Citigroup, Davos Worry About Popular Backlash To Neoliberal Order
From January 20-23, the global elite met in Davos, Switzerland for the annual World Economic Forum. The themes this year were the dangers of inequality and terrorism to the current world order, an order those present have benefited the most from and have charged themselves with maintaining.
The founder and executive chairman of the World Economic Forum, Klaus Schwab, framed the issues as a problem of managing a so-called “Fourth Industrial Revolution” that was exacerbating inequality and allowing terrorists to use digital communication systems to coordinate attacks.
The Fourth Industrial Revolution, as defined by Schwab, is “characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.”
Schwab claims the changes in technology have led to increased economic divisions between high-skilled and low-skilled labor with “a job market with a strong demand at the high and low ends, but a hollowing out of the middle.” The trend will cause increased tensions within developed societies by intensifying already historic inequality, according to Schwab.
Citigroup echoed Schwab’s concerns that current economic trends will cause social problems with fears of a populist backlash or what Citigroup referred to as “Vox Populi risk.”
Vox Populi risk is a way of saying that countries and peoples living under the current neoliberal system may channel their opposition to it by supporting anti-establishment politicians at the ballot box and launching resistance movements. The consequence of these actions could bring down the system. (*Note: Citigroup previously addressed the risk of a populist backlash to neoliberalism in now-infamous “Plutonomy Memos,” like this one published in October 2005.)
To avoid this fate, Citigroup Chief Economist Willem Buiter recommends implementing a rather progressive policy program throughout the world that includes a major redistribution of wealth, though he is less-than-hopeful about the prospect of such a program being adopted in the U.S. Yes, Citigroup.
Via e-mail, he spelled out his concerns: “Dealing with the growing inequality and possible growing job losses caused by the Fourth Industrial Revolution will require a much larger redistributive role for the state. A guaranteed minimum income and universal state-funded health care, funded out of taxes would not raise many eyebrows in Europe. It would meet huge resistance in the U.S., where there only is a decent social safety net for the old.”
Medicare for all and a universal basic income? Part of that agenda is already being championed by Democratic presidential candidate Bernie Sanders. Whether he will prevail in the primaries and general election—let alone be able to implement those programs through a Republican Congress—seems unlikely at the moment.
Of course, there is another U.S. candidate running on a popular campaign of resisting the neoliberal world order, Donald Trump. It seems to be the right-wing Trump version of Vox Populi risk that Wall Street and stateless elites seem to be fearing most at the moment. Right-wing governments and movements are rising in Europe in response to austerity economics and an immigration crisis and their policy agendas typically contradict neoliberal orthodoxies.
The fundamental questions are not if but when the current order will change and on what conditions. The resistance from powerful incumbents to more socially democratic reforms and policies appears to be paving the way for the ascendancy of reactionary forces in the West and beyond.