Davos elite searches for fixes to save system from populists
THE GREAT and the good of Davos agree they have a problem with populism. Finding a solution is the hard part.
On the second day of the World Economic Forum’s annual meeting in the Swiss Alps, delegates disagreed on how best to address the upending of the western political order, a debate made doubly urgent by the string of elections in Europe this year where anti- establishment parties could gain more ground.
While International Monetary Fund chief Christine Lagarde urged a list of policies from programmes to retrain workers to more social spending, others fretted that the turbulence is only starting. Hedge Fund billionaire Ray Dalio warned on a panel chaired by Bloomberg Television’s Francine Lacqua that “we may be at a point where globalisation is ending, and provincialisation and nationalisation is taking hold.”
That leaves technocrats trying to patch together potentially costly remedies to make the current system of global trade, banking and business links that the Davos club represents acceptable to the public at a time when new comers like Presidentelect Donald Trump threaten to dismantle it by scrapping trade deals and introducing tariffs.
“We need to go to a system where we are protecting workers,
We need to go to a system where we are protecting workers, not jobs, and society will help people retrain or re-orient. Richard Baldwin, professor of international economics at the Graduate Institute of International and Development Studies in Geneva
not jobs, and society will help people retrain or re- orient,” Richard Baldwin, professor of international economics at the Graduate Institute of International and Development Studies in Geneva, said in an interview in Davos.
“There may just be a need to man up. We have to pay for the social cohesion that we need to keep our societies advancing, and accept that this may be a higher tax burden on people.”
Lagarde said policy makers “really have to think it through and see what can be done” given the feedback from voters who say “No.” Among measures that could be implemented are fiscal and structural reforms, she added.
“But it needs to be granular, it needs to be regional, it needs to be focused on what will people get out of it and it probably means more redistribution than we have in place at the moment,” Lagarde told the panel entitled “Squeezed and angry: How to fix the middle- class crisis.” Excessive inequalities were a brake on sustainable growth, she said.
Davos over the decades has become synonymous with globalisation and open markets, but in the background this year is the failure of business and political elites to predict any of the seismic political events that shaped 2016. That has raised questions over whether they are capable of understanding and addressing the antiestablishment forces that have roiled the US and Europe over the past year.
After Trump and Brexit, there are more votes coming this year. Elections are due in the Netherlands, France and Germany, with a possible early poll in Italy following a constitutional referendum where voters rallied against the government.
The panel saw former US Treasury Secretary Lawrence Summers attacking Donald Trump while Dalio, founder of Bridgewater Associates, struck a more pessimistic tone than Lagarde. “I want to be loud and clear: populism scares me,” Dalio said. “The No. 1 issue economically as a market participant is how populism manifests itself over the next year or two.” — WP-Bloomberg