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WORLD ECONOMY IN CRISIS AGAIN

By Togba-Nah Tipoteh, Ph.D

As the World Economic Forum (WEF) celebrates its 50th Anniversary, let us recall my Message to the WEF two years ago at its 2017 Annual Meeting in Davos, Switzerland. In that Message, I predicted that the world economy would be in crisis yet once again in 2020. In economics, a crisis in the economy takes place when the gross domestic product (GDP) falls, prices rise too high in the midst of a liquidity crunch. A recession takes place when the GDP falls in two successive quarters.

However, in science, generally, the Scientist of the Millennium, Professor Albert Einstein, defines insanity as the expectation of a different result from taking the same action over and over. Since its founding, fifty years ago, the WEF has been operating on the Davos Manifesto I, which states that what matters is what benefits the shareholders rather than what benefits the stakeholders. After fifty years of existence, the WEF has declared that it is going to operate on the basis of the currently released Davos Manifesto II, which states that what matters is shareholders and stakeholders rather than shareholders alone. Therefore, the Davos Manifesto II is, in effect, the admission by the WEF that the Davos Manifesto I failed and the world economy is now in Einsteinean Crisis and should listen to the 15-year-old Swedish child Greta Thunberg, who insists on getting Climate Change to effect carbon emission below two degrees centigrade, as was decided by 196 countries at the Climate Change Conference in Paris, France in 2015. Miss Thunberg is promoting the view that what matters is what benefits stakeholders–employees, customers, suppliers, communities, and society. Miss Thunberg comes from Sweden, a Nordic country. The Nordic countries are being used for demonstrating best practices with respect to the usefulness of Davos Manisfesto II, by pointing out the Nordic experience in promoting free education and health, flexible hiring and firing, strong social security, open market, and low tariffs/trade barriers. Most importantly, the Nordic countries display a nationalism in which what matters is what a person contributes to societal advancement rather than solely to individual advancement.

Let us look at some data about how the world economy has fared in terms of meeting the WEF objective of making the world a better place in terms of improving living conditions globally and sustainably. According to the Organization for Economic Cooperation and Development (OECD) of Europe, in 1820, the ratio of the world’s top 20% population to the world’s bottom 20% population was 3:1; by 1991, this ratio was 86:1, indicating a massive increase in income and wealth inequality. The World Development Institute of the United Nations University indicates that by 2000, 1% of the world’s adults owned 40% of the global assets. The international NGO, OXFAM, states that the 85 wealthiest persons in the world have a combined wealth equal to the wealth of 50% of the world’s population. OXFAM continues by indicating that the world’s richest 22 persons have more money than all of the women in Africa. Again from OXFAM, we find out that although women and girls work for 12.5 billion hours, they do not get paid for their work, the market value of which amounts to USD10.8 trillion annually. 

Now, let us look at the experience of the 70-year-old People’s Republic of China (PRC) as it celebrates its New Year while battling with a life-threatening virus. In 1978, the rural poor in the PRC accounted for 97.5% (770 million people) of the population. At the end of 2018, the poor rural level in the PRC was 1.7% (16.6 million people), a massive reduction in the poverty rate, literally eliminating rural poverty. The PRC result was achieved by ensuring that what matters is stakeholders, with the sustainable improvement in their living standards.

In sending this 50th Anniversary Message to the World Economic Forum, let the global community, especially the poor countries, take due note of the fact that past and present experiences show that what matters is what benefits stakeholders, meaning what benefits society sustainably.

About the Author:

Dr. Togba Nah Tipoteh, Ph.D

Dr. Togba Nah Tipoteh, Ph.D., is a renowned African economist who previously served as a senior United Nations consultant, university professor of economics (emeritus), and Liberia’s Minister of Planning and Economic Affairs in the 1980s.

He is a founding pioneer of the Movement for Justice In Africa (MOJA).

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