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As 3,000 top businessmen and political leaders awaited Donald Trump’s speech at the Davos World Economic Forum on Friday, my mind flashed back to Davos in the early 2000s when those who denounced multilateral trade deals and institutions were outliers.
In 2000 and 2001, I watched cadres of scruffy anti-globalization protesters march up Davos’ narrow main drag, blocked by riot police, and occasionally heave a rock through a shop window. By 2003, Davos organizers — wary of unrest — had encouraged a counter-Davos forum held in a local high school that debated issues like “Can globalization be ethical?” and “Alternatives to free trade.”
No one could have imagined a man who championed America First and disdained multilateral anything would become the most-awaited speaker of Davos 2018 — where he eagerly proclaimed the virtues of America First.
Yet the outlook of those early anti-globalists and Trump’s America First message — while superficially similar — could not be more different.
To anti-globalizers on the left, globalization meant a race to the bottom, corporations moving jobs to countries that exploited low-wage workers while despoiling the environment. They argued that U.S. workers were hurt by the lack of a level playing field. They wanted to address inequalities in wages.
But those are not the concerns that motivate Trump.
Trump’s Davos speech — delivered carefully and uncomfortably from a teleprompter — was a sales pitch for more investment in America. Nothing wrong with that, in principle, although it was bizarre to listen to an American president who barely mentioned geopolitics as he addressed an assembly of world leaders. Instead, he kept touting his corporate tax cuts.
He also bragged endlessly about stock market gains and massive deregulation; this reminded me of grim Davos Forums where world leaders reeled from the consequences of lack of regulation in the aftermath of the 1997 Asian crisis and the crash of 2008.
Yet for a populist, his speech was sorely lacking any mention of growing income inequality, with the United States a top offender. The Davos 2018 Risks Report rightly named income inequality as one of the industrial world’s biggest economic challenges.
In the United States, in 2016, 20 percent of national income was taken in by top 1 percent of the population while the bottom 50 percent garnered around 13 percent. This disparity was far lower in Europe.
Moreover, the tax cut that Trump touted for much of his speech will do little to address that gap. One-time bonuses which some U.S. companies are offering and attributing to the cut, and which the president bragged about, don’t guarantee pay raises. With unemployment low, there is little indication so far that the huge corporate gains from the tax cut will go to job creation, especially decent-paying jobs that benefit less-educated workers. And then there’s the destruction of medical care for the working poor, but I won’t even go there.
But inequality was not on Trump’s mind at Davos. He did cite U.S. job growth gains during 2017. In fact, however, according to Federal Reserve figures, job creation last year was lower than it was during each year of President Obama’s second term.
The Trump speech had the slippery quality of a huckster who ignores anything that contradicts the pitch. “America is open for business,” he proclaimed, as if that alone could resolve the structural problems that have created massive income disparities.
If repatriated U.S. business profits go to stock buybacks and further enrich the 1 percent, Trump’s base will see few benefits. No doubt Trump will deflect responsibility by blaming Hillary Clinton. His bizarre claim in his Davos speech that the market would have gone down 50 percent if a Democrat had been elected reminded his audience that facts are not the president’s forte. And he couldn’t resist taking a swipe at the U.S. press.
No wonder then that the Davos crowd, which politely applauded Trump, was far more enthusiastic for French President Emmanuel Macron.
“Let us not be naive, globalization is going through a major crisis,” Macron said, “and this challenge needs to be collectively fought by states and civil society in order to find and implement global solutions,” He also said that “a race to the bottom” by constantly lowering taxes” was not a sufficient response to the inequalities that globalization creates.
And Germany’s Chancellor Angela Merkel got it. “Let us never accept a situation where people are left behind, particularly in the digital economy,” she said. “If we don’t manage (this) we will have Luddites.” She warned against the “poison” of populism.
Both Macron and Merkel have seen how far right political populists feed off of the discontent of those who feel bruised by technology, trade, and rapid societal change. Both are thinking serious about job training, education and cooperation to cope with the fallout.
On the other hand, Trump appeared confident that deal making (and bilateral trade deals) were all that was needed to ensure prosperity. His pitch was the perfect blend of globalist and populist, claiming he meant to “raise hopes and empower dreams” in America. At Davos, he embraced business deals for the one per cent while assuring the 50 per cent he is on their side.