Sunday, January 26, 2020

Ferguson and the billionaires at Davos

In my last post, I commented on Joe Stiglitz view, heading to Davos, that billionaires and corporate leaders are anxious to pollute the air.  In my wealth tax series I reported on the popular view on the Warren Sanders Saez Zucman view that corporate leaders and billionaires represent a regressive right wing political force, that must be stopped by any means including expropriation of their wealth, even if that means destroying the businesses that make them rich.

My colleague Niall Ferguson reports from Davos what seems actually to be on billionaires' minds: 
Take the World Economic Forum (WEF), the gathering of billionaires, millionaires, world leaders, do-gooders, busybodies and journalists that takes place each January in the Swiss resort of Davos. The overwhelming majority of people attending this year’s conference would, I have no doubt, affirm their commitment to reducing carbon dioxide emissions to avert catastrophic climate change, even while on board their Gulfstreams and in their Range Rovers.
I doubt if a single chief executive present at the WEF last week would dare publicly to challenge the view that a modern corporation should rigorously measure and regulate its behaviour in terms of its environmental and social impact, as well as its quality of governance (ESG, for short). As the US Business Roundtable declared last August, firms must now be run not only for the benefit of their shareholders but also for all their “stakeholders”: customers, employees, suppliers and communities. Milton Friedman is dead. Long live Klaus Schwab — founder of the WEF — who pioneered this notion of stakeholder capitalism.
“ESG-omania” (or “ESG-apism”) meant Davos 2020 was an orgy of virtue-signalling on climate change and diversity. To walk down Davos Promenade, the main drag, was to run a gauntlet of uplifting corporate slogans: “Sustainable solutions for Earth, for life”; “A cohesive and sustainable world starts with data”; “Let’s bring sea level and C-level together”.
Each year the WEF’s global risks report tells us what the business elite is most worried about. Ten years ago, the top five risks were “Asset price collapse”, “China economic slowdown”, “Chronic disease”, “Fiscal crises” and “Global governance gaps”. This year? “Extreme weather”, “Climate action failure”, “Natural disasters”, “Biodiversity loss” and “Human-made environmental disasters”.
(Related, the Wall Street Journal reported last week that Goldman Sachs will no longer fund fossil fuel development in the Arctic, or any US company that does not have women or "diverse" board members. And Jan 27, quotes "Salesforce chairman and co-CEO Mark Benhoff that "capitalism as we have known it is dead, and this obsession that we have with maximizing profits for shareholders alone has led to incredible inequality and a planetary emergency." ) 

In public, at least. In private, 
In quiet corners of the Davos congress centre you could hear Europeans wishing they could have at least a piece of this American action [Trumpian growth]— and complaining that Greta’s demand for “zero carbon now” was a recipe for zero growth.
... you say one thing in public and another in private. It was once the basis of life in communist systems all over the world. It turns out to be something capitalists can do just as easily, ...
Business people adopt whatever public views are convenient. And their public virtue-signaling means that winds now blow from the left. 
If Davos Man has come around to Trump — enough to expect, if not quite to hope, for his re-election — it is no guarantee that he will win on November 3. If January 2016 is anything to go by, you should probably bet against the Davos consensus and have a flutter on Bernie Sanders.
Niall organizes his thoughts around  "cognitive dissonance." Good old-fashioned "Hypocrisy" might be a more apt word. As in 
Do you give speeches about climate change at international conferences, having flown there by private jet? Do you ever sit in a big black car in a traffic jam, when you could quite easily have walked, despite knowing that this, too, is adding yet more carbon dioxide to the atmosphere?
Exhibit A: 
In this green new world, Davos Man must now prostrate himself before Stockholm Girl: 17-year-old Greta Thunberg, who delivered her latest tirade on Tuesday morning. “We don’t need a ‘low-carbon economy,’ ” she declared. “We don’t need to ‘lower emissions’. Our emissions have to stop. ...
I love Greta Thunberg, because she exposes the immense hypocrisy of the political climate establishment. When she went to school, she received the same alarmist pablum handed out to children around the world -- the climate is a crisis. Civilization is going to end. The world will be a red hot cinder in your lifetime. We have exactly 11 years to stop it. The other children, like those in communist countries including China today, understood the game. Mouth the pieties, get a good grade on the test, don't argue, and go out to play. Greta, who describes herself as neuro-diverse, took it seriously and literally. Well, if the planet is going to fry in exactly 11 years we darn well had better do something about it, and not just virtue-signal in our PR statements and buy some phony carbon offsets when we fly the Gulfstream back from Davos.

Niall's last point is excellent:
In the same way, if it’s climate change the WEF-ers are most worried about, you should probably brace yourself for a coronavirus pandemic. Talking of cognitive dissonance, what the hell were we all doing at a massive global conference last week? Fact: at least three of the WEF attendees were from — you guessed it — Wuhan.
What are the really big risks in the next 10 years? Pandemic, nuclear war, civil war, government collapse. The ones very few people are paying any attention to. The big ones are never the ones conventional wisdom sees coming a hundred years away.


On reflection, hypocrisy is not a good word either. What do you call the behavior, of mouthing platitudes that you know to be meaningless or false, from good old self interest? You know a Warren or Sanders presidency is a good possibility, and they will use the regulatory and judicial machinery ruthlessly. So let's get those public statements and virtue signals out fast -- support for "stakeholder" capitalism, climate crisis, "ESG" metrics or whatever it takes. You know that social climbing at Davos, your nonprofit boards,  (your hope to become dean someday, in academia) or just avoiding the twitter mob demand conformity. So you mouth the harder and harder to pronounce words, or even convince yourself of the worthiness of it all.  There must be a good word in  Russian, the art of getting along under a communist regime.  We say "virtue-signaling" but that does not cover the self-interest of going along with the crowd. I welcome suggestions for a good word.


  1. Excellent story! Presuming all these inserito guys don't buy into the impending doom of climate change is like presuming the Florentine bankers professed they were not Catholic!

  2. It is always enjoyable to poke fun at poseurs, and Davos is probably full of fat targets.

    Moreover (as a rank amateur), I am skeptical that CO2, at a few hundred parts per million, can effect climate much.

    Yet, the climate experts seem to largely agree that CO2 emissions are a real threat (much more than credentialed macroeconomists agree about anything).

    Even more, many prominent, credentialed macroeconomists spent nearly entire careers gravely warning about pending much-higher inflation rates (Volcker, Feldstein). Instead, for the last 40 years inflation rates have generally trended down. One more recession, and we see Europe, US and Japan migrate into minor deflation, I suspect.


    Well, I would be wary about C)2 emissions, and devise economical ways to reduction, such as fuel and pollution taxes.

    The price signal almost invariably does not capture the costs of pollution, and so pollution must be addressed through some artificial mechanism.

    Free-market types need to toss in the towel on this issue, and work on the best way to mitigate damages....from policy and CO2.

    1. """
      Moreover (as a rank amateur), I am skeptical that CO2, at a few hundred parts per million, can effect climate much.

      Without naturally occurring greenhouse gases, Earth's average temperature would be near 0°F (or -18°C) instead of the much warmer 59°F (15°C).

      What have those few hundert parts per million ever done for us ?

    2. Water vapor is by far the most important greenhouse gas. CO2 is a relative nothing. The fantastic projections of climate models depend on rising CO2 somehow increasing water vapor greenhouse warming. It would have to do this without cloud cover increasing despite the increased water vapor. The models ignore clouds because they cannot handle the complexity. A minor increase in cloud cover can negate all CO2 driven warming.

  3. Davos always struck me as a place where there was a lot of hand-wringing - lots of concern but little follow through or action. It's not enough to just show concern in sound bites or tweets.

    Regarding Wuhan:
    There was an excellent article written comparing how the SARS virus was handled compared to today's handling of the Coronavirus:

    Fascinating read.

    I'm of the same opinion - it's always the stuff you don't anticipate that gets you in the end. Reality has a way of making itself known.

  4. Interesting post, thanks, but I think "Joe Stiglitz view" should be "Joe Stiglitz's view", and in the second post, "the popular view on the Warren Sanders Saez Zucman view" has some extra words and should perhaps be "the Warren/Sanders/Saez/Zucman view".

  5. “As the US Business Roundtable declared last August, firms must now be run not only for the benefit of their shareholders but also for all their “stakeholders”: customers, employees, suppliers and communities. Milton Friedman is dead. Long live Klaus Schwab — founder of the WEF — who pioneered this notion of stakeholder capitalism.” - Dr. C.

    Ah, Milton Friedman! "So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not." - Milton Friedman

    If one takes Friedman's observation and adds it to Harold Demsetz's observation that firms are made up of owners, managers, workers and suppliers [Harold Demsetz, “From Economic Man to Economic System”, Chapter 10, pages 141 -159, The Public Corporation: Its Ownership and Control] you arrive at additional clarity. How so?

    If a firm maximizes then owners, managers, workers and suppliers are maximized. Each owner, manager, worker and supplier can then choose to award charities and other philanthropic entities with their maximum...or put their kid through college.

    On the other hand, if a firm maximizes but sends part of the maximization to “stakeholders” e.g. local and national entities acting very much in a rent-seeking capacity, then the owner, manager, worker and supplier have been usurped as well as those charities and other philanthropic entities that would have received part of the maximization.

  6. On the update: The word required is "bullshitting". See Prof. Frankfurter. :-)

  7. A Brave New World, or simply a variation on Animal Farm? I expect it is the latter, rather than the former. Meanwhile, those of us who must earn their daily bread by honest endeavor carry on and have no time to spend on the musings or satisficing behavior of the various and sundry millionaires and billionaires and euro-teens strutting and posing in Davos, CH, this month. Compared to 7 billion persons, what are a handful of glitterati in the overall scheme of life? Not of much account, I'd wager, when it comes to that. The press of humanity will determine Humanity's fate, almost surely. If you feel that you must take an opinion survey, seek the opinions of masses living on the South Asia subcontinent or the masses living, working and striving in East Asia--theirs' are the opinions that matter, not the opinions of the poseurs in Davos.

  8. Timur Kuran, "Private Truths, Public Lies: The Social Consequences of Preference Falsification," calls it, as the title indicates, "preference falsification." Kuran and Sunstein Availability Cascades also refer to a related concept of knowledge falsification.

  9. It was an old rule in Stalinist Russia. Everyone stands and applauds when Stalin enters the room. Never be the first person to stop applauding. Much the same day if the topic is climate change, or ESG, or stakeholder capitalism.

    And if the topic is Trump, never be the first person to stop booing.

  10. At some point, you have to confront them to determine their seriousness. My first statement to them usually is: If you are serious about CO2 mitigation, then you are for a robust nuclear power industry, right? If not, then they are no more coherent than bleating sheep.

  11. "On reflection, hypocrisy is not a good word either. What do you call the behavior, of mouthing platitudes that you know to be meaningless or false, from good old self interest?"



Comments are welcome. Keep it short, polite, and on topic.

Thanks to a few abusers I am now moderating comments. I welcome thoughtful disagreement. I will block comments with insulting or abusive language. I'm also blocking totally inane comments. Try to make some sense. I am much more likely to allow critical comments if you have the honesty and courage to use your real name.