A cursory look at this year’s WEF
The World Economic Forum (WEF) is
a Swiss nonprofit foundation, based in Cologny, Geneva . As a state
recognized international institution for public-private cooperation, its
mission is cited as "committed to improving the state of the world by
engaging business, political, academic, and other leaders of society to shape
global, regional, and industry agendas".
The Forum is best known for its annual winter meeting
in Davos, a mountain resort in Graubünden, in the eastern Alps region
of Switzerland .
The meeting brings together some 2,500 top business leaders, international
political leaders, selected intellectuals, and journalists to discuss the most
pressing issues facing the world. The organization also convenes some six to
eight regional meetings. Beside meetings, the foundation produces a series of
research reports and engages its members in sector specific initiatives.
The theme for this year’s WEF, held January 20-23 at its
usual home in Davos , Switzerland
A Forum report, The
Future of Jobs, released at the start of the meeting predicted that this
4th industrial revolution will cause widespread disruption not only to business
models but also to labor markets over the next five years, with enormous change
predicted in the skill sets needed to thrive in the new landscape.
As usual, the world’s rulers from Prime ministers to high
government officials to top business men were in attendance at this biggest
bash of the year.
From published reports, even from the WEF website, it seems
that the mood of the participants were somber. “There has never been a time of
greater promise, or greater peril,” Professor Klaus Schwab, founder and
executive chairman of WEF, said. “As a society, we are entering uncharted
territory,” Salesforce CEO Marc Benioff told participants on the last day of the
meeting.
Less clear, however, is the impact this revolution will have
on entire industries, regions and societies around the world. Will it be a
force for good or evil? Will it provide new opportunities for all, or will it
exacerbate inequalities?
Social media, for all the benefits it brings, makes it
easier than ever before for terrorist organizations to spread their hateful
messages, Sheryl Sandberg of Facebook told participants. We have already seen
how the hateful and highly provocative messages in the Internet discussion
groups and blogs could lead to the death of hateful preachers, founders and
writers.
Perhaps, more frightening than a terrorist organization or a
hateful website that spreads hatred around the globe with a global reach is the
idea that the technology could one day lead to humanity’s demise. Already world-known
experts are warning about the artificial intelligence (AI). Consider, e.g.,
Professor Stephen Hawking who warned last year that artificially
intelligent machines could kill us because they are too clever. Such
computers could become so competent that they kill us by accident, Hawking has
warned. According to Angela Kane, Sr. Fellow of Vienna Center
On the employment front, although the WEF has predicted that
some 5 million jobs may be lost other experts paint a gloomier picture that there
would be a global loss of 7.1 million jobs between 2015 and 2020.
How much is a contributing factor like economic
inequality for such loss of jobs? You may recall my article
– A Second Look at Pareto Principle
– that was based on Oxfam report of last year. In that I shared the fact that in 2010, it took 388
billionaires to match the wealth of the bottom half of the earth’s population;
by 2013, the figure had fallen to just 92 billionaires. It fell to 80 in 2014.
The latest report from Oxfam, “An Economy for the 1%”, now says that the richest 62 people
have as much wealth as the bottom 50 percent of humanity — 3.6 billion people. The
world’s wealthiest 62 people added US$542 billion to their net worth to raise
it to $1.76 trillion from 2010 to 2015, an increase in their composite wealth
of 44 percent. Meanwhile, the bottom half of humanity in terms of wealth lost
$1 trillion from 2010 to 2015, a drop of 41
percent. The share of the global wealth increase since 2000 that has gone to
the top 1% is 50 percent. The richest 1% now have more wealth than the
rest (99%) of the world combined.
So, what was 80 last year has
now shrunk to 62! Nothing probably illustrates the world’s incredible
inequality better than this latest Oxfam report.
Are you aware that the CEO pay averaged 303 times that of the average worker in 2014? CEOs at
the top US
firms have seen their salaries increase by more than half (by 54.3%) since
2009, while ordinary wages have barely moved. The CEO of India’s top
information technology firm makes 416 times the salary of a typical employee
there. Although
down from the 376-to-1 ratio of the peak stock-market bubble year of 2000 the
current ratio is far bigger than earlier decades. Another way of putting all
this in perspective is that CEO pay has risen 1,000 percent since 1979, while typical employee pay
has risen 11 percent.
The average annual income of the poorest 10% of people in
the world has risen by less than $3 each year in almost a quarter of a century.
Their daily income has risen by less than a single cent every year. “Growing
economic inequality is bad for us all – it undermines growth and social
cohesion. Yet the consequences for the world’s poorest people are particularly
severe,” the Oxfam report says. The fight against poverty will not be won
until the inequality crisis is tackled.
Power and privilege is being used to skew the economic system
to increase the gap between the richest and the rest. A global network of tax
havens further enables the richest individuals to hide $7.6 trillion, which is
more than the combined GDP of the UK
and Germany Africa ’s
wealthiest have stashed $500 billion in tax havens: “Almost a third (30%) of
rich Africans’ wealth … is held offshore in tax havens. It is estimated that
this costs African countries $14bn a year in lost tax revenues. This is enough
money to pay for healthcare that could save the lives of 4 million children and
employ enough teachers to get every African child into school.”
Oxfam analyzed 200 companies, including the world’s biggest
and the World Economic Forum’s strategic partners, and has found that 9 out of
10 companies analyzed have a presence in at least one tax haven. In 2014,
corporate investment in these tax havens was almost four times bigger than it
was in 2001.
The banking sector remains at the heart of the tax haven
system; the majority of offshore wealth is managed by just 50 big banks.
Tax avoidance has rightly been described as ‘an abuse of
human rights’ and ‘a form of corruption that hurts the poor’. “There will be no
end to the inequality crisis until world leaders end the era of tax havens once
and for all,” Oxfam recommends.
As taxes go unpaid due to widespread avoidance, government
budgets feel the pinch, which in turn leads to cuts in vital public services.
It also means governments increasingly rely on indirect taxation, like VAT,
which falls disproportionately on the poorest people. Tax avoidance is a
problem that is rapidly getting worse.
The International Monetary Fund (IMF) recently found that
countries with higher income inequality also tend to have larger gaps between
women and men in terms of health, education, labor market participation, and
representation in institutions like parliaments. The gender pay gap was also
found to be higher in more unequal societies. It is worth noting that 53 of the
world’s richest 62 people are men. Women hold just 24 of the CEO positions at Fortune 500 companies.
Inequality is also compounded by the power of companies to
use monopoly and intellectual property to skew the market in their favor,
forcing out competitors and driving up prices for ordinary people.
Pharmaceutical companies spent more than $228 million in 2014 on lobbying in Washington .
The report further states that the financial sector has
grown most rapidly in recent decades, and now accounts for one in five
billionaires. In this sector, the gap between salaries and rewards, and actual
value added to the economy is larger than in any other.
In the garment sector, firms are consistently using their
dominant position to insist on poverty wages. Between 2001 and 2011, wages for
garment workers in most of the world’s 15 leading apparel-exporting countries,
including Bangladesh ,
fell in real terms.
Here are some other important findings. Oxfam has recently
demonstrated that while the poorest people live in areas most vulnerable to
climate change, the poorest half of the global population are responsible for
only around 10% of total global emissions. The average footprint of the richest
1% globally could be as much as 175 times that of the poorest 10%.
Bottom line: our current economic system – the economy for
the 1% – is broken, says the Oxfam report. “The current system did not come
about by accident; it is the result of deliberate policy choices, of our
leaders listening to the 1% and their supporters rather than acting in the
interests of the majority. It is time to reject this broken economic model.”
How to fix this broken system? Oxfam suggests that our world
leaders come to the side of the majority and not the super rich, and bring a
halt to the inequality crisis. Its recommendations are:
- Pay workers a living wage and close the gap with executive rewards;
- Promote women’s economic equality and women’s rights;
- Keep the influence of powerful elites in check;
- Change the global system for R&D and the pricing of medicines so that everyone has access to appropriate and affordable medicines;
- Share the tax burden fairly to level the playing field;
- Use progressive public spending to tackle inequality;
- As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens.
How serious are our world leaders to fix our broken economic
system that is widening the inequality and creating global problems in all
sectors from migration to climate? Or, more importantly, are they prepared for
the job? After all, what we will require is a "holistic" style of
leadership, which views today's global challenges as inherently connected, as
rightly pointed out by Professor Klaus Schwab.
Leadership
in the fourth industrial revolution needs to be bold, brave and based on
real action and not empty slogans. As long as we fail on that account the annual
WEF meetings in Davos will only be viewed as a forum for the rich and not the
silent majority.
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