Going Back To Davos As Questions Haunt
By Farooque Chowdhury
17 March, 2013
Countercurrents.org
Snow capped Swiss village Davos is now free of 2,655 leaders, billionaires, techknights, financesters, economists. Weeks ago, their presence made Davos thriving as they joined the 43 rd meeting of the World Economic Forum 2013 there. In terms of money- and political-power, the deciding-personalities participating in the summit are equivalent to emperors.
In Davos, the WEF 2013 witnessed meetings and “interactive sessions”. Many of these, as a press report said, were not “fully on-the-record (or even open to humble reporters).” Discussions on the global financial and energy contexts, de-risking Africa, this century's NGO model, the Moore's Law, computing power doubles every two years or so, “the employment effects of technology”, jobs being turned obsolete by technology, ultra-superlight material, etc. stuffed the summit. Bankers' session and an initiative to fight Malaria, TB and Aids were also there. Axel Weber, chairman of Swiss bank UBS, Tidjane Thiam, CEO of insurance group Prudential, Min Zhu, DMD of the IMF, Paul Elliott Singer, founder and CEO of hedge fund Elliott Management and Andrey Kostin, president of VTB Bank, one of Russia's leading financial groups, contemplated strategic shifts and transformations changing the financial world. Davos discussed almost all important issues the world now faces, from economy to energy to environment. Finance was at the center of all discussions that went on for hours. Observations, warnings, predictions were also made.
Gloomy crisisphere covering the last few WEF summits was absent in the 2013-summit. But there are questions that are haunting the system – world capitalism – the summit participants represent.
Depressing facts
Depressing news accompanied the summit as Angel Gurria, the secretary general of the OECD, perceived a “hesitant recovery”. Recession was clinging to the eurozone and Japan . None could confidently tell whether euro crisis was over or not. The consultancy firm PWC's survey found: As far as business confidence is concerned there is a global double dip recession.
David Cameron announced Britain 's in-out referendum on EU membership in 2017. Laurent Fabius, the French foreign minister, made a response: “If Britain wants out of EU we will roll out the red carpet for you”. Fabius continued: There could be no “ Europe a la carte” in which a country picked which rules applied to it. “Imagine we are a football club. You join the football club - but once you are in, you cannot say ‘Let's play rugby',” he added. The French tone says something.
But the French are in trouble. In a radio interview the French labor minister Michel Sapin's revelation, earthly, not divine, came: France “is a totally bankrupt state”. The disclosure shook many. Banque de France told: There is a flight of capital. Business confidence in the French manufacturing industry, according to ISEE data, unexpectedly fell in January.
Portugal “is in the throes of the worst recession since 1975” said Diário Económico , the country's economic and financial newspaper. In its third straight year of recession, the country drifted to privatizing public schools, slash education budget, cut around 50,000 sector jobs. An IMF document virtually suggested “the end of a free and inclusive public school system.” With a jobless rate of 16.3 percent more than 2% of its population has emigrated in the past two years to Switzerland , the Netherlands , the UK , Germany , Angola , the oil-rich former Portuguese colony, and Mozambique ; 240,000 persons since 2011. Most of them are young, highly educated. It's a reverse, as they headed to the former colonies, variety of brain drain capitalism has not contemplated. With this trend what type of power does capitalism show? It now fails to retain brilliant minds in a developed economy.
With Spain 's worsening recession and shrinking GDP the fifth austerity package in a year was approved. The aim is to reduce the second-largest, or a bulging, budget deficit in the eurozone.
NRC Handelsblad , evening daily from the Netherlands , informed: The country “has fallen into its third recession” since the debt crisis roared in 2008.
Further depressing news followed within weeks the Davos meet concluded.
A skeptic IMF apprehended: In 2013, a “mild recession” would visit the eurozone. Warning came from the EC: In 2013, the eurozone recession will persist, the eurozone economy would shrink 0.3 percent; Spain , France , Portugal are failing to cut their deficits to agreed targets. La Vanguardia , one of Spain 's leading dailies, wrote: “Worsening recession in the eurozone”. “The eurozone has become a recession zone”, said La Tribune , one of leading business and financial dailies from France .
For the first time since 1978, an Aa1, downgraded credit rating, replaced UK 's top rating AAA.
Népszava from Budapest shocked its readers: Recession in Hungary is the fourth worst in Europe . Greece , Portugal and Cyprus exceed the country as the economy shrank 1.7 percent in 2012. The daily said: “End of a fairy tale: economy goes into freefall”. Népszava referred to a claim made in 2012 by the country's economy minister György Matolcsy: “The Hungarian fairy tale or the Hungarian example will be successful within a year”.
“Czech state sinks into longest recession in history”, said Hospodárské noviny , the country's leading daily.
It appears depressing facts were joining hands to dominate the Davos participants' jocund imagination. And, it appears it's not only a eurozone case; its wings have been unfolded over the countries identified as transition economies, the societies that formally sold their souls to the shylocks of world capitalism.
Global risks
Experts cautioned the summit.
Climate change, predicted New York University economist Nouriel Roubini, will cause tremendous economic upheaval. Tim Palmer, Oxford University physicist, apprehended a warmer Earth leading to “catastrophic consequences for humanity”. “Water is the new oil” said Vali Nasr, dean of the School of Advanced International Studies at Johns Hopkins University . Many countries will start running out of water in the coming years, added Nasr. All the predictions and warnings, in ultimate analysis, move down to the root: capitalism, its ever expansionary character, its “psychology” of profit at any cost.
Global Risk 2013 , the famous Insight Report of the WEF, assessed, identified top risks, impact, centers of gravity, etc. The report presented Global Risk Landscape and Global Risk Map. Based on an annual survey of more than 1,000 experts from industry, government, academia and civil society the Global Risks 2013 presented a landscape of 50 global risks.
Severe income disparity, the respondents perceived, was rated the most likely to manifest over the next 10 years. Major systemic financial failure was the risk rated as having the highest impact. Two other global risks appearing in the top five of both impact and likelihood were chronic fiscal imbalances and water supply crisis.
Continued stress on the global economic system and increasing stress on the Earth's environmental system, the Global Risk Report assumed, could trigger the “perfect global storm” with potentially insurmountable consequences. A sudden and massive collapse on one front, it said, is certain to doom the other's chance of developing an effective, long-term solution. It mentioned likelihood of future financial crises and natural catastrophes. On the issue of climate change it felt: It is possible that we have already passed a point of no return.
Respondents in the survey, and the report itself also, revealed the undeniable fact told many times: Income disparity, systemic financial failure, future financial crisis, perfect global storm, etc. These are “products” of capitalism, and capitalism can't live and expand without creating disparity. Gradual ascendance of monopoly finance capital is bringing in financial failures. Even, it is bringing in failure of sovereignty of independent countries. In capitalism, capital is the only sovereign, only its sovereignty is guarded, country's/state's sovereignty is utilized to secure sovereignty of capital(s). Country's/state's sovereignty is shamelessly compromised in the interest of capital(s). Capitalism's history bears the facts.
Greece is one of the recent examples, which is also an example of crude intervention by finance-force. Probably political scientists are redefining the terms “Intervention”, “Coup”, “regime change”. The present financial crisis has expanded area of this modus operandi of capitalism from poor, former colonies, neocolonies, to developed capitalist countries. However, this bears risks, especially in sociopolitical area.
Lagarde's choice
“Do not relax”, advised Christine Lagarde, the IMF boss. The advice came in Davos. She warned the eurozone was still in “a very fragile situation”. At the end of the summit, she said a “fragile and timid” recovery depended on officials in the powerhouse economies of Europe , the US and Japan making “the right decisions”. Lagarde suggested European officials' overseeing reforms so that failed banks don't add to government debt through bailouts. These were a few of her choices.
So, there is, as the IMF boss suggested, need for (1) bureaucrats' authority over bank capital, (2) nourishing and chiding of, control over and imposition of tougher, centralized supervision of bank capital as banks sometimes create hurdle on the path of government, which is tasked to smoothen the path of capital/bank. Doesn't it mean that bank capital should not be allowed to freewheel? Doesn't it mean that bank capital is not always wise? And, the statement, not by any opponent of capitalism, may sound strange although that's the fact: mere employees/governance system, officials, engaged to serve capital is asked to oversee employer, capital. It's a show of capital's self- degenerative and self-destructive power.
Lagarde's statement suggests that neither market nor capitalists, but bureaucrats, who are at the payroll of either capital or capital's ruling machine – state – have the capacity, skill, power and authority to make “right decisions”. It, if factual, carries meaning and implication touching areas of capital's limitation, breakneck competition between its parts, political ramification, etc. Moreover, shall this suggested mechanism ever work? It'll not work as, in capitalism, despite separation of economic and political institutions economic interests ultimately dictate political mechanism including bureaucracy; in the present case, the Brussels bureaucracy and international bank bureaucracy.
Citing the need of “openness, inclusiveness and accountability” (accountability in the financial sector – cleaning up elements such as shadow banking) Lagarde urged policymakers to do more to tackle inequality. But she, probably, preferred to forget that capitalist system is neither open nor inclusive nor accountable. The Great Financial Crisis (GFC) has once again exposed the fact. Financial sector itself prefers shadow as shadow provides it an ideal setting to operate. It gets exposed during crisis. Investigations/inquiries on the GFC have uncovered this fact. Policymakers can't tackle inequality as the system to which the policymakers are bonded lives on inequality while the system breeds inequality.
She cited unemployment as a vital issue for many countries. But she denied admitting that capitalism fails to eradicate the disease of unemployment as it needs unemployment, as it needs a reserve army of labor.
Policymakers should do more to help women enter the economy, she said. It's known to her that during financial crisis and stagnation women are exploited more ruthlessly. Sometimes, it goes beyond human tolerance.
Lagarde, like a visionary, hoped the world can climb away from its recent ills to a better future, if leaders can embrace the values and principles of openness and collaboration at a new moment in history.
She knows it well that the system to which the leaders are tied can't “embrace the values and principles of openness and collaboration” as the system is rife with competition, the system worships the values and principles of competition, and competition compels the system to be a close, secret system governed by a few. Examples are in abundance, from any small company to any multinational corporation producing consumer goods or weapons to any energy demon to any financial gambler to any bank capital to any media giant to any defense contractor, etc., from any merger deal to any energy contract to any armaments sale to any land or food speculation venture to a section of lobbyists' activities, from economic to financial to political deals, from ideological propaganda campaign to disinformation blitz to aggression/interference plan having roots in economic interests/plunder.
Identifying her biggest challenge in 2013 Lagarde said: It's “keeping the momentum”. She will not be able to keep momentum unless the economy generates momentum, unless the economy gets out of stagnation, and in this time, getting out of stagnation is a difficult puzzle.
Hopes
Yet, there are hopes and expectations nourished by a quarter. It's told: “It's time for a better capitalism”; “But what can – and hopefully will – emerge from the rubble is a capitalism that creates jobs, creates value, provides security and promotes fairness; the civil and civilized capitalism that was always promised”. (Deborah Orr, “It's time for a better capitalism, one that creates jobs and provides security”, the Guardian, Dec 29, 2012 )
It's also told: “[T]he market is making a pro-social and humane decision.” The reason cited for such “pro-social and humane decision” is: “It is choosing to sacrifice profits in order to save itself.... [C]ompanies slashing their profits in order to keep ticking over... [T]he recession is teaching businesses that people really are more important than profit (or at least that if people don't have jobs then they don't have customers). The rich are realizing that they can't keep getting richer if the poor keep getting poorer”. (ibid.
At least a bit, in an evasive way, of facts, is getting uncovered from the expressed hope: sacrifice to save self, slash to keep on, help poor to get rich. Behind this “benevolence” are the following facts: (1) much profit endangers profiteer and stops “ticking over”; (2) profit turns more important than people; (3) the rich try to get richer by making people poorer.
Another fact is hidden behind the said “pro social and humane” attitude: Sacrificing for self survival is not sacrifice, it's self-serving; slashing profit to keep ticking over is preparing ground to make more profit including the slashed part; help people survive so that they turn consumers is to ensure profit making; and help the poor so that they don't turn poorer is to ensure getting richer and securing the system that makes rich richer and the poor poorer; and it's virtos post nummos , virtue after money. It's a crude trick with a sophisticated face and a tax thief's soul. Have not a number of tax thieveries by the rich already been exposed in a number of developed capitalist countries a few of which always advise a number of countries on ways to cut down corruption and increase their tax base? As of 2010, the top 1 percent of the wealthiest people in the world had hidden away between $21 trillion to $32 trillion in secret tax exempt bank accounts. (“Tax Havens: Super-rich hiding at least $21 trillion”, BBC News, July 22, 2012 )
It's dreamed: “It is time now for capitalism to start doing all the things it claimed to do. Like providing jobs. Like offering a fair day's pay for a fair day's work. Like standing against protectionist monopolies. Like increasing prosperity and raising standards of living for all. Like providing the foundations of long-term stability instead of the conditions for short-lived booms.” (Deborah Orr, op. cit.)
Capitalism can't do “all the things it claimed to do” other than claiming larger, ever increasing profit as it doesn't have the capacity to move along the other path as that move will nullify it. To capitalism, a fair pay is that amount of money, which is needed to keep labor's capital reproduction capacity, not more than that as handing over more than that amount of money means slashing down profit, which is soul of capital. And, who can survive without soul? Capital can't stand against protectionist monopoly. History of the rise of protectionist monopoly, an “output” of concentration and centralization of capital, shows its irreversible journey. Capital can't increase prosperity and living standard for all as that cuts down its share, and capital's sole motive is to ever increase its share. [Short lived prosperity of a broader part of commoners in a country or a group of countries should not be wrongfully cited as that prosperity is in exchange of pauperizing people and plundering nature in other lands, and that is cruder and crueler part of story. Moreover, a task of defining a character errs if it's based on a single case, i.e., capitalism can't be analyzed on the basis of a single industrial unit or a single “benevolent” capitalist.]
However, it's now admitted: “[F]ree-marketeers maintained a Machiavellian attitude ....As has too often been the case under neoliberalism, the large companies that cry ‘free market' are the very ones who use their domineering muscle to ensure that markets are loaded in favor of their own profiteering interests.”(ibid.)
It's told: “Capitalism, in the late 20th century, became a monster. Its idols were people who took over other companies, destroying jobs, value, security and fairness as they made profits for themselves and their shareholders. The results are now hideously apparent.” (ibid.)
Now, the fact comes up as ultimately it's never possible to ignore fact.
Haunting questions
Christine Lagarde discussed “Resilient Dynamism”, the theme of Davos 2013. Mainstream, worshippers of capitalism, still banks on the system, its resilience and dynamism.
But, the system's resilience and dynamism are declining. Incidents that the system produces, experiences, and remedies that the system innovates are the evidences. Its each new crisis is wider and deeper, more threatening and carries more devastating power than the earlier ones. The first crisis having national proportion was in 1825-1826. The next one was in 1836-1837. These two and the following crises are in no way comparable to the latest one – the Great Financial Crisis – across continents: economies went/nearly-went bankrupt, too-big-to-fail financial giants melted down/tumbled, the total amount of bail out money, level on international/intercontinental initiatives, width and forcefulness in brutal imposition of austerity programs, and the political crisis that followed in countries.
Now, the conditions for stagnation are more powerful and dangerous and have turned wider than the ones Engles mentioned in his famous book on the English working class: “The anarchic conditions of modern production and distribution of products, conditions of production which are governed by profit instead of by the satisfaction of needs, conditions under which every one works on his own independent line in the endeavor to enrich himself – such conditions cannot fail to result in frequent stagnation.”
Stagnation rooted deeper is now starker.
Global risks identified by the WEF reports over the last few years dwell closely. The “Evolving Risk Landscape”, as the 2013 report identified, shows “Global Risks in Terms of Impact” (GRTI) over a seven-year period: 2007-2013. In the years 2007- 2010 the 1 st GRTI was asset price collapse. In 2011, it was fiscal crises. It evolved into major systemic financial failure in 2012 and 2013. In all these seven years, retrenchment from globalization, chronic fiscal imbalances, extreme volativity in energy and agriculture prices were also in the list of top 5 GRTIs, other than those already mentioned. These were paired by interstate and civil wars/geopolitical conflict. The evolving picture turns grim as there are environmental issues also: water supply and food shortage crises, climatological catastrophes, pandemics, chronic disease. These are closely related, and one influences the rest. [In the Age of Crisis an almost similar pattern has been identified.] Of these, respondents in the Global Risks Perception Survey rated major systemic financial failure “as the economic risk of greatest systemic importance for the next 10 years.” Should not an inquiry be made into the cause of systemic financial failure?
A grave setting emerges if only geopolitical issue as discussed in the WEF report is focused. In the geopolitical category, among others, critical fragile states, failure of diplomatic conflict resolution, global governance failure, militarization of space, entrenched corruption and crime, terrorism are included. (Considering the question of length of this article, environmental/climate and health issues identified in the report are skipped here.)
A graver scene comes forth if these (briefly mentioned in the above two paragraphs) are connected with competition, which ultimately takes political and military conflicts, i.e., war, intervention, instigated civil war, engineered civil strife as these turn the ultimate tool to resolve conflicts coming out of competition. The scene carries dangers that the competing interests ultimately can't resolve. The danger ultimately hurts people.
So, despite “Resilient Dynamism”, perceived or dreamed by mainstream, of the system the system is being haunted by unattended questions, its unresolved contradictions, within the system.
“Death of starvation”, said Marx in his Inaugural Addresses of the Working Men's International Association in October 1864, “rose almost to the rank of an institution, during this ‘intoxicating' epoch of economical progress, in the metropolis of the British Empire . That epoch is marked in the annals of the world by the quickened return, the widening compass, and the deadlier effects of the social pest called a commercial and industrial crisis.”
Now, about 150 years later, the reality has worsened. “The intoxicating ... economic progress” is being enjoyed by a super rich class in more countries, not only in a single empire, commercial and industrial crisis is turning into financial, fiscal, political crises that pushes bankers to openly overthrow elected government (regime change in Greece, etc. countries), crisis pushes states to the brink of bankruptcy, poverty overwhelms societies once considered rich and free from starvation
Consider the case of Greece . Only a few years ago, this country organized the Olympic Games, and now, it is reeling under poverty and starvation with suffering people, ailing hospitals and schools.
In Spain , the economy constructed a magnificent real estate boom with towns and mega-projects, and now these are lying vacant or only being dwelt by ghosts, and people going down the ladder of poverty are being evicted from their homes.
In the UK , a report exposed the way patients' suffered although, only a few months ago, the economy proudly showcased its National Health Service in an Olympic Games session. “There were patients so desperate for water that they were drinking from dirty flower vases”, prime minister David Cameron told parliament in a statement on the report. The report by lawyer Robert Francis, said: “This is a story of appalling and unnecessary suffering of hundreds of people.” “They were failed by a system which ignored the warning signs and put corporate self-interest and cost control ahead of patients and their safety”, Francis said in a televised statement as his report was published. “Elderly and vulnerable patients were left unwashed, unfed and without fluids. They were deprived of dignity and respect. Some patients had to relieve themselves in their beds when they were offered no help to get to the bathroom”, he said. Some patients were left in excrement-stained sheets and some who could not eat or drink without help did not receive it. Medicines were prescribed but not given. This happened between January 2005 and March 2009 in an advanced capitalist country.
The poor, the homeless, the student debtors, the hungry children in the US are being discussed. About eight years ago, the Human Development Report 2005 by the UNDP, found: “A baby boy from a family in the top 5% of the US income distribution will enjoy a life span 25% longer than a boy born in the bottom 5%.” (p. 58) The report added: “The infant mortality rate in the United States compares with that in Malaysia — a country with a quarter the income. Infant death rates are higher for African American children in Washington , DC , than for children in Kerala , India .” (p. 59)
Now, the reality of a rich land with cruel poverty comes to light with more “stories”, statistics and Jonathan Kozol's book Fire in the Ashes: Twenty-five Years Among the Poorest Children in America . The book tells about children and families trapped in poverty in the country.
The following “stories” are only two of many similar stories:
abc News informed on Nov. 29, 2012: Three years after the death of Jermaine Edwards, his mother, 61-year-old Ella was still on the hook for his student loans. Jermaine went to college to study music production, and Ella agreed to cosign his student loans to help him attend school. Jermaine died of natural causes in 2009 at age 24, leaving his mother responsible for the loans. “That's when American Education Services and National Collegiate Trust turned my son's dream into a nightmare for me and the two year old son he left behind”, Ella wrote in the petition to forgive the loans. Her son had three student loans when he died, two federal and one private. The two government loans were forgiven, but, the private loan company was refusing to forgive the loan.
On Dec. 24, 2012 an AP report from Columbia , Mo. said: “ University of Missouri junior Simone McGautha works three campus jobs and has accumulated $11,000 in student loans as she seeks to become the first in her family with a college degree. So when McGautha learned about a new campus food pantry for needy students, the 19-year-old was happy to have the help. ‘I use every bit of money I have for basic needs', the Kansas City native said. ‘I don't have family putting money in my bank account...' The student-run Tiger Pantry is among a growing number of programs at university campuses. ... The pantry.... has given free food to nearly 150 people and their families, and an additional 100 people have expressed an interest. Food recipients include nearly three dozen graduate students and a similar number of university employees, as well as a handful of professors. Student organizers modeled the program on a similar effort at the University of Arkansas known as the Full Circle Food Pantry. ... Tiger Pantry receives some money from student fees but primarily relies on donated food. Students can drop off donations in large bins around campus, and the local food pantry provided 2,500 pounds of food to help the Tiger Pantry get started. The University of Mississippi and Auburn University are also starting campus food pantries, joining schools such as Central Florida, Georgia , Iowa State , Oregon State and West Virginia . The University of California Los Angeles deploys ‘economic crisis response' teams that assist students struggling to pay bills and rent or who live on the streets.
In addition to these, a decay in governance has gripped many states, once many minds considered, highly developed democracy: Curtailment of labor and democratic rights including practices of increasing surveillance and suppression, harassment of/repression on immigrants as the governing systems face increasing crisis in subduing its subjects.
At the same time, starvation is being experienced not only by prisoners of wage in underdeveloped countries. It is also part of life in a number of developed countries. It is being experienced by (1) a vast population, victims of capital induced civil war, intervention, etc., (2) victims of profit hungry agriculture, trade, natural resource exploitation, speculation with food, (3) victims of environmental degradation and climate crisis. This is a regular phenomenon around the world. Reports of UN and non-governmental organizations concerned with the issues and press reports regularly cover these developments.
Samir Amin succinctly depicts the global scene in his essay “Seize the Crisis”: “[T]he capitalism of oligopolies; the political power of oligarchies; barbarous globalization; financialization; US hegemony; the militarization of the way globalization operates in the service of oligopolies; the decline of democracy; the plundering of the planet's resources; and the abandoning of development for the South.”
Another contradiction lives there in the global capitalist system: “[A] globalizing economy within a nation-state based political system.” (William I Robinson, “Global Capitalism Theory and the Emergence of Transnational Elites”, working paper no. 2010/02, UNU-WIDER, January 2010).
Trouble turns more complicated as the system faces questions of legitimacy. “[T]he crisis that exploded in 2008 with the collapse of the global financial system has exacerbated crises of legitimacy in many countries ... and seriously undermined the ability of transnational elites to reproduce their authority. (ibid.)
The reality carries questions that grow from within the system and persistently haunt the system. But the Davos 2013 summit failed to answer these as finding answer to the questions demands a journey to the root of the problems and an inquiry into the root demolishes premiss of the system. This destiny, demolition of the system's premiss, prohibits the system to make an inquiry despite being haunted by unruly questions.
Dhaka-based Farooque Chowdhury is a freelancer
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