The false economy

The false economy

Davos delegates don’t care about inequality or your debt

Elite retreat. World Economic Forum, CC BY-SA

The world’s rich and powerful are gathering for the World Economic Forum at the Swiss ski resort of Davos to discuss, and hopefully find solutions to, the world’s economic and social problems. The 45th meeting will be attended by kings, princes, presidents, prime ministers, leading politicians and controllers of large corporations. Amidst mutual back-slapping they will deliver set-piece speeches and soothing words at various seminars and workshops to support solutions to the world’s ecological, economic, security and social problems.

It is right that such events should exist – no nation can solve the problems on its own. In the aftermath of the banking crash and weak economic recovery in Europe, the agenda of the Davos summit is to restore trust in capitalist system and build global institutions for a better future. But this is easier said than done, especially as Davos is often far removed from the concerns of ordinary people.

The grand narrative of previous summits has been that we must not do anything to upset the rich because a nation’s salvation depends not on having a good system of education, healthcare, pensions and transport, but on keeping people happy even though their wealth is built on the sweat and blood of ordinary folk. Economic policies are increasingly formed to appease financial markets where vast amounts are gambled everyday though they produce little tangible economic activity.

In this narrative there is no space for workers, trade unions, industrial democracy, or people who want to live fulfilling lives. Markets are supposed to serve society but people are increasingly forced to dance to their short-term financial tunes. How are governments going to develop long-term economic and social policies? There is little sign that the latest summit will signal a much needed change of direction.

Previous Davos summits have carved out policies for the rich to advance their own interests and done little to check inequalities. Past failures are evident from Oxfam’s latest report which states that very soon 1% of the world’s adult population will own more than the rest. In the UK, the richest 1,000 people have doubled their wealth over the past five years to £519 billion. At the same time, millions of people have seen a real decrease in their income and lack the resources to stimulate the economy. Indeed, rising income inequality in developed economies are forcing even people in paid employment to rely on food banks.

Food banks are booming. Danny Lawson/PA

Political leaders at Davos will deliver their ritual affirmation for greater economic competition. Yes, competition gives people choices, but its present state is a cause for concern as corporations are frequently able to hold governments to ransom: “give us what we want or we are off” has become a familiar call from companies to discipline governments.

The top 500 transnational corporations control 70% of the worldwide trade, 80% of the foreign investments, one-third of all manufacturing exports, 75% of all commodities trade and 80% of the trade in management and technical services. Only four companies account for between 75% and 90% of the global grain trade. Breaking up these global behemoths and making them accountable to the public is not on the Davos agenda.

Political leaders will talk about tackling public debt, a cue for more austerity, reduction in public expenditure and further privatisation of state-owned enterprises, often at knock-down prices resulting in huge wealth transfers. Even in the western world, the neoliberal experiment for the last 35 years has failed to deliver full employment economic stability or equitable distribution of wealth. Still, politicians won’t rock the boat, though some of the NGOs attending the summit will raise uncomfortable questions.

Despite the financial crisis, western nations remain addicted to light-touch regulation and supremacy of markets. Despite the biggest banking crash, there has been little effective reform of the financial system as governments seem unwilling to upset the financial wheeler and dealers.

Low-interest policy has been used to persuade ordinary people to borrow money and stimulate the economy. Personal debt in the UK alone is around £1.432 trillion, just short of one year’s gross domestic product. What if people can’t repay this? It would be good if Davos leaders could on reflect on the consequences of huge personal debts.

International forums are increasingly essential to solve global problems, but they can’t be addressed by pursuing the interests of the 1%. A radical shift is needed to develop policies that place the interests of the 99% at the heart of the debate.