Old capitalists warm to populism

DAVOS, Switzerland — The World Economic Forum is the last place I would have expected to encounter the new populism. But when a venerable European central banker, a man whose very bearing connotes the old capitalist values, told me privately that he is now convinced that the financial system is too important to be left to the free market, I knew we were wandering into new territory.

The value of this alpine kaffeeklatsch is that it can tell you when ideas have reached critical mass. And that seems to have happened this year in the general enthusiasm for what I will call “post-capitalism” among the political and business leaders gathered here. They take it as a given that the free market failed in the crash of 2008, and that the new system will be more regulated, more interventionist, more prudential than was the old.

This change in the Davos consensus is important because for the past few decades, the Forum has been the leading symbol of the freewheeling economic model known as “globalization” — a connected world that was fostered by lower tariff barriers, deregulated markets and borderless flows of capital and labor. In years past, calls at Davos for more financial regulation would have been met with guffaws and an escort to the anti-globalization “Open Forum” down the road.

The Davos vision of globalization — of ever-rising tides that lifted ever more boats — was itself a bubble. We can see this now. It burst in the financial crisis in 2008, with pulverizing consequences for the real economy in 2009. But it wasn’t until this year that the Forum fully reckoned with the mood shift. Its work was no longer to celebrate globalization but, in the words of this year’s conference theme, to “Rethink, Redesign, Rebuild.”

To quote from one of the session summaries: “There will be no return to ‘business as usual.’ … More intrusive regulation of the financial system is now inevitable.”

The leading rabble-rouser was French President Nicolas Sarkozy, who opened the conference with a speech urging global citizens to reform the system. “From the moment we accepted the idea that the market was always right,” he said, “globalization skidded out of control.” An overemphasis on free trade had “weakened democracy,” he argued. Human values had been undermined by soulless speculators for whom “the present was all that mattered.”

Who but Sarkozy could make a diatribe on international economics so entertaining? The man is the most entertaining figure on the international stage: He scowls, he shrugs, he struts. Dressed in one of his skinny “Rat Pack” suits, he might be a Gallic Dean Martin.

When Sarkozy had finished his anti-capitalist rant, he got a standing ovation from an audience made up mostly of wealthy capitalists. The Davos magic, you might say.

But it wasn’t just Sarkozy who was calling for more government intervention. This sort of anti-market talk was the patter of this year’s Davos, and it scared me a little, frankly. I heard versions of it from financier George Soros, World Economic Forum Executive Chairman Klaus Schwab, Swiss President Doris Leuthard, and various other business leaders and economists. When the pendulum swings this far and this fast, you are sure to be getting some overreaction that will cause problems later.

Americans need to understand that the 2008 financial crisis proved a point that many Europeans and Asians have been arguing for decades: Economic “liberalism,” of the sort found in Britain and the United States, creates a dangerous overreliance on the market. During the boom years, their complaints seemed like just so much whining. Not anymore.

In the new world, citoyens, we can expect lectures from Chinese officials about the need “to bring stability on a balanced level” by controlling exchange rates, as one Chinese attendee here said privately. We can expect demands for global labor standards that mirror the rigidities imposed by European unions (as Sarkozy demanded). This is the price of globalization’s failure.

The outlines of the regulated world were clear this past week, and this new stress on soundness and stability is in many ways overdue. I just wish I had more faith in regulators’ ability to solve problems. Wasn’t the 2002 Sarbanes-Oxley Act supposed to prevent any more Enrons? Didn’t Fannie Mae have its own special regulator that was supposed to audit its books? Weren’t the most egregious speculators in 2008 the regulated banks?

Oh well, these are the problems for a future Davos to ponder, when it reckons with the mistakes made in 2010 in creating the “post-capitalist” order.

David Ignatius is a Washington Post columnist. His e-mail address is davidignatius@washpost.com.

Talk to us

More in Opinion

Editorial cartoons for Wednesday, Oct. 4

A sketchy look at the news of the day.… Continue reading

Rep. Kevin McCarthy, R-Calif., leaves the House floor after being ousted as Speaker of the House at the Capitol in Washington, Tuesday, Oct. 3, 2023. (AP Photo/Mark Schiefelbein)
Editorial: ‘This is the Republicans’ civil war,’ not Democrats’

Reps. Larsen, DelBene put responsibility on GOP to end its fight and agree to a budget deal.

3d rendering Stack of vote button badges.
Editorial: Bring Davis, Hoiby to Marysville School Board

Both women have deep ties to the community and demonstrate commitment to students and families.

FILE — In this Sept. 17, 2020 file photo, provided by the Idaho Department of Fish and Game, Chelbee Rosenkrance, of the Idaho Department of Fish and Game, holds a male sockeye salmon at the Eagle Fish Hatchery in Eagle, Idaho. Wildlife officials said Tuesday, Aug. 10, 2021, that an emergency trap-and-truck operation of Idaho-bound endangered sockeye salmon, due to high water temperatures in the Snake and Salomon rivers, netted enough fish at the Granite Dam in eastern Washington, last month, to sustain an elaborate hatchery program. (Travis Brown/Idaho Department of Fish and Game via AP, File)
Editorial: Pledge to honor treaties can save Columbia’s salmon

The Biden administration commits to honoring tribal treaties and preserving the rivers’ benefits.

Why has Providence hosptial not improved nurse staffing?

I am writing as a concerned citizen and a supporter of labor… Continue reading

Willis Tucker Park’s staff should switch to vinegar to kill weeds

After reading the article about Snohomish County Parks Department using Roundup spray… Continue reading

Years of work with Johnson proved ability to serve as sheriff

In my career of over 40 years working in and with law… Continue reading

Comment: U.S. greatness at heart of why it must support Ukraine

The U.S. holds that mantle; as it did in World War II, it’s responsible for defending democracies.

Comment: Young activists taking climate crisis case to courts

Even if lawsuits fail, there activists win by raising awareness and laying the groundwork for future campaigns.

Patricia Gambis, right, talks with her 4-year-old twin children, Emma, left, and Etienne in their home, Thursday, Jan. 24, 2019, in Maplewood, N.J. Gambis' husband, an FBI agent, has been working without pay during the partial United States government shutdown, which has forced the couple to take financial decisions including laying off their babysitter. (AP Photo/Julio Cortez)
Editorial: Shutdown hits kids, families at difficult moment

The shutdown risks food aid for low-income families as child poverty doubled last year and child care aid ends.

Editorial cartoons for Tuesday, Oct. 3

A sketchy look at the news of the day.… Continue reading

There’s no need to reduce carbon emissions; plants need CO2

National Geographic states that “Most life on Earth depends on photosynthesis.” Photosynthesis… Continue reading