Davos Man

by Peter S. Goodman

The

shape of our economies is not the product of happenstance. It is the result of deliberative engineering by the people who constructed the system in the service of their own interests. We are living in a world designed by Davos Man to direct ever-greater fortune toward Davos Man. The billionaires have financed politicians who champion the uplifting of the already stratospherically uplifted. They have deployed lobbyists to eviscerate financial regulations, permitting banks to lend and gamble relentlessly, while depending on public largesse to cover their losses.

They have squashed the power of labor movements, shrinking paychecks and handing the savings to shareholders.

Davos Man’s monopolization of the fruits of global capitalism is no accident. He has insinuated into our politics and culture what we may call the Cosmic Lie: the alluring yet demonstrably bogus idea that cutting taxes and deregulating markets will not only produce extra riches for the most affluent, but trickle the benefits down to the lucky masses—something that has, in real life, happened zero times.

Davos Man has pillaged the gains of capitalism, depriving regular people of basic economic security. This has laid the ground for politicians who weaponize fear and foment hate, while prescribing incoherent solutions to legitimate social problems.

in some countries—among them India, the Philippines, and Hungary—democracy has devolved into the mechanism for the pursuit of tribal vengeance, the means through which popular movements wield tyrannical power, attacking liberalism itself.

The greatest beneficiaries of global capitalism applied their winnings toward the ultimate hostile takeover: They captured the levers of democratic governance. They bankrolled accommodating politicians, and then wielded their influence to tilt the workings of capitalism in their favor. They demonized government and embraced privatization as the solution, placing public goods in the hands of profit-making companies. They sold austerity as a virtue and imposed it on government spending, cutting education, housing, and health care. Then they funneled the spoils of this liquidation to themselves through tax cuts.

They deregulated banking, boosting their compensation, while triggering a global financial crisis. Then they bailed themselves out and sent the bill to ordinary citizens.

they poisoned the political conversation with the Cosmic Lie—the fatuous idea that showering the wealthy with tax cuts would trickle benefits down to all.

the capitalism since hijacked by Davos Man is not really capitalism at all. It is a social welfare state run for the benefit of the people who need it least; a sanctuary for billionaires in which systemic threats are extinguished with taxpayer money, while commonplace calamities like joblessness, foreclosure, and the absence of health care are accepted as the rough-and-tumble of free enterprise.

Over the last four decades, the wealthiest 1 percent3 of all Americans has gained a collective $21 trillion in wealth. Over the same period, households in the bottom half have seen their fortunes diminish by $900 billion.

Since 1978, corporate executives have4 seen their total compensation explode by more than 900 percent, while wages for the typical American worker have risen by less than 12 percent.

The billionaires retain a formidable apparatus to fight off attempts to rewrite the rules. They are skilled at striking the pose of responding to societal outrage while protecting an order in which their privileges remain sacrosanct.

right-wing populists like Italy’s Matteo Salvini and Donald Trump, who claimed power by feigning an attack on Davos Man, while actually advancing his supremacy.

Davos Man presents his own story as the narrative of human progress, rendering efforts to force him to share the wealth as attacks on freedom. He has employed the mechanisms of democracy to sabotage democratic ideals.

A half century earlier1, the chief executive officer of the typical publicly traded American company had earned twenty times as much as the average worker. In the years since, the gap had widened exponentially, lifting the CEO’s compensation to 278 times that of the rank-and-file. Tax policies written by Davos Man for his own benefit had enhanced the divide.

the richest four hundred Americans, whose average wealth was $6.7 billion, had seen their effective tax rate cut by more than half since 1962—from 54 percent to 23 percent. Over the same period, those in the bottom half, who earned about $18,500 a year, had seen their tax burden increase, from 22.5 percent to 24 percent.

Major companies had been ruled by an imperative to stay lean as a way to cut costs and reward shareholders, leaving them little margin for error once such a scenario unfolded.

The same year that Benioff backed the special levy to address homelessness in his hometown, his company recorded revenues exceeding $13 billion while paying the modest sum of zero in federal taxes24. Salesforce deployed fourteen tax subsidiaries scattered from Singapore to Switzerland, moving its money and assets around in a masterful display of accounting hocus-pocus25 that made its taxable income vanish.

So-called profit shifting28 has been costing the American Treasury $60 billion a year in lost taxes.

what happens to programs like Medicaid and Head Start—key sources of health care and early childhood education for low-income Americans—when the largest companies pay no federal taxes? What happens to mass transit, to job training, to roads and highways, to public-health research?

“The stark reality is that globalization has reduced the bargaining power of workers, and corporations have taken advantage of it.” This was a point that Stiglitz had been making for years. The global economy was not some product of random events. Its beneficiaries had engineered it to serve their interests.

“The way we have managed globalization has contributed significantly to inequality,” Stiglitz said. “But I have not yet heard a good conversation about what changes in globalization would address inequality.”

Bezos’s near-limitless wealth alongside the desperation of his workers provides a potent illustration of why globalization has come to be depicted as a malevolent force in many countries, a sentiment exploited by political movements offering fake solutions to very real problems.

The three decades that followed the end of World War II did not eradicate deep-seated racial and gender discrimination in the United States. They included a disastrous war in Vietnam and extreme social ferment. Yet within those thirty years, the United States saw broad economic advancement. Tax rates exceeding 70 percent5 for the wealthy coincided with robust economic growth that averaged 3.7 percent a year.

The economist Milton Friedman set the revolution in motion9 in 1970 with an essay in The New York Times Magazine whose title distilled its essential content: “The Social Responsibility of Business Is to Increase Its Profits.” To Friedman, the market was sacred. Left to its own devices, it would determine the best use for investment more efficiently than any bureaucrat or do-gooder interest group. He laid down the intellectual infrastructure for Davos Man, deploying the parlance of economic theory to give license to unmitigated greed. Executives could justify no end of abominable behavior—poisoning the air, accelerating climate change, firing American workers, and moving production overseas—on the grounds that not doing these things amounted to ripping off shareholders. Maximizing profit was not merely okay; it was a moral imperative.

the shareholder was the center of the economic universe. This was the cardinal principle at the heart of globalization as engineered by Davos Man.

The trading system shaped by Morgenthau and his contemporaries at Bretton Woods was not built for the kind of globalization propelled by Friedman’s doctrine. It had especially not been designed for a global

Davos Man’s lobbying pushed corporate taxes lower in the United States, while reducing individual tax rates on income and estates. The billionaires employed teams of accountants who indulged perfectly legal strategies to keep their growing wealth beyond reach of the tax authorities.

In sidestepping the tax collector, Davos Man effectively privatized the gains of the Chinese bonanza, while sharing the proceeds with his fellow shareholders through dividends and soaring stock prices.

Between 1999 and 2011, the shock inflicted by Chinese imports14 eliminated nearly one million American manufacturing jobs, and roughly twice that number if you considered the ripple effects—the

The People’s Republic of China—still nominally dedicated to the Marxist revolution that had founded it—was becoming nearly as unequal as the United States. Between 1978 and 2015, the top tenth of Chinese households15 saw its share of national income climb from 27 percent to 41 percent. Over the same period, earnings for the bottom half dropped from 27 percent of national income to 15 percent—just a tad more than the 12 percent brought home by their American counterparts.

In exchange for this widespread harm, Trump’s trade war16 would bolster prospects for a bare smidgen of the national labor force—the 16 percent of workers without college degrees employed in manufacturing. In short, overwhelmingly white, male factory workers in towns like Granite City would gain a measure of protection at the expense of communities with lower incomes and higher rates of long-term joblessness.

The ultimate culpability fell on Davos Man. He had rigged the system to ensure his further enrichment, while depriving working people of a commensurate share of the gains. U.S. Steel, the conglomerate that owned the Granite City mill, declared a loss of $440 million in 2016. Still, the company paid out $31 million18 in dividends to its shareholders. It provided a $1.5 million salary19 to its president and CEO, Mario Longhi, plus stock-based compensation and other benefits that swelled his total pay beyond $10.9 million.

This was how capitalism worked in the United States. When trouble arose, the consequences fell on working people in the form of joblessness, bankruptcy, and depression. Corporate overseers found a way to add to their coffers no matter what happened.

Davos Man’s tendency to present false binary choices as a defense of the status quo.

In some places, especially Scandinavian countries, those harmed by trade saw the damage limited and repaired by government programs. The state trained workers for new careers when they lost jobs while helping them with their bills while they were out of work. But in the United States, spending on social safety net programs had been gutted as Davos Man shrunk his tax bill. In Denmark27, when the typical breadwinner in a family of four lost their job, they could count on 88 percent of their previous income six months later, thanks to unemployment benefits and other social programs. In the United States, the same family had to find a way to survive on 27 percent of their previous income.

Denmark collected taxes worth about 45 percent of its annual economic output. In the United States, the government was operating with tax revenues worth less than 25 percent of its economy.

With a workforce nearing 1.3 million, Amazon has risen into the second-largest private employer in the United States, behind only Walmart. It has applied its scale toward downgrading wages while squeezing additional productivity out of every hour of labor.

Davos Men like Schwarzman embraced Trump as a way to secure tax cuts and deregulation. White voters broadly flocked to Trump for the same reason that they had tended to vote Republican for a generation—in homage to lean government and low taxes, an implicit rebuke of the welfare state that many white Americans were inclined to see as handouts for minorities, even though whites were the most numerous recipients.

Fiat’s fate signaled that Italy had been conquered by Davos Man. Years of taxpayer rescues and support schemes had subsidized a multinational corporation that now distributed its bounty to shareholders in London, New York, and other faraway centers of affluence, while abandoning the communities and workers that had nurtured it.

simplistic prescription for Italy’s challenges—stop immigration—and his racist appeals to cultural chauvinism ignored the root causes of popular distress: corruption, tax evasion, and austerity. He spared Davos Man blame, while training his wrath on foreigners.

The abandonment of the left could be read as a sign that its program worked only so long as there were gains to distribute. When lean times came—when there were no paychecks to share—the left had no answer, opening an opportunity for the right. But why were there not enough jobs? It had nothing to do with Chinese immigrants filling Prato. They were creating jobs. It had nothing to do with migrants from North Africa, whose arrival came years after Italy descended into a moribund state. The imprints of Davos Man were everywhere—tax evasion, financial shenanigans, the looting of the system by the powerful.

the Brexit campaign was the work of a rogue subset of Davos Men in the hedge fund world who aimed to escape Europe as a means of getting out from under regulations.

the Davos Men who ran global finance, were responsible for the anger that had set Brexit in motion: publicly financed bailouts that spared bankers from the consequences of their disastrous speculation, followed by budget austerity for all.

Osborne had slashed spending on social welfare programs and support for local governments, forcing communities to shutter facilities. He had withheld funds for the nation’s national health care system. And he had cut corporate taxes, while indulging the Cosmic Lie. In short, he had traded the economic security of ordinary Britons for the enrichment of Davos Man.

The Weills and the Dimons shared the sense that the United States was a land of boundless opportunity in which anyone could prosper. They also illustrated a less celebrated truism: American success frequently involved the effective harnessing of elite social networks.

By 2019, the five largest banks22 in the United States controlled 46 percent of all bank deposits, up from only 12 percent two decades earlier. Investors understood that these institutions were Too Big to Fail, meaning systemically important enough that the government would always come running to save them. This allowed them to borrow at cheaper rates, boosting their profitability, lifting share prices, and putting money in the pockets of Davos Men like Jamie Dimon.

Paulson’s old firm, Goldman, recouped $12.9 billion in trading losses from taxpayers via the $182 billion bailout of the giant insurance company, American International Group. AIG also tapped some of the money to pay bonuses to its top executives.

a week after the company received the first $85 billion in rescue funds, it took its executives on a retreat to a luxury beach resort in Southern California, spending more than $440,000, including $23,000 on spa treatments23. That episode enhanced the sense that American capitalism had become a grifter’s paradise. Corporate overseers could engineer a cataclysm that wiped out nearly $8 trillion in wealth, while destroying jobs for tens of millions of people,...