If I had to describe the atmosphere at the World Economic Forum in the Swiss town of Davos in one sentence, then I would say: “A brave face on a sorry business.”
The expression first gained currency among card players, but it is not only card players who are masters at pretending, but also financiers, bankers, and politicians. And the very best at putting on a brave face gather every January at the forum in Davos.
For about forty years now, the entire global economy has been like an enormous casino. It began in the 1970s, when the gold exchange standard was replaced by paper dollars and it became possible to directly convert paper printed by central banks into material wealth. For about forty years now, the creation of material wealth has been deteriorating in the world, because everyone made a mad dash for the financial markets. Even those who technically remained in the real economy began to gamble: on the stock markets, the currency markets, and the money markets. For about forty years now, the wealth created and accumulated in previous centuries has been divided and redivided. Production and labour has been replaced by gambling and the thrill of the win. But gambling is becoming increasingly more difficult and increasingly more risky. The winner is always the one with the printing press (the casino owner), or the ones close to this press (the owner's assistants). Everyone else just loses and gets poorer, even those who aren’t technically involved in the gambling. The “money owners” hit the jackpot when the debt pyramids collapse and the stock market bubbles burst.
For those who are neither the money owners nor their staff, the game is always a bad one since it ends with a loss. The losers make up 99 percent of the population, and the money owners refer to them as “ignoramuses”, “sheep”, and worse. But the game becomes particularly bad just before a pyramid collapses or a bubble bursts, because, in their wild excitement, the “ignoramuses” leave the last of what they have at the altar of the game. And when they (the “ignoramuses”) are left with absolutely nothing and have nothing more worth taking, the money owners end the game by bringing down the pyramid and whisking away the cashier.
I have briefly described how the global casino functions, which is referred to as “financial economics” in economic textbooks. So let’s now return to the subject of Davos 2018.
The whole of last year passed in tense anticipation of the second wave of the global financial crisis. The first wave took place between 2007 and 2009 and its epicentre was the US mortgage-backed securities market. Serious analysts have continuously stressed that bubbles have been forming on the world's financial markets since then that are just as big as the ones that were on the US financial market in the summer of 2007. Exactly the same can be said about the debt pyramids: like the tower of Babylon, they are touching the sky. At the start of last year, the total debt of the US (including sovereign debt, the debts of banks and non-financial institutions, and household debt) stood at 300-350 percent of GDP. This is a higher level of debt than in 2007. According to experts, the European Union and China have roughly the same level of relative total debt as the US, although the situation in China is probably even more critical. Given China’s shadow banking, the country's total debt could be as much as 650 percent of GDP. Conclusion: the second wave of the crisis could begin at any time and its epicentre could be the US, the European Union, or China.
It seemed as if the main issue at Davos 2018 would be the threat of a second wave of the global financial crisis and measures to prevent it (or mitigate its impact). But alas! It is clear from the forum’s agenda that there are three main issues at the summit: environmental threats from extreme weather and temperatures, economic inequality, and cyber attacks.
If you believe the news reports coming out of Davos, then the place is full of euphoria. Christine Lagarde from the International Monetary Fund delighted everyone with her global economic development forecast for the final years of this decade, and the headlines from the first few days of the forum are littered with phrases such as “the growth of the global economy”, “improved outlook for economic performance of US, China and Europe” and so on. For appearance’s sake, the IMF downgraded the outlook for just one country – Great Britain – citing Brexit.
So “all is well” with the global economy. There has not been a word about the threat of a second wave of the financial crisis (at least not in anything the forum has produced; it is probably being talked about on the sidelines). And that being the case, they can devote their time to other things. The environment, for example, or cyber security. Although it is not clear what decisions can be made on the environment and the climate, given that the US decided to pull out of the 2015 Paris climate agreement. And without America, which emits the most carbon dioxide and other greenhouse gases, the Paris Agreement loses all meaning.
No one is disputing the fact that the three issues set out on the agenda are a threat to the world. But environmental and climate issues, as well as poverty and the social polarisation of society and the world, have been included on the agenda time and again over the Davos summit’s 48-year history. And the problems are still here: the environment is still deteriorating and economic inequality is getting worse. The well-known international non-governmental organisation Oxfam prepared its latest report in time for the opening of the 2018 Davos forum, which shows that global inequality has increased over the past year. Today, just 1 percent of the world’s population owns 82 percent of the planet’s wealth. Since 2010, the overall wealth of the world’s billionaires has increased by 13 percent. In fact, their wealth has grown six times faster than workers’ wages. The report’s authors also claim that these billionaires have gotten rich at the expense of these workers’ deteriorating working conditions, among other things.
And as for the issue of cyber attacks and cyber security, a serious discussion will be impossible at Davos. It needs a separate platform that primarily involves IT professionals and specialists rather than bankers and politicians. It should be remembered that Davos is a platform for the summits of the World Economic Forum, with emphasis on the word “economic”.
All in all, it is clear that the forum is starting to lose credibility and influence. It can no longer be called a “world” forum. A world economy without China and the US is complete nonsense. And Davos has strained relations with both China and the US. Last year it was visited by the planet’s biggest communist – Xi Jinping. And he seemed to be saying things that are shared and understood by those who regularly visit the Alpine summits. He spoke about globalisation, the global market, and the need for continued liberalisation in global trade and monetary and financial relations. It seems to me that General Secretary Xi Jinping also tried to allay the fears of Europeans, who were pretty unnerved by President Trump’s statements that he does not need globalisation. Xi Jinping even promised that China was ready to become “an engine of globalisation”. And it seemed as if the Chinese leader had said all the right things (from the point of view of liberal globalists), but the Davos regulars were wary. They don’t really have much time for a globalisation with Chinese characteristics.
Davos’s liberal globalists have even less time for Donald Trump. He was not at the summit last year, but even from a distance of a few thousand kilometres, the US president still managed to overawe many of the forum’s participants. What will happen this time?