Davos Man, that private-jet-taking, international-trade-dealing, easily caricatured master of the universe, is nervous.
This was clear even before he arrived this week in Davos, Switzerland, for the World Economic Forum, the exclusive annual meeting where the elites of finance, industry and governance mingle to discuss topics of global interest.
Just days ahead of the confab, Larry Fink, chief executive of the $6 trillion-plus asset management firm BlackRock and prototypical Davos attendee, made clear his own doubts about our economic future. "Popular frustration and apprehension about the future simultaneously have reached new heights. We are seeing the paradox of high returns and high anxiety," Fink declared in his annual letter to thousands of top business leaders. Noting the low wage growth, dimming retirement prospects and other financial pressures that squeeze too many across the globe, he said, "I believe that these trends are a major source of the anxiety and polarization that we see across the world today."
What should be done about this? Fink made some recommendations: "Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society."
The BlackRock letter suggests that the current economic system, which has come to prioritize corporate gains and private growth above all, sees trouble ahead and is looking for ways to save itself. That animating worry is visible in the titles of sessions on the Davos schedule (Day 1 panels: "How Is Rentier Capitalism Aggravating Inequality?" and "Why Is Our World Fractured?"). And the same realization has threaded the pronouncements of the other industry and political leaders in attendance.
Clearly, all the fretting is justified. Stock markets may be at record highs, but the good times can't last forever — especially if their benefits accrue only to a select, highly visible few. The pitch of worry increases whenever a reminder arises. Nearly every time a report about the advance of income inequality comes out — the most recent, from Oxfam last week, stated that 82 percent of all wealth created in 2017 went to the global top 1 percent — one can almost feel collars being nervously pulled in office towers around the world.
Yet it doesn't quite seem that Fink and others of the Davos elite are worried enough.
In an interview upon his arrival at the forum, less than a week after his cautionary missive went out, the BlackRock CEO appeared to temper his call for a devotion to social purpose. To reporters from CNBC, Fink noted: "The most important thing I said, and I repeated maybe three times. . . . Profits are paramount to everything a company does."
But that's precisely the outlook that has gotten them into this mess. It will have to be rethought — and perhaps discarded — if the popular frustration and upheaval disturbing the sleep of Davos Man are to be mitigated.
For several decades, in large part because of the influence of Nobel Prize-winning economist Milton Friedman, global elites have understood corporations to have one responsibility: maximizing shareholder value. This view has led to the jettisoning of the same responsibility to society at large that Fink and those of his set now warn is needed. That diminution of a larger duty has led predictably to the resentment that the Davos elites suddenly eye with such concern.
Yes, it is possible to rebuild popular faith in the global economy and the role that corporations play in the world. But it will take more than an open letter, later walked back, to an audience of lukewarm peers. Companies such as BlackRock will need to change their business practices to become more tangibly pro-social — and in ways that are visible to those who aren't in attendance at exclusive alpine events. Even marginal shifts in corporate behavior and the flow of capital could have enormous impact, but that would require a new approach to business that considers more than just the bottom line. Are asset managers such as Fink prepared to steer clear of lucrative but anti-social investment opportunities? How about a new openness to regulation and oversight? To avoid higher scrutiny, BlackRock lobbied aggressively to keep from being labeled "systemically important" under post-financial-crisis U.S. reforms. Perhaps it might just admit that it is.
Will such shifts take place? It's difficult to say. The economic system hasn't come crashing down quite yet, and it's far easier to talk the talk than walk the walk. Davos Man may be nervous, but it doesn't yet sound as though he's nervous enough to change.