MIT Professor and co-author of 13 Bankers
On the fringes of the World Economic Forum meeting in Davos this week, there was plenty of substantive discussion — including about the dangers posed by our “too big to fail”/”too big to save” banks, the consequences of widening inequality (reinforced by persistent unemployment in some countries), and why the jobs picture in the U.S. looks so bad.
But in the core keynote events and more generally around any kind of CEO-related interaction, such themes completely failed to resonate. There is, of course, variation in views across CEOs and the people work intellectual agendas on their behalf, but still the mood among this group was uniformly positive — it was hard to detect any note of serious concern.
Many of the people who control the world’s largest corporations are quite comfortable with the status quo post-financial crisis. This makes sense for them — and poses a major problem for the rest of us.The thinking here is fairly obvious. The CEOs who provide the bedrock of financial support for Davos have mostly done well in the past few years. For the nonfinancial sector, there was a major scare in 2008-09; the disruption of credit was a big shock and dire consequences were feared. And for leaders of the financial sector this was more than an awkward moment — they stood accused, including by fellow CEOs at Davos in previous years, of incompetence, greed, and excessively capturing the state.
But all of this, from a CEO perspective, is now behind them. Profits are good — this is the best bounce back on average in the post-war period; given that so many small companies are struggling, it is reasonable to infer that the big companies have done disproportionately well (perhaps because their smaller would-be competitors are still having more trouble accessing credit). Executive compensation at the largest firms will no doubt reflect this in the months and years ahead.
In terms of public policy, the big players in the financial sector have prevailed — no responsible European, for example, can imagine a major bank being allowed to fail (in the sense of defaulting on any debt). And this government support for banks has translated into easier credit conditions for the major global corporations represented at Davos.