Economic worries and the global elite

By Chrystia Freeland
June 17, 2013

Here’s one sign the global elite is starting to get worried that capitalism isn’t working for the Western middle class. At the TED Global gathering in Scotland’s elegant capital city this week, much of the spotlight was on what’s going wrong with the 21st-century economy.

That matters because the TED conferences are one of the obligatory stops on the itinerary of any self-regarding plutocrat, and in the past that constituency has often preferred its vision of the economic future served sunny-side up. (TED stands for technology, entertainment and design, and is a not-for-profit global conference organization.)

The gloom started with former Prime Minister George Papandreou of Greece. In a remarkably candid and introspective talk, Papandreou offered a mea culpa for his own mistakes and those of the European political elite. He admitted that hardship had been imposed on people who were “in the main, not to blame for the crisis” and accused the European establishment of uncritically, and at great cost, clinging to “the orthodoxy of austerity.”

Small Greece, he argued, had been made the scapegoat for a larger political and economic failure. As Papandreou mockingly put it, Europe chose to point the finger at “those profligate, idle, ouzo-swilling, Zorba-dancing Greeks.” Instead of addressing the harder, underlying issues, the impulse was to say: “They are the problem! Punish them!”

Papandreou is a son of privilege – both his father and grandfather were prime ministers of Greece – but, in a sign of the times, he inveighed against “plutocrats hiding their assets in tax havens” and “powerful lobbies protecting the powerful few.” His comments made an impact partly because he was so open in declaring his own shortcomings. Nor did he shy away from how angry a lot of people are about them.

“It’s no wonder many political leaders, and I don’t exclude myself, have lost the trust of our people,” Papandreou said, in the most affecting passage of his talk. “When riot police have to protect parliaments, a scene that is increasingly common around the world, there is something wrong with our democracies.”

For the chosen few inside the TED hall, Papandreou also inadvertently served as a physical reminder of how bitterly felt the rage is among some of the masses on the outside. Gray, rainy Scotland is a long way from Greece, but even here, Papandreou was greeted by protesters incensed at the pain his austerity measures imposed on his country. The city’s gracious, granite streets were plastered with posters calling on Papandreou to go home and attack austerity across Europe.

That was just a start. A session devoted to “Money” offered more critiques. Didier Sornette, a professor of risk at the Swiss Federal Institute of Technology, took the world’s financiers to task for being so bad at anticipating asset bubbles. Booms and busts, he asserted, are predictable and often controllable, and he offered his own technique for spotting them.

Next up for a flogging were the ratings agencies: Annette Heuser, executive director of the Washington branch of the Bertelsmann Foundation, based in Germany, denounced them as opaque, conflicted and dangerously powerful.

“The sector needs a complete overhaul, not just a trimming around the edges,” Heuser said. “We’ve left the major financial players alone for too long.”

The credit ratings of countries, she argued, need to be redefined from a profit-making business to a public good, and she outlined her effort to create an international not-for-profit organization that could challenge the oligopoly of the ratings agencies.

Most passionate of all was Mariana Mazzucato, a professor of economics at the University of Sussex, in England. Her gripe was with the familiar characterization of the private sector as the sole source of innovation and creative thinking and of the state sector as a Kafkaesque world of inefficiency, bureaucracy and frustration.

The reality, Mazzucato said, is that the state is responsible for some of the most essential, and initially risky, innovations in our world today, ranging from the Internet to “the cool, revolutionary things in your iPhone.” The state, she argued, is a “market maker,” whose ability to take bold, risky bets is critical for economies to grow at the global cutting edge.

Disclosure alert: I was a speaker, too. I talked about my chief obsession, soaring global income inequality, particularly at the very top of the pyramid, and the uncomfortable fact that the same forces that are enriching the global super-elite are hollowing out the middle class in the Western developed economies. Making capitalism work for everyone, and not just the plutocrats, I argued, is our most pressing political and economic problem.

Taken together, and given the gilded venue, all of these comments amount to a significant shift in tone. Charlie Robertson, the global chief economist for Renaissance Capital, the Russian-based investment bank, was moved to post on Twitter, in reaction to the TED lineup, that the “intellectual ascendancy of neo-liberalism since 70s may be in retreat.”

That is probably going too far. But we do seem to be at a turning point, or the beginning of one. Judging by this week in Edinburgh, even the winners in the global economy are beginning to realize that there are a lot of losers, too, and that that’s a problem. You might see that as too little too late; you might also see it as, at long last, a start.

12 comments

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Lets see if I understand this – a group of academics and politicians, who have never created a job in their lives and are supported wholly by the taxes I pay, are complaining that I have failed because I can not make enough money to pay for their ideas? I don’t think they had any private sector presenters there.

Posted by dbrown101 | Report as abusive

“the “intellectual ascendancy of neo-liberalism since 70s may be in retreat.””

Right. Because we you believe we’ve actually been enjoying “capitalism”?

The Western countries are highly controlled, limiting and socialized societies. TED is a wonderful example of how the elites control the narrative of intellectual dialogue and are almost completely blinded to their biases, until, of course, their biases destroy whole countries. God save us from these well educated idiots, including the “reporter” of this “news” story.

Posted by sgarvey | Report as abusive

I wonder if any conference vendor is giving away (ornamental gold plated?) promotional guillotine key rings?

Posted by A_Hick | Report as abusive

I love the fact that Ms Freeland refuses to let this issue lie dormant. The abuse of capitalism poses a greater threat to capitalism than communism. If we allow the structures of capitalism to be manipulated in a way where only a few actually benefit and that is maintained for longer than a generation (and that time is upon us), we run the risk of younger generations deciding that capitalism doesn’t work.

An economic system is only as good as the percentage of people it benefits. I believe that capitalism is the best system for a progressing world, but it has to be structured in a way where the wealth is not just distributed to a few.

I’m also concerned that we’re not considering any possible adverse effects to society when everything is made to serve capitalism rather that capitalism being made to serve the people. We’re to the point now where everything has to have a price tag. The value of something is only determined by what it’s worth in the market place. This isn’t only true for material things. It’s also true for our actions and attitudes. As a result, we value things like family, personal integrity, nature, community, and caring for our fellow man far less than a healthy society should. And it’s only going to get worse because no attention is being given to the detrimental effects of the marketization of every aspect of our lives.

Posted by flashrooster | Report as abusive

Yes, times are changing and new ways of thinking are on the agenda. However, I want to talk a little of cause and effect. Inequality is an effect. Riots are an effect. Bubbles are an effect. Austerity or money printing are effects. The effects are plain to see. What is the cause? While each must do their own thinking I venture that the real causes are as follows: (I) General apathy amongst middle class of 1st World Countries – a TED talk on these issues might get 100 000 hits on Youtube. A dog falling in the pool is sure to crack 10 million, and that is to say nothing of Gangnam style! (II) Government interference in business and vice versa. Government should really stay out of business and this should be constitutionally protected. I understand that they enter this arena with an apparent intent to do good but the end result is asset bubbles, raided bank accounts and eternally revolving doors. (III) Small is beautiful. Decentralize democracy and decision making power. Bring it down is a small level and many of the ‘failures of democracy’ will go away. Of course certain things must still be done nationally (the Military) but allow counties, cities and similar the real power. Also, encourage smaller business through taxation and labor laws. (IV) Ban campaign contributions from companies and from individuals over 1000 Dollars – democracy should not be for sale. (V)Constitutionally limit fractional lending to 2:1. (VI) Limit the size of banks. (VII) Let interest rates float on the open market.

Posted by BidnisMan | Report as abusive

An interesting article, with different perspectives.

Thanks.

Posted by AdamSmith | Report as abusive

@A-Hick said,

“I wonder if any conference vendor is giving away (ornamental gold plated?) promotional guillotine key rings?”

Well said, @A-Hick1 I needed a good laugh. Thanks.

Posted by AdamSmith | Report as abusive

A few thoughts/observations/recommendations… First, please stop railing against “academics” and “intellectuals.” Refer to the book “Idiot America.” As for dealing with causes and effects, while I agree in the concept, you have to understand the depth of the problem. Take a look at “Saving Capitalism from the Capitalists.” As for keeping government out of business, I can only approve of that if other regulators are given full force, e.g. legal standing and the ability to sue to hold businesses accountable. There has to be REAL enforcement at some meaningful level. Finally, consider “What Money Can’t Buy: The Moral Limits of Markets.” Market capitalism simply doesn’t belong in all fora.

Posted by CIbrate | Report as abusive

Wealth inequality is an even bigger problem than income inequality. Taken together, IMO, they are 90% of whats wrong with the world’s economy. The very wealthiest have more money than they can spend in a lifetime. The world is incredibly wealthy, but that wealth is (at this moment) concentrated in only a few hands.

Posted by AllSeeingI | Report as abusive

The greatest benefit to nations is good government. The greatest damage to good government is created by ignored flagrant conflicts of interest. Try to recognize a problem we face which wasn’t created due to allowed flagrant conflicts of interest. …………………….
Hard, isn’t it?

Posted by donee | Report as abusive

…the “intellectual ascendancy of neo-liberalism since 70s may be in retreat.”

I don’t think so.
Neoliberalism is a political philosophy whose advocates support economic liberalization, free trade and open markets, privatization, deregulation, and decreasing the size of the public sector while increasing the role of the private sector in modern society. Kinda sounds like the agenda of the tea baggers, no?

While the author may think; “Making capitalism work for everyone, and not just the plutocrats,…, is our most pressing political and economic problem”. The “problem” is not economic, it is purely political.
In this political climate the supreme court’s one-dollar-one-vote ruling on Citizens United paves the way for the plutocrats to profit from the 1930′s very alive ideals of Neoliberalism.

Posted by MediocreFred | Report as abusive

The problem is that capitalism cannot be made to serve everyone. No matter what is done the plutocrats and their trillion dollar mentors and corporate fronts and irrestible ability to corrupt democratic political systems (they don’t have to control democracy just neutralize it) are non stop 24/7 activities. This means that democracy and democrats and the majority middle class will always be on the defensive to attackers with realistically unlimited funding who never sleep, never stop or even rest and can never be eliminated or neutered. This is ascerbated by the fact that corporatization of the media has concentrated mass media into the sole hands of nameless faceless plutocrats. Powerful economic minorities will always try to frustrate the rule by the majority (democracy) because democracy is a moral undertaking and they are irresolutely amoral as their only value considered before decision or action is dollars and as morality is comprised of human, social and spiritual values – none of which can be measured in terms of dollars – these minority economic elites have zero capability in their active (corporate) sphere for morality and therefore they and corporations must always be actively restrained from taking control. They are like the scorpion in the frog and scorpion ode – “its in their nature” even when it is lethal for themselves, they just cannot resist.

Posted by Barni1 | Report as abusive