Inequality and the World Economic Forum

The world’s rulers are getting together at their biggest bash of the year, the World Economic Forum. Prime ministers and other high government officials will also be in attendance.

The theme for this year’s Forum, which began on January 20 at its usual home in Davos, Switzerland, is said to be “Mastering the Fourth Industrial Revolution.” As to what that might mean, the forum’s “jobs strategy” paper asserts:

“We are today at the beginning of a Fourth Industrial Revolution. Developments in previously disjointed fields such as artificial intelligence and machine learning, robotics, nanotechnology, 3D printing and genetics and biotechnology are all building on and amplifying one another. … Concurrent to this technological revolution are a set of broader socio-economic, geopolitical and demographic developments, with nearly equivalent impact to the technological factors.”

Two paragraphs later, the paper genteelly forecasts workforces will undergo “significant churn” due to these developments, which turns out to be an expected global loss of 7.1 million jobs between 2015 and 2020.

As to what is the cause of ongoing economic difficulties and vanishing jobs, the corporate elites who drive the World Economic Forum agenda wish to assure you that rising inequality, runaway financialization, the mad rush to move production to places with ever lower wages, corporate greed, and the subordination of all human and environmental needs to the plundering of all parts of the planet in pursuit of ever bigger profits have nothing to do with it. The Forum offers this explanation:

“The deceleration in long-term trend growth has been caused by two supply-side limitations: the big slowdown in labour force growth (in some cases into negative territory) and a sharp falloff in productivity growth. Since 2007, demand-side constraints have also been a problem. These include: debt and deleveraging in the developed world; the rapid decline in the pace of world trade; the excess-capacity-driven struggles in China’s construction, heavy manufacturing, and mining sectors; and distress in commodity-linked emerging markets and commodity industries.”

There is a lack of growth because the world is not growing. And it’s China’s fault for not buying so much raw materials and manufacturing equipment anymore.

Why, there surely is no agenda here, is there? Oh dear reader, please try to keep a straight face when reading the World Economic Forum’s description of itself:

“It is independent, impartial and not tied to any special interests. … Our activities are shaped by a unique institutional culture founded on the stakeholder theory, which asserts that an organization is accountable to all parts of society.”

Accountable to “society” — or financiers?

Well, let’s see just how “impartial” the Forum is. Or just how “accountable” to “all parts of society” it is. The Forum is a gathering of the world’s corporate elites where deals can be made and agendas can be set. As to who corporate leaders are accountable to, we need only remember the words of Milton Friedman, who put it plainly in an interview with author Joel Bakan in the context of a former BP chief executive officer suggesting (however disingenuously) the company would make environmental concerns more important:

“Not surprisingly, Milton Friedman said ‘no’ when I asked him how far John Browne could go with his green convictions. … ‘He can do it with his own money. If he pursues those environmental interests in such a way as to run the corporation less effectively for its stockholders, then I think he’s being immoral. He’s an employee of the stockholders, however elevated his position may appear to be. As such, he has a very strong moral responsibility to them.’ ”

Not that corporate executives don’t get in the action as well — CEO pay averaged 303 times that of the average worker in 2014. Although down from the 376-to-1 ratio of the peak stock-market bubble year of 2000, the current ratio is far bigger than earlier decades. Another way of putting all this in perspective is that CEO pay has risen 1,000 percent since 1979, while typical employee pay has risen 11 percent.

But don’t shed any tears for financiers. An International Labour Organization paper found that the financial industry’s share of corporate profits doubled over the course of the 1990s and 2000s, reaching 44 percent of all corporate profits in 2002.

The financial industry acts as both a whip and a parasite in relation to productive capital (producers and merchants of tangible goods and services). It is a “whip” because its institutions bid up or drive down prices, and do so strictly according to their own interests. The financial industry is also a “parasite” because its ownership of stocks, bonds and other instruments entitles it to skim off massive amounts of money as its share of the profits. Financial speculators don’t make tangible products; they trade, buy and sell stocks, bonds, currencies and other securities, continually inventing new instruments to profit off virtually every aspect of commercial activity.

Wages decline around the world

With all this in mind, it comes as no shock that the one percent is grabbing bigger pieces of the pie. Wages as a share of gross domestic product have declined since the 1970s in Britain, the eurozone, Japan and the United States. The long-term stagnation in wages has long been decoupled from any recent flattening of productivity gains — since the 1970s, productivity has soared while wages barely rose.

But perhaps nothing illustrates the world’s incredible inequality as well as the just released Oxfam report, “An Economy for the 1%.” Oxfam researchers calculate that the richest 62 people have as much wealth as the bottom 50 percent of humanity — 3.6 billion people! Among other conclusions, Oxfam reports:

• The world’s wealthiest 62 people added US$542 billion to their net worth from 2010 to 2015, an increase in their composite wealth of 44 percent.
• The bottom half of humanity in terms of wealth lost $1 trillion from 2010 to 2015, a drop of 41 percent.
• The share of the global wealth increase since 2000 that has gone to the top 1% is 50 percent.

One of the most important reasons for this increasing disparity is the use of tax havens. One estimate of the amount of money that is stashed in tax havens was $7.6 trillion at the end of 2014 — more than the combined gross domestic product of Britain and Germany. Another estimate is $8.9 trillion. And this not limited to the global North — Oxfam calculates that Africa’s wealthiest have stashed $500 billion in tax havens:

“Almost a third (30%) of rich Africans’ wealth … is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.”

“There is no alternative” we are supposed to believe. But if the capitalism to which there is supposedly no alternative works, why do such massive amounts of money have to be shoveled into it? Governments representing the United States, the European Union, Japan and China committed US$16.3 trillion in 2008 and 2009 on bailouts of the financiers who brought down the global economy and, to a far smaller extent, for economic stimulus.

The central banks of the United States, Britain, the eurozone and Japan have so far spent US$6.57 trillion on “quantitative easing” programs supposedly needed to kickstart their economies, although little was achieved other than inflating a stock-market bubble. (And lest we are tempted to wag a finger at, say, the Federal Reserve, we should be reminded that central banks are simply institutions of capitalism. If you don’t like the Federal Reserve, what you really don’t like is the capitalist system.)

“Let no billionaire be unheard” would seem to be a far more accurate slogan for the World Economic Forum to adopt.