Global Risks Report

The Davos Dreams

Farooque Chowdhury

Now the Davos elites have "raised" the issue of rich-poor divide. The World Economic Forum (WEF) has said that growing rich-poor income gap is the biggest risk the world is facing for the next decade. Pope Francis told Davos to fight inequality, hunger. But, Mr Bill Gates finds hope in this world system.

In its annual Global Risks 2014 report, the WEF said the income disparity was the most likely risk to cause an impact on a global scale in the next decade. "It raises concerns about the Great Recession and the squeezing effect it had on the middle classes in developed economies".

They are "searching" answer to the question: How to spread the wealth without risking their hegemony?

But, it's a riddle-impossible to solve within the present structure. Income inequality is an integral part of the structure, a time-bomb carried by the present world distribution system. It carries all the possibilities of wrecking the system if those pressed down at the bottom consciously continue their pressure.

So, the elites gathered in their annual carnival at Davos—the WEF—are aware of the danger of income inequality. A survey by the forum found the issue ranked near the top among global economic concerns.

Inequality, the world system's "gift" to humanity, is not only a process active in poor countries. It's also a regular and integral part of advanced, matured capitalist economies.

A few facts, all from the mainstream, cited below show the reality of inequality and limitation of the prevailing system in fighting out the "product".

Working for the Few, an Oxfam report released on January 20, 2014, said: The aggregate wealth of the world's richest 85 individuals is now equivalent to that owned by half of the world's population—3.5 billion of the poorest people. The wealth of the richest 1 percent of the world population now amounts to $110 trillion or 65 times the combined wealth of the bottom half of the world's population. In the past year, 210 individuals have "enriched" them as billionaires, joining a group of 1,426 persons with a total net worth of $5.4 trillion.

India has been cited by Oxfam as an example: The number of billionaires in the emerging economy has increased from less than 6 to 61 in the past decade, concentrating approximately $250 billion among a few dozen persons amidst a population of 1.2 billion. "What is striking is the share of the country's wealth held by this elite minority, which has skyrocketed from 1.8 percent in 2003 to 26 percent in 2008", observed the report.

India's billionaires, Oxfam says, acquired their wealth in "rent thick" sectors—industries where profits are dependent on access to scarce resources—"made available exclusively through government permissions and therefore susceptible to corruption by powerful actors, as opposed to creation of wealth."

There in today's world, peer-to-peer network of high net worth individuals paying $30,000 in annual membership fees, network of a few investors made up of CEOs, entrepreneurs and hedge-fund "wizards", who collectively manage more than $20 billion in assets exist. US Investment firm Tiger 21 is one such network of 200 investors.

So, concerns over inequality "should act as a wake-up call" to Davos participants, said Philip Jennings, general secretary of the pro-status quo labor group UNI Global Union representing 20 million workers from over 900 unions.

However, Microsoft founder Mr Gates has argued that the world is a better place than it has even been before. "Extreme poverty rates have been cut in half in the past 25 years. Child mortality is plunging. Many nations that were aid recipients are now self-sufficient", he said.

In his 25-page annual newsletter, published on January 21, 2014, Mr Gates has predicted: "By 2035, there will be almost no poor countries left in the world." The note, written by Gates and his wife Melinda, has added : By this time, almost all countries will be "lower-middle income" or richer.

Trajectory of economy is not dependent on the great Gates gospel. He is more responsible to his capital and profit—his interest, to be specific, his class interest—than to broader society.

Mr Gates can't ignore statement of the WEF : "[G]lobalization has brought about a polarization of incomes in emerging and developing economies. This is true despite the obvious progress in countries such as Brazil and lower levels of poverty in several developing countries in Asia and Africa." ("Understanding Systemic Risks in a Changing Global Environment", the WEF report) Is it a berter world?

Mr Gates knows there are scores of countries struggling with poverty and hunger other than the "several developing countries", the show cases of the world system. Mr Gates also knows a world system or its achievement or failure is not judged on the basis of performance of a number of countries. It's judged as a whole. Otherwise, Switzerland or Australia or Norway or Kuwait, and there are many such countries, or even, the US, on the basis of the half-full glass logic, can be cited as example of a better world. In the same style, scores of countries in Africa can be cited as example of the present bad days. But citing only any of the two groups leads to wrong conclusion in which Mr Gates dwells.

From around 100 countries the number of elites gathered at Davos this time was more than 2,500. They include 1,500 top business leaders and experts from banking, mainstream political, academia and social work areas. Of the 1,500 business leaders, 288 deal government relations, 230 are from banking and capital markets and 225 media leaders. Around 40 heads of states or governments also participated.

Leaders participating in the meet were quite impressive: Jim Yong Kim, World Bank chief, Christine Lagarde, IMF chief, Penny Pritzker, the US commerce secretary, Michael Froman, the US Trade Representative, Mario Draghi, president, European Central Bank, Jiang Jianqing, chairman, Industrial and Commercial Bank of China, Mark Carney, governor, Bank of England, Roberto Azevedo, direcror general, WTO, Angel Gurria, secretary general, OECD, Judith Rodin, president, Rockefeller Foundation, Didier Burkhalter, president, Swiss Confederation, Joseph Jimenez, CEO, Novartis, Christophe de Margerie, CEO, Total, Aliko Dangote, CEO, Dangote Group, Nigeria, Marissa Mayer, CEO, Yahoo and Her Excellency Rania Al Abdullah, Queen of Jordan.

The Davos participants also included leaders from hundreds of global companies. Among them are Arcelor-Mittal, Bank of America, BP, Citi, Deutsche Bank, Google, HSBC, Microsoft, PepsiCo, Standard Chartered, UBS, Unilever and Volkswagen.

In about 250 sessions, they discussed the state of global economy, inequality, etc.

Can the Davos elites keep their class interest intact while dealing with the interconnectedness of all the global risks identified in the WEF report? "[Breakdown of social structures, the decline of trust in institutions, the ...persisting gender inequalities", "extremism—in particular those of a religious or political nature—and intra-state conflicts such as civil wars" are the product of the system that the elites own, and the elites can't move against the system. Rebuilding of public trust is a dream of the elites. But they can't rebuild it as their interests are opposed to the interests of public, and their interests erode public trust.

"People are just not going to stand for it anymore", said Jennifer Blanke, chief economist at the WEF. "It's really eroding at the social fabric." (AP, op. cit.) The prevailing system harbors rich tax thieves and appropriators of labor, who increase their wealth with political favors. The system safeguards interests of the minority social classes and erodes social fabric every moment.
The system faces increasing problems. "Increasingly ... the new risks coming into focus are more complex, more uncertain and potentially exponentially more consequential."

The risks are being created by the system—capitalism—and the system can't survive without devastating everything around.

Citing the latest Notre Dame-Global Adaptation Index the WEF report said: "[I]t will take more than 100 years for the ... poorest countries to reach the current adaptive capacity of higher-income OECD countries. The World Bank estimates the cost of climate change adaptation for developing countries at US$ 70-100 billion per year through to 2050."

Does the world system stand—for the poorest countries? What the experiences gathered at international negotiations tell? Don't interests of super-rich clustered in super-corporations prevail in those negotiations, and stand as obstacle to adopting measures favorable to the poor countries?

In this year's Global Risks Report, fiscal crises feature as the top risk. Risks in the economic category include fiscal and liquidity crises, failure of a major financial mechanism or institution, oil-price shocks, structurally chronic unemployment/underemployment, failure of physical infrastructure and decline of importance of the US dollar as a major currency. The societal risk category includes risks related to social stability—severe income disparities, food crises, profound political and social instability and mismanaged urbanization, dysfunctional cities and public health. Geopolitical risks include global governance failure, political collapse of a country of geopolitical importance, increasing corruption, large-scale terrorist attacks, deployment of WMD, violent inter-state conflict with regional consequences.

This year's WEF report identifies 10 global risks of highest concern: 1. fiscal crises, 2. structurally high unemployment, 3. water crisis, 4. severe income disparity, 5. failure of climate change mitigation and adaptation, 6. greater incidence of extreme weather events, 7. global governance failure, 8. food crisis, 9. failure of a major financial mechanism/institution and 10. profound political and social instability.

The global risks and the 10 global risks of highest concern are near-similar. Moreover, all these are interconnected. The Global Risks Interconnections Map of the WEF report shows the way "all global risks are connected to others and underlines the complexity of dealing with global risk in an effective manner." According to the WEF, "the numerous and complex interconnections between them can create consequences that are disproportionate and difficult to contain or predict."

A fiscal crisis can lead to financial crisis, and a financial crisis makes impact in society, especially among the weaker sections of society, in politics, and these in turn make impact in other parts. Even, war preparedness, as is being observed in at least two advanced capitalist economies, is impacted.

"Recent examples", the WEF report says, "illustrate the reality of these interconnections—the failure of financial institutions brought about a financial crisis that resulted in liquidity crises affecting multiple national economies. This in turn led to higher levels of unemployment, widened income disparity and associated political and social tensions and protests, notably in some European countries and large emerging markets." Global governance failure, the WEF report finds, as one of the risks most connected to others.

This reality leads to systemic risks: "breakdowns in an entire system, as opposed to breakdowns in individual parts and components". (Kaufman, G G and K E Scott, "What Is Systemic Risk, and Do Bank Regulators Retard or Contribute to It?", Independent Review 7 (3), quoted in the WEF report)

The WEF report, as cited above, tells the limitation of the system, and its vulnerability. Competition, conflict of interests, aggressive character of capital creates the situation, aggravates it.

Capital can't survive if it stops expanding, and it can't expand if it stops exploiting labor and nature. Thus it enters into conflict with labor and nature. At the same time, competing capitals generate new conflicts, and intensify already active conflicts. Exploitation and conflicts generate and aggravate inequality. Injustice, etc. are born.

Do these interests gathered at Davos have the capacity to change this reality of inequality, change the source of inequality? Even, shall they uncover the source of inequality? It will be a dream if one expects this from the Davos elites as these shall go against their interests, and going against self-interests is the beginning of the end, a significant change in reality.

So, Klaus Schwab, the founder of the WEF, urged Davos attendees to bring four things to this year's event: their brains, their souls, their hearts, and their "good nerves". Are not their brains, hearts, etc. mortgaged to their class interests that stand opposite to interests of victims of inequality—billions of common people in urban slums and rustic rural homes?

In his message to Davos-participants, Pope Francis pointed out that "it is intolerable that thousands of people continue to die every day from hunger, even though substantial quantities are available and wasted".

Do the rich have that leisure moment to look at those thousands of people that "continue to die every day from hunger" as interests of the rich stand on graves of those that die from hunger. And, states, ruling machines of the rich, are not "mindful of the demands in society at a time when money appears to be plentiful." There at Davos, the devil is the class interests of the rich. And, the class interests are kept hidden by the mainstream ideologues and media. These make the elites' vow to fight inequality a day dream.

The Pontiff called for decisions, mechanisms and processes directed to a better distribution of wealth.

A better distribution, instead of a radical change in distribution system, is needed for regeneration of capital and legitimacy of status quo. A better distribution also acts as a safety valve. Still, a better distribution, even if it's populism, gives people a breathing space, a staging ground for further forward march, and a politically aware and united people is needed to have that breathing space. 

Vol. 46, No. 33, Feb 23 - Mar 1, 2014