Global capitalism appears to be saving the world and destroying the West, at the same time. I went to Davos to see whether I could resolve the paradox or, in failing to do so, at least drown my ignorance in hot chocolate.
My first lesson, however, wasn’t in global economics, but local real estate. A month before my trip, there was no available hotel room within three hours of the conference hub. Davos, a tiny Swiss village, doesn’t have enough space for WEF’s thousands of attendees. Hotels along the town’s main artery, the Promenade, jack up their rates to levels only corporate executives or multimillionaires can afford. This forces the conference’s ordinary joes either to settle in nearby villages connected by train or (as in my case) to stuff themselves into basements, bunks, and pullout couches.
This might sound like an irrelevant aside, but for those in the market for a globalization metaphor, it may be impossible to beat: At a conference symbolizing the promise of capitalism, every non-plutocrat is fighting for scraps.
Read: Globalization doesn’t make as much sense as it used to
In 2009, in the nadir of the Great Recession, the elites who convened at Davos agreed that the solution to the failure of globalization was more globalization. Then–British Prime Minister Gordon Brown called for a new Bretton Woods Agreement, referring to the 1944 conference that established the postwar order by creating the World Bank and the International Monetary Fund. “We live in an interdependent world, and the only way to move forward is to cooperate,” Kofi Annan, former secretary-general of the United Nations, said in agreement.
Ten years later, it seems obvious that the reaction among the richest countries in the world has been quite the opposite—not global integration, but global disintegration.
To get a handle on what’s happening, I first met James Manyika, the director of the McKinsey Global Institute (MGI), in the lobby restaurant of the Ameron Hotel. If you want to know where the nativist revolution is coming from, he said, a simple story must be told.
In 2016, Manyika co-wrote a landmark report on earnings growth in advanced economies over the previous 20 years. It was a tale of two decades, he said. In the first 10-year period, from 1995 to 2004, wages grew for at least 98 percent of households in just about every advanced economy. But in the second decade, from 2005 to 2014, everything fell apart.
“We found inequality, yes. But that was the least interesting thing we found,” Manyika told me. “The more interesting thing was wage stagnation in almost all the advanced economies.”
This was an entirely new phenomenon. Wage income declined for the majority of households in France, the Netherlands, the U.K., and Italy. The U.S. had it even worse. Four out of five households saw flat or falling income before accounting for taxes and transfers. Between globalization, the Great Recession, and the not-so-great recovery, the middle class was slammed.