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Trump's Ideas May Force the Introspection 'Davos Man' Needs

19 Jan 2018

Ryan Bourne

President Trump will attend the World Economic Forum in Davos
next week.

On the face of it, the annual jolly for worldwide business and
political elites at a ski resort in Switzerland looks an
unwelcoming environment for the President. “Davos Man” is seen by
many as the manifestation of the globalist agenda Trump denounces.
The biggest acclaim at last year’s jaunt, after all, went to
President Xi of China, as he outlined a robust defense of free trade days
after Trump’s inauguration extolled protectionism.

But there’s an argument to be made that on other issues, Trump’s
likely opinions will provide the shake-up the Forum needs.

Rich people blowing company cash in an expensive resort to
bloviate their political views and contemplate the musings of “very
important people” is in itself not particularly interesting. But
when politicians, businessmen, lobbyists, commentators and
regulators get together committing to “improving the state of the
world,” there are reasons to be concerned.

The first is that by design elites and vested interests dominate
the conversation.

As an example, last year the forum contained business voices
denouncing Brexit, with major banks and other established
international companies lamenting potential impacts on supply
chains and their commercial activities. Totally unrepresented were
British consumers, who pay higher prices for external goods because
of EU-level tariffs, and small businesses and yet-to-exist
enterprises, which disproportionately bear the costs, or don’t
exist, due to EU regulations.

Indeed, it should not surprise us given the aligned interests of
participants that Davos Man is so prone to groupthink on the issues
of the day. A look back at the conference of 2006 shows little to
no discussion of global systemic financial risks, but concern about
bird flu being the next Black Death.

And who can blame them? Financiers, industrialists and
regulators at Davos on any given year are generally success stories
under current policies, and see near-term concerns as threats to
their position, and arguably ignore larger systemic problems on the
horizon.

Elites, by definition, have done well out of the status quo.
They have wealth and power that they seek to preserve. It should
not surprise us then to see the World Economic Forum now pushes
articles about how to “deal” with supposed populism. Conventional
elite wisdom worldwide is social democratic — that political
fissures have arisen because of economic anxieties and
inequalities.

So the lazy “solution” is for more government investment or more
redistribution to keep the populists at bay. It just so happens
bigger government will inevitably mean politicians dealing with and
buying goods and services from existing major businesses - the very
sort that appear at the World Economic Forum every January.

Perhaps the biggest problem with Davos Man though is the general
hubris that the global elite can sit around and develop
technocratic solutions to solve problems. The essential insight of
Nobel Prize-winning economist Friedrich Hayek was that information
was inherently decentralized. Localities, regions and countries are
shaped by their own institutions, histories and cultures.

Dispersed decisions made by billions of individuals provide
companies with information about how to allocate resources. The
idea that progress comes from elites devising global plans for
“responsive leadership,” “a collective purpose,” and by shaping
“the future by … unparalleled global effort in co-design,
co-creation and collaboration” is at best delusional and at worst
leads to bad ideas gaining traction.

Davos Man is on the whole cosmopolitan and sees himself as a
“citizen of the world.” And in areas such as free trade and open
migration, international businesspeople have been worthy supporters
of economic liberty, which enables individuals to realize their
wants and needs through voluntary cooperation.

But that same worldview that sees elite global action as key to
prosperity also tends to be attracted to questionable grand
projects, from burgeoning foreign aid spending, to constructionist
international political projects such as the EU and eurozone and
extensive global interventionism to “deal with” climate change and
conflict. The knee-jerk Davos Man view is that all global
cooperation and action is a good thing.

This makes Trump’s visit all the more interesting. His ideas on
trade and migration fly in the face of evidence. But his views and
approach to other issues from aid to the UN may just be the grit in
the oyster necessary for some introspection on behalf of the global
elites.

As the economist Bill Easterly once said, Davos Man may not be
ready to acknowledge that he does not hold the fate of humanity in
his gilded hands. But that need not stop the rest of us.”

Ryan Bourne
holds the R Evan Scharf Chair for the Public Understanding of
Economics at the Cato Institute

Click here to view the full article which appeared in CATO Journal