Felix Salmon

So I’ve arrived in snowy Davos, where with typical modesty the miscellaneous moguls will attempt to “Improve the State of the World: Rethink, Redesign, Rebuild”. (Seriously, that’s the official slogan this year.) The official “purpose” page is full of claptrap of the highest order — a “Network of Global Agenda Councils” “driving the rethink” over here; “an unprecedented multistakeholder dialogue ” over there; and on top of it all, naturally, “a collaborative platform that integrates Web 2.0 technology”.

Or, to put it another way, there’s no indication whatsoever that anybody at the World Economic Forum actually Gets It. Davos is great at throwing a couple of archbishops onto a panel with Niall Ferguson entitled “Restoring Faith in Economics” (geddit?) — but what I see none of in the programme is an indication that much if not all of the crisis was caused by the arrogance of Davos Man and by his unshakeable belief that the combined efforts of the world’s richest and most powerful individuals would surely make the world a better, rather than a worse, place. Excitement about the opportunities afforded by the Great Moderation (as the credit bubble was known before it burst), financial innovation, the rise of the bankers — Davos was ahead of the curve on all of them. And as the annual symposium of smug sermonizing became increasingly established, it served as a crucial reinforcement mechanism.

It’s not like CEOs and billionaires (and billionaire CEOs) need any more flattery and ego-stroking than they get on a daily basis, but Davos gives them more than that: it allows them to flatter and ego-stroke each other, in public. They invariably leave even more puffed-up and sure of themselves than when they arrived, when in hindsight what the world really needed was for these men (it’s still very much a boys’ club) to be shaken out of their complacency and to ask themselves some tough questions about whether in fact they were leading us off a precipice.

Now that it’s clear that many of them were leading us off that cliff, there’s still no sign of contrition, although you can be sure that a few fingers will be pointed at various past attendees who aren’t here to defend themselves. Is anybody here seriously examining the idea that Davos was institutionally responsible, at least in part, for the economic and financial catastrophe which befell the world in 2008? I’ll be on the lookout for that over the next few days. But I suspect that the preening potentates will be far too busy giving themselves the job of rebuilding the world to stop and ask where they went wrong in building the last one, and whether they might actually owe the rest of us a large collective apology.

Justin Fox kicks off his new HBR blog with a cracking post on the jurisprudence of treating corporations as persons. If John Roberts really believes that shareholders control corporations, he says, that’s all the more reason not to allow corporations the rights of individuals — and he uses Milton Friedman, of all people, to make his case:

The “one and only social responsibility of business,” economist Milton Friedman wrote back in 1970 in a New York Times Magazine essay that launched a thousand arguments, is “to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game …” Friedman contrasted this with the multiple responsibilities that an individual — such as a corporate executive — might have “to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country.” …

The individuals who make up the electorate in the United States are, as Friedman described, beings of many facets — their actions and their views shaped by pecuniary self interest but also by values, beliefs, and loyalties that might conflict with that self interest. The ideal for-profit corporation, on the other hand, is out to do nothing but make as much money as it can “within the rules of the game.” It is supposed to behave in a fashion that for an individual would probably be described as psychopathic. And if corporations are allowed to play a decisive role in shaping the “rules of the game,” we have effectively put the inmates in control of the asylum…

If corporations are persons, they are — if they behave as Milton Friedman wanted them to — persons with mental and emotional impairments so severe that any decent judge would feel entirely justified in declaring them incompetent.

There’s a connection, here, to the increasingly conventional-wisdom argument that walking away from a mortgage is perfectly fine since the banks who lent the money in the first place wouldn’t hesitate to behave in exactly the same way. But if Justin is right, we’d have to be psychopaths to treat corporations as our role models in such matters.

Justin’s timing on this is impeccable, as the world’s plutocrats start firing up their private jets to fly in to Davos and pat each other on the back for their efforts to “improve the state of the world” with their “double bottom-line” or even “triple bottom-line” endeavors. It’ll be interesting to see what Davos Man thinks about the ruling in Citizens United vs FEC: the general default position at the alpine gabfest is that successful corporations, acting in their own self-interest, are perfectly positioned to make the world a better place. Maybe giving them enormous influence in US elections will simply help in terms of steering the country towards more enlightened policies!