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When the IMF Meets: Here’s What Happened At the Global Plutocracy’s Pow Wow in Peru
By: Andrew Gavin Marshall
26 October 2015
Originally posted at Occupy.com
On October 6, the finance ministers, central bankers and development ministers from 188 countries convened for the Annual Meeting of the World Bank and International Monetary Fund in Lima, Peru. The yearly gathering is one of the top scheduled events on the calendar of economic diplomats, bringing them together for private discussions, seminars and press conferences with journalists. And of course it’s a big deal for the thousands of private bankers and financiers who are there to cut deals with the chief financial policymakers in those 188 IMF-member nations.
It was ironic that this year’s meeting took place in Peru at a time when emerging market economies are experiencing increased economic problems: the result of a combined slow-down in economic growth in China, a collapse in commodity prices, and threats by the U.S. Federal Reserve to hike interest rates in the near future. Indeed, talk of China, interest rate hikes and emerging market crisis was plentiful in Peru. Central bankers, unsurprisingly, came out generally in favor of raising rates, with top monetary officials from emerging markets saying they more feared the uncertainty about when rates would rise than the rise itself, and urged the Fed to simply get on with it.
Global Pow Wow
The annual meetings bring together the Board of Governors of the IMF, made up of the central bankers or finance ministers from the Fund’s 188 member nations. But the Governors are given their marching orders from the 24-member International Monetary and Financial Committee (IMFC), made up of ministers and central bank governors from the 24 major constituencies represented on the IMF’s Executive Board, and whose membership largely reflects that of the Group of Twenty (G20).
The IMFC held their meeting in Lima on Oct. 9, presided over by the committee’s chairman, Agustin Carstens, the Governor of the Central Bank of Mexico, and the IMF Managing Director Christine Lagarde. In attendance were the finance ministers of Japan (Taro Aso), India (Arun Jaitley), Argentina (Axel Kicillof), Brazil (Joaquim Levy), France (Michel Sapin), Italy (Pier Carlo Padoan), Germany (Wolfgang Schauble), Singapore (Tharman Shanmugaratnam), Great Britain (George Osborne) and the United States (Jack Lew), along with top-level central bankers from Saudi Arabia, Nigeria, Norway, Algeria, Colombia, Belgium and China.
Also participating in the IMFC meeting were Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board (FSB); Jaime Caruana, General Manager of the Bank for International Settlements (BIS); Valdis Dombrovskis, Vice President of the European Commission; Angel Gurria, Secretary-General of the Organization for Economic Cooperation and Development; Mario Draghi, President of the European Central Bank (ECB), and other top representatives from OPEC, the World Bank and the World Trade Organization (WTO).
These various financial diplomats met and made prepared statements, but the real work and decision-making took place in the IMFC’s off-the-record discussions. These discussions also included, as usual, a joint meeting between the IMFC and the G20, after which the G20 held a press conference discussing recent agreements made by the world’s top economic diplomats collectively representing roughly 85% of global GDP.
The meetings followed the consistent hierarchy of operations among the world’s most powerful economies, starting with a private gathering of the finance ministers and central bankers from the Group of Seven (G7) nations, including the U.S., Germany, Japan, UK, France, Italy and Canada. This was followed by a gathering of ministers and monetary chiefs from the G20 nations (consisting of the G7 plus China, Brazil, Russia, India, South Africa, Argentina, Australia, Turkey, Saudi Arabia, Mexico, South Korea, Indonesia and the European Union). The heads of the world’s major international organizations also attended these meetings, functioning effectively as a steering committee for the global economy. The G20 then held a joint session with the IMFC, which functions as the steering committee of the IMF.
The IMFC’s communiqué following its meeting warned that global economic growth was “modest and uneven” with increased “uncertainty and financial market volatility.” Risks to the global economy “have increased,” it noted, in particular for emerging markets.
Apart from the IMFC and G20, a number of other important meetings took place on the sidelines of the annual gathering, many of which prominently featured bankers. One of the most important gatherings of global financiers was the Annual Membership Meeting of the Institute of International Finance (IIF), a consortium of roughly 500 global financial institutions including banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks, credit ratings agencies and development banks.
From Oct. 9-10, the world’s top bankers and financiers then held luncheons and private meetings with the world’s top economic policy-makers, who were also invited to attend or speak at the conference proceedings. The IIF’s opening ceremony was addressed by Peru’s President Ollanta Humala Tasso, and included guest speakers like the finance minister of Indonesia and central bankers from Thailand and Malaysia, as well as the top Swedish central banker, Stefan Ingves, who serves as chairman of the Basel Committee on Banking Supervision (BCBS) which is responsible for shaping and implementing global banking regulations known as Basel III.
On the second day of the IIF’s meeting, guest speakers included top officials from Brazil’s finance ministry, the World Bank, and a keynote address was delivered by the governor of Canada’s central bank, Stephen S. Poloz. The rest of the day included talks by finance ministers and central bankers from Colombia, Chile and Peru; a top official from the central bank of France; and an official from the Financial Stability Board (FSB), which is a group of global central banks, finance ministries and regulators responsible for managing stability of financial markets.
Another important gathering in Lima was the Group of Thirty (G30), presided over by its Chairman Jean-Claude Trichet, the former President of the European Central Bank. The G30 was established in 1978 as a nonprofit group of roughly 30 sitting and former central bankers, finance ministers, economists and private bankers, with the aim “to deepen understanding of international economic and financial issues” and “to examine the choices available to market practitioners and policymakers.”
Among the G30’s current members are former Federal Reserve Chair Paul Volcker; Mark Carney of the Bank of England and Financial Stability Board; Jaime Caruana of the BIS; Mario Draghi of the ECB; William C. Dudley of the Federal Reserve Bank of New York; former U.S. Treasury Secretary Timothy Geithner; former Bank of England Governor Mervyn King; economist Paul Krugman; Bank of Japan Governor Haruhiko Kuroda; Bank of France Governor and BIS Chairman Christian Noyer; Reserve Bank of India Governor Raghuram Rajan; Tharman Shanmugaratnam of Singapore; former U.S. Treasury Secretary Lawrence Summers; Chinese central banker Zhou Xiaochuan; and top bankers from UBS, JPMorgan Chase, BlackRock and Goldman Sachs.
This year, the G30 held its annual International Banking Seminar in Peru, “an invitation-only, off-the-record forum that allows for frank discussion and debate of the thorniest issues confronting the central banking community,” bringing together “over fifty percent of the world’s central bank governors, the Chairmen and CEOs of the financial sector, and a select few academics to debate financial and systemic issues of global import.”
The meeting included a short speech by Federal Reserve Vice Chairman Stanley Fischer, who told the audience that the Fed’s interest rate rise was “an expectation, not a commitment.” Fischer acknowledged that “shifting expectations concerning U.S. interest rates could lead to more volatility in financial markets and the value of the dollar, intensifying spillovers to other economies, including emerging market economies.” He reassured his audience, however, that the Fed will “remain committed to communicating our intentions as clearly as possible… to assist market participants, be they in the private or the public sector, in understanding our intentions as they make their investment decisions.”
Behind Closed Doors
But the true importance of the annual IMF meetings is not what happens in formal proceedings and seminars, but the various secret meetings of finance ministers, central bankers and private financiers that take place on the sidelines of the official conference. In these closed-door events, a select group of government and monetary officials, primarily those from the G7 and G20 nations, were invited to wine and dine with bankers at decadent dinners and lavish parties, and speak to private gatherings of the world’s top investors and money managers. It’s here, in these various meetings, where the world’s chief financial diplomats were able to meet, greet and receive praise or criticism from their true constituents: the global financial elite.
As usual, the annual pow wow of the global plutocracy came and went with little comment outside the financial press. But as always, the annual IMF meetings – and the more secretive, simultaneous gatherings of global economic diplomats and financiers on the sidelines – represented the core of global economic governance, manifest in the various ad-hoc committees that in essence rule the world.
These individuals’ main interactions were not with the populations in their home nations – the people who suffer under austerity, who have to “adjust” to the restructuring of their societies into “market economies” – but rather with those from whom they have the most to gain: bankers, billionaires and financiers. And rest assured, when the officials retire from their central bank and finance ministry positions, they will be stepping out of their membership in the G7, G20 and IMFC, and into the boardrooms of JPMorgan Chase, Goldman Sachs, BlackRock, Barclays and Deutsche Bank. They will be well rewarded, with large salaries and bonuses for a job well done while in public office. And the revolving door of global economic governance will keep turning.
A Year in the World-Traveling Life of U.S. Treasury Secretary Jack Lew
By: Andrew Gavin Marshall
Originally posted at Occupy.com
15 October 2015
Jacob Joseph (“Jack”) Lew is one of the two most powerful financial diplomats in the world, the other being his central banking counterpart, Janet Yellen, the Chair of the Federal Reserve Board. As the U.S. Secretary of the Treasury, Lew has been the most important economic official inside the Obama administration since his confirmation in February 2013 following the president’s re-election.
Prior to serving as Treasury Secretary, Lew was White House Chief of Staff to President Obama from 2012 to 2013, and Director of the Office of Management and Budget from 2010 to 2012, a position he also held in the Clinton administration from 1998 until 2011. Lew was also Deputy Secretary of State under Hillary Clinton from 2009 to 2010. But from 2006 to 2008, he worked at Citigroup, overseeing the bank’s $1.8 billion in wealth management assets, and was then appointed as one of Citi’s senior executives.
Lew’s appointment to Citigroup was made on the recommendation of the bank’s then-Chairman Robert Rubin, the former Treasury Secretary from the Clinton administration (1995-1999), with whom Lew worked closely. When Lew left the bank to join the Obama administration immediately following the 2008 financial crisis and the billions in bailouts his bank received, Lew got a bonus of almost $1 million from Citigroup on top of his more than $2 million in regular earnings from the bank.
Tracking Lew’s Movements
In examining the role played by the Treasury Secretary to shape U.S. and global economy policy, it’s revealing to look at his schedule over the course of a year. After reviewing Secretary Lew’s schedule of phone calls and meetings in 2014, it’s easier to understand what it means to be one of the world’s most powerful financial diplomats. More than any other high-level official, Lew was in consistent contact with Yellen, having held over 30 phone calls or meetings with the Federal Reserve Chairperson over the course of the year, which included regular lunch or breakfast meetings.
As the two top diplomats and managers of the American economy and the U.S. dollar, it makes sense for these two individuals to meet frequently, both to assess the economic outlook and to devise a common U.S. position at international meetings – like the bi-annual meetings of the IMF steering committee known as the International Monetary and Financial Committee (IMFC), as well as the secretive meetings of finance ministers and central bankers of the Group of Seven (G7) and Group of Twenty (G20) nations.
Officially founded in 1976, the G7 sits at the center of global economic governance, meeting at the head of state level once a year, and holding multiple meetings and conference calls among the finance ministers and central bank governors of nations that comprise its membership: the U.S., Germany, Japan, France, UK, Italy and Canada. The G20, on the other hand, was founded as a meeting of finance ministers and central bank governors in 1999, and only started meeting at the head of state level in late 2008 in the midst of the global financial crisis.
Jack Lew was in frequent contact with his G7 peers, including all of the finance ministers and most of the central bankers. In addition to the gatherings of the G7 and G20, Lew spoke or met with German Finance Minister Wolfgang Schauble roughly 20 times throughout 2014. In the same period he met or spoke with the British Chancellor of the Exchequer, George Osborne, roughly 16 times; with European Central Bank (ECB) President Mario Draghi some 15 times; and with Japanese Finance Minister Taro Aso 14 times.
Secretary Lew also had extensive contact with French Finance Minister Michel Sapin and his predecessor Pierre Moscovici, who became European Commissioner for Economic and Monetary Affairs; Italian Finance Minister Pier Carlo Padoan; Canadian Finance Minister Joe Oliver; and Mark Carney, the Governor of the Bank of England and Chairman of the Financial Stability Board (FSB), an institution that brings together central bankers, finance ministers and regulators to oversee the global management of financial markets. Lew spoke or met with Carney some 12 times throughout the year.
But apart from Yellen, the high-level official with whom Lew had the most contact was Christine Lagarde, the Managing Director of the IMF and a former French Finance Minister; Lew met or spoke to Lagarde roughly 23 times in 2014, including at the meetings of the G7 and G20, which the IMF Managing Director typically attends.
The G20 has a much wider membership than the G7, though it includes all of the G7 nations in addition to Australia, the European Union, and major emerging market economies such as China, India, Brazil, Russia, Mexico, Turkey, South Africa, Saudi Arabia, Argentina, Indonesia and South Korea. The heads of major international organizations like the IMF, World Bank, Bank for International Settlements (BIS), World Trade Organization (WTO), and the Organization for Economic Cooperation and Development (OECD) also typically attend the meetings of the G7 and G20.
Following Yellen, Lagarde and Schauble, Secretary Lew was most frequently in contact with Australian Treasurer Joe Hockey, with whom he met or spoke roughly 17 times throughout the year. While Australia is not even a member of the G7, it would typically seem odd to have such extensive communication between its Treasurer and the U.S. Treasury Secretary. But Australia was hosting the G20 meetings in 2014, and thus Hockey closely coordinated with Lew on meetings that involved financial officials convening four times during the year.
Another name that stands out is Tharman Shanmugaratnam, the Singaporean Finance Minister who held nine separate calls and meetings with Lew, and 13 including those of the G20. Shanmugaratnam became Finance Minister of Singapore, a wealthy Asian city-state, in 2007, and has also held the dual role as head of the Monetary Authority of Singapore (MAS), the country’s central bank. In addition, Tharman serves on the board of directors of Singapore’s large sovereign wealth fund, GIC, which manages between $100 and $350 billion in assets, including significant stakes in Citigroup and UBS, Switzerland’s largest bank.
The likely reason why Lew had such frequent contact with Shanmugaratnam – the chief financial diplomat of a country that is neither a member of the G7 nor the G20 – is because in March of 2011, Shanmugaratnam was appointed Chairman of the IMF’s steering group, the International Monetary and Financial Committee (IMFC), made up of finance ministers and central bank governors from the nations represented on the Fund’s Executive Board.
Lew attended the World Economic Forum in Davos, Switzerland, in January of 2014, where he held private bilateral meetings with Mark Carney of the Bank of England (and FSB), Saudi finance minister and central bank governor Ibrahim Al-Assaf, ECB President Mario Draghi, and Mexican Finance Minister Luis Videgaray, who was another emerging market diplomat with whom Lew had frequent contact throughout the year (eight separate phone calls and meetings, or 12 including those at the G20).
In February, Lew traveled to Australia for the first G20 meeting of finance ministers and central bank governors under the chairmanship of Australian Treasurer Joe Hockey. Lew moderated a session of a conference hosted by the Institute of International Finance (IIF) and held private meetings with German Finance Minister Schauble, Turkish Deputy Prime Minister and top financial diplomat Ali Babacan, and Japanese Finance Minister Taro Aso. And just before the official G20 meetings began, the G7 countries got together for a quiet one-hour meeting as well.
As the Spring Meetings of the IMF were starting in April, Jack Lew held private meetings with Russian Finance Minister Anton Siluanov, Videgaray of Mexico, Draghi of the ECB, Saudi Finance Minister Al-Assaf, and Brazilian Finance Minister Guido Mantega. Once again, Lew attended a private one-hour gathering of the G7 ministers before attending a wider G20 meeting of ministers and central bank governors on April 10. The following day, Lew attended the joint G20-IMFC meeting, and continued with G20 meetings for the rest of the day.
In September, Lew once again traveled to Australia for a special meeting of G20 financial diplomats, during which time Germany served as host for a private lunch meeting of the G7 finance ministers and central bank governors. He returned to Australia in November for the main head-of-state summit of the G20, where he privately met with his counterparts from Saudi Arabia, China, France, Japan, and with Mark Carney of the FSB.
As the chief financial diplomat from the most powerful nation and economy in the world, Jacob Lew is the central figure among G7 diplomats with whom he is in frequent contact, while closely coordinating with the chairs of the G20, the IMFC, and the heads of international organizations like the IMF and FSB. Through these and other groupings, Treasury Secretary Lew sits at what can only be understood as the absolute center of global financial diplomacy and governance.
Who Rules Europe?
By: Andrew Gavin Marshall
22 July 2015
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Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe
By: Andrew Gavin Marshall
7 July 2015
“They just wanted to take a bat to them,” said former U.S. Treasury Secretary Timothy Geithner, referring to the attitude of European leaders towards debt-laden Greece in February of 2010, three months before the country’s first bailout. Mr. Geithner, Treasury Secretary from 2009 until 2013, was attending a meeting of the finance ministers and central bankers of the Group of Seven (G7) nations: the United States, Japan, Germany, France, Britain, Italy and Canada.
It was the first occasion he had to meet Germany’s new Finance Minister, Wolfgang Schauble, presenting an opportunity to pressure the Europeans to end the crisis. The Europeans, specifically Germany and the European Central Bank (ECB), always had the ability to end the crisis. Putting up enough money in a regional bailout fund or allowing the ECB to fund governments (acting as a ‘lender of last resort’) would provide enough reassurance to the markets that no country would go bankrupt and therefore the crisis would end. It was referred to as the ‘big bazooka’ option, but Mr. Geithner had no such luck in convincing the Europeans to act quickly, largely due to German resistance.
The Europeans arrived at the G7 meeting in the remote Arctic Canadian city of Iqaluit wanting “to teach the Greeks a lesson” and “crush them,” explained Mr. Geithner. The Treasury Secretary warned them, “You can put your foot on the neck of those guys if that’s what you want to do,” but they still had to take action to reassure markets that the crisis would not spread to other countries, or threaten the euro itself. “I thought it was just inconceivable to me they would let it get as bad as they ultimately did,” said Mr. Geithner.
As the United States and the rest of the world would learn, the European strategy for the debt crisis that began in Greece and spread across the eurozone would be dictated by Germany, “the undisputed dominant power in Europe.” More than five years later, the Americans are still pressuring the Europeans to resolve their debt crisis problems, but to little effect. The stakes are now even higher as the U.S. fears the possibility of losing Greece to Russia, a conflict in which Germany is increasingly involved.
The Americans would attempt to influence Europe’s crisis through extensive contact between Mr. Geithner and Mr. Schauble at the German Finance Ministry, Mario Draghi at the ECB, and Christine Lagarde at the International Monetary Fund (IMF). The Americans knew that for anything to get done in Europe, you needed the Germans and the central bankers on board. The U.S. spy agency, the NSA, was even wiretapping the phone calls of German Chancellor Angela Merkel, top officials of the Finance Ministry and the ECB, with a particular interest in economic issues and Greece.
Germany’s political strategy was to allow the debt crisis to spread, creating the pressure required to force eurozone nations to accept German demands of restructuring their economies in return for financial aid from the EU. The German magazine Der Spiegel described Frau Merkel’s overall European strategy: “the aim was to solve the debt crisis in a step-by-step fashion.”
“If the euro fails, then Europe fails,” said the Chancellor in May of 2010, shortly after the first Greek bailout program was agreed. “The euro is in danger. If we do not avert this danger, then the consequences for Europe are incalculable and then the consequences beyond Europe are incalculable.” Merkel worked closely with Mr. Schauble at the Finance Ministry and her Minister of Economics, Rainer Brüderle, to write a draft proposal outlining the changes Germany wanted in the European Union.
The German publication Der Spiegel was leaked a copy of the draft, and concluded: “Berlin is serious about taking the lead as the euro zone struggles with a suddenly weak currency.” Germany wanted a Europe where the European Commission had the power to suspend the voting rights of nations for violating the eurozone’s debt and spending laws, including plans for managing the bankruptcy of a member nation. “Europe,” said Angela Merkel, “needs a new culture of stability.” But that culture would be enforced through the destabilizing power of financial market crises.
The German bet was that the EU could outrun financial markets, using the crisis as an opportunity to advance fiscal and political integration and impose their demands upon the rest of Europe, while simultaneously preventing markets from creating a crisis so severe that it threatened the euro or the economies of the more powerful nations. Without the pressure of financial markets, the EU could not force its member nations to restructure their economies and societies. Chancellor Merkel would frequently describe the European debt crisis to her colleagues as a “poker game” between financial markets and politicians. The first to flinch would lose.
In 2011, Bloomberg noted that Merkel was “turning Europe’s sovereign-debt crisis into an opportunity to reshape the euro region in Germany’s image,” concluding that she had “pulled ahead for now in her battle to restore policy makers’ mastery over the market.” A biographer of Merkel explained, “It’s policy by trial and error.”
Merkel’s powerful Finance Minister, Mr. Schauble, was one of the chief architects of the German strategy for Europe’s crisis. In March of 2010, he wrote in the Financial Times that, “from Germany’s perspective, European integration, monetary union and the euro are the only choice.” But aid comes with strings attached and harsh penalties for violations. “It must, on principle, still be possible for a state to go bankrupt,” wrote Mr. Schauble. “Facing an unpleasant reality could be the better option in certain conditions.”
The German minister believed “the financial crisis in the eurozone is not just a threat, but an opportunity,” as markets would “force the most debt-laden members of the 17-nation currency union to curb their budget deficits and increase their competitiveness.” This would pressure governments to accept further integration into a “fiscal union” defined and shaped by Germany. “We need to take big steps to get that done,” Mr. Schauble said in 2011. “That is why crises are also opportunities. We can get things done that we could not do without the crisis.”
Financial markets were happy to oblige the German-EU strategy, as the crisis would force the reforms long demanded by banks as a solution to the irresponsible spending of governments: austerity and structural reform. From 2002 to 2012, Josef Ackermann led Germany’s largest bank, Deutsche Bank. In 2011, the New York Times described Ackermann as “the most powerful banker in Europe” and “possibly the most dangerous one, too,” standing “at the center of more concentric circles of power than any other banker on the Continent.”
When the financial crisis struck in 2008, Angela Merkel and Josef Ackermann established a close working relationship, though not without its ups and downs. “We have a cordial and professional relationship,” said Mr. Ackermann in 2011. The banker would advise Frau Merkel on her strategy through the financial and debt crises, also working closely with Jean-Claude Trichet, then-president of the ECB. From his “seat at the nexus of money and politics,” Ackermann was “helping to shape Europe’s economic and financial future.”
After he left Deutsche Bank in 2012, Ackermann delivered a speech to the U.S.-based think tank, the Atlantic Council, where he outlined Germany’s overall strategy for Europe’s crisis. When asked why Germany simply didn’t say that it would do whatever it took to protect the euro and eurozone nations from bankruptcy (thus ending the financial crisis), Ackermann explained that it was largely due to a “political tactical consideration.” While such an option would surely end the market panic and save the euro, it would be unacceptable to the German public, let alone the German parliament.
But another major problem, noted Mr. Ackermann, was that if Germany made such an announcement, other eurozone nations “would then say, well, why then go on with our austerity programs? Why go on with our reforms? We have what we need.” Thus, he said, “I think to keep the pressure up until the last minute is probably a – not a bad political solution.” However, “if it comes to the worst,” with the potential of a eurozone collapse, the banker had “no doubt” that Germany would come to the rescue.
If the eurozone collapsed, not only would an economic and financial contagion spread with drastic consequences for all its members and the world economy as a whole, but there was also a strong political element. “A fragmented Europe has no way for self-determination,” said Mr. Ackermann. “We will have to accept what the United States, China, India, Brazil and other countries will finally define for us.” But Germany was to define the future of Europe.
“My vision is political union,” said Chancellor Merkel in January of 2012. “Europe has to follow its own path. We need to get closer step by step, in all policy areas.” In the Chancellor’s Europe, Brussels (home of the European Commission) was to be given immense new powers over member nations. “In the course a long process,” she said, “we will transfer more powers to the Commission, which will then work as a European government.” Outlining the EU’s path to a federation of nations functioning like individual states within the U.S., Merkel said, “This could be the future shape of the European political union.” Further integration among eurozone nations was a major objective, she explained, “we need to give institutions more control rights and give them more teeth.”
As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and the world, with 7% of the world population, 25% of global GDP and 50% of world social spending, Europe’s economic system was unsustainable and uncompetitive in a globalized economy. Germany’s vision for Europe was aimed at introducing “rules to force Europe’s economies to become more competitive.” But competitiveness was defined by Germany, and thus, “the rest of Europe needs to become more like Germany.”
Germany wanted Greece and the rest of Europe to impose ‘budgetary discipline’ through austerity measures: cutting public spending in order to reduce the debt. But these are painful and highly destructive policies that depress the economy, impoverish the population, destabilize the political system, undermine democracy and devastate the wider society. If you live in a country where the government funds healthcare, education, social services, welfare, pensions and anything that benefits the general population, under austerity measures, now you don’t! Not surprisingly, austerity is always unpopular with the people who are forced to live through it.
Only in times of crisis can austerity be pushed through. When financial markets threaten to cut a country off from its sources of funding, it must to turn to larger nations and international organizations for financial aid. “The current strategy of the EU,” wrote Wolfgang Münchau in a November 2009 article for the Financial Times, “is to raise the political pressure – perhaps even provoke a political crisis – with the strategic objective that the Greek government might eventually relent.” And the government would have to relent to the diktats of Germany and “the Troika”: the European Commission, European Central Bank (ECB), and the International Monetary Fund (IMF), who collectively managed Europe’s bailout programs.
In early 2010, European banks held more than 141 billion euros of Greek debt, with the largest share being held by French and German banks. The first bailout largely went to bailout these very banks. Karl Otto Pohl, the former President of the German Bundesbank noted back in 2010 that the Greek bailout was about “rescuing the banks and the rich Greeks,” especially German and French banks. As the Troika bailed out the banks, these institutions took on the Greek debt.
The second bailout organized by the Troika largely went to paying interest on Greek debt owed to the Troika. Thomas Mayer, a senior adviser to Deutsche Bank, said, “the troika is paying themselves.” Between May 2010 and May 2012, Greece had received roughly $177 billion in bailouts from the Troika. A total of two-thirds of that amount went to payoff bondholders (banks and rich Greeks), while the remaining third was left to finance government operations.
In 2015, a study by the Jubilee Debt Campaign noted that of the total 252 billion euros in bailouts for Greece over the previous five years, over 90% ultimately went “to bail out European financial institutions,” leaving less than 10% for anything else. At the time of the first bailout in 2010, Greece had a debt-to-GDP ratio of roughly 130%. As a result of the bailouts and austerity, the debt ratio has risen to 177% of GDP at the beginning of 2015. Thus, after more than five years of supposed efforts to reduce its debt, that debt has grown substantially.
But the banks are no longer the largest holders of Greek debt. Today, the Troika owns 78% of the 317 billion euro Greek debt. Greece now owes the IMF, ECB, and eurozone governments a total of 242.8 billion euros, with the largest single holder being Germany with more than 57 billion euros in Greek debt. And now the Troika wants to be paid back. “In short,” wrote Simon Wren-Lewis in the New Statesman, “it needs money from the Troika to repay the Troika.”
The effects on Greece of more than five years of living under the domination of Germany and the Troika have been palpable. Greece is a ruined economic colony of the European Union. Austerity in Greece led to the creation of “a new class of urban poor” with more than 20,000 people being made homeless over the course of 2011, and dozens of soup kitchens and charities opening up to attempt to address the growing social and human crisis.
As austerity continued to collapse the economy, unemployment and poverty soared. By 2013, more than 27% of Greeks were unemployed and 10% of school-age children were going hungry. Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared, tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose, as did drug use with HIV infections doubling and a malaria outbreak was reported for the first time since the 1970s, while suicide rates increased by 60%.
By early 2014, more than a million Greeks were left without access to healthcare, accompanied by rising infant mortality rates. A charity director in Athens noted that, “Alcoholism, drug abuse and psychiatric problems are on the rise and more and more children are being abandoned on the streets.” By 2015, roughly 40% of children in Greece lived under the poverty line while the richest Greeks, responsible for roughly 80% of the tax debt owed to the government, were hiding tens of billions of euros in offshore accounts.
Unemployment has grown to 26% (and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired Greeks now live below the poverty line. Just prior to the Greek elections that brought his party to power in January of 2015, Alexis Tsipras wrote in the Financial Times that, “This is a humanitarian crisis.” Joseph Stiglitz, the Nobel Prize-winning former chief economist of the World Bank, wrote in late June of 2015 that, “I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences.”
Thus, the German-Troika strategy of prolonging the debt crisis to reshape Europe has resulted in a human, social and political crisis that threatens the future of democracy in Europe itself. Germany has, in effect, established an economic empire over Europe, largely operating through the Troika institutions, all of which are unaccountable technocratic tyrannies.
The first pillar of the Troika is the International Monetary Fund (IMF), based in Washington, D.C., just a few short blocks down the road from the White House and U.S. Treasury Department. The United States is the largest single shareholder in the IMF, and the only one of its 188 member nations with veto power over major Fund decisions. The Financial Times referred to the IMF as “a tool of US global financial power.”
In 1977, U.S. Treasury Secretary Michael Blumenthal described the IMF as “a kind of whipping boy” in a memo to President Carter. In return for a loan to a country in crisis, the Fund would demand harsh austerity measures and other ‘structural reforms’ designed to restructure the economy along the lines desired by Washington. “If we didn’t have the IMF,” wrote Blumenthal, “we would have to invent another institution to perform this function.”
In the early 1990s, the IMF was managing ‘programs’ in over 50 countries around the world, and was “long been demonized as an all-powerful, behind-the-scenes puppeteer for the third world,” noted the New York Times. In 1992, the Financial Times noted that the fall of the Soviet Union “left the IMF and G7 to rule the world and create a new imperial age.” Operating through the Troika, IMF Managing Director Christine Lagarde took a “tough love” approach to Greece, with the Fund being referred to as “the toughest” of the three institutions.
The European Central Bank (ECB) is another pillar of the Troika, run by unelected central bankers responsible for managing the monetary union, with its headquarters in Frankfurt, Germany, home to the German central bank (the Bundesbank) and Germany’s large financial sector. Throughout the crisis, Brussels has pushed to give the ECB more powers, specifically to oversee the formation and management of a single ‘banking union’ for the EU. The ECB has, in turn, advocated for more power to be given to Brussels.
The ECB played a central role in the debt crisis, pushing Greece into a deep crisis in late 2009, making “an example” of the country for the rest of Europe, blackmailing Ireland into accepting a Troika bailout program, then blackmailing Portugal into doing the same, and putting political pressure on Italy and Spain to implement austerity measures.
In late 2014, ECB President Mario Draghi rebooted efforts to advance integration of the economic and monetary union. When the anti-austerity Syriza government came to power in Greece in early 2015, the ECB was placed to be “the ultimate power broker” in negotiations between the country and its creditors. A member of the central bank’s executive board welcomed the democratic victory in Greece by warning, “Greece has to pay, those are the rules of the European game.”
The ECB took a hardline approach to dealing with Greece, increasing the pressure on Athens to reach a deal with its creditors, with The Economist referring to the central bank as “the enforcer.” This unelected and democratically unaccountable institution holds immense, undeniable power in Europe.
The European Commission is the third pillar of the Troika based in Brussels, functioning as the executive branch of the European Union overseeing a vast bureaucracy of unelected officials with responsibility for managing the union. Throughout the crisis, the Commission has been given sweeping new powers over economic and spending policies and priorities of member nations.
Brussels was to be given the centralized power to approve and reject national budgets of eurozone nations, establishing a technocrat-run ‘fiscal union’ to match the ECB’s role in managing the monetary union. EU institutions would have “more powers to serve like a finance ministry” for all the nations of the eurozone, potentially with its own finance minister, “who would have a veto against national budgets and would have to approve levels of new borrowing,” said Mr. Schauble, the German Finance Minister.
In 2007, European Commission President José Manuel Barroso mused aloud during a press conference. “Sometimes I like to compare the E.U. as a creation to the organisation of empires,” he said. “We have the dimension of Empire but there is a great difference. Empires were usually made with force with a centre imposing diktat, a will on the others. Now what we have is the first non-Imperial empire.” Eight years later, it is clear that the EU is officially an imperial empire, using bailouts not bombs, choosing the Troika over tanks, Brussels over bullets, austerity instead of armies, advocating for consolidation instead of colonization.
Philippe Legrain, a British political economist, author, and adviser to President Barroso from 2011 to 2013 wrote that the debt crisis “divided the euro zone into creditor nations and debtor ones,” and the EU’s institutions “have become instruments for creditors to impose their will on debtors, subordinating Europe’s southern ‘periphery’ to the northern ‘core’ in a quasi-colonial relationship. Berlin and Brussels now have a vested interest to entrench this system rather than cede power and admit to mistakes.”
“In general,” wrote Gideon Rachman in the Financial Times in 2007, “the [European] Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective,” he concluded, “only when it is anti-democratic.”
Perhaps the greatest lesson of the past five years of crisis is that in a Europe under the rule of Germany and the Troika, the people and democracy suffer most. For democracy to survive in Europe, the technocratic tyranny of the Troika and debt-based domination of Germany must be challenged. Democracy is too important to be sacrificed at the altar of austerity. It is any wonder why Greeks voted ‘no’ to the status quo?
Andrew Gavin Marshall is a freelance researcher and writer based in Montreal, Canada.
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Global Power Project: Bilderberg Group and the International Monetary Fund
By: Andrew Gavin Marshall
3 February 2015
Originally posted at Occupy.com
This is the ninth installment in a series examining the activities and individuals behind the Bilderberg Group. Read the first, second, third, fourth, fifth, sixth, seventh and eighth parts in the series.
In previous installments, this series has examined the historical role played by Bilderberg meetings in influencing major institutions and policies across North America and Western Europe over the past half century; the role of the meetings in supporting the rise of corporate and financial-friendly politicians to high office; the representation of interests from among the global financial elite, and the promotion of technocracy (particularly in Europe) and the representation of key technocratic institutions and individuals from Europe’s finance ministries and central banks, who’ve played important roles in the management of Europe’s financial and debt crises between 2008 and 2014.
This installment continues with an examination of Bilderberg’s role in facilitating the advancement of transnational technocracy in the EU, bringing in some of the top technocrats from leading European and international organizations to meet in secret with finance ministers, central bankers, politicians, corporate executives, bankers and financiers. The role of finance ministers and central banks has been the focus of the previous two installments in this series. Now we look at the IMF, which, together with the European Central Bank (ECB) and the European Commission (EC), functioned as the “Troika” tasked with managing the international response to the debt crisis, organizing the bailouts and imposing harsh austerity measures and structural reforms upon the nations and people of Europe.
The IMF: It’s Mostly Fiscal
In 1992, the Financial Times published a feature article by James Morgan, the chief economic correspondent of the BBC, in which he explained that with the fall of the Soviet Union, the Group of Seven nations (specifically their finance ministries and central banks) and the International Monetary Fund have come “to rule the world and create a new imperial age.” Morgan wrote that the “new global system” ruled by the G7, the IMF, World Bank and other international organizations “worked through a system of indirect rule that has involved the integration of leaders of developing countries into the network of the new ruling class.”
The IMF is designed to come to the “aid” of countries experiencing financial and monetary crises, to provide loans in return for the nations implementing austerity measures and key structural reforms, and to promote easy access for foreign investors (ie. banks and corporations) to buy up large portions of the local economy, enriching both domestic and foreign elites in the process.
Thus, a nation which gets a loan from the IMF must typically dismantle its social services, fire public sector workers, increase taxes, reduce benefits, cut education and health care, privatize state-owned assets and industries, devalue its currency, and dismantle labor protections and regulations, all of which plunges the population into poverty and allows for major global banks and corporations to seize the levers of the domestic economy and exploit the impoverished population as cheap labor.
The IMF was created near the end of World War II, tasked with managing the global “balance-of-payments” between nations: that is, maintaining the stability of global deficits and surpluses (the borrowing, lending and trading) between countries. However, as the post-War international monetary system collapsed in the early 1970s, the IMF needed to find a new focus. In the late 1970s, the New York Times noted that the “new mandate” of the IMF was “nothing less than rescuing the world monetary system – and with it, the world’s commercial banks.”
As the major Western commercial banks lent out vast sums of money to developing nations during the 1970s, they created immense liabilities (ie. risks) for themselves. As interest rates on debt began to rise, thanks to the actions of the Federal Reserve, heavily-indebted countries could no longer pay the interest on their loans to banks. As a result, they were thrust into financial and debt crises, in need of loans to pay down their debts and finance government spending. A key problem emerged, however, in that major commercial banks (who stopped funding developing nations) could not force them to implement the desired policies. What was needed was a united front of major banks, powerful industrial nations and international organizations.
Enter the IMF: controlled by the finance ministries of the majority of the world’s nations, with the U.S. Treasury holding veto power over all major decisions. The IMF was able to represent a globally united front on behalf of the interests of commercial banks. All funding from governments, international organizations and banks would be cut off to developing nations in crisis unless they implemented the policies and “reforms” demanded by the IMF. Once they signed a loan agreement and agreed to its conditions, the IMF would release funds, and other nations, institutions and banks would get the green light to continue funding as well.
The IMF’s loans, policy prescriptions and reforms that it imposes on other nations have the effect of ultimately bailing out Western banks. Countries are forced to impoverish their populations and open up their economies to foreign exploitation so that they can receive a loan from the IMF, which then allows the indebted nation to simply pay the interest on its debt to Western banks. As a result, the IMF loan adds to the overall national debt (which will have to be repaid down the line), and because the nation is in crisis, all of its new loans come with higher interest rates (since the country is deemed a high risk).
This has the effect of expanding a country’s overall debt and ensuring future financial and debt crises, forcing the country to continue in the death-spiral of seeking more loans (and imposing more austerity and reforms) to pay off the interest on larger debts. As a result, entire nations and regions are plunged into poverty and abusive forms of exploitation, with their political and economic systems largely controlled by international technocrats at the IMF and World Bank, mostly for the benefit of Western commercial banks and transnational corporations.
The IMF has amassed great power over the past few decades, and because its conditions and demands on nations primarily revolve around imposing austerity measures and “balancing budgets,” the IMF has earned the nickname “It’s Mostly Fiscal”. However, due to the effects of the fiscal policies demanded and imposed by the IMF, causing widespread poverty, increasing hunger, infant mortality, disease and inequality, many populations and leaders of indebted nations view the IMF as far more than “fiscal.” In fact, former Egyptian dictator Hosni Mubarak once referred to the IMF as the “International Misery Fund,” a sentiment shared by many protesters in poor nations experiencing the effects of harsh austerity measures.
The IMF and Bilderberg
As one of the world’s most important and influential technocratic institutions, the IMF has a keen interest in the goings-on behind closed doors at annual Bilderberg meetings, just as the group’s participants have a keen interest in the leadership and policies of the IMF. In fact, it is largely an unofficial tradition that the managing director of the IMF is frequently chosen from among Bilderberg participants, or in the very least, attends the meetings following their appointment. In a 2011 article about that year’s Bilderberg meeting, I commented on the race to find a new managing director of the IMF, noting that only Christine Lagarde, the French finance minister, had previously attended a Bilderberg meeting (in 2009), and therefore, she seemed a likely choice.
Lagarde began her career at a corporate law firm in the United States, becoming the first female chair in 1999. In 2004, at the request of the French Prime Minister, Lagarde joined the French government of President Jacques Chirac as a junior trade minister and began to rise through the ranks. When Nicolas Sarkozy became president in 2007, Lagarde took up the post of finance minister, a position that Sarkozy had also previously held. As Foreign Policy magazine explained, both Sarkozy and Lagarde had a similar vision for France: “free markets, less regulation, and globalization.” Together, they imposed various austerity measures and structural reforms in France, and due to Lagarde’s ideological allegiance to the American-brand of “market capitalism,” she was given the nickname, “The American.”
Throughout the financial crisis, and really from 2008 onwards, Lagarde was pivotal in brokering a major bailout deal between the G7 nations, working with her “close personal friend,” Hank Paulson, the U.S. Treasury Secretary (and former CEO of Goldman Sachs). Lagarde became a skilled operator at G7 and G20 meetings, and was a regular figure at World Economic Forum (WEF) meetings. As the [New York Times noted]( in late 2008, Christine Lagarde’s “biggest fans are business leaders and foreign finance officials who have seen her in action.”
In 2008, the Financial Times ranked Lagarde as the 7th best finance minister in Europe. In 2009, she was ranked as number one, with the Financial Times writing that she “has become a star among world financial policy-makers.” That same year, she was invited to the Bilderberg conference. The following year, Lagarde was ranked in third place, having “played an important role in the Eurozone debt crisis, helping overcome Franco-German differences on the bloc’s eventual rescue plans.”
In 2011, Christine Lagarde’s name was put forward as a possible replacement for then-IMF managing director Dominique Strauss-Kahn. The influential economist Kenneth Rogoff said that Lagarde was “enormously impressive, politically astute,” and was treated “like a rock star” at finance meetings all over the world. The New York Times noted that while Nicolas Sarkozy had a challenging relationship with German Chancellor Angela Merkel, Lagarde “nurtured a close personal relationship with Mrs. Merkel.”
Shortly after Lagarde officially began to campaign to become the head of the IMF, the German, British and Italian finance ministries endorsed her candidacy, with the main rival for the top spot being the governor of the central bank of Mexico, Agustin Carstens, who secured the backing of the Latin American nations as well as Canada and Australia. Lagarde then received the golden seal of approval when she was endorsed by the U.S. Treasury Department, the only veto power voter at the IMF. Then-Treasury Secretary Timothy Geithner commented that Lagarde would “provide invaluable leadership for this indispensible institution at a critical time.” While she was campaigning, Lagarde also managed to secure the backing of China, after she met for lunch with the Chinese central bank governor and deputy prime minister.
German Chancellor Merkel commented that “there are very few other women in the stratosphere of global governance.” As the publication Der Spiegel wrote, “[Lagarde] knows ministers and national leaders throughout the world, and she is on a first-name basis with most of them.” German finance minister Wolfgang Schauble was described as “her most important partner” in the EU and “her anchor in Germany.”
Gillian Tett, writing in the Financial Times in December of 2011, noted that “never before has a woman held such a powerful position in global finance,” and much like Chancellor Merkel, Lagarde now “holds real power.” Throughout the course of the European debt crisis, she used that power. Leading one of the three major institutions of the Troika, Lagarde played a central role in the organization of bailouts and enforcement of austerity across the Eurozone. A former top technocratic official in the IMF wrote an op-ed in the Financial Times in 2013 in which he explained that the IMF, alongside the European Commission and the ECB, are together “the troika running the continent’s rescues,” which “means political meddling had been institutionalized.”
The actions of these institutions were so damaging to the economies and societies – and social stability – of many European countries that a formal investigation into the activities of the Troika was held in the European Parliament in late 2013 and early 2014. The final report, produced by Members of the European Parliament (MEPs), concluded that the Troika’s structure and accountability resulted “in a lack of appropriate scrutiny and democratic accountability as a whole.” After all, the growth and empowerment of technocracy coincides with the undermining and decline of democracy.
Christine Lagarde, who has spent her career as a corporate lawyer and finance minister, has steered the IMF on its consistent path of functioning as a transnational technocratic institution concerned primarily with serving the interests of global financial markets. As such, her participation in Bilderberg meetings – in 2009, 2013 and 2014 – brings her into direct contact with her real constituency: the ruling oligarchy.
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.