Davos: Where the wealthy will be forced to examine inequality

The World Economic Forum logo. Taken in Davos, Switzerland January 22, 2013. (Credit: swiss-image.ch / Remy Steinegger / Phillips Communications / Flickr)

The world’s most rich and powerful will gather once again for the World Economic Forum (WEF) in Davos on Monday to discuss how they can tackle the biggest threats to global development. While the slated theme this year is globalization, the problem of inequality appears to be unavoidable.

According to the WEF’s Global Risk Report 2017, released Wednesday, the three most significant trends that will shape global developments over the next 10 years will be rising income and wealth inequality, climate change and societal polarization – in that order. In addition, the two risks found to be most interconnected this year were ‘high structural unemployment or underemployment’ and ‘profound social instability.’

These economic anxieties, the WEF said, have contributed to the rise in nationalism “emboldened by the drum beat of populism,” which has exhibited itself most prominently this year through Brexit and the election of Donald Trump. In response, the WEF will strive to make the case for inclusive globalization as the only solution to these problems. They’ve dubbed it: “Responsive and Responsible Leadership.”

“What does it mean?” Klaus Schwab, founder and executive chairman of the WEF, said at a press conference on Tuesday. “It means that as a leader … you have to listen. You have to interact with those people who have entrusted you with leadership. But … you also have to act. … You have to be courageous enough to take the decisions to, what we call, ‘improving the state of the world,’ and it needs sometimes very courageous decisions.”

There to give the opening motivational address will be China’s President Xi Jinping, the first Chinese president to attend a WEF meeting. According to Jiang Jianguo, China’s head of the State Council Information Office, Xi will promote development, cooperation and economic globalization for “a human community with shared destiny.”

“With the rise of populism, protectionism, and nativism, the world has come to a historic crossroad where one road leads to war, poverty, confrontation and domination while the other road leads to peace, development, cooperation and win-win solutions,” Jiang told a symposium in Geneva, according to CNBC.

China is a prime example of the phenomenal growth that can result from the free trade of goods, capital and labor across borders, and it appears eager to lead the charge. However, it’s becoming impossible, even for China, to ignore the fatal flaw in the WEF’s decades-long theology of globalization: inequality.

“[There is] this very old-fashioned view that countries that are growing quickly may need to tolerate a period of high inequality. Then, when they have reached higher average incomes they can address inequality,” Alex Cobham, research director at the Tax Justice Network, said in an interview with Humanosphere.

“In fact the reverse seems to be true – that high inequality acts as a major obstacle to growth as well as wider human development,” he said. “If anything, you should prioritize tackling inequality first.”

Cobham pointed out that because of globalization, inequality is not just a problem confined within nations, but a problem plaguing the world.

“China is on the wrong end of a great deal of aspects of inequality associated with globalization, not least in there is taxation,” Cobham said. “We know that the ways in which international tax rules and havens … are exploited by the biggest multinationals systematically disadvantages lower-income countries, even those the size of China.”

However, multinational corporations will have some the greatest representation in Davos. For example, China’s entourage will include its two richest businessmen: Jack Ma, founder of the online marketplace Alibaba, and Wang Jianlin, chairman of the world’s largest private property developer Dalian Wanda. Ma and Wang’s estimated net worth are $34.6 billion and $31 billion, respectively, according to the Bloomberg billionaires index.

“It’s very difficult to imagine that a great many of the business representatives at Davos will be encouraging a more serious approach to corporate taxation,” Cobham said.

That is not to say that the current rush toward nationalistic populism will solve inequality either.

“The last time that we had a convergence of fear of globalization, fear of economic stagnation and poverty, fear of the international, it was after the 1929 crash,” Ngaire Woods, dean of the Blavatnik School of Government at Oxford University told Bloomberg Businessweek. “We really have to learn the lessons of the 1930s.”

Instead, globalization and even big business can play a positive role in fighting inequality. Margareta Drzeniek-Hanouz, WEF’s head of global competitiveness and risks, noted in a press release for the risk report that the Paris Agreement to fight climate change, for example, “offers hope” that global cooperation among leaders to tackle other risks can be achieved.

“Look, it’s easy to be cynical about Davos, and we should be,” Cobham said. “But it does make a difference because politicians listen on business more than they should. It does matter if big business comes together at Davos and gives a mission to politicians to be more progressive than they have been.”

Unfortunately, Cobham noted, counting on big business to endorse tax reform that fights the very inequalities from which many of them benefit is not very realistic.

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Joanne Lu

Joanne Lu is a South Carolina-based writer and editor dedicated to global development, poverty alleviation and social justice. After a year in Rwanda, she now covers the Asia-Pacific and economics. Find her on Twitter @joannelu or email joanne@humanosphere.com.