Fear in Davos

By Felix Salmon
January 25, 2012

It’s highly unscientific and anecdotal, but the winner by far of the most-talked-about-person-in-Davos award, at least when it comes to people in my earshot, is George Soros.

Soros is out of the investing game, living now as a full-time philanthropist and sage, while still keeping an eye on the fund company which bears his name and which provides him with a ten-digit income each year. Because he doesn’t have a financial book to talk, because he’s happy being brutally honest, and because he’s giving voice to the plutocrats’ darkest fears, Soros seems to encapsulate Davos 2012 like no one else.

Sitting in his 33rd-floor corner office high above Seventh Avenue in New York, preparing for his trip to Davos, he is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says, peering through his owlish glasses and brushing wisps of gray hair off his forehead. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.” Europe is confronting a descent into chaos and conflict. In America he predicts riots on the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether.

No one but Soros will actually say these things, at Davos — but everybody here fears them, which is one reason why we have the slightly ludicrous sight of billionaires bellyaching about the global burdens of inequality.

Security this year is tighter than ever — the first rule of security at these events is that it can only get ratcheted up, rather than loosened at all — and there’s a besieged feeling to this Alpine town I haven’t felt before. The financial crisis concentrated minds and was seen as a big problem to be addressed and even maybe solved. But the current breakdown of trust in global institutions cuts at the heart of the World Economic Forum’s founding principle — that if you get a bunch of important people together in the same place, they can actually make a difference.

There are fewer heads of state here than there normally are; even Bill Clinton is giving Davos a miss this year. And a theme running through many of the discussions so far seems to be the question of how one manages chaos, in a world where the risk of a chaotic breakup of the European Union can be ignored no longer. To take just one example: if you’re a European bank, with loans and funding sources and depositors in many different European countries but just one unified currency, what happens if one or more of those countries decides to go its own way and leave the euro? It’s almost impossible for a bank to prepare for such an eventuality, but it represents a huge legal and financial risk.

The WEF itself, for all its efforts at internationalization, remains a very European organization, and will naturally decline in importance and relevance as Europe fractures and loses its standing on the international stage. Last year, there were crowds around television screens showing live coverage of Tahrir Square in Cairo, as delegates turned into spectators, watching the world change with no regard at all to what the plutocrats might think. This year, the feeling of powerlessness remains. Davos hubris is dissipating, to be replaced by risk management protocols. Europe risks falling apart — and there’s nothing that anybody here can do about it, if it happens. Never have the masters of the universe seemed so very human.

5 comments

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I am not quite old enough to have thoughtful memories the US in the 1960s and early 1970s, where the powers-that-be were thought to be taking away something far more important than economic opportunity (young lives in a largely meaningless war). The Vietnam War protests played against a backdrop of race riots that were at least partially economically motivated, policial protests (like at the Chicago Democratic convention of 1968), and the murder of key public figures such as the Kennedys and MLK Jr.

The point is that we muddled through, and were perhaps stronger for a generation or two because of it. And we did so without the WEF telling the world how to respond. This organization has long been irrelevant in terms of both understanding the problems and providing actionable solutions. It seems merely a way for the elite to gather to feel important.

Posted by Curmudgeon | Report as abusive

I think that Soros speaks openly about another, maybe the biggest, of the Davos-elite’s fears. Paying taxes like the rest of us. I hope some might listen. These Davos attendees, minus the journalists, bloggers, start-ups, scientists, artists, are some of the least likely to be impacted if they paid half their income in tax. Yet is is the journalists, bloggers, start-ups, scientists, artists, who are most likely to have 50% income paid in tax. Davos is a just a social party for the 1337 (who don’t know what that means). I’ve been. It actually has some absolutely awesome parties. You need to gate-crash in many cases, but that’s possible. The skiing should be good this year.

Posted by nicfulton | Report as abusive

Hi Felix, just a few points of fact… We don’t have fewer heads of state than usual at Davos this year; we have around 40, which is more than usual. Our history may be rooted in Europe, but the Forum today really doesn’t fit the description of a “very European organisation”. We have staff from 56 nationalities, offices in New York and Beijing as well as Geneva, and a programme of regional meetings taking place this year in Mexico, Ethiopia, Thailand, China, India and the UAE. You’d be very welcome to come along and blog from any of them.

Posted by CeriParker_WEF | Report as abusive

I’m puzzled by the statement above regarding 50% income paid in tax. While no doubt there are any number of areas that need work with regard to our tax code, I think it helps to operate from fact. So: according to payscale.com, a journalist with 3 years of experience, working in NY, for a news or print company, could expect to make $39k at the mid-point and $47,730 at the 75th percentile. Using the higher number, assuming single, no dependents and standard deduction, that person would pay $5706 in federal tax, $2221 in NYS tax and if in NYC, $1283. That comes out to 19.3% in income taxes; this is probably on the high end, as there may well be the opportunity for itemized deductions or other credits. On top of that there’s a hefty sales tax in NYC of 8.875%, given that likely not all of the income will go toward things that generate sales tax, the % of income that goes toward sales tax is less than this figure. If someone owns a house, of course there’s real estate tax (but then there will be some offset for deductions.) In any case, my point is that it’s hard to see how you get to 50%…

Posted by duniamn | Report as abusive

Our direct taxes (not counting corporate income taxes, business real estate taxes, sales tax, or employer FICA taxes) came in around 25% for 2010. Agreed that it would be difficult to push that to 50% through direct taxes.

Still, if total government spending at all levels is 40% of GDP, then there are likely some people who directly or indirectly end up paying 50%.

Posted by TFF | Report as abusive