The Davos charade

Dev Nadkarni

As the world’s super rich and ultra influential movers and shakers rub shoulders at the hardy annual that is the World Economic Forum in Davos, Switzerland, the champions of the world’s have-nots do everything they can to give them as big a guilt complex as possible. But in a world in which Gordon Gecko and The Wolf of Wall Street – who have no use for anything even remotely resembling a moral compass – are role models worthy of emulation, is there anything that could entice them away from the dollar paved path leading to the temple of the goddess of greed?

This year a bleeding heart NGO used statistics with some effect. Just before the January forum, the global media went wild with stories about the world’s 85 richest people having as much wealth as the poorest half of all humans on earth. The Oxfam report, which sought to highlight rising inequality across the world also found that just one per cent of the world’s population owns 65 times the total wealth of those in the bottom half of wealth distribution. This one per cent owns some $110 trillion – about half the world’s accounted wealth.

While economists and analysts are divided on the assumptions, premises, methodology and even sources on which these statements are based, the report has brought back to centrestage debates such as whether true egalitarianism in free market democracies is achievable realistically; if dire poverty can really be wiped out within a capitalistic framework; if a more equitable redistribution of wealth can be achieved democratically to avoid utterly preventable problems that plague over a billion humans – such as hunger, health, shelter, hygiene, education and livelihoods.

This year, Pope Francis addressed the Davos jamboree telling the uber influential attendees to ensure that humanity was served by wealth, not ruled by it. The Pope called for “ … decisions, mechanisms and processes directed to a better distribution of wealth, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality.” Also among the other sideshows, I believe there were meditation sessions, which the participants could attend to develop ‘mindfulness’.

All very noble and humbling initiatives, indeed – but can such altruistic intention be translated into action that can make a difference? Some eminent non-business leaders who attended Davos have said that nearly every attendee they interact with agrees on a personal level that something needs to be done to bring the downtrodden half of the world’s population up to speed with the haves, but most plead their inability to do so because of all sorts of reasons, blaming it on the system, legislation, political compulsions, commercial sensitivity and legal issues.

This is a cop out. When it suits them, these same movers and shakers leave no stone unturned in the pursuit of their personal or corporate goals, often cutting legal and legislative corners to amass billions of dollars in profits, commissions and bonuses. Often, this is paid for by taxes from that very bottom half for whom they profess sympathy, wearing their hearts on their sleeves at events like Davos.

The Davos meeting gets together some 2500 of the world’s top political and business leaders, intellectuals, academics and journalists, among others to discuss the some of the most urgent issues the world faces – and that includes poverty, health and the environment besides others. While Davos serves as the place to be for the world’s political and financial glitterati, it also generates a great deal of intellectual debate around it. Yet, it has little to show in terms of the difference it has made to the mass of humanity whose cause it purports to champion. But then, all the mutual backslapping seems to have certainly made a difference to the likes that attend the event.

Consider this: According to the report, the world’s richest one per cent increased their share of income between 1980 and 2012 in 24 out of the 26 countries where the data is available. Believe it or not – and this may or may not be coincidental – that is almost exactly when the annual Davos event started. Before that, say statisticians, the wealth gap between the rich and the poor was not as wide as it is today, meaning that inequality levels were far less then. It also coincides with the time that the world plunged headlong into free market driven policies and that’s also when globalisation began in right earnest.

The report also points out a more recent phenomenon: in the United States, the wealthiest one per cent cornered 95 per cent of the post global financial crisis growth, while the bottom 90 per cent became poorer. Which only means that no lessons have been learned from the global financial crisis and that the financial world is well on its way back to its old habits. One asset manager speaking at a panel discussion in Davos said that some banks were still leveraging as much as sixty per cent of their capital in dealing with risky financial products like the GFC-tainted derivatives.

Irrespective of what the real motivations behind the timing of the Oxfam report were, it succeeded in bringing the debate around the relevance of the annual Davos event into the public discourse just before and after the high profile meet. While the gathering no doubt brings some of the world’s most influential people to the snowy Swiss destination every January, its true potential as regards making a positive difference to the world’s most disadvantaged – which indeed is its touted raison d’etre – remains grossly underutilised. Small wonder, then, that critics rather harshly contend that it is a place to achieve little more than strengthen the old boys’ network.

Interestingly, at about the same time as this report made the rounds of the global media last month, Microsoft founder and the world’s wealthiest man Bill Gates said that there would not be any poor country by the year 2035. He said there were more desperately poor countries while he was growing up than there are today. In 20 years time, there would only be a handful of abjectly poor nations, he believes. Clearly, the definition of ‘poverty’ needs an upgrade. It’s all a matter of perspective.

As a perceptive economist put it: a person in a poor country can get into a debt of say $10,000 and pay it off over a lifetime because of high interest and his low income. A person in a rich country can possibly get into a debt of $200,000 and pay it off for a lifetime despite lower interest and his higher income (but because of the comparatively higher cost of living). The difference is that the person in the rich country has the choice of getting into more debt because of willing lending banks. But at the end of it, what their net worth over their lifetimes is zero – the assets are all essentially owned by that top one per cent of the world’s richest.

See you at next year’s meeting to save the world.

First appeared in the February 2014 edition of Islands Business magazine