The czars and kings of Europe could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement. The Davos mentality still cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions.
The annual winter parade of the puffed-up peacocks of privilege has come and gone at Davos. The dire state of the world once again showed the courtesy not to intrude upon the gathering of major élites from business and government, permitting them to descend in their private jets and frolic at the best-catered parties in Europe. Reality, as it generally does at the World Economic Forum each January, seemed to pass by, as well.
Last year, they missed the extent of the global financial meltdown – a big miss given that it is widely seen as the worst crisis in 70 years. This year, they had trouble seeing what reforms are necessary to prevent such calamities in the future – or even that any are necessary. In 2000, Enron CEO Ken Lay declared to his fellow Davos participants that his company was the “21st century corporation.” In 2003, the gathering was abuzz over U.S. Secretary of State Colin Powell’s rock solid assertions that Saddam Hussein controlled “hidden weapons of mass destruction meant to intimidate Iraq’s neighbors.” In 2008, former Treasury Secretary John Snow announced at Davos that any U.S. recession would be ”short and shallow.”
Reality, to those inclined to view it from the cloud-fringed temples of great heights or beyond the attended gates of deference and privilege, often appears fuzzy and ill-defined.
As it was with the monarchs of early 20th century Europe who presided over one calamity after another, those responsible for the failures and excesses that led up to the great financial crisis of the 21st century lack the vision to figure out the solution. The czars and kings of that earlier era could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement. The Davos mentality cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions that stems directly from the abuses, failures and negligence of those in charge of the world’s financial ship. Like myopic despots who seldom bothered to read history, and inevitably stumbled into catastrophe over its unheeded lessons, these modern misguided princes of finance have already forgotten the events of the past year and seem headed for further anticipated collisions with the future.
Instead of striking an uplifting tone that shows the titans of Wall Street and its counterparts (or, perhaps, counterparties) actually “get it,” the spirit of Davos produced the grating sound of ingratitude and obliviousness. Josef Ackermann, CEO of Deutsche Bank AG, talked about the “noble role” of banks and announced that the world should “stop the bank bashing, the blame game.” Mr. Ackermann was chairman of this year’s forum at Davos. Billionaire Stephen Schwarzman, a regular attendee at Davos, warned there could be costs to the public’s jaundiced attitude toward the banking system. “My biggest concern is that, as a result of either proposals or tone, that financial institutions are going to feel under siege and their [sic] going to retreat with their extension of credit,” he told CNBC. Lord Peter Levene, chairman of Lloyd’s of London, mocked government’s role in bailing out the financial system: “I’m from the government — I’m here to help. You guys in the industry don’t know what to do, so we’re going to fix it for you.”
How quickly they forget. Citigroup, Bank of America, Wells Fargo, Bear Stearns, Lehman Brothers, Merrill Lynch, UBS, RBS, Lloyds, Fannie Mae, Freddy Mac, AIG and so many more, were all crumbling under the massive weight of writedowns and losses and a withering credit market that only government was able to repair.
Change, especially for those in the Davos world, often comes not in the reform that reality demands, but in the fantasy that overly indulged egos command. Not surprisingly, there is a resistance in the world of high finance to adopting or supporting widespread financial reforms. A reliance upon extended methods of liquidity and a zero Fed funds rate seems ingrained in business plans. And in a culture where obsession with bulging bonuses still prevails, you have to wonder what kind of screwy financial Frankensteins are being assembled that may once again place institutions, and the public, at risk. Paul Volcker, please take center stage.
Perhaps the irony is not entirely lost on the world that while many of its citizens shell out for the misjudgments of these Alpine participants, they also pay, as taxpayers, shareholders and customers, for this annual march into the snow drifts of élite folly.
When it comes right down to it, there are few thoughts the big players mount at Davos that could not be distilled into a simple Tweet. Their use of technology and methods of transportation have changed, but in most other ways they are little different than the princes and grand dukes who trotted themselves out every so often to remind the people that they still existed, confusing – as receding fragments of supremacy so often do – vanity with relevance.
The World Economic Forum may have found its way onto YouTube. But in most respects it is still a silent movie involving people whose attire might seem modern but whose sense of originality and connection with much of the world is as unfashionable and out of date as the Hapsburg dynasty. One might have thought that the most costly financial crisis since the 1930s and the highest unemployment rates in decades would have produced a paradigm shift at Davos, too. Instead, the world was treated to an encore performance of over-hyped élites desperately struggling to cling to any vestige of credibility and respect. They have forgotten even the most recent past. They have shown little vision for of the future. This is not leadership. It is an outrage.
As in previous years, we have included a YouTube film that gives an uncanny portrayal of the Davos mindset of another era.