Tuesday, February 1, 2011

Davos and the Rest of Us

Simon Johnson, at Baseline Scenario, has posted an interesting dispatch from the meeting of World Economic Forum in Davos, Switzerland.   He writes:

On the fringes of the World Economic Forum meeting in Davos this week, there was plenty of substantive discussion – including about the dangers posed by our “too big to fail”/”too big to save” banks, the consequences of widening inequality (reinforced by persistent unemployment in some countries), and why the jobs picture in the U.S. looks so bad.
But in the core keynote events and more generally around any kind of CEO-related interaction, such themes completely failed to resonate.  There is, of course, variation in views across CEOs and the people work intellectual agendas on their behalf, but still the mood among this group was uniformly positive – it was hard to detect any note of serious concern.
(My italics.)   Well my view of this is somewhat simple minded.  We start by parsing the concept of  Globalization, which to me represents the notion that in a global economy with sufficient interconnections, there is always to be found sufficient purchasing power to enrich a sufficiently globalized corporation (and its management) -- regardless of the economic conditions of workers and consumers in any particular nation.  What this says most directly is that a global labor market is a buyer's labor market, which promotes a race to to the bottom for  wages in erstwhile highly industrialized and prosperous nations, as exemplified by members of the G-8.

This runs counter to the old Henry Ford dictum: "I have to pay my workers enough to buy one of my cars."  The executive view of today is that globalization has given the lie to old Henry, and that there is no penalty for squeezing one's workers.

In this context, the unconcern (by CEO's) about unemployment is natural -- it's a feature, not a bug; depressed wages mean higher profits.  "Our responsibility is to our shareholders".... which, more and more, means to management itself.

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