Davos Man

by Peter S. Goodman

Another major component of the CARES Act was a $349 billion scheme—later expanded to $660 billion—known as the Paycheck Protection Program. Banks distributed this money, dispensing loans to small businesses. Under the rules, much of this debt could be forgiven provided that employers avoided layoffs. In theory, small businesses could apply directly to the government for a loan. But in reality, that was a bit like phoning your local IRS office to see if a kind staff member could maybe pop over after work to help you sort out your tax forms. The Feds lacked the people to run the program, making the government reliant on large banks to distribute the money. In determining who got loans, banks catered not to societal needs, but to their shareholders: They did business with those who tended to boost their bottom lines. Getting a loan generally required a relationship with a bank like JPMorgan Chase, which was set up to push through applications in bulk.

A publicly traded Indiana-based maker of sporting goods24 that already had a $50 million credit line from JPMorgan Chase wound up with a $5.6 million loan. Major restaurant chains, pharmaceutical companies, and hotel franchises got loans without having to do anything, while businesses that lacked an established connection with America’s largest bank got free enterprise. Which is to say, very little. Businesses owned by African Americans, Latinos, and women were largely shut out. The program would ultimately distribute 650,000 loans worth at least $150,000 each. Only 143 Black entrepreneurs25 received loans of that size.

Mnuchin had promised that the “overarching focus” of the program was “keeping workers paid and employed.” But several major companies took the money and then fired their workers, while a parade of unsavory characters walked away with loans. A luxury hotel in San Diego26, the Fairmont Grand Del Mar, received $6.4 million but then shut down and stopped sending paychecks to hundreds of workers.

For utter shamelessness, it was difficult to top the financial players who had taken control of large swaths of American health care. Having rendered the system vulnerable to the pandemic, they exploited the resulting disaster as an opportunity to extract rescue money. In March 2020, Steward Health Care, a chain of hospitals owned by the private equity giant Cerberus Capital, threatened to close a facility north of Philadelphia unless the state of Pennsylvania handed over $40 million.39 The firm, whose chairman was former vice president Dan Quayle, was in control of $43 billion’s worth of investments. Its cofounder and co-CEO, Stephen A. Feinberg, boasted a net worth estimated at $1.8 billion. Yet the company insisted that it required an infusion of state relief, or the thirty thousand people of Easton,

One of the country’s largest hospital chains, Providence Health System, secured grants exceeding $500 million43, despite paying its CEO $10 million in 2018, and even as it boasted almost $12 billion in cash.

The Cleveland Clinic carried a reputation as one of the best institutions in the United States, an innovator known for elevating the quality of care. In the pandemic, it distinguished itself as something else—an operator on the make for bailout funds, and a Davos Man collaborator. It tapped the government for $199 million44 in bailout funds, even as it sat on $7 billion in cash, while generating $1.2 billion in investment returns. It had distributed $28 million to investment advisers to manage its portfolio.

canny investments in lawmakers yielded valuable dividends. The chairman of the House Ways and Means Committee, Richie Neal, a Massachusetts Democrat, scotched a proposal that would have greatly restricted surprise billing via the tried-and-true legislative strategy of advancing his own, weaker bill. In place of price regulation, he substituted an arbitration system to settle billing disputes. The arbitrator would use as a reference point the rates paid in recent years—effectively locking in the jacked-up fees extracted by the private equity companies. And even that bill was delayed by a year. This was constituent service, Washington-style.

The Fed’s money was certain to land in these BlackRock-controlled funds. BlackRock itself would decide which ones and how much. This setup violated a basic sense of fair play. In the same way that a mayor should not be able to steer a city contract to a company controlled by his family, the Davos Man overseeing taxpayer money in an emergency should presumably find some other place to park it than in his own company’s funds.

In slashing the corporate tax rate, President Trump had enabled private equity players to ditch their previous structures as so-called partnerships—which had been set up to shield earnings from the tax collector—while converting themselves into ordinary corporations13. This had unlocked a lucrative world of new investors such as mutual funds. They had previously been shut out of investing in private equity because of the complex tax filings involved in dealing with partnerships. Blackstone’s conversion to a regular corporation had produced a surge of money. By the end of 2019, with Blackstone’s shares soaring, Schwarzman’s net worth14 had climbed to $19 billion, up from $13.2 billion only eight months earlier. Schwarzman had shared the windfall with the Republican leadership who had enabled it. McConnell’s primary fund-raising vehicle, the Senate Leadership Fund, was brimming with $20 million in contributions from Schwarzman alone.

Schwarzman had allegedly used his private jet to transfer cash from the taxpayers of Kentucky into his own pockets. He had supposedly deployed the plane to fly Blackstone’s agents to Kentucky for meetings, and then billed the state for the cost of the flights. The tab had allegedly exceeded $5 million a year.

It was a devastating claim—an accusation that Schwarzman had pillaged Kentucky’s retired civil servants. He had used the proceeds to bankroll the Davos Man collaborator who ran the Senate, who was in turn applying his power to deny aid to the people of his own state in the middle of a catastrophe.

members of the billionaire tribe were not satisfied with merely profiting from the opportunities presented by an epochal disaster. They sought to exploit the pandemic as a chance to demonstrate their moral underpinnings—a useful device in the reach for fresh gains.

heard with growing fervor from Davos Man, the idea that the pandemic was a great unifier, a collective experience that diminished the importance of wealth disparities, racial divides, and other distinctions by reducing all of humanity to its most elemental state—one species rendered vulnerable by a virus that treated everyone equally.

The facile notion that the pandemic was an equal opportunity menace was belied by the simplest observation about who was delivering the packages, who was stocking shelves at grocery stores, and who was emptying bedpans in nursing homes, where senior citizens were dying in alarming numbers. In the United States, women, Blacks, and Latinos were prominently overrepresented in such jobs, just as they were overrepresented among the ranks of the dead. In Britain, people of Caribbean and African descent were suffering death rates double and triple those of whites despite the country’s socialized health care system, which offered free care to all.

In the twenty-seven states4 that lifted moratoriums on evictions over the course of 2020, people died of COVID-19 at more than one and a half times the surrounding rates.

As tens of millions of ordinary Americans lost their jobs, the value of Salesforce shares climbed, lifting Benioff’s net worth from $5.8 billion to $7.5 billion by the fall of 20206.

“To prosper over time12, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he wrote.

The financial press christened Fink “the new conscience of Wall Street.”14 But he wasn’t calling for do-gooder charity. He was arguing for a sharpening of accounting standards to fully capture risk.

BlackRock had joined a body called Climate Action 100+, a group of money managers that collectively controlled more than $40 trillion in investment. It aimed to force fossil fuel producers to publicly commit to plans to reduce carbon dioxide emissions. Yet BlackRock’s funds held more than $87 billion’s worth of shares16 in companies that were in the group’s crosshairs, among them BP, Shell, and ExxonMobil. And BlackRock had repeatedly voted against resolutions proposed by the body seeking to impose clear targets for progress.

Marriott had earned more than $3.1 billion over the past two years. Contrary to Sorenson’s talk about investing in his people, he had pursued the immediate gratification of its shareholders. He had plowed Marriott’s profits plus debt toward buying more than $5 billion’s worth of its own shares, leaving minimal reserves to weather the crisis that was rapidly unfolding. This was Davos Man’s standard mode. Even as Dimon campaigned for stakeholder capitalism via the new mission statement, he and the rest of the Business Roundtable endorsed share buybacks as a means of “making capital markets efficient”—finance-speak for using money to sate investors, rather than wasting it on wages.

Between 2017 and 2019, the companies that comprised the S&P 500 stock index had spent a total of $2 trillion to buy back their shares25. These buybacks had sent share prices higher,

Sorenson indulged the ritual of sacrifice. He was foregoing his salary—$1.3 million annually—in solidarity with affected workers. But he said nothing about his stock-based pay, which had exceeded $8 million the year before, or the cash incentive plan that netted him $3.5 million.

Marriott followed through with paying out scheduled dividends, handing a fresh $160 million to shareholders—enough to employ more than five thousand maids for six months.

You could call hotel maids “stakeholders” or “highly valued associates” or whatever you pleased, but when the bottom line was under attack, they became costs to be ruthlessly eliminated.

If the last half century of American capitalism had proven anything, it was that one special stakeholder—the shareholder—could prosper spectacularly at the direct expense of everyone else.

Milton Friedman’s argument that we need not worry about racial discrimination in the workplace, because the free market would prevent it. Companies that limited their access to talent would be punished. American capitalism had since demonstrated that companies could survive—could, in fact, wildly enrich their shareholders—while neglecting to make their workforces remotely representative of society.

why was the wealthiest, most powerful country on earth dependent on the charity of a profit-making software company to outfit its medical personnel with basic protection in the face of a pandemic? Part of why individuals like Benioff could crow about giving back was because of how comprehensively they had taken to begin with. They had benefited from public goods financed by taxpayers—the schools that educated their employees; the internet, developed by publicly funded research; the roads, the bridges, and the rest of modern infrastructure, which enabled commerce—and then deployed their lobbyists, accountants, and lawyers to master legal forms of tax evasion that starved the system.

Under pressure, Amazon announced that it would provide up to two weeks of paid leave to employees ordered into quarantine by a doctor. Even then, some Amazon workers reported not receiving the money9. In withholding paid sick leave, Amazon was not merely exploiting a hole in American law. It was applying its corporate muscle to keeping that hole wide open. Amazon outsourced the dirty work10 to a host of trade associations—the U.S. Chamber of Commerce, the National Retail Federation, the National Federation of Independent Business, and the Food Marketing Institute. All reported lobbying on paid sick leave policies in the Families First Act. So did Dimon’s shop, the Business Roundtable, despite its public championing of stakeholder capitalism.

In several states, Amazon workers earned so little that many qualified for food stamps—an effective subsidy from the taxpayer that allowed the company to pay poverty-level wages.

even as Amazon laid claim to a halo, the company was profiteering off the disaster: It was jacking up prices for the very goods it was supposedly prioritizing, the watchdog group Public Citizen later revealed.

Amazon charged $39.9912 for a pack of fifty disposable face masks that it usually sold for $4. Amazon demanded $7 for antibacterial soap that was normally $1.49.

classic Davos Man evasive maneuver—deploying data to project an air of authority in an effort to shut down a damaging inquiry.

From its inception, Amazon had been devoted to enriching shareholders through extreme vigilance against costs.

Bezos’s obsessively systematic approach to every facet of his company made him a revered figure among the shareholder class, a case study to be analyzed at business schools.

Amazon was also caught producing and distributing television segments touting the company’s achievements28 in “keeping its employees safe and healthy,” while passing them off to content-hungry local television stations as real journalism. At least eleven stations aired the packages, with their anchors reading the identical scripts word for word. It made for a fitting tribute to stakeholder capitalism—official words of corporate empathy broadcast in unison, while the cameras cut away from protesting workers massing in Amazon warehouse parking lots.

Profit-minded interests had turned the health care system in the region of Lombardy—Italy’s wealthiest—into something more like a business than a public enterprise organized to protect lives. Over decades, opportunists had privatized the system, yielding lucrative opportunities for themselves, while weakening its capacity to furnish basic medical care.

Unlike in the United States, where the vulnerabilities of a world-class medical system could be pinned directly on monied interests, Europe’s tragedy was the result of a host of overlapping elements and policy decisions, with the blame less easily affixed to individuals. Throughout Europe, national health care systems were the rule, ensuring that anyone could access medical care—a stark contrast to the United States. But the common backdrop was scarcity, the result of Davos Man’s success in limiting his tax burden, combined with the injection of the profit motive.

“If you consider profit to be the endgame of health care instead of health, some people are going to be left out.”

the Fraternity of Communion and Liberation, a Catholic movement that twinned pious social conservatism with prodigious moneymaking. The organization captured interests in major hospitals throughout Lombardy, wielding its influence to restrict the availability of abortions. Formigoni’s organization was able to take control of hospitals by dint of a privatization law that he had pushed through the regional assembly. It enabled public money to be spent on private companies that provided medical care through the regional health care system. In the quarter century after the passage of the law, private hospitals seized control of 40 percent of the Lombardy market

The privatization scheme triggered a surge of investment into rewarding specialties like oncology and cardiac surgery, while forsaking traditional family medicine. At Milan’s San Raffaele Hospital4—one of the finest facilities in Italy—booking an appointment as a regular user of the regional health system required calling in and sitting on hold for nearly forty minutes, while those who paid for VIP service secured slots in forty seconds. Among the direct beneficiaries of the marketization of regional health care was the man who had set it in motion—Formigoni.

The managers found their own ways to profit. According to an eventual complaint from prosecutors in Milan, executives at the San Donato Group connived with their counterparts at major pharmaceutical companies8, including Novartis, Eli Lilly, and Bayer, to swindle the Lombardy system through price gouging on drugs. The hospitals received the drugs at a discount, and the executives pocketed the difference—some 10 million euros—while taxpayers reimbursed the hospitals at inflated prices.

“Specializations such as hygiene and prevention, primary health care, outpatient clinics, infectious diseases and epidemiology have been considered not strategic assets, not sexy enough,” said Michele Usuelli, a neonatologist in Milan who held a seat on the regional assembly, representing the center-left Più Europa Party. “That is why we have a health system very well prepared to treat the most complicated diseases, but completely unprepared to fight something like a pandemic.”

“If the mentality is that you need to make money from health care, the investment in community medicine looks clearly less remunerative.”

Among some 1,200 contracts conferred by the central government and eventually made public—deals worth a collective $22 billion—roughly half had been secured by companies that tripped serious questions of propriety. The recipient companies were frequently run by people connected to the governing Conservative Party. One company headed by an employee of the Board of Trade, a government body, secured a $340 million contract to furnish protective gear for medical staff. It eventually produced 50 million masks at a cost of $200 million. They proved defective and could not be used. Meanwhile, qualified companies that lacked friends in high places were largely shut out.

Around the world, those decrying pandemic restrictions seized on Sweden as an alternative model. “Without locking down13, Sweden—and this is the key—has fared far better than other European countries that did lock down,” declared the Fox News commentator Tucker Carlson. There was one problem with this assessment: Sweden’s strategy was a disaster. By the summer of 2020, more than five thousand people were dead in a country of 10 million people, giving Sweden one of the worst per capita death rates on earth, and exponentially higher than in neighboring countries—twelve times worse than Norway, seven times worse than Finland, and six times the level in Denmark.

A decade of tax cuts that benefitted billionaires like the head of H&M had resulted in diminished government revenues despite the Cosmic Lie that they would pay for themselves. Much as in the United States, for-profit nursing homes derived savings in part by downgrading staff.

Sweden was still devoting vast sums of money to elderly care—some 3.2 percent of its annual economic output, as compared to 0.5 percent in the United States. Only the Netherlands and Norway17 spent more. But increasing sums were being absorbed by administrative costs and, most crucially, dividends for the shareholders of private companies.

The previous year, Attendo, the company that owned the home, had tallied revenues in excess of $1.3 billion. But it had failed to stockpile adequate supplies of protective gear like masks and gowns. It had enough to comply with national guidelines, but not enough to contend with the pandemic. As the virus spread Attendo sought to buy supplies.

The shortages inside nursing homes attested to the degree to which Sweden had been seized by the mentality of marketization. Stockpiling masks cost money. So did employing full-time nurses. Why not just rely on the web and temp agencies to deliver products and staff as needed? Limiting expenses and rewarding shareholders had taken precedence over social welfare.

German banks had lent aggressively to finance Mediterranean investment debacles. In limiting European relief and demanding austerity, Germany ensured that ordinary households20 in southern Europe would suffer years of desperation so that its own lenders could collect on their debts.