Tuesday, January 22, 2013

Davos - when will someone talk about the elephant in the venue?

Regular readers of my blog know my views of the annual World Economic Forum at Davos.

There is not inconsiderable hype in the business world and among some in governments about the annual exercise in mutual onanism called the Davos Economic Forum in Switzerland. Like many conferences of high profile people, one of the key objectives is to get people to agree and put out nice sounding statements that will offend no one and look like some enormous intellectual capital has been applied to the economic issues of the world.

Liam Halligan at the Daily Telegraph calls for this year's WEF to actually do something useful, like dealing with the elephants in the economic room that never get discussed, because to do so would embarrass the inept, timid and unprincipled politicians that scurry about the venue at Davos, seeking to appear important and competent.   He focuses on the US fiscal cliff and the unsustainability of the "Western model" of growing state dependency, deficit spending and public debt.

However, Davos wont do that.   It didn't identify the financial crisis, it didn't debate solutions, it hasn't really done much at all over the years.   It does involve a lot of networking and back slapping.  Andrew Ross Sorkin in the New York Times has written about how many of the prophesies at Davos prove to be far from true, like Bill Gates predicting Google didn't really have a business, how Ken Lay CEO of Enron was a keynote speaker in 2001 (yes the one convicted of conspiracy and fraud)  and how C. Fred Bergsten, senior fellow and director emeritus of the Peter G. Peterson Institute for International Economics in Washington, said at Davos 2008 that it was inconceivable that there could be a world recession.

It's hilarious, for an event where the cost to send a delegate is a registration fee of US$20,000 a head, plus accommodation, airfares and other expenses of course, add a zero or two if you actually want to speak.

No doubt the business people attending see value in networking and discussing opportunities, but it is the fact it provides a forum to ignore some serious home truths about public policy in governments, whilst politicians are there talking about everything, but the hard issues, that makes the Forum more hype than substance.

No serious scholar of economics or finance would look at the Davos World Economic Forum as a locale of intense debate and discussion about any need for serious systematic change to domestic or foreign policy in any countries.

So what SHOULD be talked about?

How about this:

- The budget deficit and public debt of the United States, exacerbated by the unsustainability of social security and Medicare, and how it requires the US to choose between serious cuts in the role of the Federal Government, or serious increases in taxes, and what both options mean for economic growth and the long term future of the United States as the world's leading economy;

- The future of the European Union, particularly the nationalisation of southern European public debt by northern European economies, and how unsustainable the widespread European model of ever growing public spending and regulation of the private sector has proven to be in sustaining growth, employment and confidence.  In other words, how will Europe grow when so much of its economy and society is dependent on internal transfers;

- The risks and disappointment that quantitative easing/money printing/debasement and devaluation of currencies has proven to be in re-invigorating those economies that have engaged in it, and the emergence of new asset price inflation bubbles fueled by the fiat money manufacturing process.  In other words, real debate about the use of monetary policy to create money and the chimera of the short term "success" it creates.  Is there starting to be a shift back towards commodity money as a source of store of value?;

- The opportunities trade liberalisation in good and services can have in promoting economic growth, reducing poverty, increasing employment and improving the environment, if only the US, EU, Japan, China, India and Brazil could get their act together and launch a new WTO trade round, and how the creeping protectionism globally threatens to cause much harm.  How could world leaders catalyse a new open trade round for the 21st century?;

- The corrosion of economies and societies by corruption, through the effective confiscation of wealth by corrupt politicians and business owners using state regulation, protectionism, subsidies, exemptions from legal enforcement of contract, tort, criminal and property laws.  How critical it is for developing countries to seriously tackle corruption, with open independent courts, open free media and political systems that allow voters to remove those in power readily, and to protect the rights of all citizens from infringement by government, by gangsters and other thugs.  What does failing to do this encourage in terms of net emigration, the lack of interest from foreign investors beyond extractive businesses?

- The qualitative difference between governments cutting spending on consumption, and increasing taxes on wealth and income creation, and how one helps to create economic growth, whereas the other stymies it.

It wont happen.  Economic vandals like Gordon Brown will be speaking, a man who was one of the world's worst dealers in precious metals, but also an egregious creator of rampant state dependency and an unsustainable economy fueled by an endless addiction to promoting private and public sector credit.  His personal behaviour was notable for paranoia and an egotistical over-estimation of his own intellect and perspicacity, he shouldn't be speaking in polite company.

It includes Eurocrats, who demand austerity from Member States but more money for their own, unaudited, intergovernmental organisation.  The leader of a company that facilitated a country lying about its public spending and then seeking to profit from it.  A communist and finally a serial bigamist who jokes about rape.  Pardon me if I am not impressed by a group that invites individuals with such questionable intellectual and moral credentials.

Of course the World Economic Forum includes meetings in secret, but who really will take on the corruption,  the wilful deception by politicians of the monetary and fiscal positions of their countries, including those who promised unearned money, goods and services at the price of bankrupting future generations?

It wont be happening in Davos.

Yep, it's not worthy of the esteemed individuals who actually do attend.

Move along, there isn't a lot to see here.

UPDATE:  Helen Clark is at Davos.  Who is surprised? 5 star hotels, schmoozing and pontificating, whilst escaping the excoriating criticism of the substandard subsidiary of the UN she leads.   She is keen on how austerity is impacting on development, code for "how dare developed countries cut spending on aid funnelled through intergovernmental organisations because they have the temerity to try to balance their budgets by means others than taxes".  Rich, of course, for an international civil servant who pays no tax.


Kiwiwit said...

Hear, hear.

Barry said...

Hear hear hear!