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WEF only ‘about tweaking the system’: rogue business leaders call for real wealth distribution

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18 Jan 2023
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WEF only ‘about tweaking the system’: rogue business leaders call for real wealth distribution

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WEF only ‘about tweaking the system’: rogue business leaders call for real wealth distribution

By Paula Dupraz-Dobias

Fifty years after a group of economists, business people and scientists called for a rethink of the economic growth models, the climate crisis and rising social inequalities have brought a new urgency to the need to find novel solutions. But it’s not on Davos’s formal guest list that the instigators of that line of thought can be found.

Members of the Club of Rome, a global think tank focussing on global issues including poverty, environmental destruction and global health issues, were in the Alpine village on Tuesday, at one of the many venues set up and sponsored by both invited guest corporations to the World Economic Forum (WEF), as well as civil society groups.

Consisting of a group of leaders from public and private sectors as well as academia, the Club of Rome is best known for a publication it commissioned in 1972 entitled the Limits of Growth, warning that the drive for continued economic growth was incompatible with limitations in global resources and could have an impact on the population, if not properly managed.

The group has argued that traditional economic growth models have led to the concentration of the benefits of that growth in the hands of very few, generating social inequalities.

Recently there have been growing calls for a rethink in global finance amid widening wealth disparities due to the economic impacts of the Covid-19 pandemic and the latest cost of living crisis. On Wednesday, United Nations secretary general António Guterres condemned what he called a “morally bankrupt financial system in which systemic inequalities are amplified by societal inequalities”.

It is “a system that routinely denies debt relief and concessional financing to vulnerable middle-income countries in desperate need,” he added.

Earlier this week Oxfam reported that two-thirds of the $42 trillion in new wealth generated since 2020 went to the top one per cent of the global population. The “Survival of the Richest'' report release coincided with the resumption of live meetings at the WEF in the Alpine village, attracting global elites and major companies.

Meanwhile, at last year’s spring edition of the WEF in Davos – a more pared-down event to this week’s gathering where over 2,600 people are expected – 1,040 private jet flights landed in airports serving the resort, according to Greenpeace.

Climate change is one of the top issues on the agenda this week and the organisation has called for “bold collective action”. Gim Huay Neo, managing director and climate chief at the WEF says climate change and ecosystem distribution are the “biggest threats to humanity”.

As the debate over the environmental and social limits of growth has once again returned, Geneva Solutions met with Sandrine Dixson Declève, co-president of the Club of Rome, Carlos Alvarez Pereira, its vice-president and Peter Blom, former CEO of Triados, a Dutch bank involved in sustainable finance and a full member of the organisation, to get their take, somewhat more direct than those of WEF corporate members.

Alvarez Pereira said that a Club of Rome meeting held in the late 1960s included the participation of Klaus Schwab, the WEF founder, and Jay Forrester, a professor at the Massachusetts Institute of Technology (MIT), who developed a computer model, on returning from the meeting, that became the basis for the Limits of Growth.

“Klaus Schwab decided to go in another direction, which I am sorry to say, is a lot about self indulgence about the richest and most powerful people on Earth, to feel that they are doing something, and to be talking about it,” Alvarez Pereira commented.

Geneva Solutions: Every year at the start of the WEF’s annual meeting, Oxfam’s report on wealth concentration reminds us of the issue of growing inequalities, and coincides with the arrival of some of the world’s richest for the event  in Davos.

Sandrine Dixson Declève: The Club of Rome has always said in the Limits of Growth, that we have to rethink growth scenarios, because they are not solving the problems that we were seeing already in 1972 in terms of growing population, challenging planetary boundaries, and income and wealth distribution, and how we can continue to sustain that growing population, and make sure that they have proper wellbeing.

If we skip to today, we have come up with new solutions to avert some of the social tipping points. One of them is taxation policy, and how we address the perversity of enabling wealth to go into the pockets of a few. We released a letter saying we have to tax the rich if we think about transformational economics. It means rethinking our taxation systems which do not consider taxing corporations in a way they should be taxed, looking at global commons and the way in which we tax them, and finally looking at income tax for the world’s most wealthy.  One per cent of the world’s wealthiest own most of the income around the globe. That is not possible, if we want to maintain economic stability.

With the issue of across-the-board, fixed taxation of the wealthy once again being discussed, some participants here in Davos might now publicly say that taxing the wealthy is an interesting concept, but are weary of how that wealth will be distributed.

Globally, we feel that everyone should have at least $15,000 as a minimum income. The OECD has spoken of a taxation policy to help  bring up those with the lowest incomes into a higher income bracket. Another way is to close the loopholes, where corporations are not paying a fair amount of taxes, and then redistribute that into social programmes, education, etc. We need energy poverty avoidance programmes and solidarity checks. This is how we can distribute some of that wealth.

Should the government be responsible for distributing that wealth?

Alvarez Pereira: It is not only the governments, it will need a change of mindset from everyone, especially from those who are at the core of how value is monetised, and what wealth creation means today.

Philip Hildebrand (former Swiss Central Bank head) made a very honest comment at the 2022 Building Bridges forum in Geneva. It was at the same time terrible. He said as a citizen I could say many things (in favour of wealth distribution), but as an investor, as vice chairman of BlackRoc, what I have to say in terms of my fiduciary duty is that we cannot recommend to our clients to move their investments in renewable energies, circular economies, etc., because those are more risky, unless the governments fix that problem.

It was an incredible statement to make in public, because it contains many of the origins of the problem. It is blaming governments. He was not in denial regarding climate change, biodiversity loss and inequality, saying there is lots of pain and there will be much more. But how can you work with assessments that says that you are creating wealth when you are not creating wealth? Those investments which you are saying are less risky are destroying the ecosystems and the future of humanity. You are not creating wealth in this way. It's fake.

The WEF largely relies on the contributions of corporate entities.  Is it possible to see effective action being taken on climate change from these businesses at the WEF?

Dixson Declève: You need both. Those companies, especially the extractive industries, are making money on the back of natural resources, which does not go back to the people, in countries weighed down by debt. We need to address the issue of debt cancellation. There are so many perversities at so many levels. We need to ensure that there is taxation on what we call the global commons taxation. Norway has done that where they have redistributed the wealth from the natural resources. Yes, they are still making a profit but they are splitting some of those profits with the people, and that is part of what we are proposing. The question is whether governments are capable of properly redistributing. But they have to change the taxation systems as they are today. We also need to get rid of perverse subsidies such as fossil fuel subsidies, which could be instead shifted to social transition funds, including renewable and new energy funds. That has to happen alongside taxation of assets that many of these wealthy people are not paying for.

What conversations are having with large businesses here at the SDG Tent in Davos and how are they responding?

Alvarez Pereira: We are here because there are many people coming from business contexts who are open enough to what we are saying. Maybe they are the vanguard, and the WEF is not, but rather a bit behind.

Dixson Declève: We have many business leaders who sit as members (of the Club of Rome). Aurelio Peccei, the founder of the Club of Rome, was himself an industrialist. We believe the business is a part of the transformation and that they are responsible for the economic shift that we are calling for. We have to work with businesses and have to call out the realities and perversities of the business practices that we see, but also with governments.

How does the WEF meeting serve you?

Dixson Declève: We come here to remind people that (continued economic growth) is not the way. We have to think about what economic development really means, and move away from a 21st century notion that isn’t even about the economy. It’s about finance and the over financialisation of the economy. We have totally lost sight of the real functioning of the economy, which is a driver for people to actually have jobs, and sustain their lives and livelihoods. It has now come to be about shareholder value and often profit-linked.

Peter Blom: I came to the WEF events many years ago, and felt Klaus Schwab was intent to do something positive for social good. But it is more about tweaking the system. The Club of Rome is more about the need to replace the system, which is very ambitious. The question is how do you go from this system to a new system. It is more of a question now than ten years ago.

How do you think that system change will happen?

Dixson Declève: It is hard to fight the power structures, which is why we have had the same message for 50 years. Those who are in power and those who are profiting from those profits are holding on with dear lives. We just saw what happened at Cop27: the lobbying has only weakened our decisions regarding phasing out oil and gas. But what is important now is to see that times are different. We are faced with those tipping points. We had 50 years during which we could have stopped those tipping points from happening. Now we are in the midst. We will be in permanent chaos and polycrisis. People are actually waking up to the fact that this is bad business, bad economics. This could be the demise or the extinction of the human population.

Blom: Initially we were fighting the leaders. Now they acknowledge there is a real problem. In the financial sector, nobody denies climate change. They say informally that the system is broken, which they didn’t say 10 years ago. But they still don’t say that publicly, because shareholders would not want to hear it. I do feel that if there is momentum and that there are opportunities to change, they are more likely to do it than 10 years ago. That is a change.

SOURCE: GENEVA SOLUTIONS

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