Davos Notebook

Three-and-a-half questions for the Davos gurus

DAVOS/For the last several years, the World Economic Forum (WEF) has published an annual report on global risk, as part of the run-up to the storied annual meeting in Davos. The 50-page report makes for gloomy reading: it is a dense collection of some of the major threats to the world’s security — from asset price collapse to weapons of mass destruction — and the interconnections between them. And they’re all carefully mapped in terms of their perceived likelihood and perceived economic impact.

You’ve got hand it to WEF: their report is thorough and sobering, and makes a great reference tool for later in the year. Last year’s report said that “there is a rising risk of sovereign defaults,” and that proved more accurate and expensive than anyone wished.

Yet for all its insistence on a big-picture, global perspective, the WEF risk report can seem internally contradictory or just hollow, as if pieces of cloth were produced in separate quarters with no one sewing them into a coherent quilt.
And so, for those who want the big picture to be even bigger, here are three-and-a-half major questions raised, but not answered by the WEF risk report.

Why do global institutions break down?
The WEF is very worried about the failure of “global governance.” This is unsurprising, since the WEF is very similar in outlook to other global-reach institutions, like the IMF, World Bank, United Nations, etc. The report finds “a growing sense of paralysis in responding to global challenges,” and cites as examples ineffective UN climate change negotiations; the stalled Doha round of trade talks; lack of progress on some UN Millennium Development goals; the ineffectiveness of Security Council reform and moves to curb nuclear proliferation.

Yet the WEF is much less clear about what is causing these institutions to fail. It is temperamentally prone to blame individual nations, and in some instances (such as nuclear proliferation), that may well be appropriate. But what about trade and currency policy? The report acknowledges that enforced economic globalization in emerging markets might harm employment and “potentially threaten social stability.” Why, then, should emerging nations want to inflict political and economic damage on themselves that their more enlightened developed brethren would never accept? Another way of saying this: maybe global governance isn’t working because the cures global institutions offer (and sometimes enforce) are often worse than the disease.

from Chrystia Freeland:

The new global elites

The January/February issue of The Atlantic features Chrystia's cover story, "The Rise of the New Global Elite." The piece discusses the rise in income inequality over the past few decades, how today's tycoons are more likely to be self-made and cosmopolitan than the plutocrats of the past, and how the new elite have more in common with the nouveau riche in emerging markets than with their own countrymen.

Chrystia was on Morning Joe this morning to preview the article along with James Bennett, The Atlantic's editor-in-chief. Here's the video of their conversation:

And, here is an excerpt from Chrystia's piece in the Atlantic:

Before the recession, it was relatively easy to ignore this concentration of wealth among an elite few. The wondrous inventions of the modern economy—Google, Amazon, the iPhone—broadly improved the lives of middle-class consumers, even as they made a tiny subset of entrepreneurs hugely wealthy. And the less-wondrous inventions—particularly the explosion of subprime credit—helped mask the rise of income inequality for many of those whose earnings were stagnant.