Donald Trump’s presence will be felt at the World Economic Forum this year even though he isn’t actually due to attend. The populism driving the blustery real estate developer’s unlikely campaign for the U.S. presidency finds its roots in the inequality that the annual gathering in Davos represents – and which the world business and political leaders in attendance will, again, talk about solving.
While Trump’s tangerine visage will hang heavy over this Swiss mountain town in 2016, he’s just the most imposing of a long line of politicians who, particularly since the great financial crisis that began in 2008, have rallied voter discontent in ways that are upending the establishment.
The disruption that Trump and his ilk represent can, theoretically, be a good thing. A corrupt status quo with entrenched political and corporate interests will, over time, erode faith in democratic institutions. History suggests that can lead to economic instability, even violent revolution. Certain types of populist movements, however, carry their own, equally frightening risks.
“The history of populism in democracy is not great, and it’s not self-correcting in a lot of cases,” said Ken Jacobs, chairman and CEO of international investment bank Lazard during a Breakingviews Predictions panel discussion last week. “You only have to look to Europe between the two wars and to a number of the Latin American countries pre-war and post-war to see that.”
What’s inarguable is that all variations of modern populism share a similar root: disaffection with the social contract, and an abiding sense that the benefits of economic progress are not just asymmetrically distributed, but potentially no longer available to ordinary citizens.
On this front, charity Oxfam, in its regular party-pooper report ahead of the World Economic Forum, provides some startling evidence that this may indeed be the case today. It’s not just in the United States either, which holds a presidential election in November, but across the globe.
Just 62 individuals – 53 of them men – control the same amount of wealth as 3.5 billion people, or the poorer half of the human race, according to Oxfam’s findings. Just five years ago, 388 individuals controlled that level of wealth. Moreover, the riches of these 62 people have nearly doubled since 2010, reaching an absolute figure of $542 billion.
The billionaires, chief executives and prime ministers convening in Davos from Wednesday to Saturday are acutely aware of the underlying problem of wealth and income inequality, as they have been since the financial crisis. The program this year is actually dedicated to “Mastering the Fourth Industrial Revolution,” a nod to forces like technology and automation which are exacerbating the wealth divides, and peppered with sessions like “Politics of Inequality” and “The Inequality Challenge.”
It’s a shame that populism isn’t specifically on the agenda, even if it can be diagnosed as a byproduct of inequality. Not all forms of mass insurrection are bad. Spain’s political system, for example, has reformed since the emergence of the so-called “indignados” movement a few years ago, which gave rise to parties like Podemos and Ciudadanos. This has beneficially challenged a two-party system – not to mention monarchy – long calcified by corruption.
Scholars have argued that relatively bloodless reforms, like America’s New Deal nearly a century ago and China’s shift toward a market economy over the past two decades, were at heart populist movements. Both marked massive shifts in the established order and had the effect of lifting millions of people out of poverty and into the middle class.
The belief that whatever compact existed as a result of the New Deal and its many more recent derivatives has shattered is what leads to the seemingly unstoppable rise of Trump in the race for the Republican nomination. A similar phenomenon is happening in the Democratic Party. Socialist Vermont Senator Bernie Sanders has taken front-runner Hillary Clinton by surprise.
Both have engaged in the sort of scapegoat tactics that often characterize the bad form of populism. Sanders rails against the moneyed elite – basically Davos Man. Trump targets Muslims and Mexican immigrants, linking the woes of his base, the underemployed American with authoritarian inclinations, to globalization, which is a precondition for the very existence of the World Economic Forum.
The central difference is that Sanders’ targets are amply endowed to refute or undermine his assertions. That’s not the case with the voiceless, mostly poor, immigrants that Trump, and his emerging nemesis in the GOP, Texas Senator Ted Cruz, have sought to vilify. Without any ability to push back publicly, Trump is able to whip up the angry and undereducated in ways that worryingly echo the worst populist movements of the recent past, particularly National Socialism in Germany.
“The contract around American capitalism used to be pretty simplistic – it was basically I don’t mind you getting rich as long as I have the chance to get rich,” said Jacobs, who will be among this week’s Davos attendees. “The challenge for us right now is whether that has fundamentally broken down… the sense that I can’t make it next is pervasive.”