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Davos is Crony Capitalism on Steroids

Three days and ten thousand buzzwords later, yet another gathering of the World Economic Forum [1] (commonly known as “Davos”) has concluded. By the time business leaders and officials pack their bags to return home to the “real world,” many powerful connections will undoubtedly be forged and reinforced.

To the vast majority of American citizens left out of the conference in Switzerland, the question naturally arises: who talked with whom, and what deals were made? Sure, conspiracy theories abound, placing President Trump with the entire Russian delegation on the snowy knoll. But for all of the conspiracy-mongering, The Independent writer Hamish McRae seems to hit closest to the mark in assessing Davos [2] as an “informal and efficient” business meeting instead of a “temple of evil” or pro-capitalism bash.

That, ironically, makes it an even darker event than you might think.

Let’s face it: a clustering of brilliant minds with practically endless resources isn’t bad on its face—until government officials enter the equation. The repeated dalliances between business and government leaders at an event where attendance is famously restricted gives rise to a certain air of “special access” that in turn fosters concerns of cronyism and favoritism.

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Nowhere is this more apparent than in the defense sphere, where the head of the Pentagon regularly rubs shoulders with top brass in weapons production and technological development. When then-defense secretary Ashton Carter crashed Davos [3] in 2016, he met with executive after executive offering to do their part in the fight against the Islamic State.

As one senior defense official put it, “I think the secretary’s found people in the tech and business community who are just as concerned about America’s security and are just as patriotic as anybody else.” Count Meg Whitman, outgoing CEO of Hewlett Packard Enterprises (HPE), as one of these “concerned” individuals. In the months after meeting with Secretary Carter, Whitman secured some of the largest contracts that HPE has ever obtained from the federal government.

Of the 10 largest deals that the company has inked with Uncle Sam, three were signed [4] in the three-month period following the 2016 Davos meeting. Now obviously a large agency like the Pentagon will find efficiencies in contracting with behemoths like HPE. But going with the big guy also has its disadvantages. HPE, it turns out, is also in the hunt for foreign governmental clients—including the Kremlin. In an effort to sell cyber defense software to Russia, the company shared sensitive details [5] of source code used in a product supplied to the Pentagon. This may not be a sufficient reason to eschew HPE entirely, but it does show a kind of corporate mendacity that stems from privileged access. Longstanding ties between HPE and the government means that, regardless of careless oversights and waste, they’ll always have (at least five [6]) seats at the Davos roundtable.

Similar examples of shenanigans show up in agriculture dealings. A darling of United State Department of Agriculture (USDA) programs, Cargill Inc., rakes in agricultural subsidies at an impressive pace. In fact, as Good Jobs First’s subsidy tracker shows [7], the mega-corporation garners millions a year in subsidies and loan guarantees from “Farm Bill” commodity support programs. Support also flows in via the Bioenergy Program for Advanced Biofuels (BPAB), which ironically allows Cargill and other large agribusinesses to receive support [8] for facilities that don’t even produce advanced biofuels. Connections between Cargill leadership and former USDA secretary Tom Vilsack began when the latter worked for a law firm representing the company.

Cargill’s federal benefits climbed higher and higher as David MacLennan, Cargill CEO and regular Davos attendee, heaped praise [9] on federal officials. There is no telling how many times MacLennan has pulled former secretary Vilsack aside to discuss “strategic partnerships” at Davos. And we’ll likely never know. We’ll also likely never know the extent of partnership between the U.S. Dairy Export Council (which Vilsack currently leads [10]) and Cargill [11].

Of course none of this proves corrupt quid-pro-quo arrangements. Most high-level government officials are just trying to do their jobs, and Davos offers an opportunity to capable businesses tackling today’s leading challenges.

But good intentions shouldn’t lead to an understatement of the problem. Smaller businesses that may be even more capable are shut out of the meeting entirely, and simply don’t get the same attention and access as their bigger counterparts. Agencies like the Department of Defense simply prefer to retain the connections they already have [12], and that often leads to toxic relationships [13] in which the government is virtually held hostage to a small pool of contractors who have managed to box everyone else out.

Elite convocations like Davos also help perpetuate—and reinforce—a problematic revolving door in which officials leave office to consult and lobby for industries that have business and regulatory interests in Washington. To say that Davos isn’t a sort of prom for individuals perched on either side of that door would be naive.

While there’s nothing that the World Economic Forum can do to fully address this concern, small steps matter. Making more of an effort to court small businesses would create a more-representative cross section of companies. Encouraging officials to meet with more than corporate top brass would allow for a more meaningful conference, and counter perceptions of cronyism and smoke-filled rooms. With enough effort, Davos organizers can retain the event’s efficiency and glamour, while bolstering its vibrancy.

Ross Marchand is an economics writer based out of Washington D.C., and is an alum of the Mercatus MA Program at George Mason University. He is also the policy director at the Taxpayers Protection Alliance.

13 Comments (Open | Close)

13 Comments To "Davos is Crony Capitalism on Steroids"

#1 Comment By EliteCommInc. On January 26, 2018 @ 6:41 pm

Great more financial bricks to lug around.

grrrrrrrr.

#2 Comment By EliteCommInc. On January 26, 2018 @ 10:04 pm

I guess prompted by this article i zipped through one of my favorite movies

“Lord of War”

There are just too many to count. I suspect that Davos is but the tip of tip of a very large and deeply submerged iceberg. One is caught between condemnation and figuring out how to get an piece of the ice.

#3 Comment By Fran Macadam On January 26, 2018 @ 11:55 pm

Globalism. Policy made far from the crowd of Americans the internationalists find madding. Democratic accountability? Zero. Acres of private jets and a mutual self help society.

#4 Comment By BruceB On January 27, 2018 @ 2:35 am

When was the last time the powerful willingly gave up power?

C’mon, you know the answer.

#5 Comment By Dan Green On January 27, 2018 @ 7:54 am

First Fascism , then Communism , now neo liberalism. All create an elite ruling class as they feed their citizens fantasy. These folks in command have much to loose.

#6 Comment By Dan Green On January 27, 2018 @ 7:57 am

First Fascism, then Communism, now neo Liberalism, that creates an elite ruling class, based on Fantasy, has much to lose if they cannot keep their ideologies alive

#7 Comment By Stephen J. On January 27, 2018 @ 11:58 am

Some info on the Davos-ians at links below.
————————————————–
January 23, 2018
“The Globalists and the Gullible Gather in Davos”

“…Harvard Professor Samuel P. Huntington described Davos Man (a phrase that first got widespread attention in the 1990s) as an emerging global superspecies — and a threat. The members of this class, he wrote, are people who ‘have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the élite’s global operations.’” [1]…
[more info at link below]
[14]
————————————————–

January 25, 2018
“A Satirical Postcard from Davos”

Hello out there to all our friends around the world: The homeless, the refugees, the victims of our wars, the unemployed, those that are mortgage-challenged, the food stamp recipients, and many others. If I missed mentioning some of you unfortunates and dispossessed, it is because there are so many of you trying to make ends meet, but never mind you are all included in our thoughts and prayers as we participate in our annual gathering that costs thousands of dollars to attend. I believe “$76,000” and “US$245,000” were numbers published. Anyway, what’s a few bucks when taxpayers can pick up the tab for some of us and our entourages….
[more info at link below]
[15]

#8 Comment By cka2nd On January 27, 2018 @ 12:28 pm

If ever a large meteoroid (bolide?) should strike the Earth in a particular spot, today in Davos would be the time. Bonus points if the Clintons or Barack Obama are there, too.

#9 Comment By Cornel Lencar On January 28, 2018 @ 2:29 am

My only objection with the article is this: “a clustering of brilliant minds”. That is rich.

#10 Comment By JamesG On January 28, 2018 @ 9:25 am

How awful.

Prospective buyers meeting with prospective sellers.

Is this The Nation?

#11 Comment By Joan On January 28, 2018 @ 10:53 am

I the question as BruceB ‘s comment “When was the last time the powerful willingly gave up power?”

#12 Comment By Not So Free On January 28, 2018 @ 7:55 pm

Imagine what would happen if terrorists (false flag?) were to destroy their big conference in Davos.

#13 Comment By Rick On February 1, 2018 @ 3:02 am

This insistence that crony capitalism is somehow distinct is absurd. It is capitalism. The collusion between government and business imply a separation of the two which really has never existed in the history of capitalism. That “free markets” have ever existed is also a fantasy — a belief unsupported by history. Davos is just business as usual.