-rich were able to grow their invested wealth more quickly than overall income growth, as Thomas Piketty showed.
What Davos has stood for doesn’t sound so good anymore.
Davos had come to represent the annual meeting of the One Percent. The intellectual underpinnings of the discussions once seemed unassailable: letting the free market make policy decisions sounded better than having to be held accountable for making hard and visible political decisions. Now there are unhappy electorates around the world who would disagree.
The well-intentioned fantasy that enlightened leadership from the top would lead to a better world for everybody was irresistible – at least for the guys at the top.
The big news from the Magic Mountain this year is that these people aren’t as important as they used to be. They aren’t calling all the shots, now that voters are changing the conversation in some countries, and populist/nationalist leaders are squelching the conversation in other ones.
The orthodoxy of neo-liberalism isn’t dead. But it’s no longer seen as inevitable, all-powerful, or even entirely desirable. The promises it was making didn’t hold up. The system was producing great benefits, but for a small number of people, as it turned out.
And since the Demigods of Davos are no longer the only people shaping the future, they aren’t as all-powerful as they used to be.
They’re certainly not as newsworthy.
January 25, 2019