The World Economic Forum is about to begin again in Davos, Switzerland but Davos Man, that quintessential pan-national, pro-market, global leader of finance and business is all but dead. First created by that great political analyst Samuel P. Huntington, Davos Man may be walking and talking in Davos next week, but he is stricken with a terminal irrelevance that infects both him and the conference that once celebrated his masterly success. The Great Recession of the past two years is revealing that globalization, the economic ideology of Davos Man, was never more than a gloss over nascent nationalism. In the end, it is the nation-state and the local taxpayer that is saving the banks and businesses run by Davos Man from total destruction. The Great Recession is also showing that Chicago-School efficient market theory is as false an economic belief system for the global economy as it is for national policy. While globalization has clearly improved the lives of millions of Chinese, we can now see that it has also led to the immiseration of millions of middle class and poor Americans. The theory that efficient markets within a free trade system would benefit ALL participants is now proven wrong.
Let’s check the metrics. Peel back the huge debt and asset inflation (as the Great Recession has) that drove economic growth and prosperity for the past 20 years and you find this: real US family income has not grown in two decades and is down 4% for the past 10 years. Real earnings of full-time US workers with Ph.ds has fallen by 10% since 1990. The US trade surplus of high tech products has been falling for nearly 20 years and turned into an actual deficit—now running at $8 billion a month—that is getting worse. The US stock market, that measure of corporate growth and economic prosperity, has stagnated for well over a decade. Today, one out of 8 Americans is on government food stamps and nearly 20% of working age Americans are unemployed, underemployed or so discouraged they’ve left the work force.
Then there is inequality. The populist rage that is upending politics in the US is a reaction, in large part, to the widening inequality that globalization has brought to the West. Income inequality has widened sharply since the 1970s—as globalization began to pick up speed. A huge portion of the profits generated by global banks and corporations have been captured by none other than Davos Man, the top 1% of society.
Davos Man now stands naked in front of the world, devoid of the mantel of superior economic theory and absent the technical (certainly financial) skills required to guide the world economy. Alan Greenspan has admitted publicly that he is utterly shocked that the markets did not self-correct--that efficient market theory didn't work. We now need to take the next step and admit that globalization, based on efficient market theory, doesn't work either for millions of people.
It might have been different for Davos Man. If the US had invested more in educating its children to boost their skills and competitiveness; if the US had changed its immigration policies to attract the more educated and entrepreneurial; if the US had been able to stop Asian currency and trade mercantilism; if the US had taxed its people to pay for foreign wars, big tax cuts and higher government expenditures instead of borrowing abroad--a lot of "ifs"-- globalization and Davos Man might have been saved.
Alas, it's too late. I went to the World Economic Forum for 12 years. I enjoyed the networking, the learning and the partying. But I won't be going back to Davos next week. Davos Man has nothing left to say.