Davos: Global inequality is about power, not just wealth

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Global inequality is about power, not just wealth

by Nick Buxton


Making the gap between rich and poor wider: Klaus Schwab, the Chair of the World Economic. (Robert Scoble under a Creative Commons Licence)

Two years ago, Occupy was an expression of how angry people were at inequality. And now, the idea of the 1% is still one of the most important topics in politics. But sometimes, the way they talk about it is very strange. Like last week, when multi-millionaires (who spend $100,000 every year when they go to Davos) said that the difference in incomes is their ‘number one’ worry.

The World Economic Forum (WEF) even seemed to like it when the Pope and Oxfam criticised them; Klaus Schwab, the Chair, agreed that the differences in the world are too large and we need to include more people.

But there was one criticism that the people at WEF did not want to listen to: that they should not assume that they should decide on global issues. The fact that very few people have so much money is only part of the problem (Oxfam’s report said that 85 of the richest people own the same amount of money as half the world’s population).

The bigger problem is the concentration of power. This is created by the concentration of wealth, and it creates more concentration of wealth. If they talk about this, they will have to question their meetings in Davos and the way they have encouraged policies that have made businesses and leaders more powerful in recent decades.

A new report by the Transnational Institute is called State of Power – Exposing the Davos Class. It shows that the widening gap between rich and poor is closely related to an economic system that has given businesses more power than ever before over policy-making. Also, the same system has given more rights to businesses than humans.

Today, 37 of the world’s largest economies are corporations. Walmart, Shell, Volkswagen and others have become modern empires. Their economies are bigger than Denmark, Israel or Singapore. And the power is even more concentrated in the owners of the corporations – 147 companies (or 1 per cent of businesses) control the shares of more than 40 per cent of the world’s transnationals.

Corporations have been able to achieve this power by taking over the state, like a virus infecting a body. Their motivation to make profit is genetic. Corporations have tried at every stage to take away any barriers and help them grow like cancer. As a result there are trade agreements that allow corporations to sue states and the states have no legal help.

The WEF is not trying to fight against this problem and look at the causes of inequality and social injustice; the WEF is supporting it. The Forum proudly says that its members control it: they are ‘1,000 of the world’s top corporations... with more than $5 billion in turnover. These enterprises are among the top companies in their industry and create the future of their industry and region.’

We shouldn’t forget that the idea for the North American Free Trade Agreement (NAFTA) between Mexico, the US and Canada began at Davos. The result (as we know 20 years later) is the terrible problems of sweatshops, environmental contamination, high poverty levels and violence for Mexico.

And if we look at the main corporate members of Davos we can see a history of fraud, tax evasion, human rights abuses and environmental degradation. None of this stops them having free access to Davos and governments worldwide.

Klaus Schwab doesn’t ask questions about the responsibility and effect of these businesses. But he says they should have even more power to decide public policy. In a Foreign Affairs article in 2008, he said we need ‘global corporate citizenship’. He said that companies ‘are stakeholders together with governments and civil society’.

Schwab says that it is best to deal with the world’s complex problems through ‘multi-stakeholderism’. This means we would have transnational corporations together with a few powerful governments, carefully selected ‘thought leaders’ and invited members of ‘civil society’. The power balance of this multi-stakeholderism is clear in the group at Davos – a model for the global governance that Davos wants in the future. This year, 1,500 business delegates went to Davos, but there are only 37 NGO leaders (mainly from large NGOs) and 10 labour leaders.

But because of powerful political support, Schwab’s suggestion of government led by businesses is getting more popular. In 2009, taking advantage of the global crisis, WEF started the Global Redesign Initiative (GRI). The aim of this was get all stakeholders to talk about how international institutions should change to help with the problems we have now.

Its final report suggests we should have a stakeholder approach in every aspect of public policy. It says we should not have agreements between governments, international frameworks and laws that restrict corporations. Instead, we should have voluntary codes of conduct and soft law. The theme of this year’s WEF, ‘The Reshaping of the World’, is developing this proposal.

The people at Davos are trying to concentrate political power even more. This takes us completely in the wrong direction for fighting against the social and ecological crises we have now. Susan George said, ‘Democracy has not developed as fast as globalization; nationally and internationally, the leaders make decisions without the agreement of the people.’

Davos says it is the forward-thinking, enlightened, socially responsive side of business – but it is basically part of the problem, not part of the solution. The members have been forced to think about inequality because of the power of popular movements around the world. But the things the members do are making the inequality greater.

Nick Buxton is the communications manager at the Transnational Institute.