by Michael Roberts
Today, the global political and economic elite meet in Davos Switzerland under the auspices of the World Economic Forum (WEF).
Every year the WEF has an annual meeting in the super exclusive ski resort of Davos,
with the participation of 3,000 politicians, business leaders,
economists, entrepreneurs, charity leaders and celebrities. For
example, this year Chinese president Xi Jinping, South Africa’s Jacob
Zuma and many of the economic mainstream gurus and banking officials are
among the attendees. Xi Jinping will be the first Chinese president to
attend Davos and will lead an unprecedented 80-strong delegation of business leaders, economists, academics and journalists. He will deliver the opening plenary address on Tuesday and use it to defend “cooperation and economic globalisation”.
US vice-president Joe Biden, China’s two richest men and
London mayor Sadiq Khan will travel on private jets to nearby airports
before transferring by helicopter to escape the traffic on the approach
to the picturesque town. So many jets are expected that the Swiss
government has opened up Dübendorf military airfield, an 85-mile
helicopter flight away, to accommodate them. The increase in private
jet flights – which each burn as much fuel in one hour as typical use of
a car does in a year – comes as the WEF warns that climate change is
the second most important global concern.
While the rich elite fly in on their private jets, extra hotel
workers are being bussed in to serve the delegates, while packing into
five a room in bunk beds. One of the main themes of Davos will be the
rising inequality of income and wealth. So Davos itself is a microcosm.
At Davos’ super luxury hotel the Belvedere, there will be “specially
recruited people just for mixing cocktails”, as well as baristas, cooks,
waiters, doormen, chambermaids and receptionists to host world
leaders, business people and celebrities, who this year include pop
star Shakira and celebrity chef Jamie Oliver (worth $400m). Last year, a
Silicon Valley tech company was reportedly charged £6,000 for a short
meeting with the president of Estonia in a converted luggage room. The
hotel has also previously flown in New England lobster and provided
special Mexican food for a company that was meeting a Mexican
politician.
Britain’s Theresa May will be the only G7 leader to attend this
year’s summit as it clashes with Donald Trump’s inauguration as the 45th
US president. Last year, former UK PM David Cameron partied tie-less
with Bono, Leonardo DiCaprio and Kevin Spacey, at a lavish party hosted
by Jack Ma, the founder of internet group Alibaba and China’s richest
man with a $34.5bn (£28.5bn) fortune. Tony Blair also attended the Ma
party last year.
Basic membership of the WEF and an entry ticket costs 68,000 Swiss
francs (£55,400). To get access to all areas, corporations must pay to
become Strategic Partners of
the WEF, costing SFr600,000, which allows a CEO to bring up to four
colleagues, or flunkies, along with them. They must still pay SFr18,000
each for tickets. Just 100 companies are able to become Strategic
Partners; among them this year are Barclays, BT, BP, Facebook, Google
and HSBC. The most exclusive invite in town is to an uber-glamorous
party thrown jointly by Russian billionaire Oleg Deripaska and British
financier Nat Rothschild at the oligarch’s palatial chalet, a 15-minute
chauffeur-driven car ride up the mountain from Davos. In previous years,
Swiss police have reportedly been called to Deripaska’s home after
complaints about the noise of his Cossack band. Deripaska’s parties have
“endless streams of the finest champagne, vodka, and Russian caviar amidst dancing Cossacks and beautiful Russian models.”
The official theme of this year’s forum is “responsive and responsible leadership”!
That hints at the concerns of global capitalism’s elite: they need to
be ‘responsive’ to the popular reaction to globalisation and the failure
of capitalism to deliver prosperity since the end of the Great
Recession and they also need to be ‘responsible’ in their policies and
actions – a subtle appeal to the newly inaugurated Donald Trump as US
president or Erdogan in Turkey, Zuma in South Africa, Putin in Russia
and Xi in China.
The WEF has been the standard bearer of the positives from
‘globalisation’, new technology, free markets, ‘Western democracy’ and
‘responsible’ leadership. Trump and other leaders of global and
regional powers now seem to threaten that enterprise. But Trump is the result of the failure of the WEF project itself i.e. global capitalist ‘progress’.
In my book, The Long Depression, in the final chapter I raised three
big challenges for the capitalist mode of production over the next
generation: rising inequality and slowing productivity; the rise of the
robots and AI; and global warming and climate change. And these issues
are taken up in this year’s WEF report entitled The Global Risks Report. The
WEF report cites five challenges for capitalsim: 1 Rising Income and
wealth disparity; 2 Changing climate; 3 Increasing polarization of
societies; 4 Rising cyber dependency and 5 Ageing population.
The report points out that while, globally, inequality between countries has been “decreasing at an accelerating pace over the past 30 years”,
within countries, since the 1980s the share of income going to the top
1% has increased in the United States, United Kingdom, Canada, Ireland
and Australia (although not in Germany, Japan, France, Sweden, Denmark
or the Netherlands). Actually, as I have shown in recent posts,
global inequality (between countries) has only decline because of the
huge rise in incomes per head in China. Excluding, there has been
little improvement, with many lower income countries having worsening
inequality. And as the WEF says, the slow pace of economic recovery
since 2008 has “intensified local income disparities with a more
dramatic impact on many households than aggregate national income data
would suggest.”
The latest measures of inequality of incomes and wealth as presented
by Thomas Piketty, Emmanuel Saez, Daniel Zucman and recently deceased
Tony Atkinson, are truly shocking, with no sign of any reduction in
inequality in the US, in particular.
Since the global financial crisis the incomes of the top 1% in the US
grew by more than 31%, compared with less than 0.5% for the remaining
99% of the population, with 540 million young people across 25 advanced
economies facing the prospect of growing up to be poorer than their
parents. And to coincide with Davos, Oxfam, using the data compiled for
the annual Credit Suisse wealth report finds that the world’s eight richest individuals have as much wealth as the 3.6bn people who make up the poorest half of the world!
In my blog and , I discuss the reasons for this sharp increase in
inequality. Inequality is a feature of all class societies but under
capitalism it will vary according to the balance of power in the class
struggle between labour and capital. The WEF report likes to think that
the cause is the differential of skills between those who are better
educated and therefore can obtain higher wages. But research has shown
this to be nonsense. The real disparity comes when capital can usurp a
greater proportion of value created in capitalist production. Increased
profitability, lower corporate taxes and booming stock and property
markets since the 1980s have shifted up incomes from capital compared to
wages, particularly for the top echelons in corporations.
And then there is the impact of ‘capital bias’ in capitalist production that I have referred to before.
According to the economists Michael Hicks and Srikant Devaraj, 86% of
manufacturing job losses in the US between 1997 and 2007 were the result
of rising productivity, compared to less than 14% lost because of
trade.
“Most assessments suggest that technology’s disruptive effect on
labour markets will accelerate across non-manufacturing sectors in the
years ahead, as rapid advances in robotics, sensors and machine learning
enable capital to replace labour in an expanding range of
service-sector job. A frequently cited 2013 Oxford Martin School study
has suggested that 47% of US jobs were at high risk from automation and
in 2015, a McKinsey study concluded that 45% of the activities that
workers do today could already be automated if companies choose to do
so.” (WEF).
Technological change is shifting the distribution of income from
labour to capital: according to the OECD, up to 80% of the decline in
labour’s share of national income between 1990 and 2007 was the result
of the impact of technology. While at a global level, however, many
people are being left behind altogether: more than 4 billion people
still lack access to the internet, and more than 1.2 billion people are
without even electricity.
In my book, I cite the next challenge for capitalism is climate
change from global warming. The WEF report does too. There are a
growing “cluster of interconnected environment-related risks – including extreme weather events, climate change and water crises” .Global
greenhouse gas (GHG) emissions are growing, currently by about 52
billion tonnes of CO2 equivalent per year. Last year was the warmest on
the instrumental record according to provisional analysis by the World
Meteorological Organisation. It was the first time the global average
temperature was 1 degree Celsius or more above the 1880–1999 average.
According to the National Oceanic and Atmospheric Administration, each
of the eight months from January through August 2016 were the warmest
those months have been in the whole 137 year record.
As warming increases, impacts grow. The Arctic sea ice had a record
melt in 2016 and the Great Barrier Reef had an unprecedented coral
bleaching event, affecting over 700 kilometres of the northern reef. The
latest analysis by the UN High Commissioner for Refugees (UNHCR)
estimates that, on average, 21.5 million people have been displaced by
climate- or weather-related events each year since 2008,59 and the UN
Office for Disaster Risk Reduction (UNISDR) reports that close to 1
billion people were affected by natural disasters in 2015.
The Emissions Gap Report 2016 from the United Nations Environment
Programme (UNEP) shows that even if countries deliver on the commitments
– known as Nationally Determined Contributions (NDCs) – that they made
in Paris, the world will still warm by 3.0 to 3.2°C. To keep global
warming to within 2°C and limit the risk of dangerous climate change,
the world will need to reduce emissions by 40% to 70% by 2050 and
eliminate them altogether by 2100.
The World Bank forecasts that water stress could cause extreme
societal stress in regions such as the Middle East and the Sahel, where
the economic impact of water scarcity could put at risk 6% of GDP by
2050. The Bank also forecasts that water availability in cities could
decline by as much as two thirds by 2050, as a result of climate change
and competition from energy generation and agriculture. The Indian
government advised that at least 330 million people were affected by
drought in 2016. The confluence of risks around water scarcity, climate
change, extreme weather events and involuntary migration remains a
potent cocktail and a “risk multiplier”, especially in the world
economy’s more fragile environmental and political contexts.
The third big challenge cited by the WEF is restoring global economic
growth. The report points out that permanently diminished growth
translates into permanently lower living standards: with 5% annual
growth, it takes just 14 years to double a country’s GDP; with 3%
growth, it takes 24 years. “If our current stagnation persists, our
children and grandchildren might be worse off than their predecessors.
Even without today’s technologically driven structural unemployment, the
global economy would have to create billions of jobs to accommodate a
growing population, which is forecast to reach 9.7 billion by 2050, from
7.4 billion today.”
So the WEF report highlights a whole batch of problems ahead for the
stability and success of global capitalism. And what are the answers for
a ‘responsive and responsible’ global leadership gathering in Davos?
Capitalism must be preserved, of course, but it will necessary “to reform market capitalism and to restore the compact between business and society.”
But having said that globalisation is failing in its report, the WEF
then says that the way forward is really more of the same. “Free
markets and globalization have improved living standards and lifted
people out of poverty for decades. But their structural flaws – myopic
short-termism, increasing wealth inequality, and cronyism – have fueled
the political backlash of recent years, in turn highlighting the need to
create permanent structures for balancing economic incentives with
social wellbeing.”
Thus the WEF report calls on the rich elite “to be responsive to
the demands of the people who have entrusted them to lead, while also
providing a vision and a way forward, so that people can imagine a
better future.” And how to do this? “Leaders will have to
build a dynamic, inclusive multi-stakeholder global-governance
system…the way forward is to make sure that globalization is benefiting
everyone.”
Reducing inequality and poverty, boosting productivity and growth
through new technology while preserving jobs and raising incomes;
reducing gas emissions into the atmosphere to avoid global catastrophes,
while preserving and reforming capitalism through global cooperation
from Trump in the US, Xi Ping in China, Putin in Russia and Brexit
Britain and the European Union. Hmm…
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