Where finance and media intersect with reality


Why the Davos Succession Story Is a Modern Arthurian Legend in the Making


(And How What Happened to Twitter, Also Happened to the World Economic Forum)

This is a post based on a Twitter thread about how popularity and success always corrupt and ruin neutral platforms, often through the bureaucracies created to protect them. The more liquid they are, the greater the gains from influencing them. But also the greater the gains for society of correcting those imbalances.

When Klaus Schwab founded the World Economic Forum in 1971, his intention was to create a neutral ground which could foster constructive dialogue between European business managers and expose them to American practices taught in places like Harvard. While WEF had a globalist and pro-market agenda, Schwab also believed that managerial processes and technocracy could help to regulate capitalism.

Henry Kissinger, John Kenneth Galbraith and Dean Baker were among those who inspired the business philosophy.

The organisation stressed ethics in its mission statement from the earliest days. In 1973, when the Forum was still known as the European Management Symposium, it set out its code of ethics in its Davos Manifesto. This became the basis for WEF’s future motto “committed to improving the state of the world”.

WEF’s original code of ethics from 1973, as well as its broader history, can be found here:

The opening code noted that “the purpose of professional management is to serve clients, shareholders, workers
and employees, as well as societies, and to harmonize the different interests of the stakeholders”. Some have construed this to reflect an obvious commitment to corporatism.

What is Corporatism?

Corporatism is usually understood to be a company-centric system that encourages collective bargaining between unions and employers. The bargaining, however, is usually brokered by the state. Under the WEF model, however, Schwab was positioning his organisation to become an unelected substitute for the state’s brokering role, on a global level.

This made sense because Klaus Schwab’s stakeholder theory was “beginning to evolve into a broader concept of corporate global citizenship.”

In a global system, no state has a pre-existing mandate to broker on behalf of other states or stakeholders. There is the UN, but this is a political organisation that doesn’t explicitly bring corporates to the table. Nor is it focused on business practice. WEF saw the opportunity to fill that void.

Despite WEF’s ethics codes, profitability and the market mechanism remained a necessary means “to enable the management to serve its clients, shareholders, employees and society.” That differentiated it from classic corporatist models.

Corporatism, however, has always come in many flavours. For example, Mussolini favoured a “corporatist” economic model with a nationalistic spin for fascist Italy. Joseph Schumpeter championed a more decentralised version to help regulate the externalities of laissez-faire.

Indeed, I was surprised to learn this week that some of those who advocate corporatism as a “good” alternative to unconstrained laissez-faire do not consider the WEF system to be a corporatist model at all.

They prefer to describe WEF as a system in which many formerly national and legislative functions are transferred to transnational agencies or nonprofits or corporations in what is better described as “technocratic neoliberalism.”

Not everyone agrees. One noted US-based economist told me: “In general, corporatism is just another word for fascism in the original Italian sense. It is a collaboration between organised groups in society to exploit the unorganised.” And that “stakeholder capitalism” is just another word for it.

The debate about whether WEF is truly a corporatist system or not, however, is largely an academic one. Overall, corporatists don’t like WEF being described as such because they see it as bad PR for their idealised form of corporatism, which has more in common with a decentralised guild structure.

They also argue that the “good form” of corporatism needn’t be undemocratic. In their eyes, elements of FDR’s “New Deal” era could be described as corporatist, illustrating that the market mechanism is not always needed for economic allocation. Egregious misallocation can be corrected by a democratic ballot instead.

While I have a lot of sympathy for the above view, I don’t think it changes the fact that to the average person, WEF still comes across as an undemocratic and thus “bad” version of corporatism. Nobody elected Klaus Schwab after all.

The fact that WEF is internationalist and committed (unlike true corporatism) to using the market mechanism for economic allocation (the neoliberal bit), fails to counter the fact that it inadvertently disenfranchises non-stakeholders from having a say in the system.

It also fails to account for the fact that despite claiming to be a neutral brokering ground, the system endowed Klaus Schwab – an unelected figure – with disproportional influence over the global agenda via his ability to amplify or de-amplify specific voices or causes.

A Monarchic Court System

By the time the global financial crisis struck it was becoming clear that Klaus’ model of using technocratic means to enforce the market mechanism on society was struggling to improve the state of the world. The more WEF expanded its reach and membership, the greater the negative externalities of its system, from climate change to inequality, became.

The bureaucracy which was put in place to constrain the excesses and injustice of laissez-faire thus, instead of improving the state of the world, seemed mostly to be allocating capital to preserve and expand the bureaucracy at the cost of everyone else.

Business models remained focused on socially irresponsible profit-maximization. At the same time, the system was also incentivising corporations to lobby states to force a free market on labour while securing protectionist policies for themselves.
In this way, WEFism encouraged corporate bureaucracies to grow ever larger regardless of the social cost.
Eventually, the externalities became so obvious, WEFism had no choice but to evolve or face certain revolution. It simply had to be seen doing something. The ESG movement was the market-based solution the system came up with.

And with that, the reinvention of the global elite into dogooders of the highest order, anointed by divine providence to save the planet, became a thing. The era of top-down corporate virtue signalling began in earnest. That their mandate for supreme executive power derived from a farcical Alpine ceremony rather than a mandate from the masses didn’t seem to matter to them.

The assumption was that by outsourcing social responsibility to the market, WEF could have its neoliberal cake and eat it. In reality, however, WEF was trying to steer markets using market incentives to achieve non-market goals which continued to inflate its own bureaucracy.

The goals themselves continued to be determined at forums like WEF. Since the forum was a multistakeholder system in theory, the assumption was this was a fair representation of consensus and thus not illegitimate.

What it actually resulted in, however, was a system that championed mass-market manipulation in the name of goals deemed subjectively virtuous by the elite, who (for the most part) were merely parroting the view of their own bureaucracies and courts.

Nobody noticed that the dynamics they were encouraging mimicked the very dynamics of crypto pump-and-dump schemes. i.e. getting influential people to champion investments with dubious cashflows on the basis that if enough people buy in, the capital returns will make up for the lack of short-term profitability.

In an idealised scenario, the influencers would not just be significant asset managers, but also statesmen with the capacity to set policies that favoured ESG portfolio companies, and discriminated against more cost-effective competitors.

A Modern-Day Versailles

This brings us back to Klaus Schwab and the consensus processes he cultivated to help determine which non-market-based goals should be boosted and which should not. In theory, the consensus process was supposed to be organic. In reality, the whole system — like in any monarchic court — was flawed because whoever had most influence over Klaus Schwab achieved outsized influence in the market.

The corporate bureaucracies that benefited most from having their interests advanced by Schwab, naturally invested the most in advancing their people into his circle. Schwab’s role at the WEF, in that sense, became analogous to the role of Yoel Roth, the former Head of Trust and Safety at Twitter.

Like with Twitter’s old regime, bureaucracies that were established to regulate, vet and control for the worst of an open-ended market-based system, ended up being exploited by the beneficiaries of the prevailing system to ensure that dialogue that threatened their status within it was suppressed or deprioritised.

As this happend, WEF’s own head office grew ever larger and became stacked with individuals with heavyweight allegiances and obligations to external parties, often former politicians. Were they serving WEF, Klaus Schwab, society, themselves or the corporates and political parties that had forged them?

WEF’s trustee board became a reflection of the many special interests trying to influence the neutrality of the system.

By the time I was being interviewed for a job managing the WEF’s blog in 2012, which they hoped to make edgy, engaging and provocative, it was clear that no editorial professional would be able to operate with any semblance of editorial independence at the organisation.

All thought-provoking content generated by an editorial team would have to go through a laborious committee approval process before being published. On the other hand, if the powers that be decided a poorly thought out “thought-piece” by a “friend” of the system (a la “you will own nothing and be happy”) had to be published, editorial professionals managing the site would have little power, if any, to push back against it.
This was as far removed from journalism as anything could be, even more so than the time I worked as the editor of BP’s internal magazine. I declined the job.

All of the above is why the question of Klaus’ succession is such a big one. The issue has turned into a Game of Thrones plotline. Those who have invested in influencing Klaus’ viewpoints, don’t want a successor who might think differently. Davos is Klaus Schwab.

But it’s also the case (I think) that Schwab himself was never as malleable as external parties hoped he would be. To some degree, Schwab was also an unknown force, who regularly surprised his inner circle by insisting on opening the door to leaders or influencers they would have preferred to banish. A good example of this was how earnestly he defended Donald Trump’s right to attend the conference in 2017.

Leadership Crisis

That unknown element of Klaus Schwab exacerbates the political difficulty of replacing him.

A truly neutral replacement threatens the self-serving bureaucratic system of rentiers that WEF has created. Such an appointment would likely prompt a hissy fit of mass partnership defections (to a real-world Mastadon equivalent), threatening the revenue/sustainability of the system. System fragmentation would follow, killing the forum’s raison d’etre.
In reality, WEF’s chances of ever reinventing itself as a neutral entity are negligible because of the extensive baggage it has accumulated thus far.

On the other hand, a politicised appointment risks destabilising the current status quo in equal measure by creating the perception that one specific faction or cause may be being favoured over the other. Internal squabbling and chaos would be bound to follow.

What is fair to conclude is that once Schwab steps down, or dies, what little neutrality the organisation is perceived to have will finally and officially be exposed as illusory. This self-preservationist factor is no doubt what has discouraged Schwab from retiring earlier.

When that becomes self-evident, Davos will either die or become so irrelevant as to have no sway over the global order at all.

A successor’s only hope of achieving public legitimacy comes in persuading the world they have a democratic mandate to lead. Failing that, they would need to convince the world of some otherworldly Excaliburian divine right to rule.

With Tony Blair largely tipped as the frontrunner for the job, the chances of that happening are low. He would be self-evidently the choice of the shadowy factions and oligarchies that currently have most sway over the system.

The END.

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