Faulty diagnosis plagues the Davos Manifesto. This document is the centerpiece of the World Economic Forum, attended by leaders of over 50 countries and other notables. In general, the public expression mindset of the attendees is social and economic betterment and social justice through improving capitalism. It wants a “better kind of capitalism”. It is globalist, centralist and control-minded. It aims for central and worldwide coordination. It is interventionist. It is universalist in orientation.
The underpinning of the Manifesto is criticism of value-creation by business. The Manifesto claims that business is too short-term oriented, too focused on creating value for owners and suppliers of capital, and not mindful enough of “all its stakeholders – employees, customers, suppliers, local communities and society at large.” It wants to “harmonize the divergent interests of all stakeholders…through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.”
This thinking has signal defects. The main one is that the Davos diagnosis fails to target the biggest spoilers of a just and ethical capitalism. These are banking systems with central banks and unsound money and credit. These, in turn, are created by overly-powerful governments that are corrupt. It is not faults of capitalism that create big problems; competition rapidly weeds out mistakes, if given a chance to work. It is central banking, tax, regulatory and warfare policies that prevent healthy business competition.
The centralization of immense government powers sets the stage for the capture of government by a broad range of interest groups. One of the many results is a flawed capitalism that goes by many names, such as crony capitalism and state capitalism.
Blaming business is superficial and fails to target the real culprit, which is the idea that government is the go-to tool to solve social and economic problems and to create social betterment. Given the completely wrong diagnosis of the elements that spoil capitalism, it is no surprise that the Davos Manifesto advocates more government, when it should be targeting unsound money and central intervention in debt markets and interest rates.
The Manifesto has two sorts of statements. First comes a list of desirable behaviors of companies. The problem with it is that it’s disconnected from any mention of private property, competition and price systems to attain the goals. There is no other known way, short of freedom, to reconcile the divergent interests of different groups in society; and to replace them by a coordinated division of labor rooted in individual freedom. Nothing but individual freedom results in human betterment on a society-wide broad scale. The sustained application of government power doesn’t do this. Davos completely fails to see this, understand this or build viable recommendations based upon this.
Instead, the Manifesto promises stakeholder socialism:
“A company is more than an economic unit generating wealth. It fulfils human and societal aspirations as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives. Executive remuneration should reflect stakeholder responsibility.
“A company that has a multinational scope of activities not only serves all those stakeholders who are directly engaged, but acts itself as a stakeholder – together with governments and civil society – of our global future. Corporate global citizenship requires a company to harness its core competencies, its entrepreneurship, skills and relevant resources in collaborative efforts with other companies and stakeholders to improve the state of the world.”
Notice the words “must be measured” for “performance”. Notice what “Corporate global citizenship requires” [Emphasis added.] These signal methods of control that are above those provided by competition, sound money, property rights and open entry into business. The Davos vision is vague but still discernible. It is some sort of a worldwide control over businesses that is supposedly able to bring social betterment while making companies act in the best interests of widely-divergent interests (stakeholders). This simply cannot be accomplished. Socialism doesn’t work.
The actionable core to the Davos Manifesto is not its ideas of how companies should behave, but its vision of how to make them behave. On that account, Davos embodies European-style thinking, European Union (EU) thinking, EU-style bureaucracy, EU-style regulations, and EU-style rule. It is antithetical to freedom and free market capitalism. It ends up being a suffocating socialism, the kind of policies that will ruin any country. In America this kind of thought is the proper enemy of any person who truly loves his country and wants to see it and its people prosper and not succumb to the evils of socialism.9:10 am on January 21, 2020 Email Michael S. Rozeff