As I write these words, several thousand high-ranking officials, business leaders, financiers and others are finishing up their meetings in Davos – a beautiful ski resort in the Swiss Alps. These meetings of the World Economic Forum do what it says on the tin. These folks discuss, decide and implement the policies that manifest themselves in how the global economy operates – essentially, they run the economic show.
Let’s consider the performance of our leaders in their guidance of the global economy since the WEF began. The global economy, as measured by GDP, has grown at a solid rate (averaging over 2% on an annual basis in real terms over the past few decades). It thus might be appropriate for the leaders assembled in Davos to take a bow.
Critics might argue that much of the economic growth was a function of falling interest rates, but some credit must go to governments, finance ministers and central bank governors for their stewardship of monetary policy which contributed to growth. Others might suggest that the boom of the last three decades was a function of a one-time unsustainable escalation of debt for which we are now paying a heavy price. Nevertheless, even the six years of sluggish growth suffered by Western countries has not offset the growth of the previous 30 years.
However, when one analyses income distribution a very different and much darker picture emerges. In the USA, real wage growth has been stagnating since the 1970s – just as our leaders began to meet in Davos. In the UK, real wages grew by 2.9% per annum in the 1970s and 1980s, falling to 1.5% real wage growth in the 1990s and 1.2% in the 2000s, decreasing at an average of 2.2% since 2010. A similar picture emerges from the rest of Europe – so there has been growth but its rewards have not been evenly shared.
Oxfam announced in advance of the WEF that the richest 1% of the world owns about one half of global wealth, and their share has been rising over recent decades. As this 1% is mightily represented in Davos, it is fair to say that Davos has been a fabulous success … for them! Oxfam made headlines at Davos last year with a study showing that the 85 richest people on the planet have the same wealth as the poorest 50%.
If I were in that group I would certainly be turning up to the WEF and doing everything I could to reinforce the idea of leadership by this elite. If indeed I were one of the world’s richest people I would pay for this myself and it would be an investment well worth making. But who pays for the officials of government, policy-makers and central bankers to go to this Forum? Well, we as taxpayers, actually.
The question is why in this time of scarcity, we can justify this expense when the budgets of many social programs are being slashed and when benefit caps are being cut. Is it appropriate that they be wined and dined as they map out economic strategies, at a Swiss ski resort, in consultation with this unelected elite which has already benefited so handsomely and so singularly from the WEF’s global economic leadership? Switzerland, whose currency is appreciating rapidly, does not need the money, and the 1% seems to be doing pretty well already. I propose that we ban any public spending on Davos and the WEF. Perhaps with that money, we can make seed-stage grants for businesses creating social change or provide badly needed first-loss capital for innovative impact investment fund concepts or fund a whole host of alternatives that will contribute much more than expensive dinners in a country with an already appreciating currency.
First published in Third Sector in January 2015.