It is Davos again. The annual meeting of world leaders in the Swiss ski resort has this year a predictably sombre tone. There are notable absences. Rupert Murdoch will not be there. Nor will Dominique Strauss-Kahn. Nor will Saif al-Islam Gaddafi, celebrated by the World Economic Forum as a Young Global Leader in 2006. It is, as Margaret Thatcher said when she was deposed, a funny old world.
But many global leaders will be there, for it is a very efficient way of setting up a string of meetings. So the gathering will, as always, crystallise the mood of the moment. That is, of course, one of concern – and at two levels. One is the way the developed world economy is failing to recover as swiftly as seemed likely even a few months ago, with the eurozone probably back in recession. The other is the failure of our mixed market system, not just to generate growth, but to spread wealth equably.
On the first, there is not much new to say, except perhaps to note that the present wobble is very much a European phenomenon, associated with the tensions of the eurozone. The US recovery seems more secure and the emerging world continues to grow at a rapid rate. (China adds the equivalent of another Greece to the world economy every four months.)
On the difficulty of delivering equity, though, developed and emerging economies are alike. We worry about boardroom pay and the US is aware of the lack of tax paid by its super-rich. But concern about rising inequality is equally evident in China, India, Latin America, Africa – just about everywhere. Inequality in the emerging world is arguably even more socially destructive than in the developed world. It has grown more swiftly and is more overt: for example, last year China overtook the US as the largest market for Rolls-Royce cars. Deng Xiaoping declared that to get rich was glorious, but I suspect he had the country as a whole in mind, not a handful of business people.
Any society that seeks to survive without revolution has to find ways of channelling social pressures and "haves" everywhere recognise that. What is new is that whereas a decade ago this was recognised (though maybe insufficiently) in the West, it was not much of an issue elsewhere. I think that is changing, particularly in India, but also in China and indeed much of Africa. The question of course is what is to be done.
Well, there won't be any answers to that in Davos, nor could there be. But open discussion among "the one per cent" is a first step towards taking measures to reverse the march to an increasingly unequal world. You can see from the line-up of speeches, and statements from prominent attendees such as George Soros, that this discussion has begun.
You can be cynical about this and say the "haves" are just protecting their pile by calling for greater equality and using philanthropy to project their own influence. But we should recognise that this is easier for the old developed world to cope with than for the emerging world. We have a century of experience in fostering greater equality: mass education, access to healthcare, public pensions, progressive taxation and so on. We know what we have to do, even if we don't do it as well as we should.
The emerging world does not have that experience because, until recently, it didn't have the wealth to share. Globalisation has reduced inequality between countries, but increased it within them. We are right to celebrate the first and it would be hard to reverse it. But the second does undermine globalisation and the fact that "Davos Man" is worried should be a relief to the rest of us.
Fine-tuning the GDP figures
When you see the final quarter GDP figures today, remember this: they are preliminary ones and they are almost certain to be revised upwards. The average annual upward revision of GDP figures over the past 20 years has been 0.8 per cent. This is particularly marked in the early period after a recession. During the two recoveries most similar to this – the early 1980s and 1990s – the quarterly upgrade was 0.35 per cent, or an annual rate of 1.4 per cent. So it is perfectly plausible that growth last year could be initially estimated at 0.9 per cent, yet turn out to be 2.3 per cent.
The trouble is that we won't know for several years. GDP is calculated from three different sets of numbers: for output, income and expenditure. In theory, they should be the same, but until you have final figures from things such as corporate and personal tax returns, you cannot reconcile them. Quite why there should be such a persistent under-estimate is a bit of a puzzle. The US has the opposite issue, for it consistently over-estimates GDP and has to revise down. It would be nice to attribute the divergence to national characteristics: British understatement and American bragging. The truth is no one has yet managed to explain what has been going wrong.
However, people looking for some comfort that growth last year might have been faster than reported can point to the borrowing figures out yesterday. So far, we are still on track in cutting the deficit, with revenues running reasonably strongly. Fingers should remain crossed.Reuse content