What to take away from Davos
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TEXT OF INTERVIEW
Bob Moon: Get this: The cost of a ticket to this past weekend’s World Economic Forum in Davos, Switzerland, was a mere $19,000. One ticket. All for a chance to network with CEOs, heads of state, famous academics. And, it is hoped, the ability to see the global financial system in a new light.
Marketplace’s Economy 4.0 correspondent David Brancaccio keeps an eye out for ways that financial system can better serve more people. Hello, David.
David Brancaccio: Hey Bob.
Moon: So some of the smartest folks have been talking about the global economy for the past few days and what has come out of the deliberations that gets us closer to making the economy work better for more people?
Brancaccio: All right. Among the many ideas that may float forth from Davos, one of them is enabling the globalization of talent. Let’s say you have an entrepreneurial woman in India, who has a lot to give and is eventually going to have a big business that employs a lot of people. Remove the barriers to here moving to where the capital is, the venture capital, the employees — i.e. come to the United States. That’s one of the ideas. Another one is called the Robin Hood tax. You heard of that?
Moon: No, tell me about it.
Brancaccio: Well what does Robin Hood do? Takes from the well-heeled and gives to the poor. We heard this from the president of France, Nicolas Sarkozy, also head of the G-8. The idea: Tax international financial transactions. Imagine how many of those there are. Imagine the money that could be raised.
Moon: A lot.
Brancaccio: Yeah, a lot I would say. Financial transactions tax. So the idea is to take the proceeds and give it to developing nations to help them develop further.
Moon: And the reaction to that?
Brancaccio: Not going to be so warm on Wall Street. But the global anti-poverty group Oxfam thinks it’s a great idea.
Moon: Now one of the sessions at Davos involved a session that was titled, “A new economic narrative for the 21st century.” They figure that out?
Brancaccio: Well, 20th century narrative: Capitalism versus communism. Capitalism wins. Twenty-first century started with the collapse of the market system, so what’s next? I got to talk to with Joseph Stiglitz, the Nobel prize winner and Columbia University econ professor, and he thought the story would be something like this realization:
Joseph Stiglitz: Clearly, our financial system took enormous returns, but didn’t actually lead to faster economic growth or more stable economic growth for the American economy or for the global economy.
So according to Professor Stiglitz, the new narrative is about what is the return of all this financial activity to society. He says it has to be about well-being — like is your population better off — and it has to be jobs. Long-term unemployment here and in developing countries came up a lot at Davos.
Moon: Of course, David, Davos got upstaged this year to some extent by the unrest in Egypt. How much did that detract from the conference.
Brancaccio: It actually fit into a pair of the major themes that came up at a lot of the conferences, near as I could see. One of them is this issue of the destabilizing effects of long-term unemployment, especially youth unemployment, which is behind a lot of the tensions we’re seeing playing out in Egypt and in Tunisia. The other issue is rising commodity prices, particularly food prices. We’re not talking about it much here in the U.S. yet, but I saw the U.N. data. Food prices are up 25 percent in the last year around the world and one of the responses at Davos is rein in commodity speculators, presumably driving up some of these prices. But the chairman of Nestle, the big food company, he sees it differently. He says if you want to bring down food prices, maybe we should stop turning food into bio-fuel. Now, of course, he’s talking about corn being turned into ethanol, an idea that may not go over that well in Iowa.
Moon: It’s a lot of talk, which is what Davos is known for. Where’s the action plan?
Brancaccio: Well Davos is about being a cauldron of ideas. Action plan maybe from the G-20, G-8, International Monetary Fund, or a reformed United Nations.
Mon: David Brancaccio, thanks.
Brancaccio: My pleasure.
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