The World Economic Forum (WEF) in Davos, Switzerland, normally an opportunity for the global elite to congratulate one another on their continued dominance of world economic matters and policy victories, has been unable this year to ignore the growing popular movements that have risen to challenge many of the forum's fundamental prescriptions for growth and economic stability.
Additionally, this year's forum has been unable to shirk the pessimistic predictions among its own participants. According to a survey of this year's attendants, fears of a "major geopolitical disruption over the next 12 months has risen significantly to 54%." However, as the survey showed, "respondents from the private sector are marginally more confident about the [world's financial] prospects for 2012 than those from the public, civil society and academic sectors" but are "more worried about the possibility of a social, geopolitical, environmental or technological disruption than their peers."
Further proving that the forum has taken a more pessimistic tone this year is the title of one of today's sessions, 'Seeds of Dystopia,' which mirrors the WEF's Global Risks 2012 Report, released earlier this month. Among those who share the financial worries of a continued economic slump and predict further social and political upheaval, is Nouriel Roubini. An economist and co-author of the book Crisis Economics -- and also known as Dr. Doom for some of his (accurate) predictions of past economic events (read 'meltdowns') -- Roubini spoke on today's panel. The Business Insider delineates some of Roubini's key points:
Roubini & Co. Scare The Crap Out Of Davos'Social unrest, Roubini says, is tied directly to economic uncertainty'
- What is connecting everyone in the world these days is economic and financial insecurity, the rise of income and wealth inequality, challenges from poverty, unemployment effects of financial crisis.
- Freakouts about debt loads, moreover, are leading to budget cuts — which, in Europe, at least, are making the recession worse.
- 225 million people worldwide are unemployed
- 1 in 3 people on the planet are poor or unemployed
- 1% of the world's families own 40% of the wealth
- Wages as a percent of GDP are at an all-time low
- Corporate profits as a percent of GDP are at an all-time high
- Current policies will lead to explosions
- This inequality is "Great Gatsby revisited"
- We're in a "vicious circle"... fiscal austerity to solve debt problem is making everything worse
These points, most notably his critique of fiscal austerity, follow recent comments Roubini made on Indian television in an interview on NDTV:
Amnesty International, also represented on the 'Seeds of Dystopia' panel, challenged the governing global economic paradigm in a statement by Secretary General Salil Shetty on Tuesday:
The economic crisis, and how governments have chosen to address it, poses a clear and unambiguous risk to the rights of people in many countries. Davos cannot afford to be a congratulatory club for the rich and powerful. We must use this opportunity to challenge the orthodoxy of the policies being pursued and ensure governments meet their responsibilities.
Corporate malpractice has been allowed to flourish by government policies of deregulation and limited oversight. In the pursuit of profit, financial institutions have been given a free pass to create systems that expose the most vulnerable groups to exploitation as corporate greed takes precedent over accountability and transparency.
Most governments do not see the connection between financial systems, economic policy and human rights. But wherever you go today you can see people who have lost their jobs, their homes and are struggling even to afford food, you cannot fail to see the devastating impact on people’s basic rights.
Rather than ensuring their policies protect human rights, governments are retreating to old approaches and cosy relationships that will lock in long term inequalities for generations. This is a man-made crisis and the solutions being offered by leaders risk repeating the gross failures of the past.
In a similar vein, Roubini criticizes a world economic system that is institutionally geared toward short-term gains at the top, but shows little regard for shared prosperity and long-term economic security throughout. Roubini makes this point in an interview published today in Foreign Policy:
It's about income and wealth inequality, but it's also about jobs -- whether your children are going to be better off than you. It's about economic insecurity, about whether the benefits of social security, health care are going to be there. It's about underemployment, or unemployment. So it takes different manifestation in different places, of course. There's the Arab Spring, Occupy Wall Street, the riots in London, the middle class in Israel demonstrating because they cannot afford their homes, the Chilean students that cannot afford good education, anti-corruption in India, people saying enough of what's going on in Russia, and in China where people cannot go out on the streets to protest so they turn to the microblogs to voice anger about corruption and inequality.
So it's a whole nexus of things that have to do with economic insecurity, whether it's poverty, education, skills, the ability to compete in a global economy, keeping your old-age benefits, and then inequality. The manifestation of them can be class warfare as opposed to nationalism, or religious warfare as opposed to inter-generational cleavages between young and old. But I think there's a complex nexus of economic concerns that are at the basis for many of the things that are happening in different ways in different countries.
And stressed that the "issue of inequality" cannot be ignored if there's a desire to avoid a 'global class war':
We must make sure that growth is inclusive -- in China, in India, in Latin America -- and that we do create opportunities for young people in Europe and United States to have jobs and succeed in life. We have a huge amount of social and political instability. The issue you raised is usually couched as the bottom of the bottom, meaning the starving people in sub-Sahara Africa. But there is a bigger issue because now we have several billion people in the world working in advanced economies, in emerging markets, who feel very insecure about their own future.
And unless we're going to address that, everything that happened in the last year -- from the Arab Spring to Occupy Wall Street to riots throughout Europe -- is going to get worse. Even in sub-Saharan Africa, you could start to see a lot of social and political instability. We've seen, for example, what happened in Nigeria, when they started to phase out subsidies on oil, and prices went up by 200 percent. Which is why there are now riots in the streets.
So we have to think about these issues; we have to discuss them and figure out how to address them. Not only are a lot of people starving, but actual social and political instability comes from potentially middle class people who see their hopes being dashed.
So what did the 'Seeds of Dystopia' panel think should be done? The Business Insider made the following list, as suggested by the participants:
- More unionization, more power to the worker
- More investment in education
- More investment in "human capital"
- More investment in infrastructure
- Less austerity, more investment in growth (Europe)
- Redistribution of power in society — power to the working people
- Mandated standards instead of voluntary codes of conduct (for business, presumably)
- Need a "Tahir Square" moment in corporate board rooms to get away from short-termism
- Mandate that 50% of boards must be women
- Deal with massive CEO-to-employee pay inequality with taxation
- Be courageous with financial regulation
And, as noted by Shetty:
Business and political leaders need to recognize the need for a new approach that is fair and inclusive. Instead of entrenching the divide between rich and poor, they need to adopt growth plans that address this divide. They must place people’s rights at the heart of any solutions. Otherwise, the recent social unrest unfolding in countries across the world could only be the beginning.