Davos was in shock this year. “Lost in a blizzard of complexity” and staring into a populist abyss, the corporate elites were struggling for answers. Its chief organiser, Klaus Schwab, executive chairman of the World Economic Forum, called on attendees to help “overcome the present mood of divisiveness and negativism,” sounding a little too much like a senior executive at a corporate conference when the company is on the skids and everyone thinks they are about to be made redundant.
How different things looked this time last year. The delegates were told that Donald Trump would be humiliated and a triumphant David Cameron would be congratulating Hillary Clinton on becoming president. Brexit, Trump and the rise of populism didn’t make it into the Davos predictions for 2016.
This year the agenda is a somewhat different. As Noah Barkin reports:
The titles of the discussion panels at the WEF, which runs from Jan. 17-20, evoke the unsettling new landscape. Among them are “Squeezed and Angry: How to Fix the Middle Class Crisis”, “Politics of Fear or Rebellion of the Forgotten?”, “Tolerance at the Tipping Point?” and “The Post-EU Era”.
So how come so few people saw this coming?
There are two reasons. Firstly, we have been through nearly four decades when politics seemed to matter less and less to the business world. During that period, what David Goodhart called the two liberalisms dominated politics, the social liberalism of the left and the economic liberalism of the right. As he said:
Whoever you vote for you get the same old mix of economic liberalism and social liberalism – Margaret Thatcher tempered by Roy Jenkins.
Something similar happened in the US. From sometime in the mid 1980s, the right concentrated on its economic agenda and the left on its social agenda while both quietly conceded ground on the other front. As Alan Wolfe put it:
The right won the economic war, the left won the cultural war.
Both kept up the rhetoric on their losing fronts. The left condemned deregulation, privatisation and rising inequality while not being able or willing to do much about it. The right talked tough on immigration and traditional values to gain working-class votes while, as Thomas Frank observed, not actually delivering on any of it. It often comes as a surprise to people that Ronald Reagan granted the largest illegal immigrant amnesty in US history or that Margaret Thatcher abolished corporal punishment in schools. Despite her warnings about being swamped by immigrants, the rhetoric didn’t translate into action. As the Migrants’ Rights Network says, Thatcher’s policy on immigration was very light touch.
Corporations were, by and large, happy with both liberalisms. Deregulation, privatisation and lower taxes suited them well and the diversity and discrimination laws were a small price to pay. The occasional diehard corporate executive would complain, after a few glasses of wine, about being ‘forced to recruit black people’ (yes, that really happened) but a new generation of bosses happily embraced diversity when they realised that well-educated and well-scrubbed employees came in all colours. Immigration sat at the intersection between the two liberalisms. Economic liberals liked free movement of labour and social liberals championed multiculturalism. Companies liked it because it gave them access to more workers and a much wider range of skills.
Which brings me to the second reason. Over time, the prevailing political culture came to suit most large corporations and, as the likelihood of it changing seemed to diminish, company executives lost interest in politics. I have been in and around corporations for three decades and I have been struck by how little company executives talked about politics. A few in the big consultancies and banks were paid to pay attention but, even here, they were usually more interested in political risks in more volatile parts of the world than in what was going on closer to home. For the most part, those who discussed politics did so because they were interested in it, not because keeping up to date was in any way part of their job. They discussed politics as others might discuss gardening or golf. Some people at very senior levels were astonishingly unaware and uninterested even in UK politics, let alone those of the rest of Europe .
Back in the 1970s, I’m told, company boards kept a keen eye on politics. By the mid 1990s, though, there wasn’t much point. Whoever won there wouldn’t be much change that would affect large companies. A few changes to employment rights, perhaps, and the introduction of a fairly modest minimum wage but nothing to cause any real concern. In the US, big firms gave donations to Republicans and Democrats alike. In the UK, the help was more subtle, as city firms embedded their staff within political parties for ‘free’.
For corporations, who won elections mattered less than it had decades earlier. The details might change but the overall direction wouldn’t. The relative importance of politics was reflected in the job prospects of political science graduates. It was much easier to get a job with an economics degree. After all, economists understood numbers and money and ‘real’ stuff. Politics was just a hobby, interesting but not something that would have much of an impact on the organisation. It’s still pretty much like that now.
So most people in the world of big business weren’t really watching what was happening in the stable countries with good credit ratings. It was assumed that they would carry on as before. That there were people in these countries who were as angry and resentful as those in more volatile parts of the world rarely crossed anyone’s mind.
The triumph of the two liberalisms didn’t suit everyone though. A lot of traditional right and left-wing voters began to notice that the things they thought they were voting against kept happening anyway, whether it was political correctness and liberal education or privatisation and deregulation. Attitudes to immigration, which was never that popular among people in Britain, began to harden in the rest of Europe and the US.
While people were reasonably comfortable, they would put up with the parties they had long supported doing things they didn’t always agree with. But economic collapse destroyed that side of the bargain too. The financial crisis and the long squeeze on pay and living standards turned mutterings of discontent into shouts.
For a while, it looked as though the pre-crisis economic consensus had survived. The backlash against capitalism that many on the left had hoped for never materialised. Leftwing parties, which might once have hoped to profit from a crisis precipitated by global finance, found that they were too much identified with the system to profit from its collapse. The revolution never came.
That there might be a backlash against global capitalism from the right didn’t seem to occur to anyone. In a direct riposte to Thomas Frank’s book, after President Obama’s re-election, Paul Krugman asked, “Who cares what’s the matter with Kansas?” Diverse and tolerant America was the real America, he said. Those blue-collar socially conservative voters were, apparently, no longer worth worrying about.
The day after Donald Trump’s victory, Thomas Frank was scathing in his criticism of the complacent “liberalism of the rich”:
[T]hat there is a kind of chronic complacency that has been rotting American liberalism for years, a hubris that tells Democrats they need do nothing different, they need deliver nothing really to anyone – except their friends on the Google jet and those nice people at Goldman. The rest of us are treated as though we have nowhere else to go and no role to play except to vote enthusiastically on the grounds that these Democrats are the “last thing standing” between us and the end of the world. It is a liberalism of the rich, it has failed the middle class, and now it has failed on its own terms of electability.
Though the backlash has come from the right, it’s not the same right that talked tough on social issues while deregulating, privatising and leaving corporations and the wealthy to do want they liked. These are nationalists who combine the social conservatism of the traditional right with the pro-worker policies and protectionism of the old left. Their rhetoric is xenophobic but also anti-corporate, often combining the two. It contests both the social liberalism of the left and the economic liberalism of the right. This combination, in varying forms, is a feature of the north European nativist populist parties and, insofar as his ideology has any coherence, the stated policies of Donald Trump.
Even in countries where parties of the populist right have little hope of gaining power, their electoral support is exerting a gravitational pull on the policies of mainstream parties. This is most obvious in the UK’s Brexit debate where, it appears, membership of the single market and customs union will be sacrificed in favour of the need to curb immigration. Theresa May’s government has also loosened its fiscal stance and promised a crackdown on tax avoidance and high executive pay. Even Germany’s CDU is shifting towards a more nationalist stance, its chairman declaring that “Multiculturalism has failed.” President Trump is already cajoling and threatening big corporations like Apple, Ford, Boeing and Toyota to ‘bring the jobs back’ by producing more in the USA. In whatever form it takes, this new populist right is not giving big business the sort of easy ride it has enjoyed over the past three decades.
“Big business won’t allow it” is a phrase I have heard often over the past twenty years or so. Both the libertarian right and the left told us that the power of nation states was over and that corporations would soon rule the world. But if big business had been that powerful it wouldn’t have allowed the referendum on the EU in the first place and it would certainly have stopped Britain’s withdrawal from the single market. To find an electoral verdict being met with such dismay in the corporate boardrooms of Britain, you’d have to go back to Harold Wilson’s victory in 1974. If the level of donations is anything to go by, the election of Donald Trump was met with almost as much unease in America’s big corporations. Hedge funds and tech companies bet heavily on a Clinton victory.
So not only is big business not as powerful as it was cracked up to be, it didn’t even see the populist backlash coming. Hence all those sessions at Davos which can be summed up under the heading, “What the hell happened?”
Of course, the populist surge may turn out to be short-lived. The Brexit and Trump victories were delivered by the over-50s. Within a few years, support for right-wing nationalist parties might, quite literally, die away. But their upending of the established political order has shown that, if people don’t like something and enough people decide to vote against it, even Davos Man can’t get his own way all the time. Other forms of popular opposition may appear in the future.
For the last three decades, business has treated politics as interesting but not very relevant. Now politics is back with an angry face and for corporations life won’t be quite so easy. Big business is in shock not only because of what happened but because, even with all its highly paid analysts and forecasters, it failed to see any of it coming.