Rich corporations “must share wealth” to avoid unrest

Monday, 31 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

DAVOS, Switzerland (Reuters): Poverty and unemployment reared their heads at the World Economic Forum last week, with speakers urging the elite audience to bridge a growing gap between booming multinationals and the jobless poor.

Greek Prime Minister George Papandreou, who also chairs the Socialist International group of centre-left parties, said the global crisis had led to an “unsustainable” race to the bottom in labour standards and social protection in developed nations.

“Politically, I believe we are at a turning point where... there are signs in Europe of more nationalism, more racism, anti-Muslim, anti-semitism, fundamentalisms of all types,” he said. “We need to look to a different model.”

Maurice Levy, Chairman and Chief Executive of French advertising giant Publicis, said there was “a huge suspicion about CEOs, bankers, corporations”.

“People do not understand that these large corporations are doing extremely well, while their lives have not improved and without the support of the people, there is no way we will be able to grow,” he told a panel discussion.

“We have been led by greed. We have been led by only the bottom line, the profit and we have sacrificed the workers in order to please the stockholders.”

The increasing division between fast-growing emerging market economies and stagnating, jobless nations in the developed world has been a theme at the talks in Davos this year, which some corporations pay tens of thousands of dollars to attend. Corporate chieftains have preferred to focus on their optimism that roaring growth in countries such as China and India will outweigh flat or declining sales in Europe or Japan , allowing them to keep growing profits.

But some speakers suggested this was short-sighted.

Former US President Bill Clinton said tackling income inequalities was essential to future growth and needed to be part of the core of doing business in the 21st century.

US economist Nouriel Roubini predicted a backlash against budget cuts in Europe if there was no rapid return to economic growth.

“People are willing to do austerity, willing to do sacrifices and reform as long as there’s light at the end of the tunnel,” he said.

With unrest in Tunisia and Egypt a major talking point in Davos, Mthuli Ncube, the Tunis-based Chief Economist for the African Development Bank, predicted more trouble ahead if the fruits of growth were not shared more evenly:

“If you are not even creating jobs, not even sharing the economic growth that is coming through, then there will be push-back,” he said. “It’s one thing to get good growth going. It is another to share that.”

Eckhard Cordes, Chief Executive of German discount retailer Metro, said the only answer for Europe’s armies of unemployed young people was to improve their level of education and take higher-skilled jobs.

“We’ve got no choice in countries like Germany,” he said. “What we have to do to at least keep the wealth we have today is to invest in education, train people, educate them.”

Klaus Kleinfeld, Chairman and CEO of U.S. aluminium giant Alcoa, offered a different solution. “Elderly people you don’t outsource, these people stay in the country,” he said in Davos. “You can look at healthcare as a job engine.”