Occupy the igloos!

[ddstory.livejournal.com]

It's that time of the year again in Switzerland. Between hotels where the room costs $ 500 per night, and the security cordons of armored limos, in the Swiss mountain resort of Davos a strange camp has appeared. It's made of igloos! Protesters have built it as a warning to the super-powerful dignitaries who've gathered inside the hotel: "Be careful, or you could be sleeping in the snow by the same time next year". Or maybe that's just some wishful thinking. Certainly so.

The thing is, the prospects for prosperity are getting ever slimmer in most countries, the public trust for both government representatives, corporate CEOs and the systems they represent, has been plunging. There's a sense of uncertainty floating around the Euro zone, and don't get them started on the ulcers that are Afghanistan, Syria and North Korea! Now the Occupy movement of course registered some presence at the annual global economic summit in Davos, where a couple thousand famous and not so well known but still VIPs from more than 100 countries are meeting as we speak, presumably to find solutions to the world's economic problems.

In Davos the VIP guests usually enjoy hyper security, they're concealed from their critics so they could, perhaps, find those coveted solutions. This year the global anti-corporate movement is represented by a small but very vocal group of protesters who've prepared to meet the world official and unofficial leaders with a camp of igloos and tents, and anti-capitalist slogans. Even weather is favorable to the protesters. It has stopped snowing and the sun is trying to break out among the clouds. There are even some "crazy" billionaires who've taken the side of the "99%-ers" and are bemoaning the social injustices of the world.

People here are saying they've never seen so much snow in Davos for the last few decades. I don't believe them, but fine. "The snow is perfect for the igloos though!", some of the Occupy guys said for a local newspaper. I suppose in a way they're enjoying all of this. Meanwhile, the world aristocracy doesn't seem to be giving a damn about all the yelling. They'd pass beside the loose crowds in total silence, watching dispassionately from behind the dark windows of their limos - and that's at least one familiar sight from previous years. Familiar things tend to give us a sense of stability and predictability, no? ;)

Because of the huge amount of problems they're supposed to solve this year, many of the Davos guests may well prefer indulging in less painful and more lucrative activities instead, like doing secret corporate deals behind closed doors, which is the trademark of these economic forums. The US and other politicians will be trying to recruit new investors for their respective regions, and in turn the investors will look for promising young entrepreneurs, and all of them will probably be hoping that someone would come up with a genius idea.

The truth about Davos is that even if nothing is achieved on the policy front, at least one thing is for sure - a number of nice business deals will become a fact once the summit is over, ones that we may never learn about, or would learn in many months post-factum. I expect that this year the focus will be on the CEOs of the Chinese corporations who are making a real invasion in Europe, and Europe itself will be undoubtedly the fading star on this forum. Ironically, Europe who has worked for many years for expanding the forum and introducing some non-European, non-North-American participants, will now be pushed further to the sidelines by that new generation of Asian, South American and even African businesspeople. And I'm not just talking about BRICS.

Angela Merkel will open the official part of the meeting with what is expected to be a keystone speech, which will probably outline the direction of Germany's policy on the European debt crisis for the coming months. Because Germany is basically the only player that matters there, being the economic juggernaut of the continent, and all that. The list of participants in Davos this year is longer than ever in its 40 year history, including dozens of heads of state and chairmen of the most important central banks. It's the cream of the world's leaders in one place, no doubt.

If one is to take part in this brainstorm along with these dignitaries, they'd need a special invitation, and those guys don't invite just anyone. You have to be a promising business leader, a prominent scientist, or leading analyst, and surprisingly there are some human rights activists as well, just for color I suppose. The bottom-line of all this hubbub is to shape the world order for the coming year(s). If there's one place where the global economic climate is being set, it's in Davos.

Four years after the sub-prime mortgage crash and the financial collapse, growth in the developed world is still very shy. It's no secret that many people on both sides of the Atlantic are feeling betrayed by their leaders' decisions which they think only benefit those same bank(st)ers and the big financial sharks who are being primarily blamed for the crisis. While people are wondering who to blame, the governments or the financiers, or both, the social and economic gap is widening.

The Occupy movement may not be as numerous here as in the US, maybe because Davos is located in one of the remotest places, in the middle of the highest Swiss Alps, and in a tightly guarded valley. But still, those who ventured to make the trip haven't wasted their time - they kept themselves occupied with carving huge ice blocks to build igloos out of, while waiting for the despised world leaders to arrive. I was told it takes 4 people about 6 hours to build one of those igloos.

I saw a protest sign on a street in Geneva, saying "If voting could really change anything, it would have been made illegal". That may tell us a few things about the moods of disappointment with democracy that are floating around.

The organizers of the forum are warning that all these moods could urge some governments to resort to state protectionism, and push societies towards populist nationalism and widespread public discontent, including social unrest and violence. This is particularly valid for the three world powers where 2012 happens to be an election year - America, Russia and France. And the Arab world too, of course. Probably the mantra that's the most frequently heard is "a new model". Apparently all the current models have failed, and new ones will be sought there. What exactly those would look like, remains a mystery so far.

The most important question for many government officials seems to be "When will growth be restored?" And this, despite the growing indebtedness and the diminishing confidence in the markets. And the biz leaders will be holding private talks about how more young people could be hired and how the trust in the leadership could be restored, and how to make sustainable energy resources a more attractive option, and how to benefit from the new technologies. All that sounds very nice, I'm sure.

And I'm sure the guys who are calling the shots in those economies and who are pulling the strings of the politicians will be having some hard talks with the officially elected representatives of the people. And some chiding will be done, and some instructions will be issued. The results of all that will be seen in the next 12 months. Of course, you won't see any minutes of the meetings being released anywhere on the media. So those who can read between the lines will have to indirectly deduce what had been talked there.

I haven't seen Alex Jones anywhere around, though. But he still has time to make it to this remote corner in the Alps. ;)

Comments

[allhatnocattle.livejournal.com]

The disproportionate disparity of wealth used to be a fringe topic of the far left. Occupy's major success was to bring the subject to the mainstream. And Occupy did so without a specific goal, without a leader and without help from the media.

Occupy's mere simple presence in Davos is enough to bring attention issues that national and business leadership would otherwise ignore. No doubt that FoxNews will report on Occupy in a way that is flagrantly condescending and covertly mocking. "How can OCCUPY do anything without leadership?" lol

[ford-prefect42.livejournal.com]

The west is in decline until our standard of living comes into near parity with that of china.

Simple market economics mandates that that be so. There is simply no way that a job will go to a person that must have a single family house, heating and air conditioning, a diet high in beef, a car, a 40 mile commute, and highly advanced medical care when that job can be done by a person that walks to work from their room shared with 4 people, heated and cooled by body heat or opening the window, on a diet of rice with no car that generally dies when they get sick. None.

Over any timescale, assuming that the government does nothing stupid, like nationalizing industries, or restricting growth, all exportable jobs will go to those who do them the cheapest.

In the past, American and western europe had a few advantages, like a strong rule of law and political stability. That caused the builders of capital intensive plant (semiconductor fabs, and the like) to prefer to build here. No longer. The GM bondholder debacle, the "offshore drilling moratorium", the Greek Bond "haircut", etcetera have made it clear that the rule of law is no longer in place, and their investment can, and will, be confiscated at whim.

Now, as societies like ours decline, a couple things happen. First, wealth concentrates. As jobs flow overseas (inevitable), the low-flight workers lose their jobs. But the "money men" keep theirs. In fact, their profitability grows, because they have climbed the barriers to entry. Who can build a factory in china? It isn't you and I, it's Steve Jobs. That's another process that is inevitable. There's no point in railing against it, because it is an *effect* of bad policy, not a *cause*. It's something to look out for as a leading indicator of things going "tits up".

Second, expanding deficits. As the low flight jobs leave, the "safety net" catches the displaced. That's what it's there for after all. The problem is that in this circumstance the jobs aren't coming back. So the deficits are here to stay. The problem is, the safety net supports people at an unsustainable standard of living, so there's less than no incentive for anyone to leave it once they're in it.

Third, increasing disattisfaction and scapegoating. Occupy, in short. Displaced people that feel "entitled" to things that are no longer available get angry. they protest, demonstrate, riot, etcetera. Mostly, they look for someone to blame. They usually find exactly the wrong people. The Jews. The top 1%. The Muslims. The chinese. This builds for a few years.

Now you're at a turning point. If you get a genius charismatic leader at *just* the right time, you have war and genocide. If you get same-old-same-old pluggers, you have descent into chaos. You get increasing vandalism, "copper theft", rapidly expanding "shadow economy", the rise of barter, as the government erodes the currency to keep meeting unsustainable burdens. A flight of the wealthy to safer climes, taking all the money with them.

This happens unless *something changes*. A war between japan and china. The discovery of a massive oil field in the north sea saved Great Britain a few decades ago. Something like that is required, or the trends will continue.

[ddstory.livejournal.com]

Wow there's been a lot going on in your head. :)

Now seriously. I agree that so far too many people have been living beyond their means and some more realistic approach to their financial capabilities would be prudent. But yeah, may we have good luck with that.

But I'm more curious about what solutions (apart from incidental luck or major conflict) you'd propose. You know, a scenario that doesn't require genocide.

[ford-prefect42.livejournal.com]

... I am not sure that any course change is going to be feasible. There are the politics to be considered as well as the practicals, and the politics of the western world are in a notably bad way. Extreme fractitiousness does not make for the ability to make hard choices.

I can also not really think of any major declines of standard of living in a nation that didn't result in one of those. People are very very attached to what they think they should have.

I can also tell you that the bulk of the things I have to suggest will not be easy sells.

Economically and from an engineering/structural perspective, I have a decent clue what has to be done, I am profoundly sceptical that it can be managed politically.

[kardashev.livejournal.com]

Who says such an optimistic solution is even possible?

We're set to approach a human population of around ten billion before the end of the century. All forms of resources will become scarce from health care to water. The massive extinction of plant and animal species will continue. Greenhouse gas emissions might slow down but that's about it.

It's inevitable. Billions of people will die with or without war and genocide.

[ford-prefect42.livejournal.com]

Thermodynamically, I disagree that it has to go down like that. Given energy, there is no practical limit to water supplies. There is no shortage of uranium, nor wil there be unless world nuclear power is expanded 100 fold for 100 years. And then there's insolation based energy like wind and solar.

Even food production, given sufficient energy, could be expanded to levels sufficient to meet that population level. Hydroponic towers etcetera.

Lest we forget, the earth is a closed system, nothing is really "consumed", it's just altered.

And then there is the remotest possibility that something sensible will happen societally that causes population growth to level off somewhere in there.

No, I am not talking about an inevitable billions die "population bomb" type problem on the near horizon, I am talking about an inevitable economic collapse on the part of the recently wealthy western nations. Asia came past us. Completely.

Now, I am not saying that there won't *be* a population bomb style crash, but anything like that that is going to happen will be after america and europe have undergone... interesting times.

[yes-justice.livejournal.com]

Even food production, given sufficient energy, could be expanded to levels sufficient to meet that population level. Hydroponic towers etcetera.

Hell, just eat insects. No, seriously (http://www.ted.com/talks/lang/en/marcel_dicke_why_not_eat_insects.html).

[vnsplshr.livejournal.com]

"Third, increasing disattisfaction and scapegoating. Occupy, in short. Displaced people that feel "entitled" to things that are no longer available get angry. they protest, demonstrate, riot, etcetera. Mostly, they look for someone to blame. They usually find exactly the wrong people. The Jews. The top 1%. The Muslims. The chinese. This builds for a few years."

This.

[gunslnger.livejournal.com]

I'll make a post on it later, but here's some food for thought along the lines you're talking about.
http://www.businessinsider.com/you-simply-must-read-this-article-that-explains-why-apple-makes-iphones-in-china-and-why-the-us-is-screwed-2012-1

[ddstory.livejournal.com]

Looking forward to it, frankly.

[abomvubuso.livejournal.com]

Davos has started with a rather ambitious task: "Redefining the future of capitalism". Wow.

Ben Verwaayen, the Alcatel-Lucent CEO asked, "Why did we in Europe need 2 years to come down to a conclusion that we'd have come anyway?" Well, because there are as many opinions and approaches as the number of heads thinking over the matter. If he wants a hive mind instead, he won't get it. (Or won't he?)

And don't forget that while the cameras are focused on Davos and the politicians are "brainstorming", the private bond holders of Greek debt are hashing out the future of the negotiations for the Greek debt restructuring - in Paris, behind closed doors.

[allhatnocattle.livejournal.com]

If Greece was still with the Drachma (or returns to the Drachma) the solution would be rather simple. Greek government prints more money, de-valuating the currency, spurning cheap exports, foreign tourism and foreign investment in cheap Greek property/labour. Well, it might not be quite so simple but that's generally what governments do and expect.

On the other hand, if say Germany went back to the Mark, the currency value would rise making BMW's that much more expensive, and that means much fewer sales. Germany wants the Euro to remain, not only there in Germany, but in the rest of Europe as well. But Greece is a little too much of a burden for Germany to handle.

So, in my humble opinion, whatever that's worth, I think it's obvious what the EU is going to do about the Greek "question". "...should they stay or should they go. If they stay there will be trouble. But if they go it could be double..." I think they'll tell Greece to go... maybe promise them some cash if they go quietly and don't make a scene. Then Greece can be the best cheap vacation spot in Europe.

[ford-prefect42.livejournal.com]

It's hard to "spur" a dead horse. Monetary manipulations of trade balances are sharply limited in their application.

[allhatnocattle.livejournal.com]

This is the baby and the bath water scenario. Monetary manipulations are especially limited when a currency is shared. The Greek question is a bit like having fiscal problems in Guam affecting the USD.

[ford-prefect42.livejournal.com]

Well, yeah, in this case. I was actually more thinking the US situation. At some point here, you *know* someone's going to suggest we deliberately deflate the dollar to "spur exports". Problem is, it's not going to overwhelm things like a 15 to one multiple on minimum wage rates, or the presence or absence of a supply chain, or rather ludicrous over-regulations of all types, or the absence of a workforce willing to... well, work, or, or, or, or. Monetarism is effective for tipping the balance between 2 roughly equal countries, but not much use for pulling industry back to the US from China.

And, like you say, kind of a moot point for greece. I'm just pointing out that even if they'd *stayed* on the drachma, they'd still be screwed.

[allhatnocattle.livejournal.com]

If they had stayed on the Drachma they would still be screwed to a degree, but at least have had the tools to resolve their own fate rather then have Europeans do it for them. Greece is limiting services, raising taxes, expanding tax base, chasing tax evaders, etcetera, everything within it's power. Beyond it's power is currency manipulation. Fate is being decided by foreigners in Davos, and nobody is happy about it.

[ford-prefect42.livejournal.com]

Greece cut spending by 11 percent, in the face of deficits of 8% gdp. Raising taxes is a pretty questionable call when they were already high and the economy is already in the toilet...

They have made *zero* efforts that any austrian school economist would consider advisable, they hhave done nothing to reduce barriers to entry into businesses, nothing to allow greater productivity in the workforce, nothing to reduce the cost of labor, nothing to allow expanded resource extraction, nothing to expand energy production.

In short, no, I don't think that it's accurate to say that they have done "everything possible", I think that they have tried *desperately* to maintain the status-quo-ante.