January 17, 2017
Sir, in Wikipedia we can read that Martin Wolf “has been a forum fellow at the annual meeting of the World Economic Forum in Davos since 1999.” If that’s true, which it does not necessarily have to mean in these days of fake-news, Mr. Wolf is as much a “Davos” man as anyone else of them.
I make a note of this because now Wolf writes: “weakening of globalisation partly reflects the exhaustion of easy opportunities for global commerce and the feeble growth of demand since the crisis. But it also reflects shifts in policy: the post-crisis re-regulation of finance has had a pronounced home bias, with reduced support for cross-border activities.” “Populism will not lead to a better world” January 17.
What? Do we now have a “pronounced home bias”? What about Basel II’s risk weights of 0% the Sovereign, 20% the AAArisktocracy, and 100% “We the People” and that are mostly still in place?
No, though I might run the risk of being be tilted a vulgar populist by Davos’ Wolf, I assure you Sir that I do not find much wrong in reducing the regulator’s pronounced risk aversion bias; that which have them favoring the lending to “safe” corporates wherever they are, or to friendly and “safe” Sovereigns, over the lending to “risky” SMEs and entrepreneurs in their own localities.
And what’s that running around like chickens, scared of some possible horrors of neo-protectionism, in a world that has been so much changed? Do the Davos intellectuals really think that Trump would be able to impose really major increased costs on the American consumers? Like telling its kids “the price of an I-phone will be 50% higher because it has to be made in America… and you must now wait one year more to have it delivered? Forget it! That would be like introducing a 50% tax on all purchases on the web, so as to defend the local mom and pop stores. The smuggling of drugs and fake goods would then be minor compared to that of the so many new entrants.
What Davos should be doing though, is to analyze the need for new solutions in a world in which, because of increased automation, there will be more and more structural unemployment; and also one in which, for sustainability reasons, perhaps some consumers’ aspirations must be reduced.
I believe a Universal Basic Income might indeed be one of the best tools available. I fret though about leaving the discussions on such beautiful and delicate solutions that can so easily be distorted into a monster, in the hands of the so many redistribution profiteers and besserwissers always present in Davos.
PS. Basel II assigned a risk weight of 20% to those rated AAA-AA; and one of 150% to those rated below BB-. Sir, are we supposed to be impressed by the intellectual capacity of the Davos group that saw nothing wrong in considering those perceived as very risky a much bigger threat to the banking system than those perceived as very safe? You tell me!