26 January 2012
Apparently the topic on everyone’s lips at the World Economic Forum in the Swiss alpine resort of Davos this year is income inequality and how to reduce it.
Does the global corporate elite not realise there is a fairly obvious solution, and it’s staring them in the face?
As a starting point they might care to consider whether their inflation-busting 20%-plus annual pay rises and the annual multi-million pound bonuses, often awarded by somnambulant remuneration committees irrespective of genuine performance, are strictly speaking necessary. They might also consider whether the astronomical fees so carelessly lavished on their buddies in investment banking, consultancy, accountancy and the law are, strictly speaking, necessary.
As I have said in an earlier blog post, chief executives, finance directors and other company directors rarely question the astronomical charge-out rates and fees demanded by such ‘professionals’, even when the advice is poor, the consequences disastrous, the conflicts of interest lead to negative outcomes for the shareholders, and the risks posed to the providers are minimal — and despite the clear evidence of cartelization at the top end of all these sectors.
Has the idea that they might have to make any personal sacrifices — such as enduring a marginally less affluent lifestyle or or having less freedom to spray money at armies of overpaid professional advisers, for example — not crossed these benighted individuals’ minds?
The notion of making such sacrifices or suggesting more radical and substantive changes, doesn’t even seem to be on the agenda for the Davos elite.
Like France’s Bourbon monarchy in the 1780s, they prefer to bury their heads in the sand (or should I say, ‘the snow’), ignoring the revolutionary clamour that’s building among the proletariat, while their oleaginous courtiers promulgate disingenuous spin about a (barely existing) “global market for talent”. (I would recommend Merryn Somerset Webb’s short article “The Talent Myth“, which successfully demolishes that.)
There is of course a small minority of socially-responsible and enlightened business leaders out there. They include philanthropists like the Microsoft founder Bill Gates and the Berkshire Hathaway chairman Warren Buffett, who recently said that higher taxes on the wealthy would bring greater fairness to US taxpayers across to board.
Another Davos delegate who has “seen the light” is Azim Premji, the chairman of Bangalore-based software company Wipro. In December 2010, he transferred a shareholding worth $2 billion to a foundation that supports education for the poor. Premji told Bloomberg: “We have seen in 2011 what ignoring this aspect can result in. If we don’t take cognizance of it and try to solve this problem, it can create a chaotic upheaval globally.”
The Reuters finance blogger Felix Salmon captured some of this in a blog post yesterday, albeit from a different angle. He wrote: “Security this year is tighter than ever — the first rule of security at these events is that it can only get ratcheted up, rather than loosened at all — and there’s a besieged feeling to this Alpine town I haven’t felt before … Davos hubris is dissipating, to be replaced by risk management protocols. Europe risks falling apart — and there’s nothing that anybody here can do about it, if it happens. Never have the masters of the universe seemed so very human.”
This brings me on to an interview that the Financial Times did with the spokesman of Occupy WEF, who have established a makeshift camp of Igloos and tents on the fringes of the Swiss resort (outside the security cordon, naturally). The 30-or-so Occupy protestors think it farcical that the same bunch of myopic, sometimes moronic, greedsters who led us into the crisis are now wasting shareholders’ money pontificating about how to resolve it.
In an emailed exchange the pink’un asked the group’s spokesman David Roth why he is protesting and what he hopes to achieve. I reproduce a selection of his answers below:-
What are you hoping to achieve by protesting outside WEF?
Our protest stands for the massive injustices created by neo-liberal capitalism over the past decades. We are a sign of resistance against the idea that people who have been responsible for crises since the 1980s (and the crisis we live in today) can yet claim to be the rescuer of the world economy. Those who pretend to have the solution want to divert attention away from the question of substantial change. We are succeeding in building pressure against this.
What do you think of the World Economic Forum as an institution? How – if at all – would you like to see it change?
Every institution fancying itself as being entitled to control the world’s economy without appropriate representation of the population and without fair involvement of all relevant political and economic views is a highly undemocratic farce! It’s as simple as that. Nobody needs an elite forum, but we need the renewal of genuine democracy.
Do you think that young people have a chance of changing the establishment?
Our camp can be a good way to wake up young people. We don’t expect to build so much pressure that our authorities will suddenly embrace radical change, but we can be part of a future generation who will proceed to an economic system beyond capitalism.
The politicians at Davos this year seem to be no less in denial and therefore powerless than the corporate leaders. Writing in the Financial Times’s rolling blog Martin Wolf said the German chancellor Angela Merkel is no less determined than her corporate counterparts to adhere to a flawed ideology, even if this will almost certainly lead to the ruination of Europe.
“Like the Bourbons, Merkel has learned nothing and forgotten nothing. … Austerity everywhere is a recipe for economic contraction, worsening fiscal outcomes, weaker financial systems, yet greater contraction … This economic perspective will kill the euro. It is a tragic inevitability.”