By Zubeida Jaffer
Why is there such a fuss about the importance of the World Economic Forum? The annual meeting at Davos will only ever make a difference to our lives if the rules of economic engagement are changed. And there was no substantial talk of that in 2017.
Allow me to explain. Those who gathered at Davos represent one percent of the world’s business leaders who essentially determine the rules of doing business. Government delegations attend to provide assurances that these rules apply to their legal systems and in the hope that some benefits will come their way.
These first world business and political leaders have fueled a world economic order that has thrust great inequality on all of us. According to Oxfam’s report, ‘An economy for the 99 percent’, the gap between the rich and the poor is far greater than had been feared. The report shows that eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity. Last year, the Oxfam report suggested that 62 billionaires owned the same wealth as the poorest half. They disclosed this year that the figure would have been nine and not 62 if they had access to new and better data on wealth distribution especially in India and China.
The report further details how big business and the super-rich are fuelling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics.
In 2015, an AU report stated that Africa was losing more than $50bn dollars every year in illicit financial outflows as governments and multinational companies engage in fraudulent schemes aimed at avoiding tax payments to some of the world’s poorest countries. The report released by the African Union’s (AU) high-level panel on illicit financial flows and the UN economic commission for Africa (Uneca) confirmed that illegal transfers from African countries have tripled since 2001, when $20 bn was siphoned off.
Those who gathered at Davos this year are aware of these issues and discussed them but there is no decision to change the rules so that we manage the world economy for the benefit of all and not just a fortunate few.
Some of you who are reading this article will think that this is all inevitable because we have chosen an economic system where the market reigns supreme. We would rather have this than a socialist system where the governments run businesses. But here you are wrong. It is not a matter of whether we choose capitalism or socialism. It is a matter that we craft a system that is fairer to all.
It is a matter that requires us to realize that the changed rules of engagement took root through the neoliberal doctrine of rampant financialisation of the global economy. This extreme form of plunder has evolved when regulation around trade and the market were systematically lifted giving free reign to global companies.
Before this, trade and the market were mostly part of the social eco system where the well-being of the society was considered. Take the post-world war 2 years, huge investments were made in Europe to rebuild and provide countries with a level of comfort through the US led Marshall Plan. Health services were free and those who did not find work were entitled to state support under extensive welfare state regimes.
About 40 years ago, under the leadership of Margaret Thatcher and Ronald Reagan much of this philosophical position was swept away. They argued for the free reign of business without government regulation. The word capitalism was replaced with the notion of “the market”. So if this was what “the market” wanted, we all had to obey.
Suddenly the market became the explanation for many decisions that were against the interests of ordinary people. Through the financial sector, the market was able to win the right to make profits at levels never seen before. The financial sector was run as a massive casino encouraging gambling on a large scale. It was not the sale of goods and services that was central to making money. It was having money to invest in the financial markets that now give the greatest returns.
This resulted in two major developments, the centrality of profit for the shareholder and the obscene enrichment of CEOs. This coincided with a burgeoning of globalization that many blame for the financial crises.
Chinese leader Xi Jinping, the first Chinese leader to attend the WEF, defended globalization at Davos and said it was excessive profits and not globalization that caused financial crises.
Efforts to curb excessive profits have made slow progress in the world. The EU has been successful in challenging exorbitant bonuses paid to executives but have made little progress with imposing a price ceiling on executive remuneration.
Our CEOS are the seventh best paid in the world. I wonder how they sleep at night when millions go to bed hungry at night. Just recently Mr Whitey Basson of Shoprite Checkers was paid R49.7 million in basic pay and a special performance bonus of R50 million in one financial year.
Some argue this is acceptable because business uses its own money while a state organization uses taxpayer’s money.
Lets take a closer look at this logic. We are the shoppers and pay high prices for food that we buy. The company’s profit comes from the high prices that we pay so unquestioningly. It also comes from keeping many of its workers employed on a casual basis with no decent benefits. It has to come from somewhere. And those like Mr Basson don’t blink. Their consciences do not make them acknowledge that these rules of enrichment are extracting a great social price from us. Perhaps our government should propose a special tax regime for people who earn irrational salaries in both the public and private sector.
When Jorge Da Silva took over a café in Muizenberg in 1974, his approach to business, like other small business people, was very different to the dominant ethic today. His son, Nelson da Silva, who continues to run the Majestic, explained: “My father always said, “I’m here to make a living, not a killing.”
Nelson da Silva continues his father’s legacy. I was baffled to find I could buy a cup of coffee for R6 on the beachfront and had asked him to explain. That was a few years ago. Now it is R8 served with hot milk and sugar. What more does one need on a cold day when strolling down the beach?
Today high profit and high interest hold us all hostage. Davos will only be truly significant if it provides a way forward out of a set of rules that have evolved over the past 40 years. Its only when large numbers of people across the world understand this and challenge the economic status quo that this system of global cronyism will be curbed.
Until the rules change to curb “the market”, the rich will get richer and most of us will get poorer. One percent of the world will make a killing and the rest will struggle to make a living.