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The Specter Haunting Davos – Piketty as ‘Banquo’s Ghost’: Reforming 'the Mercenary Society' via an Energetic Agenda

Christopher Colford's picture



Metaphor of the month, via a deft dispatch from Davos: Thomas “Piketty was not in attendance this year – which was like putting on ‘Hamlet’ without the Prince” of Denmark, quipped Larry Elliott, the economics editor of The Guardian, as he needled ostentatious Davos-goers for only half-heartedly living up to the Davos dictum  of being “ ‘committed to improving the state of the world,’ provided nothing much changes.” 

Let’s shift the Shakespearean citation slightly, from “Hamlet” to “Macbeth”: Like Banquo’s ghost, the specter of Piketty’s analysis of inequality and injustice seemed to haunt many private-sector leaders at Davos this year – and thus the scholar from the Paris School of Economics didn’t need to be present in order to have a powerful impact at this year’s World Economic Forum.

Amid last week's self-exculpatory denialism from the unrepentant-oligarch wing of the Davos Man culture, one could almost hear the apologists for plutocracy and the free-market fatalists joining the conscience-stricken Macbeth in shrieking to Banquo's implacable apparition: “Thou canst not say I did it! Never shake thy gory locks at me!

The Davos 2015 parade of plutocrats may have been worth all the time and trouble, after all – despite its customary spectacles of self-indulgence – if the pageantry helped pique the conscience of some of the One Percenters and their courtiers, at least momentarily. “Most of the conversations between chief executives here are about Piketty-type issues. They talk about things [at Davos that] they wouldn’t be talking about back in the boardroom,” one eminent corporate leader told Elliott of The Guardian. Piketty-inspired concerns about inequality – along with fears of chronic economic stagnation and an irretrievably despoiled planetseem likely to inform this year’s top-level global policy forums, from Addis Ababa in July to the United Nations in September to Paris in December.
 
Signaling that many private-sector leaders have been awoken by, and are responding to, Piketty's landmark analysis of the intensifying concentration of capital in ever-fewer hands – which is provoking a more rigid stratification of society along hardening lines of social class – the World Economic Forum itself set the stage for Davos 2015 by publishing a 14-point agenda for promoting more inclusive growth. That analysis, searching for constructive solutions, is certainly a welcome contribution to the debate. Yet Piketty’s analysis of the widening gaps between the ultra-wealthy and everyone else – with Davos as perhaps an inadvertent self-parody of the cocooned Uber One Percent – suggests that there’s scant hope for mending a torn society unless policymakers enact policy changes on a vast scale: by (among other priorities) adopting greater progressivity in tax rates and enforcing a crackdown on cross-border tax evasion.

(An aside, regarding those who quibble with a point of Piketty-era terminology – and those who have attempted, and have conspicuously failed, to refute Piketty’s logic. Using a chicken-and-egg argument, some theorists lament the Piketty-inspired focus on the term “inequality,” insisting that inequality may be the outgrowth of, rather than the cause of, economic stagnation and social stratification. Fair enough. Yet such casuistry dwells on a distinction without a practical difference. Enacting pro-growth programs to avoid “secular stagnation” would surely be wise policymaking. Yet no serious plan would envision going back to a pre-2008-style “GDP growth at any cost” approach. The global financial crisis of 2008 revealed the recklessness of simplistic gun-the-engine, GDP-uber-alles policies that produce merely unsustainable, low-quality growthToday’s pragmatists, instead, champion a more inclusive economy that eases social divisions and sustains broader opportunity – promoting what the World Bank Group calls “shared prosperity.”)

Judging by Piketty’s esteem among Davos 2015 participants, most leaders of the private sector – all but a recalcitrant few, some of whom dwell on the free-market fundamentalist fringe – have evidently gotten the message (at last): Chronic inequality and stifled social mobility have reached a socially intolerable and perhaps politically destabilizing intensity. Yet if all but an eccentric remnant in the private sector “get it,” do public-sector policymakers – many of whom seem ever-eager to do the bidding of the most self-aggrandizing monied interests? The Davos-style ideal of “capitalism for the long term” is motivated by “enlightened self-interest,” yet many boardrooms – and those politicians who are forever at their beck and call – apparently need still more enlightenment and less self-interest.

Charting the next steps beyond Piketty's “Capital in the Twenty-First Century" – advancing from academic analysis to social action – will be the next order of business in 2015, a year with parliamentary elections in several pivotal countries. Just in time for the post-Davos and pre-election season, a newly published book seems poised to pick up where Piketty left off: emphasizing that society needs a healthier balance between private-sector dynamism and public-sector activism, undergirded by a humane sense that an economy with truly shared prosperity should prioritize social fairness.

With their appetites whetted by early excerpts published this week in The Observer, many admirers of Piketty will be eager to read “How Good We Can Be: Ending the Mercenary Society and Building a Great Country” by Will Hutton, the principal of Hertford College, Oxford. Hutton – for all his gloom about the injustices inflicted on his native United Kingdom over the past 35 years – advances an optimistic agenda that might show the way toward correcting decades’ worth of policy errors.

“Inequality has become a challenge to us as moral beings,” declares Hutton, reinforcing Piketty’s view of a society starkly stratified by social class. A callousness toward social divisions has spilled over from the economic realm into political decision-making, resulting in an “amoral deficit of integrity” – and Hutton is not shy about pointing to a specific turning point, or about naming a specific name.

“Ever since [Margaret] Thatcher’s election in 1979, Britain’s elites have relegated concerns about inequality below the existential question of how to restore our capitalist economy to economic health, a matter deemed to transcend all other considerations,” writes Hutton. “The language of the socioeconomic landscape has been commanded by words like efficiency, productivity, wealth generation, aspiration, entrepreneur, pro-business and incentives. To the extent they are significant at all, preoccupations with inequality have been seen as of second-order importance.”

The “raw trends” of the weakened power of wage-earners and the strengthened dominance of capital-owners – the outgrowth of Piketty’s iconic formula, r>g – “are then exacerbated by the reduction of taxation on capital, companies and higher earners in the name of promoting incentives and 'wealth generation.' " No wonder, Hutton asserts, that the United Kingdom has suffered “a stunning increase in inequality, the fastest in the OECD.”

Readers who were drawn to Piketty’s logic – yet who were left by "Capital" with a despairing feeling of “where do we go from here?” – are likely to warm to Hutton’s work, which extends the logic of his influential 1995 analysis, “The State We’re In.”

“Indifference to the growing gap between rich and poor, in all its multiple dimensions, is the first-order-category mistake of our times," warns Hutton. "No lasting solution to the socioeconomic crisis through which we are living is possible without addressing it.”

Recalling his years of energetic columns in The Guardian and The Observer, Hutton’s activist economic prescription in “How Good We Can Be” seems likely to include a better-focused approach to industrial policy; targeted investment in innovation capacity; pro-entrepreneurship mechanisms to sharpen competitiveness; and pro-active tax policies that ease rather than intensify the wealth divide.

Many of those who missed this year’s Davos triumph of Piketty-style reasoning are now awaiting the arrival of Hutton’s new book on this side of the Atlantic. Piketty scored the scholarly sensation of 2014 with the publication of “Capital.” My early hunch is that Hutton, with “How Good We Can Be,” just might achieve a similar agenda-setting success in 2015.
 

#TakeOn Inequality


 

Weekly Wire: The Global Forum

Roxanne Bauer's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

Discarding Democracy: A Return to the Iron Fist- Freedom in the World 2015
Freedom House
For the ninth consecutive year, Freedom in the World, Freedom House’s annual report on the condition of global political rights and civil liberties, showed an overall decline. Indeed, acceptance of democracy as the world’s dominant form of government—and of an international system built on democratic ideals—is under greater threat than at any point in the last 25 years.  Even after such a long period of mounting pressure on democracy, developments in 2014 were exceptionally grim. The report’s findings show that nearly twice as many countries suffered declines as registered gains, 61 to 33, with the number of gains hitting its lowest point since the nine-year erosion began.
 
Digital Inclusion: The Vital Role of Local Content
Innovations, MIT Press
The journal features cases authored by exceptional innovators; commentary and research from leading academics; and essays from globally recognized executives and political leaders.  The current issue contains lead essays entitled “Building a Foundation for Digital Inclusion”, “Inequitable Distributions in Internet Geographies”, and “To the Next Billion”.  It also includes case narratives entitled “A Mobile Guide Toward Better Health” and “A Social Network for Farmer Training” and more.

Will falling oil prices lead to a decline in outward remittances from GCC countries?

Dilip Ratha's picture
The Gulf region is an important destination for migrant workers and perhaps the largest source of migrant remittances. Some 23 million foreign workers send home over $90 billion in remittances. On average, they make up around 50% of the population in the GCC countries, ranging from 31% in Saudi Arabia to 84% in Qatar (Table 1). Controlling for size, these countries are by far the largest sources of remittances, with an average of 5.7 percent of GDP in 2013 compared with only 0.7 percent in the United States.  

Table 1: Migrants and outward remittances in GCC countries, 2013
 Migrants and outward remittances in GCC countries, 2013

In Uncertain Economic Times, a Chance for Global Breakthroughs

Jim Yong Kim's picture
A shop in Sri Lanka is lighted by solar panels. © Dominic Sansoni/World Bank


​The global economy is growing, but a bout of New Year anxiety has taken hold, posing challenges to our global mission: boosting the prosperity of the bottom 40%, ending extreme poverty by 2030, and avoiding a climate meltdown.

Weekly Wire: The Global Forum

Roxanne Bauer's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

#Davosproblems: The financial crisis isn‘t over, and the inequality crisis is just beginning
Quartz
The World Economic Forum’s annual meeting has kicked off in Davos, Switzerland under the banner of “The New Global Context.” Falling in the long shadow of the financial crisis, the WEF’s theme reflects as much hope as a creeping sense that economic turmoil is the new normal. Some seven years into the current crisis, the participants at Davos are acutely aware that the world economy still hasn’t recovered its past momentum.

The Power of Market Creation, How Innovation Can Spur Development
Foreign Affairs
Most explanations of economic growth focus on conditions or incentives at the global or national level. They correlate prosperity with factors such as geography, demography, natural resources, political development, national culture, or official policy choices. Other explanations operate at the industry level, trying to explain why some sectors prosper more than others. At the end of the day, however, it is not societies, governments, or industries that create jobs but companies and their leaders. It is entrepreneurs and businesses that choose to spend or not, invest or not, hire or not.

Davos: New Briefing on Global Wealth, Inequality and an Update of that 85 Richest = 3.5 Billion Poorest Killer Fact

Duncan Green's picture

This is Davos week, and over on the Oxfam Research team’s excellent new Mind the Gap blog, Deborah Hardoon has an update on the mind-boggling maths of global inequality. 

 
 



Wealth data from Credit Suisse, finds that the 99% have been getting less and less of the economic pie over the past few years as the 1% get more. By next year, if the 2010-2014 trend for the growing concentration of global wealth is to continue, the richest 1% of people in the world will have more wealth than the rest of the world put together.


Measurements of wealth capture financial assets (including money in the bank) as well as non financial assets such as property. It is not just inefficient to concentrate more and more wealth in the hands of a few, but also unjust. Just think of all the empty properties bought by wealthy people as investments rather than providing housing for those in need of a home. Think of the billionaire chugging out carbon emissions flying around in a private jet, whilst the poorest countries suffer most from the impacts of climate change and the poorest individuals living want for a decent bicycle to get to school or work.
 

Funding The Data Revolution

Claire Melamed's picture

A revolution starts with an idea, but to become real, it has to move quickly to a practical proposition about getting stuff done.  And getting things done needs money.  If the ideas generated last year, in the report of the UN Secretary General’s Independent Expert Advisory Group and elsewhere, about how to improve data production and use are to become real, then they will need investments.  It’s time to start thinking about where the money to fund the data revolution might come from, and how it might be spent.

Getting funding for investment in data won’t be easy.  As hard-pressed statistical offices around the world know to their cost, it’s tough to persuade governments to put money into counting things instead of, say, teaching children or paying pensions.  But unless the current excitement about data turn into concrete commitments, it will all fade away once the next big thing comes along, leaving little in the way of lasting change.

Next step for the Data Revolution: financing emerging priorities

Grant Cameron's picture

Last August, the UN Secretary-General Ban Ki-moon asked an Independent Expert Advisory Group (IEAG) to make concrete recommendations on bringing about a Data Revolution in sustainable development.  In response, the IEAG delivered its report, and among other items, recommends, “a new funding stream to support the Data Revolution for sustainable development should be endorsed at the Third International Conference on Financing for Development,” in Addis Ababa in July 2015.

Three Issues Papers for Consultation

To support this request and to stimulate conversation, the World Bank Group has drafted issues papers that focus on three priority areas:

  1. Data innovation
  2. Public-private partnerships for data
  3. Data literacy and promotion of data use

The papers aim to flesh out the specific development needs, as well as financing characteristics needed to support each area. A fuller understanding of these characteristics will determine what kind of financing mechanism(s) or instrument(s) could be developed to support the Data Revolution.


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