World economic forum in davos: just don’t talk about redistribution.

Experts debate what governments must do to get a grip on the crises. They continue to assume that inequality will increase.

The main thing is to be there: The elite of political and economic decision-makers – mostly male, for some inexplicable reason – meet in Davos. Picture: dpa

One should not put his word at this year’s World Economic Forum in Davos on the gold scale, sent David Rubenstein in advance. The head of the U.S. investment firm Carlyle Group admitted that he had been quite wrong with his economic forecasts in 2014.

With this admission, the debate on economic problems and their possible solutions began on the first day of the World Economic Forum 2015.

Managers and investors, economists and politicians were particularly concerned with these issues: the weak or declining growth in Europe and some emerging countries such as Russia and Brazil, to which the International Monetary Fund (IMF) has just drawn attention, the expected reaction of the European Central Bank to the low inflation rate and the high unemployment in countries such as Spain and Italy. There was no shortage of recommendations to governments.

Carlyle chief Rubenstein called the threat of deflation in Europe a "serious problem, because it’s hard to get out of." He thus signaled his support for the program of "quantitative expansion" that the European Central Bank (ECB) may announce on Thursday.

Just "buying time

Many observers expect the ECB, together with the national banks of the euro countries, to start buying up government bonds and other securities. In doing so, the central bankers want to make money available to commercial banks to encourage them to lend to companies and citizens. This should also help to raise prices in the markets so that the economically dangerous tendencies toward falling prices do not become entrenched.

Min Zhu, Vice Director of the IMF described the expected program as necessary. A package of 750 billion euros was expected, said Deutsche Bank chief Anshu Jain. Axel Weber, formerly head of the Bundesbank and currently chairman of the board of Swiss bank UBS, also assumed at the Wednesday morning discussion event that the central bank would take the measures. However, Weber was more skeptical. He warned that ECB’s Mario Draghi was just "buying time again" – and also recommended, "She shouldn’t do too much."

"Open up labor markets"

Weber, among others, argued that the near-stagnation and high unemployment in Europe was not primarily caused by monetary policy. Rather, he said, the "labor markets are closed." Policymakers must therefore reduce the regulations that prevent new jobs from being created, he said. Weber recalled the Hartz reforms of the red-green Schroder government, which he considered successful. Only by such means could "structural youth unemployment" be tackled, the UBS supervisor said. IMF Vice Director Zhu also pleaded for "opening up labor markets."

Another plea often heard in Davos is the call for more investment in infrastructure. This refers to networks for the transport of water, electricity, gas, data and traffic. Many experts believe that it doesn’t matter where the money comes from. If the states could not raise enough, they should bring private investors on board. The thinking behind this is that infrastructure investment creates demand to overcome stagnation, it improves future growth prospects, and it can open up new return opportunities for private investors.

"What is the workforce doing?"

Moderator Gillian Tett of the Financial Times framed the most important question of the WEF discussion on "Inclusive Growth in the Digital Age" this way: "What will the workforce do when nearly half of U.S. jobs are eliminated in the coming decades by the use of new communications technologies?"

Better schools would have to better prepare children and young people for the professions, lifelong learning institutions would have to accompany the workforce, was the overwhelming answer. It was reserved for Ajay Banga, the head of Mastercard, to formulate a doubt here: "Education alone does not solve the problem of inequality." With this, he pointed out that employees weeded out by digital production increases may no longer find a new job, or only a lower-paid one.

However, Davos almost always ends at this point in the analysis. The business audience does not want to think about redistribution of public or private funds for the benefit of the disadvantaged. When moderator Tett asked the audience at her event, the show of hands was clear: Yes, the majority expects inequality to continue to increase, even in the industrialized countries.

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