The Davos Way

Luís Ángel Fernández Hermana - @luisangelfh
5 December, 2017
Editorial: 155
Fecha de publicación original: 16 febrero, 1999

The king means little to his swineherd

The World Economics Forum at Davos, the annual get-together of the rich and powerful on the planet, turned into a Freudian exercise in self-flagellation. For a start there was the title of the meeting: Global Responsibility, quite an ironic one in the mouths of transnational corporation CEOs, high ranking officials from world and national banks, financial leaders and eminent speculators. Then came their statement that short term speculative capital flows lambaste the world economy particularly violently leaving scars wherever they land. Destruction of local economies, unemployment, sudden poverty and the disappearance of enormous financial and material resources are some of their most visible manifestations. Then, finally, came their conclusions: less reverence for the market and more control of this capital. In less than three years, the sermons of George Soros, the great stock exchange diviner, have become doctrine. The baby produced by these outstanding men, neo-liberal economic globalisation, is pooping on them.

Nevertheless, one thing is demanding more control and the other is actually putting it into practice. Speculative capital flows, especially short and medium term ones, are basically information flows. And, there is no way of blocking the former without stopping the latter. And behind both of these lies technological innovation and the investment necessary for driving it into the economic circuit. It is not a vicious circle but a capricious spiral which, for a start, nobody knows how to control or predict which way it will turn either. Its dynamism does not depend on public policies but on hundreds of thousands of private actions, which are becoming more private all the time, so much so that sometimes there are just a couple of people behind them. So, this is why the world elite is discovering, not without a great deal of apprehension, that it is time to abandon the neo-liberal baby which they fed with “irresponsible speculation” and that it is time to move on to the post-liberalism of “unrealisable planning”. This policy includes the idyllic aim of “harmonising” political economies and political systems on a world scale all at one go.

The package comes adorned with a growing preoccupation for inequality. Up until now, this made sense because it was a way of highlighting weak points for invading societies with high-risk capital, immediate profits and magical volatility. Now, inequality is suddenly seen as a serious problem because it increases the insecurity — the irresponsibility– of the markets. It creates and destroys human, financial and material resources and leaves enormous conflict in its wake. It is not seen as the most suitable scenario for controlling political systems, nor the economic ones, let alone “harmonising” both of them. Soros, the kingdom’s grand speculator, warned of this at previous Davos meetings. His words have now been branded on this picturesque little Swiss Alpine village: either capital flows are controlled or the whole invention goes down the drain.

The Internet has predictably become the maximum exponent of this tendency towards a lack of control. The US and the International Monetary Fund –and the European Union to a large extent– especially the stock markets of the former, look at this agitation from over their shoulders. Regulation? Regulate what? Now that Wall Street is going through another Golden Age thanks to the end of the millennium game, do we bet on the information flows themselves? Whereas at the beginning of the year there was hardly any online trading going on, today there are seven million stockbrokers fighting for a space on the Net – the vast majority of them new at the game, amateurs– and making companies rise and fall which under any other circumstances would not even have been heard of even in their own backyards. IPO’s, Initial Public Offers, when a company puts its shares on the market for the first time, are proving to be the new cornucopia. The secret of survival in this remake of “The Bonfire of the Vanities” is swimming with the “good” flows of information, being signed up to suitable markets (which work as though they were distribution lists, as is the case with Ameritrade) and having sufficient liquid reserves to be able to handle the first blows. If you get it right, you can become a weekend capitalist with earnings which exceed two years salary or more. If you are lucky, you can take your life earnings.

There are millions and millions of dollars in circulation. And the volume is increasing every day. Behind them are very young companies made up of one or two people, who are still in the red, with technology that is labelled “very promising” and the whole of the Internet for them to use as a grazing ground. They launch information flows which make up a growing part of this short term capital — starting off in the US — and maintain a state of turbulence in the world stock exchanges because of the very turbulence caused by information disseminated through interconnected electronic systems. Financial transactions are instantaneous. When the spiral begins, it has a whirlwind effect. Capital, like gas, expands through the electronic environment and attacks where it gets a whiff of profits to be made. And, just as instantly, the weaker economies fall apart at the seams. Who is going to tell the US that it should control these markets? And, if, by chance, it takes any notice, what exactly should it control? The growing legion of internauts devoted to pumping up the healthy economic face the White House shows to the world perhaps?

Translation: Bridget King.