| by Victor Cherubim
From Al Gore on global warming, to fears over Euro zone or Ebola, oil or overwhelming crisis, the World Economic Forum Davos 2015, can be classed as an “economic fashion parade”. What matters at Davos are the informal conversations among the gathering of billionaires, UN functionaries, lobbyists, politicians and all those who wish or can afford to hob-knob with the elite, to gauge the pulse of public opinion.
( January 20, 2015, London, Sri Lanka Guardian) Christopher Bullock wrote:”Tis impossible to be sure of anything, but death and taxes.”
But, are there only two certainties?
Soon we will see leaders and celebrities flock to the ski resort of Davos, Switzerland. It is an annual get together, similar for film stars and film critics at Cannes each year. It is a sure thing, as sure as the snow on the ski slopes.
The real challenge for governments is to show by deed and not just words, that they belong to the same world as the rest of its citizens. This is not only echoed in the voices in Sri Lanka but around the world. Excessive corruption has eroded public trust and created disillusionment. Regaining public trust and confidence is not easy.
Recovery or recession
The hallmark of Davos, more important than the message on the podium, is the increased disparity in wealth among the rich and the poor, as viewed from the sidelines. We note “on current trends by next year 1% of the world’s population will own more wealth than the other 99,”
As “The Daily Telegraph” summed it:”There is no other single event in the international calendar that attracts such an extraordinary concentration of wealth, power, and proven intellect, fascination and derision because many see it as just a talking shop for self-perpetuating global elite.”
We have seen World Summits of World Leaders use their high profile roles to highlight “sustainable development to climate change, from eradicating global terrorism to cyber crime, controlling monetary policy to money laundering.” But, how much is put into practice.
Critics fear that “too many meetings on meetings” –Davos followed by two summits, one in New York in September 2015 and the other in Paris in December where negotiations for an action plan on Climate Change will take place – are considered “too big, unfocussed and risk being all too easily ignored”.
Still others feel there has been some progress made in the 15 years from 2000 since these series of meetings were held. Yet this process of “consultation” has produced at least 17 “development” goals, generating 169 targets. It is hoped that the purpose of these meetings is to narrow the list, if that by itself, is a virtue.
The five of 2015
In his recent book: “Criminal Capital – How the Finance Industry Facilitates Crime” Stephen Platt scrutinises “the vulnerability of banks, brokerages, trust companies and investment funds to create criminal abuse.” He addresses the toxic behaviours in financial services. He exposes how the finance industry has enabled corruption; drug trafficking, terrorism, human trafficking, proliferation, piracy and tax evasion. He examines the role of the traditional powerhouse financial centres as well as offshore centres and rapidly emerging international financial centres in the Middle East, Africa and Asia, involving money laundering, corrupt public officials, fraud. He challenges the reader to consider whether following the excessive risk taking by banks in the 2008 crisis; sufficient steps have been taken to address the situation or whether radical reform is further needed.
Here then are the five issues of 2015?
1. Oil and the world’s financial stability
2. Shifting sands in the world’s political landscape
3. Loss of public trust
4. Higher than normal expectation
5. Insatiable Greed
Do you know it costs around $6.00 a barrel to produce a barrel of oil in Saudi Arabia? In this situation is there any credit risk for this country to keep producing oil at today’s low of $47 a barrel? But, what about the tremendous credit risks for countries like Russia, Iran and particularly Venezuela. In the summer of 2014 a barrel of Brent Crude was $115, today it is less than half at $50 a barrel.
What happened in the four recessions of the post war (1974/5; 81/82; 90/91 and 2008/09) was the rising price of oil. In contrast today, we may have the opposite: consumer prices plunging, but the sharp volatility in a short period of six months, will have its effect in years to come. Will Governments take measures for financial stability?
Shifting sands in the world’s political landscape
With no show in Paris, it is no surprise that US remains “lazer-like focus” on domestic issues, a year before the US Presidential election.
With European economy stagnant, and with “Grexit” looming on the horizon, exports to China, including machine tools from Germany, are said to weaken.
Will China in turn export “deflation” to Europe and the rest of the world with a trend for lower, cheaper Chinese goods driving down inflation below target?
With an election in May in Britain, can anyone beat the vision of the Magna Carta, as there is a clamour to abandon the European Human Rights Act?
Loss of Public Trust
The real challenge for governments is to show by deed and not just words, that they belong to the same world as the rest of its citizens. This is not only echoed in the voices in Sri Lanka but around the world. Excessive corruption has eroded public trust and created disillusionment. Regaining public trust and confidence is not easy. It may be years away, but battered reputations have to be rebuilt from foundation, from planning to performance.
Higher than normal expectation
It is natural as the sunrise, that an accompaniment of loss of public trust comes together with higher than normal expectation of renewal. Making good on promises to bring floundering economies back on track, is never easy. Focus on public stunts and sound bites and not enough on cutting red tape, slashing bureaucracy, sourcing corruption will be viewed as too little too late. Sri Lanka perhaps, could do well in replicating the, Indonesian success model, with a clear economic framework for growth, without a confusing mix of messages.
Whether it is sport, Cricket or Rugby, or in stored up political problems of nations or clubs, or peoples, all look and seek their pound of flesh. In sport, for example, producing thrilling and explosive action, fixture congestion, without consideration of player welfare is arguably the biggest threat facing sport. Many Tests are being played to prop up finances, causing injuries and diluting interest.
In politics, critics argue insatiable greed in driving down economies as part of the power play. The convergence of public and private good, claiming that acting in accordance with own self interest produces socially beneficial results, is flawed.
“Concerns that the economic recovery since the global downturn of 2008/9 has been accompanied by a squeeze on living standards and an increase in the value of assets owned by the rich,” is gaining ground.
Observers state that at Davos today, inequality is seen not as an accident or a natural rule of economics, but as a result of the policy framework of bankers and the ineptitude of governments.