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Inside the Strange Bubble World of Davos
Scenes from Switzerland’s annual gathering of the rich and clueless.
“I want a world of peace, freedom, and democracy,” new Brazilian President Jair Bolsonaro declared in his keynote speech at this year’s World Economic Forum in Davos, Switzerland, on Tuesday. The far-right leader then asked everyone in the audience—all his wealthy new friends—to come and invest in the “new Brazil.” He got a polite welcome.
It’s exactly the kind of feel-good nonsense we’ve come to expect from this strange annual gathering of the very rich, the very powerful, and the very clueless. At home, Bolsonaro—occasionally known as Brazil’s Donald Trump—has disparaged gays, women and blacks and waxed elegiac about his nation’s past military dictatorship. But all that tends to be forgiven when the Bolsonaros of the world arrive in Davos, which confers upon every attendee a kind of immaculate re-conception. One becomes a member of the global elite.
For years, the annual meeting in this tiny Swiss mountain village—the inspiration of an obscure German professor-cum-impresario named Klaus Schwab, who acts as a sort of P.T. Barnum to the world’s billionaires—has served as a living monument to globalization: tirelessly promoting it, ticking off its pleasures and benefits at innumerable panels and champagne soirees, and grossly underestimating its downsides. But what Davos has demonstrated more often is how cut off its elite attendees really are—and continue to be—from the realities of globalization.
This year’s theme is typically forward-sounding: “Globalization 4.0.” On the first day, one of the most sought-after panelists, Ruth Porat, the chief financial officer of Alphabet (Google’s parent company), discussed the health benefits of her company’s artificial intelligence at a panel called “Shaping a new market architecture.” This is also typically Davosian: The people whom the forum asks to address the problems of global capitalism are often the very people who represent the problems of global capitalism (in the eyes of many critics). In past decades, these were the Wall Street elites who used to argue that they could be trusted with deregulation and throwing open the world’s capital markets all at once during the era of “hyperglobalization.” That didn’t work out too well, especially in the fall of 2008. Now it’s the giant social media companies that are said to be undermining freedom and capitalism and making a mockery of monopoly issues.
But Davos is not the sort of place where one hears fundamental questions raised about capitalism—even though Schwab and his ilk have long been mocked for missing just that.
“The organizers have long been aware of the growing backlash against ‘Davos Man’ and have tried to adjust, by inviting a broader group of participants and increasingly focusing on fixes,” said the Harvard economist Dani Rodrik, who two decades ago warned the Pollyannas of Davos against excessive optimism about markets in his book Has Globalization Gone Too Far?
“But there is no getting away from the fact that the tone is set by the international companies that foot the bill and the hyperglobalist character of the meeting,” Rodrik told Foreign Policy. “The entire ethos of the exercise remains antithetical to the demands of our time.”
More to the point, at Davos the corporate line usually dominates. For example, the most dramatic downsides of “new market architecture” and “Globalization 4.0” are arguably embodied in such star Davos performers as Google, as detailed in Shoshana Zuboff’s important new book, The Age of Surveillance Capitalism. Zuboff, a scholar at Harvard Business School, details how companies such as Google and Facebook have perfected the ongoing exploitation of their users, changing the nature of capitalism “in much the same way that the Ford Motor Company discovered the new economics of mass production,” she told the Guardian newspaper this weekend.
People do not yet realize the way the “surveillance capitalist” corporations have utterly altered the game, Zuboff said, nor that the Facebooks and Googles will never employ people in the manner or the numbers that Ford or General Motors did. Surveillance capitalism is creating new social inequality and abandoning “the organic reciprocities with people that in the past have helped to embed capitalism in society and tether it, however imperfectly, to society’s interests,” she said. “Once we thought of digital services as free, but now surveillance capitalists think of us as free.”
The new nefarious misuse of personal data mined from Facebook and others (in the hands of companies like Cambridge Analytica) has also enabled the Trumps and Bolsonaros, as well as the Brexit vote (thanks to large-scale data manipulation by the Leave campaign). In the past decades, the myth of markets-as-panacea perpetuated at Davos made the 2008 financial crisis and worsening inequality possible—inviting a populist backlash against globalization in the person of Trump.
But don’t expect to hear this discussed in great detail at Davos. Ironically, as the New York Times reported Tuesday, the most dire warning about the intrusions of the real world this year came from someone who didn’t attend, the legendary investor Seth Klarman, who warned investors that they’d better start worrying about “social cohesion.”
Meanwhile, the inequalities of untrammeled globalization continue to fester and grow. Even as Davos saw a record 1,500 private jets arrive this year, 50 percent more than last, and Oxfam reported that the richest 26 people in the world now own as much wealth as the bottom half of the world’s population, that half—some 3.8 billion—saw their wealth decline by 11 percent. According to Axios, wealth held by the world’s billionaires has grown from $3.4 trillion in 2009, right after the Wall Street-generated market crash, to $8.9 trillion in 2017.
A good portion of those trillions descend on this ski town every January. The Davos conclave is an odd, dazzling collection of big brains and big-pocketed billionaires, sober central bankers and senior government satraps, and rising and falling political stars. They gather every day at the Congress Centre, a sprawling, gray-cement structure at the village center whose every staircase and hallway is an artery for networking and deal-making. Davos, indeed, is mainly a silver-lined schmoozathon; the meetings about the fate of the world that take place in the main auditorium are window dressing, for the most part. Networkers set up power trysts by text and email, attend a gamut of parties and dinners, and enjoy the skiing and spartan Swiss aesthetic. Above all, Davosians love the planned serendipity you can get only from drawing A-listers together from around the world. There is plenty of gilt but not much guilt.
So removed is Davos from the world—it takes many hours to reach if, like most ordinary people, you go by car or bus—there is something almost metaphorical about the town itself. As an attendee myself in the late 1990s and early 2000s, I remember marveling that in one of the famously cutoff countries in the world—Switzerland—there existed a separate bubble world, itself wholly isolated. One doesn’t get much more divorced from reality than that.
And over the decades, it became clear to me that it was because of self-absorbed forums like this that globalization became so inbred, so one-dimensional. It was because of the Davos mindset that the elite of the Washington Consensus never saw the backlash against globalization until it was upon them. It is because of mutually reinforcing discussions at forums such as Davos, with their mild dissents uttered diplomatically at dinner, that economists so confidently imposed a one-size-fits-all standard on transitioning economies and underestimated how dangerous all that unleashed hot capital might be—not just to the developing world but to the major economies as well. It was because of the closed little elite world represented by Davos that almost no one foresaw that globalization would create so much social upheaval.
As former U.S. Federal Reserve vice chair Alan Blinder once told me, when historians look back on the late 20th century, “they will marvel at the equanimity” with which those in power accepted “the shift from labor to capital, the almost unprecedented shift of money and power up the income pyramid.” Today’s brutal inequality, in other words. But this was always easy to swallow at Davos. Or as Joseph Stiglitz, the Nobel Prize-winning economist and critic of the Washington Consensus, put it: “Smart people are more likely to do stupid things when they close themselves off from outside criticism and advice.”
Yes, it is a great deal of fun for the rich and powerful to be … rich and powerful together. And every once in a long while, something substantive actually gets done at Davos: At the 1994 meeting, for example, then-Israeli Foreign Minister Shimon Peres and Yasser Arafat, the leader of the Palestine Liberation Organization, were able to craft a draft agreement on Gaza and Jericho.
But let’s face it: These people need to get out more.