January 20, 2017; New York Times, “DealBook” and Australian Financial Review
When many of the wealthiest and most powerful men and women in the world recently gathered in Davos, Switzerland, for the annual World Economic Forum, the growing divide between rich and poor was not new to their agenda. But the wave of opposition to globalization that has fueled populist movements across the globe has come as a shock. The unexpected victory of Donald Trump has made that worry so much greater. Surprisingly, these icons of success seemed stumped about how they should respond.
As NPQ reported earlier this month, the Global Risk Report 2017, which was released at the Forum, described the threat to the world economy and stability in stark words.
Persistent inequality, particularly in the context of comparative global economic weakness, risks undermining the legitimacy of market capitalism. At the same time, deepening social and cultural polarization risks impairing national decision-making processes and obstructing vital global collaboration.
Alexandra Stevenson of the New York Times, reporting from Davos, cited a Twitter post from Ian Bremmer, the president of Eurasia Group, a political-research firm, that seemed to sum up the meeting’s tone:
Elites won’t be able to manage populism until they stop seeing it as a threat and start seeing it as a symptom. #wef17
— ian bremmer (@ianbremmer) January 17, 2017
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As Stevenson observed, “If that is the case, Davos has, so far, made little progress.” Another veteran participant, William Browder, told her, “This is the first time there is absolutely no consensus. Everyone is looking into the abyss.” Hedge fund manager Ray Dalia said, “Populism scares me. The No. 1 issue economically as a market participant is how populism manifests itself over the next year or two.”
In his inaugural address, President Trump placed blame for the economic struggles felt by many at the feet of the elite.
For too long, a small group in our nation’s Capital has reaped the rewards of government while the people have borne the cost. Washington flourished—but the people did not share in its wealth. Politicians prospered—but the jobs left, and the factories closed. The establishment protected itself, but not the citizens of our country. Their victories have not been your victories; their triumphs have not been your triumphs; and while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land.
In focusing on those with political power, he agreed with the economic elite who had gathered at Davos. No sacrifice from his fellow “1%-ers” is needed. Peter Goodman, who covers the Forum for the Australian Financial Review, said:
They are eager to talk about how to set things right, soothing the populist fury by making globalization a more lucrative proposition for the masses. Myriad panel discussions are focused on finding the best way to “reform capitalism,” make globalization work and revive the middle class. What is striking is what generally is not discussed: bolstering the power of workers to bargain for better wages and redistributing wealth from the top to the bottom.
Nobel Prize-winning economist Peter Stieglitz, who has written about the impact of globalization and the wealth gap, saw this elite group as unwilling to consider sacrificing their position and power.
People talk about inequality, how it’s a major problem, the greatest threat to globalization and the global economy. You have to recognize that the way we have managed globalization has contributed significantly to inequality. But I have not yet heard a good conversation about what changes in globalization would address inequality. That is not an accident. Any sincere list would have to include items that involve transferring wealth and power from the sorts of people who come to Davos to ordinary workers via more progressive taxation, increased bargaining rights for labor unions, and greater protections for labor in general.
Can President Trump and his peers actually respond to the angst of who feel left out, who see the growing wealth gap as their pain, without sacrificing some of their wealth and power? The traditional Republican approach has been to lower taxes and shrink government in the belief that this will stimulate the economy and the increased wealth of the nation will “trickle down” to all segments of the population. According to some economists, this strategy has helped grow the wealth of those who are already rich and has increased the divide. Renegotiating trade agreements, as the president has strongly advocated, does not appear to solve this problem as well. Add the wild card of increasing automation’s impact on the very nature of work, and we have many things that seem to limit the effects that the economy can have on how wealth is shared without an active effort at redistribution. Is the Populist President ready to be that populist at his own expense? If he cares about those who make up his base, is he ready to begin paying his fair share and asking others of great wealth to join him?—Martin Levine
