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Transforming the world

Jan 25 2012 07:35 Reuters

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Davos - The Occupy movement, which went global after protests against Wall Street last year, is camping in igloos to bring its argument with the super rich "1%" to Davos.

It is a reminder to the leaders of finance and industry at the World Economic Forum (WEF) of the resentment leading to questions about the future direction of capitalism.

"At meetings the rest of society is excluded from, this powerful '1%' negotiates and decides about the fate of the other 99% of this world," said David Roth, "Camp Igloo" organiser and head of the Swiss centre-left's youth wing.

"The economic and financial concentration of power in a small, privileged minority leads to a dictatorship over the rest of us. The motto 'one person, one vote' is no longer valid, but 'one dollar, one vote'. We want to change that."

Roth's group has set up camp in sub-zero temperatures and snow to "occupy" the WEF in a car park just outside the security cordon around the meeting that has become a byword for globalisation.

He is seeking dialogue with the WEF but few of the 2 000 visitors are likely to see the camp by the train station, many preferring to travel by private jet or helicopter from Zurich. A one-way trip costs 5 100 Swiss francs ($5 500), according to a WEF handout.

Police arrested two men suspected of scrawling "SMASH WEF" on the walls of the Swiss National Bank in Zurich last week. They also stopped an unauthorised anti-WEF demonstration in the capital Berne on Saturday.

In its Global Risk Report earlier this month, the WEF showed it is well aware of the Zeitgeist, warning that a backlash against rising inequality risks derailing the advance of globalisation and threatens growth worldwide.

Rising youth unemployment, a retirement crisis among pensioners dependent on debt-burdened states and a wealth gap have sown the "seeds of dystopia", according to the report, based on a survey of 469 experts and industry leaders.

"The middle class is thinning out," said Lee Howell, the WEF managing director behind the report. "It's no longer simply cyclical, with everybody down and everybody getting to go back up. This time some people may not get up."

Klaus Schwab, a former business school professor who launched the annual get-together in 1971, is calling for more humility from executives who he said "have still not learnt the lessons from past mistakes".

"Dystopia, the opposite of utopia, could precipitate a downward spiral of the global economy, pulled by social disruption, protectionism, nationalism and populism," he said.

A survey of 1 200 experts the WEF published on Monday showed fear of a major geopolitical disruption over the next year has risen significantly to 54% from 36% last quarter.

Ahead of this year's Davos meeting, based on the theme The Great Transformation: Shaping New Models, everybody is adding their two cents to the debate on the state of the world.

British Prime Minister David Cameron, who speaks at Davos on Thursday, said years of uncontrolled "turbo capitalism" have broken the link between risk and reward, giving some executives generous pay deals despite lacklustre performance.

In a Call to Action ahead of Davos, 11 leaders of international organisations - including International Monetary Fund (IMF) head Christine Lagarde - said economic growth, jobs and protectionism are the top three worries at the start of 2012.

Davos man

Davos 2012 sees some changing of the guard. It is welcoming leaders from the Arab Spring like Tunisian Prime Minister Hammadi Jebali, interim Libyan Prime Minister Abdel Rahim El Keib as well as Egyptian presidential candidates.

Imran Khan, the former cricketer turned Pakistani politician, will be bringing his campaign against corruption to the meeting.

The WEF will also be putting up in local schools about 70 young people it calls its "global shapers" who are supposed to develop leadership potential so they can "serve society".

There are notable absences of Davos regulars like former IMF head Dominique Strauss-Kahn, Swiss central bank chief Philipp Hildebrand, Greece's former prime minister George Papandreou and bank UBS chief Oswald Gruebel, all felled in recent months.

Rupert Murdoch, who had to pull out last year as his News Corp media empire became embroiled in a scandal over phone-hacking, is not expected for a second year running.

But it is striking how many names remain the same despite the upheaval since the financial crisis of 2008.

Of 30 video messages from Davos co-chairs and partners posted by the WEF ahead of the meeting, all are from men, with only a few Asian or Middle Eastern faces among the ranks of middle-aged white males.

One is Arif Naqvi, chief executive of Abraaj Capital, a private equity manager that specialises in emerging markets.

"We have a crisis of leadership," Naqvi said. "The Occupy Wall Street movement is going to gain momentum in different cities simply because of the inequality issue and we need to address it."

In a December report, the Organisation for Economic Cooperation and Development (OECD) said the earnings gap between rich and poor had reached its highest level in 30 years.

The wealthy's share rose across the OECD in the three decades from 1980 to 2010, although much more so in the United States, followed by Australia, Canada, Britain and Ireland.

"Rising inequality is one of the major risks to our future prosperity and security," said OECD chief economist Pier Carlo Padoan on Monday. "The main challenge facing governments today is implementing reforms that get growth back on track, put people to work and reduce the widening income gap."

'Extraordinary greed, inequality'

"Is 20th-Century capitalism failing 21st-Century society?" asks the first debate at the meeting which starts on Wednesday.

Sharan Burrow, general secretary of the International Trade Union Confederation, is one of the speakers in that debate.

"It is too simplistic to say we need a new system. The system is not working because of extraordinary greed, extraordinary inequality and attacks on workers' rights that are leading to a crash in demand," she told Reuters.

"What business has to realise is that they will not survive if demand continues to collapse."

The WEF's Schwab said capitalism's original distinction between the entrepreneur and the salaryman has been corrupted by excessive pay. He said top managers should not earn more than 20 times their lowest-paid worker.

The gap between the top and bottom on pay is biggest in the United States, where average CEO remuneration is 142 times that of employees, according to Thomson Reuters ASSET4 data.

Former White House aide Larry Summers cites an opinion poll which showed 40% of Americans no longer have a positive opinion of capitalism, but said he believes the crisis of confidence in the system could be addressed with sufficient fiscal and monetary stimulus to kickstart growth.

Job creation

Many business leaders meeting in Davos believe their most important contribution to fixing the crisis is creating jobs.

"There is a tremendous risk of social discohesion with the slow growth in the economy that is currently happening, so job creation for companies is tremendously important," said Unilever chief executive Paul Polman in a WEF video message.

The group that makes Knorr soups, Lipton tea and Dove soap hopes to create 500 000 jobs for smallhold farmers and plans to open 30 new factories in developing markets, Polman said.

Vineet Nayar, chief executive of India's fourth-largest software services firm HCL Technologies, will announce at Davos a plan to create 10 000 jobs in the United States and Europe, reversing the trend of outsourcing business to India.

Along with creating more jobs, the OECD also urges governments to consider raising taxes on the rich to reduce inequality, a move already endorsed by billionaires Warren Buffett and L'Oreal heiress Liliane Bettencourt.

President Barack Obama has proposed a new minimum tax called the "Buffett Rule" for households on more than $1m annually.

Davos man will be discussing other ways to improve his image through philanthropy, looking for tips from regular attendee Bill Gates, who gave away his title as the world's richest man by plowing billions into his charitable foundation.

Leftist and environmental campaigners will be making their annual award in Davos for the worst cases of corporate contempt for the environment and human rights. But interaction with the dissidents will be minimal.

Asked whether anyone from the Occupy movement had been invited to address the meeting, Schwab said that the forum wanted to engage, but not with those who only criticise.

"We are looking for such people who can make an interesting contribution. The problem is sometimes if you look at 'Occupy Davos' or 'Occupy Wall Street' or whatever it is, it's a movement but who are really the significant representatives?" 

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