Davos: Two Worlds, Ready or Not

[Derechos]

On the fringes of the World Economic Forum meeting in Davos this week, there was plenty of substantive discussion -- including about the dangers posed by our "too big to fail"/"too big to save" banks, the consequences of widening inequality (reinforced by persistent unemployment in some countries), and why the jobs picture in the U.S. looks so bad.

But in the core keynote events and more generally around any kind of CEO-related interaction, such themes completely failed to resonate.

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In terms of public policy, the big players in the financial sector have prevailed -- no responsible European, for example, can imagine a major bank being allowed to fail (in the sense of defaulting on any debt). And this government support for banks has translated into easier credit conditions for the major global corporations represented at Davos.

The public policy issue of the day, from the point of view of such CEOs, is simple. There needs to be sufficient fiscal austerity to strengthen public balance sheets -- so that states can more effectively stand behind their banks in the future, and to keep currencies from moving too much. Leading bankers, in particular, insisted on the paramount importance of providing unlimited government support to their sector during 2008-09; now they insist with equal or greater vigor that support to all other parts of society be curtailed.

This is where cognitive dissonance creeps in. Most CEOs feel that the provision of general public goods is not their responsibility, although they are very happy to help guide (or capture) the provision of public goods specific to their firm.

But it is reckless decisions by some in the financial sector that produced the crisis and recession -- this is what accounts for the 40 percent of GDP increase in net government debt held by the private sector in the United States (to be clear: it's the recession and mostly the consequent loss of tax revenue). And CEOs are happy to lead the charge both against raising taxes and in favor of deficit reduction.

This adds up to public goods being weak and so much under pressure around the world.

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The gap between the CEOs' world and the real world should be bridged by the official sector. But where are the politicians and government officials who can explain what we need and why? Who can confront the CEOs in the highest profile public forums, and push them on the social responsibility broadly defined?

http://www.huffingtonpost.com/simon-johnson/davos-two-worlds-ready-or_b_815762.html

[Hydra]

1. No real surprise there

They've had their hands into the ultimate cookie jar- national treasuries. Money that didn't actually require them to do anything.

Now they want to maximize the money coming in(raise taxes on workers) and cut the money going out, except to them.

Meet the new Royal class. Not that they weren't before, but it's going to move to a whole new level.