Leaders of the world's largest and most powerful companies are on edge. A decade after the financial crisis, their businesses are thriving and their pocketbooks are overflowing, but they worry about populism and the threat it poses to the global order they helped build.
Many executives gathered at the exclusive World Economic Forum this week acknowledged that inequality is a major problem fueling populist backlash, and that some middle-class jobs in the West are being lost to trade and automation (even though more jobs overall are being created around the world).
A few business leaders in Davos went so far as compare today's situation to the late 19th century, an era when tycoons like Andrew Carnegie, Andrew W. Mellon, and John D. Rockefeller amassed huge fortunes while most in the working class toiled under harsh conditions.
"We're living in a Gilded Age," said Scott Minerd, chief investment officer of Guggenheim Partners, which manages more than US$265 billion in assets. "I think, in America, the aristocrats are out of touch. They don't understand the issues around the common man."
The solution to inequality, many in Davos said, is "upskilling" people so that they can obtain better jobs in the digital economy.
"The lack of education in those areas in digital is absolutely shocking. That has to be changed," Stephen Schwarzman, chief executive of Blackstone, told a panel. "That will very much lessen the inequalities that people have in terms of job opportunities."
Schwarzman, whose net worth is estimated at US$13 billion, said it is "up to the grown-ups" to make digital upskilling happen in K-12 schools.
His calls were echoed by others, including Ruth Porat, chief financial officer at Alphabet, Google's parent company; Keith Block, co-chief executive of Salesforce; C Vijayakumar, chief executive of HCL Technologies; and Michael Dell, founder of Dell Technologies.
"All of us collectively can do quite a lot to create opportunities so that everybody is included in this growth," said Dell, who is worth an estimated $28 billion. "It's going to require lots of new skills, capabilities."
Dell said the issue goes beyond K-12 education and that companies need to train workers continuously. His own company struggles with finding enough skilled workers, and poaching them from other companies doesn't work, Dell added. "You need to hire and train and grow them from within."
At a meeting of the International Business Council on the sidelines of Davos, chief executives pledged their companies would train "more than 17 million people globally."
Salesforce and PwC championed in-house training platforms in which employees can earn rewards for taking online courses in coding and acquiring other digital skills.
However, the World Economic Forum acknowledged that private-sector efforts would probably fall short. In a report released earlier this month, the forum estimated it would cost the United States US$34 billion to reskill the 1.37 million workers expected to lose their jobs to automation in the next decade. The forum said 86 per cent of the cost "would likely fall on the government."
"Upskilling is not going to alter the insecurities and inequalities," said Guy Standing, author of "The Precariat: The New Dangerous Class," who spoke on four panels at Davos this year. He said most executives still don't understand what is needed.
Standing said calls for more education and training were a "cop-out," and that the result would undoubtedly help only a small number of people, which in turn could bring down wages and status in whatever new jobs they went on to obtain.
A study in 2015 by economists Brad Hershbein, Melissa Kearney and Lawrence Summers postulated what would happen if 10 per cent of American men, ages 25 to 64, who did not have a bachelor's degree suddenly obtained one. They found that it would improve pay and job prospects for the men who earned the degrees, but would do little to reduce the inequality gap because the richest Americans have so much more income and wealth.
There's also the question of who would pay for education and re-skilling. Democrats like House Representative Alexandria Ocasio-Cortez have proposed higher income taxes on the rich, while Senator Elizabeth Warren is set to unveil a proposal for a new tax on wealth.
But millionaires and billionaires in Davos panned the idea of higher taxes, arguing that the private sector does a better job than the government of spending money wisely.
"No, I am not supportive of that, and I don't think it would help the growth of the US economy," Dell responded when asked about his views of Ocasio-Cortez's proposal for a 70 per cent marginal income tax on earnings above US$10 million.
Dell noted that he and his wife contribute most of their wealth to a foundation. "I feel much more comfortable with our ability as a private foundation to allocate those funds than I do giving them to the government."
Others argued that their tax rate is already high and that raising tax rates could push people to move abroad or not invest.
"If I look at my tax rate now, it's probably well into the 60s," said AECOM chief executive Michael Burke, adding that he pays federal taxes, California income taxes, sales tax and a significant property tax. "I think we ought to have a competitive tax rate."
When asked whether corporations should pay higher taxes, executives again criticised the idea. In 2017, President Donald Trump and the Republicans in Congress passed a sweeping tax bill with the largest corporate tax cut in US history.
"It's an easy fix, I think, for many people to say, 'Well, let's just tax,'" Block said during a panel.
By contrast, leaders from academia and the nonprofit world were quick to call for higher taxes and a redistribution of income.
"Extreme economic inequality is out of control," Winnie Byanyima, the executive director of Oxfam International, told a panel. "We're in a world where governments do not tax wealth enough, do not tax the rich enough."
An Oxfam report this week found that the share of wealth held by billionaires was increasing by $2.5 billion a day, while the share of wealth among the 3.8 billion of the world's poorest was decreasing by US$500 million dollars a day. While some quibble with the methodology of the Oxfam report, there's widespread consensus that inequality is getting worse in many parts of the world.
Standing, a professor at the School of Oriental and African Studies at the University of London, called for a "new income distribution system," where governments commit to assuring a universal basic income that would be enough to keep its citizens out of poverty.
A Gallup poll last year showed that only 56 per cent of Americans overall - and less than half of Democrats - have a positive view of capitalism, a decline in sentiment in one of the best years for the economy since at least 2000. More Democrats now think more favourably of socialism than capitalism.
Some executives said the business community needs to do a better job of helping people see how much they benefit from a free, capitalist economy.
"We're not helping people really understand what capitalism and socialism really means. And we're not educating them enough to train them for the new jobs," said Burke.
Critics were quick to pounce on the executives as out of touch, and their proposed remedy of upskilling as naive, if not insulting.
"Davos is always in favour of reducing inequality and poverty: locally, nationally and globally - but not if they have to pay for it," tweeted economist Branko Milanovic who studies inequality at the City University of New York (CUNY).
However, others said it was not practical to look for solutions to the problems of the common man from the top echelons of society.
"There's an uncomfortable awareness that things are not right, the ecological crisis, the angst out there, the Brexit vote, the Trump vote, but then they come up with these bromide platitudes," said Standing. "But in a sense, we can't expect them to provide the answers. They are part of the problem."
- Washington Post