Trump’s Ideas May Force the Introspection ‘Davos Man’ Needs

January 19, 2018 • Commentary
This article appeared in the Investor’s Business Daily on January 19, 2018.

President Trump will attend the World Economic Forum in Davos next week.

On the face of it, the annual jolly for worldwide business and political elites at a ski resort in Switzerland looks an unwelcoming environment for the President. “Davos Man” is seen by many as the manifestation of the globalist agenda Trump denounces. The biggest acclaim at last year’s jaunt, after all, went to President Xi of China, as he outlined a robust defense of free trade days after Trump’s inauguration extolled protectionism.

But there’s an argument to be made that on other issues, Trump’s likely opinions will provide the shake‐​up the Forum needs.

Rich people blowing company cash in an expensive resort to bloviate their political views and contemplate the musings of “very important people” is in itself not particularly interesting. But when politicians, businessmen, lobbyists, commentators and regulators get together committing to “improving the state of the world,” there are reasons to be concerned.

The first is that by design elites and vested interests dominate the conversation.

As an example, last year the forum contained business voices denouncing Brexit, with major banks and other established international companies lamenting potential impacts on supply chains and their commercial activities. Totally unrepresented were British consumers, who pay higher prices for external goods because of EU‐​level tariffs, and small businesses and yet‐​to‐​exist enterprises, which disproportionately bear the costs, or don’t exist, due to EU regulations.

Indeed, it should not surprise us given the aligned interests of participants that Davos Man is so prone to groupthink on the issues of the day. A look back at the conference of 2006 shows little to no discussion of global systemic financial risks, but concern about bird flu being the next Black Death.

And who can blame them? Financiers, industrialists and regulators at Davos on any given year are generally success stories under current policies, and see near‐​term concerns as threats to their position, and arguably ignore larger systemic problems on the horizon.

Elites, by definition, have done well out of the status quo. They have wealth and power that they seek to preserve. It should not surprise us then to see the World Economic Forum now pushes articles about how to “deal” with supposed populism. Conventional elite wisdom worldwide is social democratic — that political fissures have arisen because of economic anxieties and inequalities.

So the lazy “solution” is for more government investment or more redistribution to keep the populists at bay. It just so happens bigger government will inevitably mean politicians dealing with and buying goods and services from existing major businesses — the very sort that appear at the World Economic Forum every January.

Perhaps the biggest problem with Davos Man though is the general hubris that the global elite can sit around and develop technocratic solutions to solve problems. The essential insight of Nobel Prize‐​winning economist Friedrich Hayek was that information was inherently decentralized. Localities, regions and countries are shaped by their own institutions, histories and cultures.

Dispersed decisions made by billions of individuals provide companies with information about how to allocate resources. The idea that progress comes from elites devising global plans for “responsive leadership,” “a collective purpose,” and by shaping “the future by … unparalleled global effort in co‐​design, co‐​creation and collaboration” is at best delusional and at worst leads to bad ideas gaining traction.

Davos Man is on the whole cosmopolitan and sees himself as a “citizen of the world.” And in areas such as free trade and open migration, international businesspeople have been worthy supporters of economic liberty, which enables individuals to realize their wants and needs through voluntary cooperation.

But that same worldview that sees elite global action as key to prosperity also tends to be attracted to questionable grand projects, from burgeoning foreign aid spending, to constructionist international political projects such as the EU and eurozone and extensive global interventionism to “deal with” climate change and conflict. The knee‐​jerk Davos Man view is that all global cooperation and action is a good thing.

This makes Trump’s visit all the more interesting. His ideas on trade and migration fly in the face of evidence. But his views and approach to other issues from aid to the UN may just be the grit in the oyster necessary for some introspection on behalf of the global elites.

As the economist Bill Easterly once said, Davos Man may not be ready to acknowledge that he does not hold the fate of humanity in his gilded hands. But that need not stop the rest of us.”

About the Author
Ryan Bourne

R. Evan Scharf Chair for the Public Understanding of Economics