Several thousand high-ranking officials, business leaders, financiers and others recently met in Davos – the beautiful ski resort in the Swiss Alps – for the World Economic Forum. The forum offered an opportunity for them to discuss, decide and implement the policies that manifest themselves in the way the global economy operates – in essence, they run the economic show.
Let's consider the economic performance of our leaders since the WEF began in the 1970s. The global economy, as measured by GDP, has grown at a solid rate, averaging more than 2 per cent a year in real terms over the past few decades. It might be appropriate, therefore, for the leaders assembled in Davos to take a bow.
Critics might argue that much of the growth was a function of falling interest rates, although some credit must go to governments and central bank governors for their stewardship of monetary policies that contributed to growth. Others might suggest that the boom of the past three decades was a function of a one-off unsustainable escalation of debt for which we are now paying a heavy price. Nevertheless, even the last six years of sluggish growth suffered by western countries have not offset the growth of the previous 30 years.
However, when one analyses income distribution, a very different and much darker picture emerges. In the US, real-wage growth has stagnated since the 1970s. In the UK, real wages grew by 2.9 per cent a year in the 1970s and 1980s, slowed to 1.5 per cent in the 1990s and 1.2 per cent in the 2000s, and have decreased at an average of 2.2 per cent since 2010. A similar picture emerges from the rest of Europe - there has been growth, but its rewards have not been shared evenly.
Oxfam announced in advance of the WEF that the richest 1 per cent of the world owns about half of global wealth. This 1 per cent was well represented in Davos and it is fair to say that the event was a fabulous success for them.
But the cost to the taxpayer of staging this forum – ultimately, it is the taxpayer who pays for the government officials, policy-makers and central bankers to attend – is huge. The question is how, in a time of scarcity, we can justify this expense when the budgets of many social programmes are being slashed and benefits are being cut.
Is it appropriate that these leaders be wined and dined, as they map out economic strategies, at a Swiss ski resort, in consultation with an unelected elite that has already benefited so handsomely and so singularly from the WEF's global economic leadership? Switzerland, whose currency is appreciating rapidly, does not need the money, and the elite 1 per cent seem to be doing pretty well already.
I propose that we ban public spending on Davos and the WEF. Instead, the money should be spent on providing seed capital for start-ups or grants for early-stage enterprises that generate huge social impact but cannot afford professional services. There's a host of ways to spend this money more effectively than by using it to pay for expensive dinners in a country with an already appreciating currency.
Rodney Schwartz is chief executive of ClearlySo, which helps social entrepreneurs raise capital