The main theme of this year's World Economic Forum Annual Meeting is the "New Global Context," which, I think, is quite pertinent in the current economic climate. The organizers of the Davos summit determined this theme on the basis of following major topics:
- The systemic impact of deepening geopolitical fault lines, decreasing multilateral cooperation and increasing strategic competition.
- The expected normalization of monetary policy through the reduction of quantitative easing and a future rise in interest rates.
- The continuing erosion of trust in public and private sector institutions, and the deteriorating dialogue between government and business globally.
- The breadth and velocity of scientific and technological advances that are considered inspiring and empowering as well as disruptive and ominous.
- The inability to significantly improve the management and governance of critical global commons, most notably natural resources and cyberspace.
- The ecological, societal and business repercussions of unabated climate change, youth unemployment and income inequality.
- The generational shift from societies sharing common values to those that are primarily interest-driven, and the related rise of sectarianism, populism, nationalism and statism.
These are topics of very high concern, but I wonder whether the world, particularly the Western world, can initiate a sincere self-criticism based on them. Let us seek an answer to this question, taking into consideration the most striking topics and the ones that complement one another.
First of all, the organizers of the Davos summit acknowledge that the global economic and political cooperation are in danger, and the rising competition has led to a geopolitical division. As a result of this, they also accept that the systemic impacts of ever-growing income and wealth inequality in the world will worsen with the U.S. Federal Reserve's interest hike in 2015.
The rising wealth inequality in the world is an indisputable fact and a systemic problem. This can be explained in the most current aspects as follows:
The world economy has been facing a financial crisis since 2008. But actually this crisis has transformed into a constantly increasing income and wealth inequality gap, evolving into a systemic problem. According to the report titled "Wealth: Having It All and Wanting More" published by U.K.-based international anti-poverty charity Oxfam, the richest 1 percent of the world population will dominate the world's wealth in 2016, while the average wealth per adult in this group will sit at $2.7 million. This reality is a perfect sign of inequality, which is a result of the "financialization" process dating back to the 1990s. Oxfam's report reveals that the slice of global wealth held by the world's richest individuals climbed to 48 percent in 2014, from 44 percent in 2009. It is argued in the report that one of the ways of fighting the current inequality is to implement strong measures against tax fraud. Meanwhile, global wealth is estimated to have doubled in the past 14 years reaching $263 trillion.
Could the "New Global Context," which is the main theme of this year's summit, be established without deconstructing the existing 1 percent? In my opinion, this is a very hard task. The main theme and topics of this year's summit remind us of economist Joseph Schumpeter's concept of "creative destruction." Could the important systemic problems in each topic be solved by ignoring the formulation of creative destruction that Schumpeter uses in explaining the dynamics of capitalism?
It goes without saying that capitalism cannot build a new thing without destroying the old one. That is why the masters of global capitalism, who will attend the summit, should, sooner or later, realize that this crisis will lead to a major destruction that will result in a new beginning.
Nobody wants the impact of such a destruction to be the same as it was in the past, say in World War I and World War II. Then, what needs to be done to avoid this? The economic mechanisms should be developed to enable the East's and South's poor folks, who now hold the production potential, to derive more income from the system, tax systems should be made fairer, and resources should be transferred to social areas rather than being used for armament. These are the initial steps to solve such systemic problems.
Today, the central banks of many countries, including India and Turkey, should abandon the economic policies that were determined by the Washington Consensus and have been proven to be wrong. Nobody should forget that unless developing countries rise, the global crisis will not end and the aforementioned income and wealth inequality will continue to deteriorate. To this end, developing countries should give up falsified neoliberal economic policies dating back to the 20th century. In order to achieve a transparent, fair and open global economy, and to bring prosperity to all peoples soon, developing countries, first and foremost, should find a unique path of their own for the future of the system.
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