It has been a rough few years for the globalists. Growing popular furor at transnational elites for their corruption and mismanagement has led to the UK voting to leave the European Union, Italians shooting down a pro-EU referendum, and the election of Donald Trump as president of the United States.
This year’s meeting of globalist elite in the World Economic Forum in Davos, Switzerland, seemed more like group therapy than policy planning. Political and corporate leaders sadly recognized that populism was on the ascendancy and that increasingly people were rebuking their project.
Former Obama economic advisor and hedge fund consultant Larry Summers lamented that middle class Americans had lost faith that elites worked in their interest, saying “There’s obviously elements of the middle class looking up and seeing how well an elite has lived and seeing all the various benefits that have gone to people at the top of the income distribution.”
Summers also offered a pretty sharp critique for someone who recently served in government: “I think it’s a mistake not to recognize that the middle class in my country, and I think in others, is also very concerned that people do not feel that the government is fighting for it.”
IMF Managing Director Christine Lagarde went even further than addressing perceptions. Lagarde conceded that the economic model was failing working people and suggested more wealth redistribution was in order. For the reformed model to work, she said, “it needs to be granular, it needs to be regional, it needs to be focused on what will people get out of it and it probably means more redistribution than we have in place at the moment.”
The IMF under Lagarde’s leadership has been slowly moving away from neoliberal orthodoxy. A report last June concluded that neoliberal economic policy, a staple of the IMF for over 20 years, led to slower economic growth and increased income inequality.
A study by Oxfam, published in the run up to Davos, certainly drives the inequality point home. According to the study, just eight men own as much wealth as the poorest half of the world.
Given such stagnant growth and yawning inequality, it would be more surprising if there wasn’t a populist backlash. How deluded must these elites have been to think that austerity for the poor and bailouts for the rich would never have yielded serious opposition?
Regardless of previous bubbles—both economic and political—the political and economic elite have been shocked into reality by recent events. Will they adopt Lagarde’s redistributionist policies, or double-down on technocratic neoliberalism? If they chose the latter, their days at the top may be numbered.