Home » Posts tagged 'China'
Tag Archives: China
Money Managers for Mankind? China in the Age of Global Governance, Part III
By: Andrew Gavin Marshall
3 March 2016
Originally posted at Occupy.com on 9 February 2016
In pursuing the strategy toward China of “integrate, but hedge,” the United States and its G-7 allies attempted to manage China’s global financial role, giving the world’s second largest economy a greater stake in the existing system while attempting to prevent alternative or antagonistic emerging market economies from gaining power.
However, due to the slow pace of reforms and their often disappointing results – case in point: the five-year delay of International Monetary Fund (IMF) reforms that would give China and other emerging economies greater influence in the Fund and World Bank – China has turned to creating its own development bank, the Asian Infrastructure Investment Bank (AIIB). And while China was developing the AIIB over the course of 2015, China was not only hedging its own bets – it was also advancing a strategy of “integration” on the monetary front. In the world of currencies, central banks and the global monetary order, China had an important year.
The main issue has been the inclusion of the Chinese currency – the yuan, or renminbi – in the elite basket of currencies managed by the IMF known as Special Drawing Rights (SDRs). Consisting of four of the world’s most traded currencies (the U.S. dollar, the euro, Japanese yen and British pound), the SDR is a currency unit whose value is weighted among those four currencies and used in IMF transactions between nations and central banks. But the real importance of the SDR basket is that it is a symbolic grouping of the few select currencies (and countries) that dominate the global monetary system. They are the most traded, saved and important currencies in the world, giving the countries and institutions that control them inordinate power in the global monetary and economic system.
China has lobbied for years to be included in the SDR basket, as both a sign of its global economic status and as a recognition of its new geopolitical power. But for China to be included, it needed to meet a number of criteria related to how easily tradable the currency is, how many central banks use the currency as a reserve asset, and whether or not interest rates are determined by market forces. Eswar Prasad, an economics professor at Cornell University who was previously the China country director at the IMF, commented that “this is ultimately going to be decided on political rather than economic merits.”
In laying the groundwork for inclusion, the IMF announced late last May that the renminbi was no longer considered to be “undervalued” – a long-held complaint of the IMF, United States and other G-7 nations that felt for such a large economy to maintain such a cheap currency gave it an overwhelming trade advantage, keeping its products cheaper and thus more competitive in international markets. Thus, the IMF’s declaration paved the way for consideration of the Chinese currency to be included in the SDR.
When the G-7 finance ministers and central bank governors met in Berlin in late May, they discussed the potential inclusion of the renminbi in the SDR basket. German Finance Minister Wolfgang Schauble said that “it is desirable in principle” but “the technical conditions must be examined.” The G-7 countries continued to push China to reform its capital markets in order to increase its potential for inclusion. This pressured China to implement further market reforms to “liberalize” its financial markets, allowing for private financial institutions to play a larger role in managing the country’s economy (as opposed to being more state-directed and managed).
Earlier that same month, the People’s Bank of China (PBoC), China’s central bank, approved roughly 30 foreign financial institutions to invest its domestic bond market, giving banks like HSBC, BNP Paribas, Société Générale, ING and Morgan Stanley greater access to the world’s third largest bond market (following the U.S. and Japan). China made moves over subsequent months to increase the access of foreign central banks and sovereign wealth funds to its bond market, as the country continued reforms that liberalized its economy. However, China still remained hesitant to adapt market forces too quickly or too fully that might have the effect of destabilizing the economy.
In August, the IMF recommended that while the renminbi should be added to the SDR basket, with a final decision to be made in November, the currency’s actual addition to the basket should not take place until September of 2016. This was in order to allow the country to implement further financial reforms and give banks, central banks and asset managers enough time to adjust their currency holdings to a slightly reformed monetary order. Some G-7 countries, such as Germany, France, Britain and Italy, favored a quick inclusion of the renminbi to the SDR, but Japan and the U.S. favored a more cautious approach.
Then, partway into August, China shocked global financial markets with a rapid currency devaluation – done partly to provide a boost to its own slowing economy – raising criticism from several countries that China was engaging in a currency war to lower the value of the renminbi in order to boost exports at the expense of other nations. However, because China’s currency is so closely tied to the U.S. dollar, as the dollar has risen in value over the past year or so, China’s currency has risen with it. This has put further strain on China’s economy and decreased its competitiveness relative to other global currencies whose value has declined relative to the rise of the dollar. That’s why, when China devalued in August, it explained the move as an attempt to move more towards a market oriented value for its exchange rate.
China was accused of currency manipulation due to its sudden devaluation, though it was in fact more accurately a response to the pressures from the manipulated changes in the value of the big currencies (U.S. dollar, Japanese yen and euro), which fluctuated in response to the winding down or ramping up of their respective Quantitative Easing (QE) programs. China managed to mute some harsher criticisms of its move by quickly announcing further market-oriented reforms to its financial and interest rate markets.
At a meeting of G-20 finance ministers and central bank governors in early September, U.S. Treasury Secretary Jacob Lew pressured his Chinese counterparts to continue the process of implementing market reforms, and specifically allowing markets a larger say in determining the value of the Chinese currency.
In mid-November, the IMF officially recommended that China be included in the SDR basket, which would “turn its currency into one of the pillars of international finance,” noted the New York Times. However, the final decision was to be made by the IMF’s Executive Board at the end of the month, where the G-7 countries have the power to pass or block any final moves. Following the IMF staff recommendation, China’s central bank announced that it would be implementing further reforms to allow markets more of a say in setting interest rates. And in late November, the IMF Executive Board voted in agreement to let the renminbi be included in the SDR basket, effective October 1, 2016.
Then, partway into December, China announced that it would begin to measure the value of its currency against a basket of 13 currencies instead of just the U.S. dollar. This would give the currency more room to fall in value relative to the U.S. dollar’s rise, and would give the country more “monetary independence” from the decisions and actions of the U.S. Federal Reserve. The announcement came just as the Fed was set to raise interest rates for the first time in nearly a decade, a move that would drive the U.S. currency even higher and put even more pressure on China as its economy continues to slow. In response, the Chinese currency hit a new four-year low against the U.S. dollar, increasing the country’s trade competitiveness.
The rise of China is one of the most important economic stories of the late 20th and early 21st centuries, and will continue to remain so. While the United States and the G-7 seek to “integrate, but hedge” their bets in bringing China into the structures of global economic governance, such as through inclusion into the SDR basket, China continues to pressure for greater political power commensurate with its economic weight, “hiding its brightness, biding its time.” But the time is increasingly present, visible with China’s founding of the Asian Infrastructure Investment Bank (AIIB), as a potential rival to the World Bank.
The integration of China into the structures and systems of global economic governance will have lasting ramifications. Not simply because it represents a shift from the dominance that the G-7 nations held over the global economy for the past four decades, but because the Chinese model of state-run totalitarian capitalism itself presents an alternative approach to constructing a market economy. As China increasingly becomes a part of the governing structure of the world economy, its model will gain increased influence. Indeed, if war and hostilities between the other great powers are to be avoided, the future of global capitalism may well rely on a combination of Western markets and institutions backed up by totalitarian institutions like the regime in Beijing.
Given that the capitalist system is experiencing a crisis in its legitimacy – with warnings from the head of the Bank of England, the IMF, and influential financial dynasties that the system is increasingly under threat due to its excesses – democracy may no longer be compatiblewith capitalism. And totalitarian state structures may be the only way to save capitalism from itself.
“Hide Your Brightness, Bide Your Time”: China in the Age of Global Governance, Part II
By: Andrew Gavin Marshall
3 March 2016
Originally posted at Occupy.com on 2 February 2016
This is the second article in a three-part series focusing on China’s transformed role on the world financial stage. Read the first part here.
One of the most important developments in the global economy over the past thirty years has been the integration of China into the global economic system and its governing institutions. The United States and the G-7, which collectively dominate these institutions, have managed the process in a slow, incremental fashion, allowing China a larger voice, greater representation and more authority in return for its implementation of reforms to further advance the market economy and allow Western banks and corporations greater access to the Chinese market.
But China, and other emerging market economies, have become increasingly frustrated with the slow efforts on the part of the G-7 nations and the institutions they control. With emerging economies, and notably China, accounting for such a large share of global economic growth and wealth, those countries feel increasingly underrepresented in international economic institutions and decision-making. Their international political power does not accurately reflect their international economic influence.
Integration and greater representation within the global economic architecture is designed to give emerging economies a greater stake in the international economic and political system, providing them with ownership and authority. However, if the process is too slow or the results too weak, emerging economies could potentially create their own parallel institutions and perhaps even (in the long term) construct a parallel or opposing economic system altogether.
China is the most important emerging market economy and the one at the forefront of this process of integration. The United States has for decades pursued a strategy toward China described as “integrate, but hedge.” In a nutshell, the concept is that it is imperative to bring China within the international system, but it must be done slowly and in a way that curbs China’s potential capacity to disrupt the system or existing power structures. However, such a strategy can backfire, for hedging bets can easily transform into antagonism, pushing China to adopt more aggressive responses and ultimately creating the circumstance such a strategy was supposed to avoid.
This process is evident in the development of the Asian Infrastructure Investment Bank (AIIB), which came in response to the slow efforts by the U.S. to give China and other emerging economies greater representation and ownership in the International Monetary Fund (IMF) and World Bank. In 2010, the IMF agreed to implement reforms to its governance structure and that of its sister institution, the World Bank – which is dominated by the U.S. and the G-7 – allowing several emerging market countries to gain increased shares and power within the 188-member-nation institutions.
But since the reforms were agreed in 2010 and ratified by virtually every nation in the world, only the U.S. has refrained, held back by a Congress that proclaims its wariness to give up any influence within the Fund. However, America would maintain its status as the top shareholder in the IMF and World Bank, while remaining the only one with veto power, and Japan would keep its position as the second largest shareholder. But the reforms would elevate China from the Fund’s sixth largest shareholder to third largest, putting it ahead of Germany, the United Kingdom and France.
Following years of delays in ratifying the IMF’s quota and shareholder reforms, Chinese President Xi Jinping announced in October of 2013 plans for the formation of “a new multinational, multibillion-dollar bank to finance roads, rails and power grids across Asia.” The so-called Asia Infrastructure Investment Bank would present a challenge to the role of the World Bank and the Asian Development Bank (ADB), in which Japan and the U.S. are the two largest shareholders.
The U.S. was quick to pursue a strategy of containment and opposition to the proposed bank. As China was engaging in behind-the-scenes diplomacy with several Asian, European and other large nations around the world to gain support for the AIIB, the United States was lobbying its allies to oppose the bank and refuse to join its membership. China was meanwhile attempting to secure a roster of rich nations to join the AIIB as founding members and thus provide the development bank with much-needed capital. The U.S., however, was pressuring South Korea and Australia, among others, to reject the proposal and ensure that “membership in the bank would be limited to smaller countries, depriving it of the prestige and respectability the Chinese seek.”
At first, the U.S. lobbying and pressure seemed to work. When the AIIB was officially founded in late October of 2014, it had a membership of roughly 20 smaller countries along with China. The only other large nation to join was India. But in March of 2015, the UK defied pressure from the U.S. and announced that it would be joining the AIIB. U.S. officials weren’t pleased; one told the Financial Times that Washington was frustrated with Britain’s “trend toward constant accommodation of China.” This approach, said the official, “is not the best way to engage a rising power.”
Once Britain, a G-7 member, joined the AIIB, it led the way for other powerful and rich nations to do so. Within days, three other G-7 nations – Germany, France and Italy – all announced they were joining the bank. At the same time, Japan, China’s major competitor for economic, political and military influence in the region, said it was sticking by its major patron, the United States, and refused to join the AIIB. “The United States now knows Japan is trustworthy,” said Japanese Prime Minister Shinzo Abe.
But the American strategy of opposition to the AIIB was not without its critics. Lawrence Summers, the former U.S. Treasury Secretary, former chief economist at the World Bank, and a top economic adviser to President Obama in his first term, wrote in the Financial Times that the U.S. decision to oppose the AIIB could represent “the moment the United States lost its role as the underwriter of the global economic system.” Summers wrote that “the global economic architecture needs substantial adjustment,” with the U.S. and G-7 nations needing to adapt to a world in which China was virtually the same economic size as the United States, and in which emerging market economies accounted for roughly half of global wealth.
The President of the World Bank, U.S.-appointed Jim Yong Kim, pledged to find ways to cooperate with the new Chinese-led development bank, as did the Japanese head of the Asian Development Bank (ADB). Former World Bank President Robert Zoellick also wrote that U.S. opposition to the AIIB was “a strategic mistake.” Even President Obama in April suggested that the AIIB could potentially be a “good thing,” but stressed that it would have to adopt the standards set by U.S. and Western-controlled institutions like the World Bank.
In June of last year, former Federal Reserve Chairman Ben Bernanke chimed in, saying, “The U.S. Congress is largely at fault for all that’s happening,” referring to the role of the legislature in blocking the ratification of the IMF’s reforms. Because of this, he explained, China and other countries have been increasingly looking to create their own regional institutions. “It would have been better to have a globally unified system,” said Bernanke.
By September, following a state visit between Chinese President Xi Jinping and President Obama at the White House, the U.S. formally announced “what amounts to a truce” over their opposition to the AIIB, with the U.S. saying it would stop lobbying against the institution in return for China agreeing to increase its financial contributions to institutions like the World Bank. However, both the United States and Japan continued to refuse to join the AIIB as members. At a joint press conference, President Xi said that “China is the current international system’s builder, contributor and developer and participant, and also beneficiary.” China was willing, he added, “to work with all other countries to firmly defend the fruits of victory of the second world war, and the existing international system.”
According to plan, the AIIB is to start with a capital base of $100 billion, and its ownership structure is designed to give countries in the Asia Pacific region roughly 75% of the voting shares, “giving smaller Asian countries a greater say than they have in other global organizations.” China provides the AIIB with nearly $30 billion of its $100 billion, giving its chief backer between 25% and 30% of voting shares and the only veto, since major decisions require a 75% majority.
The second largest contributor and shareholder is India, providing $8.4 billion, followed by Russia at $6.5 billion. Next is Germany with a $4.5 billion contribution, South Korea and Australia each providing $3.7 billion, with France and Indonesia each contributing $3.4 billion. Among the other large shareholders are Brazil, the UK, Turkey, Italy, Saudi Arabia, Spain, Iran, Thailand and the Netherlands.
The result: while the U.S. and Japan sit on the sidelines hedging their bets, the AIIB starts its place in the world of global economic governance with a membership of 57 nations from around the world. As former Chinese leader Deng Xiaoping said several decades ago, “Hide your brightness; bide your time.” With the founding of the AIIB, China may very well be staking a claim on its time for greater power in the global economy.
“Integrate, But Hedge”: China In the Age of Global Governance, Part I
By: Andrew Gavin Marshall
3 March 2016
Originally posted at Occupy.com on 26 January 2016
This is the first article in a three-part series focusing on China’s transformed financial role on the world stage.
“Hide your brightness; bide your time,” cautioned Deng Xiaoping, the chief architect of modern China who was the country’s supreme ruler from 1978 until the 1990s. Deng oversaw the “opening” of China into a modern state-capitalist society. He articulated a strategy for China’s integration into the global economic system – a strategy that progressed over the past four decades such that the world’s most populous nation is now its second largest economy, increasingly able to flex its new geopolitical and economic power and ambitions.
But China’s integration into the existing structures of global economic governance is not without risks and challenges. The country has grown economically as a result of slow, state-managed reforms to its economic system and the degree to which it has worked with the Western-created and -dominated economic system – in particular, those members of the Group of Seven (G-7) nations, the United States, Germany, Japan, the United Kingdom, France, Italy and Canada.
The G-7 was established a few years prior to China’s economic opening, and in the subsequent four decades has been the prime driving force in shaping the architecture of the global economic system. As emerging market economies implemented economic reforms encouraged by the G-7 nations and the institutions they dominate, they demanded more representation and power within the institutions and structures of global economic governance. China is chief among the emerging market economies, and has been at the forefront of pushing for representation and influence in the global economy and its governing institutions.
The G-7 nations, and in particular the United States, have accepted that emerging markets and China need to be integrated into the existing structure, but the challenge has been to manage the process in a slow, incremental way that allows the G-7 to continue pressuring emerging markets into implementing further reforms while maintaining G-7 nations’ own position at the center of the system. For this reason, the Group of 20 (G-20) was created in the late 1990s as a meeting of finance ministers and central bank governors from the G-7 countries and several important emerging markets, including China.
Over the years and decades that China has implemented market reforms (albeit, managed by a totalitarian one-party state), the country has joined such institutions as the World Trade Organization (WTO) and gained elevated status within the International Monetary Fund (IMF) and World Bank. However, its political, diplomatic and military power has also grown alongside its economic weight. East Asia, once the unquestioned domain of American and Japanese power, now has a new regional hegemon. This makes the imperative for China to integrate into the global economic architecture all the more imperative, as it would give the country a greater stake in the system as it exists, instead of potentially creating an alternative or rival system and institutions.
However, while integration is essential in the eyes of the West (and, indeed, in the eyes of many of China’s rulers, as well), it also carries immense risks. Unlike Japan, China is not dependent upon the U.S. for military protection and support, nor does it operate through a similar state democratic structure with which the industrialized world is familiar. Indeed, China and Japan are often antagonistic toward one another, a long product of Japan’s historical imperial war mongering and colonialism in the region. China has no desire to bow down to any outside power such as the U.S., nor submit to regional competitors such as Japan, and least of all does it intend to play second fiddle to any other power in its own backyard.
So, while there is a mutually beneficial economic relationship between China and the West, prompting the need for further integration into the structures of global economic governance, there is also a great deal of mistrust and uncertainty between China and the West, particularly on military and foreign policy matters. Historically, the rise of any new great power has always taken place in an environment of geopolitical tension and war. America, as the existing global hegemon, has designed its political and economic strategy toward China with these concerns in mind.
The American approach toward China was articulated, and in part designed, by the political scientist and former top U.S. government official and adviser Joseph Nye, as a strategy of “integrate, but hedge.” Nye, who formerly served in senior positions in both the State Department and Defense Department, is considered one of the most influential foreign policy intellectuals in the U.S. His influence extendsthrough multiple think tanks and advisory boards of which he is a member, including the Trilateral Commission, the Council on Foreign Relations (CFR), the Center for Strategic and International Studies (CSIS), the Aspen Strategy Group, and on advisory boards to the Defense Department and State Department.
Nye explained in The New York Times that in his role at the Defense Department in the 1990s, he helped develop the Pentagon’s East Asian Strategy Report, which identified three major powers in the region: the United States, Japan and China. It was at this time that the U.S. strategy of “integrate, but hedge” was designed, and it continued through the Clinton, Bush and Obama administrations. Maintaining the U.S. alliance with Japan was central to the strategy, as it “would shape the environment into which China was emerging.” The objective was “to integrate China into the international system,” which included joining the World Trade Organization (WTO), but Nye added: “We needed to hedge against the danger that a future and stronger China might turn aggressive.”
In the Fall of 2011, high ranking members of the Obama administration began making clear that U.S. grand strategy envisioned an increased focus and presence in the Pacific Asian region. Writing in Foreign Policy in October of 2011, then-Secretary of State Hillary Clinton explained that the U.S. was implementing “a strategic turn to the region” to maintain “peace and security” and “open markets.” Such a strategy would “secure and sustain America’s global leadership.” Clinton wrote that the U.S. relationship with China was “one of the most challenging and consequential bilateral relationships the United States has ever had to manage” which “calls for careful, steady, dynamic stewardship.”
In November of 2011, President Obama declared the “pivot” to Asia was a “top priority” for the United States. “The United States is a Pacific power and we are here to stay,” said the President, though he claimed that it was not a strategy designed to “contain” China. “We’ll seek more opportunities for co-operation with Beijing,” he said. “All our nations [of the Pacific region] have a profound interest in the rise of a peaceful and prosperous China.”
Thomas Donilon, President Obama’s National Security Advisor from 2010 to 2013, described the same strategy toward China while speaking to an audience at the Center for Strategic and International Studies (CSIS) in November of 2012. One of the central elements of the pivot to Asia, explained Donilon, was “pursuing a stable and constructive relationship with China.” America’s relationship with China “has elements of both cooperation and competition,” and U.S. policy was designed “to seek to balance these two elements in a way that increases both the quantity and quality of our cooperation with China as well as our ability to compete.” The U.S. had made clear, he said, “that as China takes a seat at a growing number of international tables, it needs to assume responsibilities commensurate with its growing global impact and its national capabilities.”
Another component of the pivot to Asia was to advance the region’s “economic architecture,” which meant a stronger engagement with regional forums and multilateral institutions, and notably advancing the Trans Pacific Partnership (TPP), a regional ‘trade’ deal driven by the United States to “deepen regional economic integration.” The Trans Pacific Partnership (TPP) agreement was finalized in 2015 as a “21st century trade agreement” between the United States, Canada, Mexico, Chile, Peru, Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam and Brunei. The agreement was largely viewed by America’s allies as “a counterweight” to China’s regional and global economic and political ambitions.
The Financial Times described the TPP as the “economic backbone” of the U.S. pivot to Asia, writing that, “the goal for the U.S. and Japan is to get ahead of China… and to create an economic zone in the Pacific Rim that might balance Beijing’s economic heft in the region.” As President Obama said: “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules.”
So while the United States continues to “write the rules” of global economic governance as it pursues its decades-long strategy of “integrate, but hedge,” China appears to still be following the original advice of Deng Xiaoping: “Hide your brightness, bide your time.” Time will tell.
I have recently launched a Kickstarter campaign to try to raise money to support my efforts to finish the first book of what will likely be a series on ‘Power Politics and the Empire of Economics’.
What I am asking of my readers is not only to consider donating to the project, but more importantly, to share and promote it through social media, by sending it to others who you think may be interested, and to help get the word out in any way you can!
Every bit helps, and a great deal of help is needed if this is to be successful!
I have collected below links to the campaign, as well as a video I made to promote it, and links to the sample introduction chapter that I published online so that potential patrons could read the kind of material that they would be supporting.
About the Project:
This book will tell the stories of the rich and powerful oligarchs and family dynasties who collectively rule our world: the global Mafiocracy, operating behind-the-scenes playing their games of power politics, globalization’s Game of Thrones where rich and influential families play their games, balancing collusion and cooperation with fierce competition to rule the world Empire of Economics.
In 1975, Henry Kissinger told President Ford: “The trick in the world now is to use economics to build a world political structure.”
This book is that story.
A small network of banks and other financial institutions dominate the global economy, its wealth and resources. This small network of corporate power functions as a global financial Mafia, complete with excessive criminal behaviour in laundering drug money, funding terrorists, rigging interest rates and manipulating markets.
Name a nation, and there are rich dynasties that rule behind the scenes. The Rockefellers in the United States, the Rothschilds in France and Britain, the Agnelli family in Italy, the Wallenbergs in Sweden, the Tata family of India and Oppenheimers of South Africa, the Koc and Sabanci families of Turkey, the Gulf Arab monarchs and the rich industrial families of Germany with dark Nazi pasts.
Germany once again rules Europe, with the European Union’s institutions of unelected technocrats undertaking a process of internal colonization as they impose their economic empire upon Greece, Spain, Italy, Ireland, Portugal and Cyprus. Finance ministers and central bankers are the agents of empire, cooperating closely with bankers, oligarchs and dynasties to create a world which best serves their interests. The global financial Mafia mingles with political leaders at forums and secret meetings like the Bilderberg group, the Trilateral Commission and the World Economic Forum.
From the streets of Athens, to Egypt, Turkey, Brazil, Spain, China, South Africa, Chile, Canada, and in the streets of Ferguson and Baltimore, people are rising up against exploitation, repression and domination.
This book is not simply a collection of stories of the ruling Mafiocracy; it is designed to encourage strategy among popular and revolutionary movements capable of creating something altogether new. It is time to do away with a world ruled by oligarchs, and save the species from itself. But first, we must know our world better.
Help me to complete the first book in a series on ‘Power Politics and the Empire of Economics’. For four years I have been doing my own research, scouring the archives of the New York Times, Wall Street Journal, Financial Times, government documents, official reports and corporate strategies, studying the world of power and empire, translating the political language of ‘economics’ into plain and simple English.
I have been published in multiple news sources, online and in print, interviewed by radio and television networks, and now I am asking for your help to raise $10,000 so that I can finish the first book in this series, to expose the Empire for all to see, its strengths as well as the weaknesses left exposed for us to exploit. Let us bring true democracy and an end to Mafiocracy. Help me to write this book, and together, let’s help each other to end the Empire.
Donate today. Thank you.
Andrew Gavin Marshall
World Economic Forum 2015: Global Governance In a World of Resistance
By: Andrew Gavin Marshall
26 January 2015
This article and its accompanying infographic have been jointly published by the Transnational Institute and Occupy.com.
The annual meetings of the World Economic Forum (WEF) in Davos, Switzerland, bring together thousands of the world’s top corporate executives, bankers and financiers with leading heads of state, finance and trade ministers, central bankers and policymakers from dozens of the world’s largest economies; the heads of all major international organizations including the IMF, World Bank, World Trade Organization, Bank for International Settlements, UN, OECD and others, as well as hundreds of academics, economists, political scientists, journalists, cultural elites and occasional celebrities.
The WEF states that it is “committed to improving the state of the world through public-private cooperation,” collaborating with corporate, political, academic and other influential groups and sectors “to shape global, regional and industry agendas” and to “define challenges, solutions and actions.” Apart from the annual forum meeting in Davos, the WEF hosts regional and sometimes even country-specific meetings multiple times a year in Asia, Latin America, Africa and elsewhere. The Forum is host to dozens of different projects bringing together academics with corporate representatives and policy-makers to promote particular issues and positions on a wide array of subjects, from investment to the environment, employment, technology and inequality. From these projects and others, the Forum publishes dozens of reports annually, identifying key issues of importance, risks, opportunities, investments and reforms.
The WEF has survived by adapting to the times. Following the surge of so-called anti-globalization protests in 1999, the Forum began to invite non-governmental organizations representing constituencies that were more frequently found in the streets protesting against meetings of the WTO, IMF and Group of Seven. In the 2000 meeting at Davos, the Forum invited leaders from 15 NGOs to debate the heads of the WTO and the President of Mexico on the subject of globalization. The participation of NGOs and non-profit organizations has increased over time, and not without reason. According to a poll conducted on behalf of the WEF just prior to the 2011 meeting, while global trust in bankers, governments and business was significantly low, NGOs had the highest rate of trust among the public.
In an interview with the Wall Street Journal last September, the founder and executive chairman of the WEF, Klaus Schwab, was asked about the prospects of “youth frustration over high levels of underemployment and unemployment” as expressed in the Arab Spring and Occupy Wall Street movements, noting that the Forum was frequently criticized for promoting policies and ideologies that contribute to those very problems. Schwab replied that the Forum tries “to have everybody in the boat.” Davos, he explained, “is about heads of state and big corporations, but it’s also civil society – so all of the heads of the major NGOs are at the table in Davos.” In reaction to the Occupy Wall Street movement, Schwab said, “We also try… to put more emphasis on integrating the youth into what we are doing.”
So, what exactly has the World Economic Forum been doing, and how did it emerge in the first place?
It began in 1971 as the European Management Forum, inviting roughly 400 of Europe’s top CEOs to promote American forms of business management. Created by Schwab, a Swiss national who studied in the U.S. and who still heads the event today, the Forum changed its name in 1987 to the World Economic Forum after growing into an annual get together of global elites who promoted and profited off of the expansion of “global markets.” It is the gathering place for the titans of corporate and financial power.
Despite the globalizing economy, politics at the Forum have remained surprisingly national. The annual meetings are a means to promote social connections between key global power players and national leaders along with the plutocratic class of corporate and financial oligarchs. The WEF has been a consistent forum for advanced “networking” and deal-making between companies, occasional geopolitical announcements and agreements, and for the promotion of “global governance” in a world governed of global markets.
Writing in the Financial Times, Gideon Rachman noted that more than anything else, “the true significance of the World Economic Forum lies in the realm of ideas and ideology,” noting that it was where the world’s leaders gathered “to set aside their differences and to speak a common language… they restate their commitment to a single, global economy and to the capitalist values that underpin it.” This reflected the “globalization consensus” which was embraced not simply by the powerful Group of Seven nations, but by many of the prominent emerging markets such as China, Russia, India and Brazil.
Indeed, the World Economic Forum’s main purpose is to function as a socializing institution for the emerging global elite, globalization’s “Mafiocracy” of bankers, industrialists, oligarchs, technocrats and politicians. They promote common ideas, and serve common interests: their own.
Geopolitics, Global Governance and the Arrival of the “Davos Class”
The World Economic Forum has been shaped by – and has in turn, shaped – the course and changes in geopolitics, or “world order,” over the past several decades. Created amidst the rise of West Germany and Japan as prominent economic powers competing with the United States, the oil shocks of the 1970s also produced immense new powers for the Arab oil dictatorships and the large global banks that recycled that oil money, loaning it to Third World countries.
New forums for “global governance” began to emerge, such as the meetings of the Group of Seven: the heads of state, finance ministers and central bank governors of the seven leading industrial powers including the U.S., West Germany, Japan, U.K., France, Italy and Canada, starting in 1975. When the debt crisis of the 1980s hit, the International Monetary Fund and the World Bank achieved immense new powers over entire economies and regions, reshaping the structure of societies to promote “market economies” and advance the interests of domestic and international corporate and financial oligarchs.
Between 1989 and 1991, the global power structure changed dramatically with the fall of the Berlin Wall and the collapse of the Soviet Union. With that came President George H.W. Bush’s announcement of a “New World Order” in which America claimed “victory” in the Cold War, and a unipolar world took shape under the hegemony of the United States. The ideological war between the West and the Soviet Union was declared victorious in favor of Western Capitalist Democracy. The “market system” was to become globalized as never before, especially under the presidency of Bill Clinton who led the U.S. during its largest ever economic expansion between 1993 and 2001.
During this time, the annual meetings of the World Economic Forum became more important than ever, and the role of the WEF in establishing a “Davos Class” became widely acknowledged. At the 1990 meeting, the focus was on Eastern Europe and the Soviet Union’s transition to “market-oriented economies.” Political leaders from Eastern Europe and Western Europe met in private meetings, with West German Chancellor Helmut Kohl articulating his desire to reunify Germany and cement Germany’s growing power within the European Community and NATO.
Helmut Kohl laid out his strategy for shaping the “security and economic structure of Europe” within a unified Germany. Kohl’s “grand design” for Europe envisioned a unified Germany as being “firmly anchored” in the expanding European Community, the main objective of which was to establish an “internal market” by 1992 and to advance toward an economic and monetary union, with potential to expand eastward. Kohl presented this as a peaceful way for German power to grow while assuaging fears of Eastern Europeans and others about the economically resurgent country at the heart of Europe.
At the 1992 WEF meeting, the United States and reunified Germany encouraged “drastic steps to insure a liberalization of world trade,” and furthered efforts to support the growth of market economies in Eastern Europe. The German Economics Minister called for the Group of Seven to meet and restart global trade talks through the 105-nation General Agreement on Tariffs and Trade (GATT). At that same meeting, the Chinese delegation included Prime Minister Li Peng, who was the highest-level Chinese official to travel internationally since the 1989 Tiananmen Square crackdown.
Of great significance also was the attendance of Nelson Mandela, the new president of South Africa. When Mandela was released from prison in 1990, he declared the policy of the African National Congress (ANC) was to implement “the nationalization of the mines, banks and monopoly industries.” When Mandela attended the January 1992 meeting of the WEF just after becoming president, he changed his views and embraced “capitalism and globalization.” Mandela attended the meeting alongside the governor of the central bank of South Africa, Tito Mboweni, who explained that Mandela arrived with a speech written by ANC officials focusing on nationalization. As the week’s meetings continued, Mandela met with leaders from Communist Parties in China and Vietnam, who told him, “We are currently striving to privatize state enterprises and invite private enterprise into our economies. We are Communist Party governments, and you are a leader of a national liberation movement. Why are you talking about nationalization?”
As a result, Mandela changed his views, telling the Davos crowd that he would open South Africa up as a market economy and encourage investment. South Africa subsequently became the continent’s fastest growing economy, though inequality today is greater than it was during apartheid. As Mandela explained to his official biographer, he came home from the 1992 WEF meeting and told other top officials that they had to choose: “We either keep nationalization and get no investment, or we modify our own attitude and get investment.”
At the 1993 meeting, the main consensus that had emerged called for the U.S. to maintain its position as a global economic and military power, and for it to take the lead encouraging greater “co-operation” between powerful nations. The major fear among Davos participants was that while economies were becoming globalized, politics was turning inward and becoming “renationalized.”
Later that year, Anthony Lake, Bill Clinton’s National Security Adviser, articulated the “Clinton Doctrine” for the world, explaining: “The successor to a doctrine of containment must be a strategy of enlargement – enlargement of the world’s free community of market democracies.” Lake explained that the United States “must combine our broad goals of fostering democracy and markets with our more traditional geostrategic interests.” No doubt, the Davos crowd welcomed such news.
At the 1994 meeting, the director-general of GATT, Peter D. Sutherland, declared that world leaders needed to establish “a new high-level forum for international economic co-operation,” moving beyond the Group of Seven to become more inclusive of the major “emerging market” economies. Sutherland told the assembled plutocrats that “we cannot continue with the majority of the world’s people excluded from participation in global economic management.” Eventually, the organization Sutherland described was formed, as the Group of 20, bringing the leading 20 industrial and economic powers together in one setting. Formed in 1999, the G20 didn’t become a major forum for global governance until the 2008 financial crisis.
In 1995, the Financial Times noted that the new “buzzword” for international policymakers was “global governance,” articulating a desire and strategy for updating and expanding the institutions and efforts of international co-operation. The January 1995 World Economic Forum meeting was the venue for the presentation of an official UN report on global governance. President Clinton addressed the Davos crowd by satellite, stressing that he would continue to push for the construction of a new “economic architecture,” notably at meetings of the Group of Seven.
In 1997, the highly influential U.S. political scientist Samuel Huntington coined the term “Davos Man,” which he described as a group of elite individuals who “have little need for national loyalty, view national boundaries as obstacles that are thankfully vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations.” An article that year in The Economist came to the defense of the “Davos Man,” declaring that he was replacing traditional diplomacy which was “more likely to bring peoples together than to force them apart,” noting that the WEF was “paid for by companies and run in their interests.”
Samuel Huntington presented a thesis, summarized in a 1997 Financial Times article, that outlined a world that “would be divided into spheres of influence,” within which “one or two core states would rule the roost.” Huntington noted that the “Davos culture people,” while extremely powerful, were only a tiny fraction of the world’s population, and the leaders of this faction “do not necessarily have a secure grip on power in their own societies.” The Financial Times, however, noted that while the “Davos culture people” did not constitute a “universal civilization” being such a tiny minority of the world’s population, “they could be the vanguard of one.”
Russian Oligarchs and the Rise of China
In fact, at the previous year’s meeting in Davos, the World Economic Forum functioned precisely as the vanguard for seven Russian oligarchs to take control of Russia and shape its future. At the 1996 meeting of the WEF, the Russian delegation was made up largely of the country’s new oligarchs who had amassed great fortunes in the transition to a market economy. Their great worry was that Russian President Boris Yeltsin would lose his re-election later that year to the resurgence of the Communists. At the WEF meeting, seven Russian oligarchs, led by Boris Berezovsky, formed an alliance during private meetings, where they decided to fund Yeltsin’s re-election and work together to “reshape their country’s future.” This alliance (or cartel, as some may refer to it), was the key to Yeltsin’s re-election victory later that year, as they held weekly meetings with Yeltsin’s chief of staff, Anatoly Chubais, the architect of Russia’s privatization program that made them all so rich.
Berezovsky explained that if the oligarchs did not work together to promote common ends, it would be impossible to have a transition to a market economy “automatically.” Instead, he explained, “We need to use all our power to realize this transformation.” As the Financial Times noted, the oligarchs “assembled a remarkable political machine to entrench and promote the market economy – as well as their own financial interests,” as the seven men collectively controlled roughly half the entire Russian economy.
Anatoly Chubais commented on this development and the role of the oligarchs, saying: “They steal and steal and steal. They are stealing absolutely everything and it is impossible to stop them… But let them steal and take their property. They will then become owners and decent administrators of this property.”
In the 1990s, with the spread of global markets came the spread of major financial crises: in Mexico, across Africa, East Asia, Russia and then back to Latin America. At the WEF meeting in 1999, the key issue was “reform of the international financial system.” As the economic crises spread, the Group of Seven nations, and the Davos Class, told the countries in crisis that in order “to restore confidence [of the markets], they should adopt politically unpopular policies of radical structural reform,” promoting further liberalization and deregulation of markets to open themselves up to Western corporate and financial interests and ‘investment.’
The major emerging markets have been frequent participants in annual Davos meetings, providing a forum in which national elites may become acquainted with the global ruling class, with whom they then cooperate and do business. China has been a major feature at Davos meetings. China started sending more high-level delegations to the WEF in the mid-1980s. During the 2009 meeting, two prominent speakers were President Putin of Russia and the Chinese Prime Minister Wen Jiabao. Both leaders painted a picture of the crisis as emanating from the centers of finance and globalization in the United States and elsewhere, with the “blind pursuit of profit” and “the failure of financial supervision” – in Wen’s words – and bringing about what Putin described as a “perfect storm.” Both Wen and Putin, however, declared their intentions to work with the major industrial powers “on solving common economic problems.”
In 2010, China’s presence at Davos was a significant one. Prime Minister Wen Jiabao, who attended the previous year, was not to return. In his stead, his chosen successor, Li Keqiang, attended. China’s economy was performing better than expected as its government was coming under increases pressure from major global corporations.
Kristin Forbes, a former member of the White House Council of Economic Advisers and an attendee at Davos, commented, “China is the West’s greatest hope and greatest fear… No one was quite ready for how fast China has emerged… Now everyone is trying to understand what sort of China they will be dealing with.” China sent its largest delegation to date to the World Economic Forum, with a total of 54 executives and government officials, many of whom were intending to “go shopping” for clients among the world’s elite.
Li Keqiang, the future Chinese prime minister, told the Davos audience that China was going to shift from its previous focus on exports and turn to “boosting domestic demand,” which would “not only drive growth in China but also provide greater markets for the world.” Li explained that China would “allow the market to play a primary role in the allocation of resources.”
In 2011, The New York Times declared that the World Economic Forum represented “the emergence of an international economic elite” that took place at the same time as unprecedented increases in inequality between the rich and poor, particularly in the powerful countries but also in the fast-emerging economies. Chrystia Freeland wrote that “the rise of government-connected plutocrats is not just a phenomenon in places like Russia, India and China,” but that the major Western bailouts reflected what the former chief economist at the IMF, Simon Johnson, referred to as a “quiet coup” by bankers in the United States and elsewhere.
Davos and the Financial Oligarchy
The power of global finance – and in particular, banks and oligarchs – has grown with each successive financial crisis. As the financial crisis tore through the world in 2008, the January 2009 meeting of the World Economic Forum featured less of the Wall Street titans and more top politicians. Schwab declared, “The pendulum has swung and power has moved back to governments,” adding that “this is the biggest economic crisis since Davos began.” Goldman Sachs, which in past years was “renowned for hosting one of the hottest parties at the World Economic Forum’s glittering annual meeting in Davos,” had cancelled its 2009 party. Nonetheless, Jamie Dimon, CEO of JPMorgan Chase, decided to continue with his plans to host a Davos party.
In 2010, thousands of delegates assembled to discuss the “important’ issues of the day. And despite the reputation of banks and bankers being at all-time lows, top executives of the world’s largest financial institutions showed up in full force. The week before the meeting, President Obama called for the establishment of laws to deal with the “too big to fail” banks, and European leaders were responding to the anger of their domestic populations for having to pay for the massive bailouts of financial institutions during the financial crisis.
Britain and France were discussing the prospect of taxing banker bonuses, and Mervyn King, governor of the Bank of England, suggested the possibility of breaking up the big banks. Several panels at the WEF meeting were devoted to discussing the financial system and its possible regulation, as bankers like Josef Ackermann of Deutsche Bank suggested that they would agree to limited regulations (at least on “capital requirements”).
More important, however, were plans for a series of private meetings of government representatives and bank chiefs, who would meet separately, and then together, in Davos. Roughly 235 bankers were to attend the summit – a 23% increase from the previous year. Global bankers and other corporate leaders were worried, and warned the major governments in attendance against the financial repercussions of pursuing “a populist crackdown” against banks and financial markets. French President Nicolas Sarkozy spoke to the Forum’s guests about a need for a “revolution” in global financial regulation, and for “reform of the international monetary system.”
The heads of roughly 30 of the world’s largest banks held a private meeting at Davos “to plot how to reassert their influence with regulators and governments,” noted a report on Bloomberg. The “private meeting” was a precursor to a later meeting at Davos involving top policymakers and regulators. Brian Moynihan, CEO of Bank of America, said of the assembled bankers, “We’re trying to figure out ways that we can be more engaged.” According to Moynihan, a good deal of the closed-door discussion “was about tactics, such as who the executives should approach and when.” The CEO of UBS, a major Swiss bank, commented that “it was a positive meeting, we’re in consensus.” The bankers said they were aware that some new rules were inevitable, but they wanted to encourage regulators and countries to coordinate the rules through the Group of 20, revived in 2009 as the premier forum for international cooperation and “global governance.”
Josef Ackermann, CEO of Deutsche Bank, suggested that “we should stop the bank bashing,” and affirmed that banks had a “noble role” to play in managing the economic recovery. Christine Lagarde, France’s Finance Minister and current Managing Director of the IMF, encouraged a “dialogue” between governments and banks, saying, “That’s the only way we’re going to get out of it.” Later that week, the bankers met “behind closed doors with finance ministers, central bankers and regulators from major economies.”
The key message from finance ministers, regulators and central bankers was a political one: “They [the banks] should accept more stringent regulation, or face more draconian curbs from politicians responding to an angry public.” Guillermo Ortiz, who had just left his post as governor of the central bank of Mexico, said, “I think banks have misjudged the deep feelings of the public regarding the devastating effects of the crisis.” French President Sarkozy stated that “there is indecent behavior that will no longer be tolerated by public opinion in any country of the world,” and that bankers giving themselves excessive bonuses as they were “destroying jobs and wealth” was “morally indefensible.”
As the 2011 Davos meeting began, Edelman, a major communications consultancy, released a report that revealed a poll conducted among 5,000 wealthy and educated individuals in 23 countries, considered to be “well-informed.” The results of the poll showed there to be a massive decline in trust for major institutions, with banks taking the biggest hit. Prior to the financial crisis in 2007, 71% of those polled expressed trust in banks compared with a new low of 25 percent in 2011.
Despite the lack of public trust in banks and financial institutions, Davos remains devoted to protecting and expanding the interests of the financial elite. In fact, the Foundation Board of the World Economic Forum (its top governing body) includes many representatives of the world of finance and global financial governance. Among them are Mukesh Ambani, who sits on advisory boards to Citigroup, Bank of America and the National Bank of Kuwait; and Herman Gref, the CEO of Sberbank, a large Russian bank. Ernesto Zedillo, the former President of Mexico who is also a member of the board, currently serves as a director on the boards of Rolls Royce and JPMorgan Chase, international advisory boards to BP and Credit Suisse, an adviser to the Bill & Melinda Gates Foundation, and is a member of the Group of Thirty and the Trilateral Commission as well as sitting on the board of one of the world’s most influential economic think tanks, the Peterson Institute for International Economics.
Also notable, Mark Carney, the governor of the Bank of England, is a member of the Foundation Board of the World Economic Forum. Carney started his career working for Goldman Sachs for 13 years, after which he was appointed as Deputy Governor of the Bank of Canada. After a subsequent stint in Canada’s Ministry of Finance, Carney returned to the Bank of Canada as governor from 2008 to 2013, when he became the first non-Briton to be appointed as head of the Bank of England in its 330-year history. From 2011 to present, Carney has also been the Chairman of the Financial Stability Board, run out of the Bank for International Settlements in Basel, Switzerland.
Apart from heading the FSB, Mark Carney is also a board member of the BIS, which serves as the central bank for the world’s major central banks. He is also a member of the Group of Thirty, a private and highly influential think tank and lobby group that brings together dozens of the most influential economists, central bankers, commercial bankers and finance ministers. Carney has also been a regular attendee at annual meetings of the Bilderberg Group, an even more-exclusive “invite only” global conference than the WEF.
Though there are few women among the WEF’s membership – let alone its leadership – Christine Lagarde has made the list, while simultaneously serving as the managing director of the IMF. She previously served as the French finance minister throughout the course of the financial crisis. Lagarde also attends occasional Bilderberg meetings, and is one of the most powerful technocrats in the world. Min Zhu, the deputy managing director of the IMF, also sits on the WEF’s board.
Further, the World Economic Forum has another governing body, the International Business Council, first established in 2002 and composed of 100 “highly respected and influential chief executives from all industries,” which “acts as an advisory body providing intellectual stewardship to the World Economic Forum and makes active contributions to the Annual Meeting agenda.”
The membership of the WEF is divided into three categories: Regional Partners, Industry Partner Groups, and the most esteemed, the Strategic Partners. Membership fees paid by corporations and industry groups finance the Forum and its activities and provide the member company with extra access to meet delegates, hold private meetings and set the agenda. In 2015, the cost of an annual Strategic Partner status with the WEF had increased to nearly $700,000. Among the WEF’s current strategic partners are Bank of America, Barclays, BlackRock, BP, Chevron, Citi, Coca-Cola, Credit Suisse, Deutsche Bank, Dow Chemical, Facebook, GE, Goldman Sachs, Google, HSBC, JPMorgan Chase, Morgan Stanley, PepsiCo, Siemens, Total, and UBS, among others.
Depending on its finances from these sources, as well as being governed by individuals from these and others institutions, it is no surprise that Davos promotes the interests of financial and corporate power above all else. This is further evident on matters related to trade.
Davos and “Trade”
Trade has been another consistent, major issue at Davos meetings – which is to say, the promotion of powerful corporate and financial interests has been central to the functions of the WEF. As the Wall Street Journal noted, “it is pretty much a tradition that trade ministers meet at Davos with an informal meeting.” At the 2013 meeting, U.S. Trade Representative Ron Kirk explained at Davos that the Obama administration was “committed to reaching an agreement to smooth trade with the European Union,” saying in an interview that “we greatly value the trans-Atlantic relationship.” The week’s meetings suggested that there “were signs of progress toward a trade accord.” Thomas J. Donohue, the president of the U.S. Chamber of Commerce, who was present at Davos, commented that “half a dozen senior leaders in Europe are ready to move forward.”
In fact, at the previous Davos meeting in January 2012, high level U.S. and EU officials met behind closed doors with the Transatlantic Business Dialogue (TABD), a major corporate grouping that promotes a U.S.-E.U. “free trade” agreement. The TABD was represented at the meeting by 21 top corporate executives, and was attended by U.S. Trade Representative Kirk, WTO Director-General Pascal Lamy, the European Commissioner for Trade, Karel De Gucht, other top technocrats, and Obama’s Deputy National Security Adviser for International Economic Affairs, Michael Froman (who is now the U.S. Trade Representative). The result of the meeting was the release of a report on a “Vision for the Future of EU-US Economic Relations,” which called “to press for urgent action on a visionary and ambitious agenda.” The meeting also recommended the establishment of a “CEO Task Force” to work directly with the “High Level Working Group” of trade ministers and technocrats to chart a way forward.
Just prior to the 2013 meeting in Davos, the TABD corporate group merged with another corporate network to form the Transatlantic Business Council (TBC), a group of top CEOs and chairmen of major corporations, representing roughly 70 major corporations. The purpose of the TBC was to hold “semi-annual meetings with U.S. Cabinet Secretaries and European Commissioners (in Davos and elsewhere).” At the Davos 2013 meeting, the TBC met behind closed doors with high level officials from the U.S. and EU. Michael Froman, who would replace Ron Kirk as the U.S. Trade Rep, spoke at the meeting, declaring that “the transatlantic economy is to become the global benchmark for standards in a globalized world.”
The following month, the U.S. and EU “High Level Working Group” released its final report in which it recommended “a comprehensive trade and investment agreement” between the two regions. Two days after the publication of this report, President Obama issued a joint statement with European Council President Herman Van Rompuy and European Commission President José Manuel Barroso, in which they announced that “the United States and the European Union will each initiate the internal procedures necessary to launch negotiations on a Transatlantic Trade and Investment Partnership,” or TTIP. At the announcement, Kirk declared the sectors that will fall under the proposed agreement, stating that, “for us, everything is on the table, across all sectors, including the agricultural sector.”
The World Economic Forum in a World of Unrest
Perhaps most interestingly, the World Economic Forum has been consistently interested in the prospects of social unrest, protests and resistance movements, particularly those that directly confront the interests of corporate and financial power. This became particularly true following the mass protests in 1999 against the World Trade Organization, which disrupted the major trade talks taking place in Seattle and marked the ascendency of what Davos called the “anti-globalization movement.”
These issues were foremost on the minds of the Davos Class as they met less than two months later in Switzerland for the annual WEF meeting in 2000. The New York Times noted that as President Clinton attempted to address the issue of restoring “confidence in trade and globalization” at the WEF, global leaders – particularly those assembled at Davos – were increasingly aware of the new reality that “popular impressions of globalization seem to have shifted” with growing numbers of people, including the protesters in Seattle, voicing criticism of the growing inequality between rich and poor, environmental degradation and financial instability. The head of the WTO declared that “globalism is the new ‘ism’ that everyone loves to hate… There is nothing that our critics will not blame on globalization and, yes, it is hurting us.”
The guests included President Clinton, British Prime Minister Tony Blair and Mexican President Ernesto Zedillo, along with the leaders of South Africa, Indonesia, Malaysia and Finland, among others. The head of the WTO and many of the world’s trade ministers were also set to attend, hoping to try to re-start negotiations, though protesters were also declaring their intention to disrupt the Forum’s meeting. With these worries in mind, the Swiss Army was deployed to protect the 2,000 members of the Davos Class from being confronted by protesters.
As the World Economic Forum met again in January of 2001 in Davos, “unprecedented security measures” were taken to prevent “hooligans” from disrupting the meeting. On the other side of the world, in Porto Alegre, Brazil, roughly 10,000 activists were expected to converge for the newly-formed World Social Forum, a counter-forum to Davos that represented the interests of activist groups and the Third World. As the Davos Class met quietly behind closed doors, comforted by the concrete blocks and razor wire that surrounded the small town, police on the other side of the fence beat back protesters.
In the wake of the financial crisis, the WEF meeting in 2009 drew hundreds of protesters to Davos and Geneva where they were met by riot police using tear gas and water cannons. Inside the Forum meeting, French Finance Minister Christine Lagarde warned the assembled leaders, “We’re facing two major risks: one is social unrest and the second is protectionism.” She noted that the task before the Davos Class was “to restore confidence in the systems and confidence at large.” Protesters assembled outside held signs reading, “You are the Crisis.”
The January 2012 WEF meeting took place following a year of tumultuous and violent upheavals across the Arab world, large anti-austerity movements across much of Europe, notably with the Indignados in Spain, and the Occupy Wall Street movement just months prior in the United States and across much of the world. As the meeting approached, the WEF announced in a report that the top two risks facing business leaders and policy makers were “severe income disparity and chronic fiscal imbalances.” The report warned that if these issues were not addressed it could result in a “dystopian future for much of humanity.” The Occupy Movement had taken the issue of inequality directly to Davos, and there was even a small Occupy protest camp constructed at Davos.
As the Financial Times noted, “Until this year  the issue of inequality never appeared on the risk list at all, let alone topped it.” At the heart of it was “the question of social stability,” with many Davos attendees wondering “where else unrest might appear.” Beth Brooke, the global vice chair of Ernst & Young, noted that “countries which have disappearing middle classes face risks – history shows that.”
With citizens taking to city streets and protesting in public squares from Cairo to Athens and New York, the Financial Times noted that discontent was “rampant,” and that “the only consistent messages seem to be that leaders around the world are failing to deliver on their citizens’ expectations and that Facebook and Twitter allows crowds to coalesce in an instant to let them know it.” For the 40 government leaders assembling in Davos, “this is not a comforting picture.”
In Europe, democratically elected leaders in Italy and Greece had been removed and replaced with economists and central bankers in a technocratic coup only months earlier, largely at the behest of Germany. Mario Draghi, the head of the European Central Bank (ECB), was perhaps “the most powerful leader in Europe,” though an Occupy movement had sprung up at the headquarters of the ECB in Frankfurt as well.
During the Forum, Occupy protesters outside clashed with police. Stephen Roach, a member of the faculty at Yale University and a chairman of Morgan Stanley Asia, wrote an article in the Financial Times describing his experiences as a panelist at the “Open Forum,” held on the last day of the Davos gathering, in which citizens from the local community could participate along with students and Occupy protesters. The topic he discussed was “remodeling capitalism,” which, Roach wrote, “was a chance to open up this debate to the seething masses.” But the results were “disturbing” as “chaos erupted immediately” with chants from Occupy protesters denouncing the forum and calling for more to join them. Roach wrote that it was “unruly and unsettling” and he “started thinking more about an escape route than opening comments.”
Once the discussions began, Roach found himself listening to the first panelist, a 24-year-old Occupy protester named Maria who expressed anger at “the system” and that there was a “need to construct a new one based on equality, dignity and respect.” Other panelists from the WEF included Ed Miliband from the U.K., a UN Commissioner, a Czech academic and a minister from the Jordanian dictatorship. Roach noted that compared to Maria from Occupy, “the rest of us on the panel spoke a different language.”
Having spent decades as a banker on Wall Street, Roach confessed that “it as unsettling to engage a hostile crowd whose main complaint is rooted in Occupy Wall Street,” explaining that he attempted to focus on his expertise as an economist, “speaking over hisses.” He explained that all of his “expert” insights on economics “hardly moved this crowd.” Maria from Occupy, Roach wrote, got the last word as she stated, “The aim of Occupy is to think for yourself. We don’t focus on solutions. We want to change the process of finding solutions.” As “the crowd roared its approval,” Roach “made a hasty exit through a secret door in the kitchen and out into the night.” Davos, he wrote, “will never again be the same for me. There can be no retreat in the battle for big ideas.”
In October of 2013, The Economist reported that “from anti-austerity movements to middle-class revolts, in rich countries and in poor, social unrest has been on the rise around the world.” A World Economic Forum report from November 2013 warned of the dangers of a “lost generation” that would “be more prone to populist politics,” and that “we will see an escalation in social unrest.” Over the course of 2013, major financial institutions such as JPMorgan Chase, UBS, HSBC, AXA and others were issuing reports warning of the dangers of social unrest and rebellion. JPMorgan Chase, in its May 2013 report, stated that Europe’s “adjustment” to its new economic order was only “halfway done on average,” warning of major challenges ahead. The report complained about laws hindering the advancement of its agenda, such as “constitutional protection of labor rights… and the right to protest if unwelcome changes are made to the political status quo.”
The 2014 meeting of the World Economic Forum drew more than 40 heads of state, including then-president of Ukraine, Viktor Yanukovich, as well as Mexico’s Enrique Pena Nieto, Japanese Prime Minister Shinzo Abe, British Prime Minister David Cameron, Brazilian Presient Dilma Rousseff, Iranian President Hassan Rouhani, Israeli Prime Minister Benjamin Netanyahu and Nigeria’s Goodluck Jonathan. U.S. Treasury Secretary Jacob Lew and prominent central bankers such as Mario Draghi and Mark Carney also attended alongside IMF Managing Director Christine Lagarde and World Bank president Jim Yong Kim.
As the meeting began, a major report by the World Economic Forum was published, declaring that the “single biggest risk to the world in 2014” was the widening “gap between rich and poor.” Thus, income inequality and “social unrest are the issue[s] most likely to have a big impact on the world economy in the next decade.” The report warned that the world was witnessing the “lost generation” of youth around the world who lack jobs and opportunities, which “could easily boil over into social upheaval,” citing recent examples in Brazil and Thailand.
Brazilian President Dilma Rousseff is due to attend the annual Davos meeting this week. But just prior to that meeting, violent protests erupted in the streets of Brazil in opposition to austerity measures imposed by President Rousseff, recalling “the beginnings of the mass street demonstrations that rocked Brazil in June 2013.” One wonders whether Rousseff will be attending next year’s meeting of the WEF, or whether she will still even be president.
Indeed, the growth and power of the Davos Class has grown with – and spurred – the development of global unrest, protests, resistance movements and revolution. As Davos welcomes the global plutocrats to 2015, no doubt they’ll be reminded of the repercussions of the “market system” as populations around the world remind their leaders of the power of people.
Global Power Project: Bilderberg Group and the Tyranny of the Technocrats
By: Andrew Gavin Marshall
19 December 2014
Originally posted at Occupy.com
Bilderberg is an inherently technocratic institution. It brings together top “experts” and decision-makers from a number of important sectors to engage in off-the-record conversation, speaking a “common language” in order to help design and coordinate policies that more accurately represent the interests of concentrated power.
As such, Bilderberg not only serves a technocratic function, but it is also populated with a number of the world’s most influential technocrats who are members and invited guests: top officials of central banks, finance ministries, international organizations, think tanks, foundations and universities. Their participation in Bilderberg meetings provides them with a “private” forum in which to engage with the political, corporate and financial oligarchy. More concretely, Bilderberg meetings enable participants to promote the expansion and further institutionalization of technocracy. But to understand Bilderberg’s relevance to technocracy, let’s first define the concept.
What is Technocracy?
Technocracy is largely defined as “rule by experts,” or the exercise of power by “professionals.” As the Economist explained in 2011: “Technocracy was once a communist idea: with the proletariat in power, administration could be left to experts.” But the scientific management of society “was popular under capitalism too,” and the magazine noted there was even a prominent “Technocratic Movement” in the United States in the early 20th century.
The late 19th and early 20th century witnessed rapid industrialization, new oligarchies, mass migration, revolution, a clash of empires between old and new, emerging technologies and inventions, expanded literacy, new energy sources and novel forms of communication and transportation. It was an age of oligarchs and unrest. Many of the most powerful societies turned to technocracy to help manage the great transitions of the era. As the oligarchs sought to maintain their influence by institutionalizing it within society, they also while sought to manage the expectations and interests of the population: by engaging in social engineering with the objective of maintaining social control, or what the ruling class called “stability.”
Capitalist, Communist (or State-Socialist) and Fascist societies turned to technocracy and the rule of experts to transform the structure of modern civilization through a “scientific management” of human society – where oligarchic power is legalized and institutionalized, and the population gives its consent, or is at least its obedience, to the ruling structure.
The Chinese Communist Party and state is largely ruled by unelected technocrats, as are several military dictatorships and one-party states. On occasion, even Western “democratic” nations become ruled by unelected technocrats, though as the Economist noted, “only for a short time” and “in unusual circumstances.”
Recent examples include the imposition of technocratic governments in Italy and Greece, in late 2011 when democratically elected leaders were removed from power and replaced with economists and central bankers. Another recent example was in Ukraine, where, following the removal of the more pro-Russian president, the management of the government was handed to a former central banker.
Despite these exceptions of direct technocratic rule, there are technocratic institutions and individuals who oversee major parts of our society and determine important policies that have profound consequences for hundreds of millions, and often billions, of people around the world. Central banks, finance ministries, international organizations, think tanks, foundations and universities are all highly influential technocratic institutions, often managed by high-level technocrats and governed (or advised) by members of the financial and corporate oligarchy.
China’s Technocratic Tyranny
A November 2013 article in The Atlantic described Chinese politics as “a nightmare” for those who were “lovers of clear, concise language.” The author, Matt Schiavenza, cited the names of the top ruling body (Politburo Standing Committee), the major conference establishing policy and direction for the following years (Third Plenary Session of the 18th Party Congress), and the conference’s resulting document that promised to “comprehensively deepen reforms,” and argued: “Chinese politics are designed to attract as little attention as possible.”
The technicality and obscurity of the language serves to hide the exercise and effects of power behind an image of “expertise.” Only those who are experts in matters of law, finance, economics, political science, etc., are capable of understanding the language, and thus, the implications of its use. In China, the technocratic language of the Party and state hide the rule of not only the visible top technocrats, but of the powerful political and financial oligarchs and dynasties behind them.
China’s political and economic power is concentrated in the hands of a new aristocratic class of what are called “Princelings,” the descendants of Communist China’s revolutionary leaders. These leaders wielded formal political power, and after the turn to capitalism, from the late 1970s onward, the descendants of these families came to dominate the economic resources of the country. As Bloomberg noted, in China “wealth and influence is concentrated in the hands of as few as 14 and as many as several hundred families.”
For foreign businesses and banks to gain access to the Chinese market, the most effective means has been through the practice of hiring or establishing relationships with the Princelings. Major global banks, such as Deutsche Bank, Morgan Stanley, Goldman Sachs, Credit Suisse and others, frequently hire princelings in order gain access and influence within China’s leadership, since the relatives of princelings themselves govern the bureaucracies and state-owned industries, determining the flow of money through society.
JPMorgan Chase has been under investigation by the Securities and Exchange Commission (SEC) for its practice of hiring hundreds of princelings in China to gain access to its lucrative market. In the words of Bloomberg, these princelings have become China’s “new capitalist nobility.”
Wen Jiabao served as China’s prime minister for the decade leading up to 2012, and his family amassed billions in assets, a practice consistent for most (if not all) of China’s ruling political figures, including its new president, Xi Jinping. Almost all of the nine members of the ruling Politburo Standing Committee under the previous Chinese government were from families that amassed enormous fortunes and controlled entire areas of the economy, with corruption “more severe than at any time in history,” as the Financial Times quoted a veteran Communist Party member and journalist.
China is a one-party dictatorship with powerful military and security forces and high-tech surveillance. It is ruled by gangsters, oligarchs and technocrats. China is, essentially, a Mafiocracy. Yet the language of its technocratic form of governance obscures this reality behind the veneer of impartiality and expertise. Behind the scenes, gangsters rule and families feud.
This reality of Chinese politics was revealed in 2012 when one of China’s princelings and rising political stars, who was set to gain a seat on the Politburo Standing Committee in 2013, became the subject of a dramatic downfall worthy of the palace intrigue in ancient imperial China. Bo Xilai’s rise to power was turned into a life sentence in prison after his closest adviser sought asylum in a U.S. consulate, fearing for his life and telling the Americans that Bo Xilai’s wife had murdered a British banker in a hotel room with cyanide.
The fall of Bo Xilai and his family was not a subject the Chinese leadership wanted aired publicly. The popular attention and implications of the story were largely the result of social media being used by an increasing percentage of Chinese citizens. What was intended to be the behind-the-scenes factional power struggles of families vying for top-spots on the Politburo Standing Committee, spilled out into the public as the most dramatic news story since the Tiananmen Square massacre in 1989, and changed the course of Chinese politics.
It is also interesting to note that one of China’s top technocrats, Liu He, was invited to the Bilderberg meeting in 2014. In China, Liu He is one of President Xi Jinping’s top economic advisers, considered to be largely “pro-market” and seen as a prominent reformer. The Wall Street Journal described Liu He’s job as “nothing less than to craft an economic vision that will guide China for the decade to come.” He has also been referred to as “China’s Larry Summers.”
Technocracy in the West
Much like the powerful, dramatic and shocking figures and processes hiding behind the bland language of Chinese politics, the ambiguous language of global economics and finance hides its own ruthless realities. Behind the words and actions of central bankers, finance ministers and other top technocrats, we’re able to see countries collapse, governments overthrown, populations impoverished, societies destroyed, fascism and racism explode as people riot, rebel and revolt.
The language of “financial technocracy” belies a world of mass impoverishment, exploitation, domination and immense concentrations of power. These technocrats define and manage global financial and economic policy, construct the ideology the justifies the rule of the oligarchy, and implement policy which is intended to protect and expand the interests of that oligarchy.
As central bankers demand “fiscal tightening” and finance ministers implement “structural reforms,” the populations of Greece, Portugal, Ireland, Cyprus, Spain and Italy were plunged into crisis. Meanwhile, poverty and unemployment rise, fascist parties emerge, social unrest and riots in the streets become common, suicide rates increase, health and education systems come under strain and collapse, and governing political parties lose legitimacy and turn to police repression to control the crowds. Economic opportunity and political democracy become things of the past. Behind the technocratic language of economics lies a world of brutality.
Bilderberg’s structure, members and objectives that promote and expand the power of technocracy are inherently destructive to democracy. Europe’s debt crisis, and the technocratic institutions and individuals that managed it, have had profoundly negative consequences on the lives of hundreds of millions of people. The functions of technocracy and the actions of Europe’s top technocrats effectively serve the interests of concentrated financial and corporate power.