Davos Still Pushes Failed Global Vision

January 25, 2013




Story Transcript



What are you doing in Davos, Bill?

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: I’m part of the Greenpeace counter-Davos event.






But it turns out that Davos does these indicators, these supposed competitiveness indicators, that also pick up a bunch of the things in the Washington consensus. And in particular they push for deregulation and they push for tying compensation of executives to supposed performance. And it turns out both of those things have been central to creating the criminogenic environments that have produced our crises. So instead of making things better, they’ve actually made things much worse. And it’s particularly nasty because the whole purpose of this competitive index is so you can, whatever country you’re in, take the index score for your country and go to your national legislature and say, we need to weaken regulation, we need to giveâ€”make it easier to fire employees, because we’re not very competitive compared to whatever neighboring nations are or [crosstalk]


BLACK: Exactly. Designed by business for business to make it easy for business leaders to become ever wealthier at the expense of everyone else. Now, I don’t think they intend to make the world a better place for crime, but that is the unintended consequence of what they’re doingâ€”and, of course, in some cases it’s quite intended by some of the business people that are doing it.


JAY: Right. When you say that this encourages criminal activity, this is because if you tie executive salary compensation to performance, it encourages phony performance. As long as you can make it look on your books like you’ve made money, you get more money. It has no bearing on how sustainable or even how real it is.

BLACK: That’s correct. And it’s another weakness of their survey mechanism. You know, it just says something like, do you, your country, tie pay to performance. Well, yeah, supposedly, but in a way that actually encourages fraud because it’s heavily based on short-term reported results, which are easy to pervert through accounting fraud. And that’s exactly what it meant, and that’s exactly why it got those rankings so bad. I mean, the Irish banks, the United Kingdom banks, the Spanish banks, the Icelandic banks were all reporting record profits so that they could goose their bonuses to their executives under their performance plans.


JAY: Now, is there any sense do you get from theâ€”I don’t know if you had time to spend time talking to people in the official Davos, but do you get any sense that there’s a recognition that this great neoliberal vision they’ve been promotingâ€”obviously for some of their stakeholders it worked very well, ’cause it made them very rich. On the other hand, the global economy’s a complete basket case.


JAY: And I guess it also works well when the United States, for example, can say what happened simply isn’t fraud, even though I don’t know what else it would be, ’cause it meets every definition, one would think, of fraud in terms of what Goldman and others like them did.


JAY: Thanks very much for joining us, Bill.

BLACK: Thank you.


