Why is there such a fuss about the importance of the World Economic Forum (WEF)? The annual meeting at Davos will only ever make a difference to our lives if the rules of economic engagement are changed. And there was no substantial talk of that in 2017.
Allow me to explain. Those who gathered at Davos represent one percent of the world’s business leaders who essentially determine the rules of doing business. Government delegations attend to provide assurances that these rules apply to their legal systems and in the hope that some benefits will come their way.
These developed-world business and political leaders have fuelled a world economic order that has thrust great inequality on all of us.
According to Oxfam’s report, An Economy for the 99%, the gap between the rich and the poor is far greater than had been feared. The report shows that eight men own the same wealth as the 3.6-billion people who make up the poorest half of humanity. Last year, the Oxfam report suggested that 62 billionaires owned the same wealth as the poorest half. They disclosed this year that the figure would have been nine and not 62 if they’d had access to new and better data on wealth distribution, especially in India and China.
The report further details how big business and the super-rich are fuelling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics.
In 2015, an African Union report stated that the continent was losing more than $50-billion every year in illicit financial outflows as governments and multinational companies engage in fraudulent schemes aimed at avoiding tax payments to some of the world’s poorest countries. The report, released by the AU’s high-level panel on illicit financial flows and the United Nations’ Economic Commission for Africa, confirmed that illegal transfers from African countries have tripled since 2001, when $20-billion was siphoned off.
Those who gathered at Davos last month are aware of these issues and discussed them, but there was no decision to change the rules so that we manage the world economy for the benefit of all and not just a fortunate few.
Some of you who are reading this will think that this is inevitable because we have chosen an economic system in which the market reigns supreme. We would rather have this than a socialist system in which the governments run businesses. But here you are wrong. It is not a matter of whether we choose capitalism or socialism. It is a matter of whether we craft a system that is fairer to all.
It is a matter that requires us to realise that the changed rules of engagement took root through the neoliberal doctrine of rampant financialisation of the global economy. This extreme form of plunder evolved when regulations for trade and the market were systematically lifted, giving free rein to global companies.
Before this, trade and the market were mostly part of the social ecosystem. Take the post-World War II years: huge investments were made in Europe to rebuild and provide countries with a level of comfort through the United States-led Marshall Plan. Health services were free and those who did not find work were entitled to state support under extensive welfare state regimes.
About 40 years ago, under the leadership of Britain’s Margaret Thatcher and the US’s Ronald Reagan, much of this philosophical position was swept away. They argued for business to operate freely without government regulation. The word capitalism was replaced with the notion of “the market”. So if this was what “the market” wanted, we all had to obey.
Suddenly the market became the explanation for many decisions that were against the interests of people. Through the financial sector, the market was able to win the right to make profits at levels never seen before. The financial sector was run as a massive casino, encouraging gambling on a large scale. It was not the sale of goods and services that was central to making money; it was having money to invest in the financial markets that now gave the greatest returns.
This resulted in two major developments: the centrality of profit for the shareholder and the obscene enrichment of chief executives. This coincided with the burgeoning of globalisation that many blame for the financial crises.
Chinese leader Xi Jinping, the first Chinese leader to attend the WEF, defended globalisation at Davos and said it was excessive profits and not globalisation that caused financial crises.
Efforts to curb excessive profits have made slow progress in the world. The European Union has been successful in challenging exorbitant bonuses paid to executives but has made little progress with imposing a price ceiling on executive remuneration.
South Africa’s chief executives are the seventh-best paid in the world. I wonder how they sleep at night when millions go to bed hungry at night. Just recently, Whitey Basson of Shoprite Checkers was, in one financial year, paid R49.7-million in basic pay and a special performance bonus of R50-million.
Some say this is acceptable because business uses its own money, whereas a state organisation uses taxpayers’ money. Let’s take a closer look at this logic.
We are the shoppers and pay high prices for food. The company’s profits come from the high prices we pay so unquestioningly. They also come from keeping many of its workers employed on a casual basis with no decent benefits. They have to come from somewhere. Those like Basson don’t blink. Their consciences do not make them acknowledge that these rules of enrichment are extracting a great social price from us.
When Jorge da Silva took over a café in Muizenberg in 1974, his approach to business, like other small business people, was very different to the dominant ethic today. His son, Nelson da Silva, who continues to run the Majestic, explained: “My father always said, “I’m here to make a living, not a killing.”
Nelson da Silva continues his father’s legacy. I was baffled to find I could buy a cup of coffee for R6 on the beachfront and had asked him to explain. That was a few years ago. Now it is R8 and served with hot milk and sugar.
Perhaps our government should propose a special tax regime for people like Basson, who earn irrational salaries in the public and private sector.
Today, high profits and high interest rates hold us hostage. Davos will only be truly significant if it provides a way out of a set of rules that has evolved over the past 40 years. Until the rules change to curb “the market”, one percent of the world will make a killing and the rest will struggle to make a living.
It’s only when large numbers of people across the world understand this and challenge the economic status quo that this system of global cronyism will be curbed.
Zubeida Jaffer is writer-in-residence attached to the University of the Free State’s communication science department. This article first appeared on thejournalist.org.za.