[OPE] Class conversations at Davos

From: Jurriaan Bendien <jurriaanbendien@online.nl>
Date: Sat Feb 05 2011 - 18:22:36 EST

Class consciousness comes to Davos

The Economist, Jan 28th 2011 by J.M. | DAVOS

(...) Class is also part of the conversation this year, especially in the
Anglo-Saxon business world. There is a growing realisation that the pain is
disproportionately hitting the bottom of society, an acknowledgement that it
is not going to change soon-and, perhaps more selfishly, a worry that it
will result in a backlash of some sort. Thus British businesspeople,
especially those with consumer businesses, fret what will happen when
governments cuts begin to bite in northern towns where many households
depend on the state (either through benefits or as an employer). But the
biggest worry is in America.

The two Americas
Take the views of two extremely rich Americans: a retailer and a banker. The
retailer points out that his firm is now in effect dealing with two
Americas. The first group are broadly upper-income and defined by a sense of
mild optimism. They tend to work for the larger companies represented at
Davos, which are doing well. Their mortgages cost less because of lower
interest rates. They often own shares, so they are pleased by Wall Street's
recovery. They are not spending in the completely carefree way they did
before the crunch, but, if they see something they want, they don't pause
before producing their credit card. The second, which he defines as middle-
and lower-incomes, is defined by fear: they have either lost their jobs or
they are worried about losing them. They spend money on essentials but not
on discretionary items-and they are living from pay-packet to pay-packet.
There is a clear monthly pay-cycle effect, with spending rising at the
beginning of the month when they have cash in their pockets, but falling at
the end.

The banker's world is Wall Street-a long way from Middle America. But that
is where he grew up, and he is deeply worried that well-paid middle-class
manufacturing jobs are disappearing. He points to General Motors' recent IPO
prospectus, and the huge gain the carmaker has achieved by shedding UAW
workers. "Frankly, I think those guys are never going to get jobs." Wherever
he looks in America he sees working-class males with little future.

Their worries are compounded by two things. The first is a sense that there
is little that can be done to stop this. America is simply going through a
period of deleveraging and slow growth. Both the retailer and banker think
money should be spent on education, retraining and the other familar
bromides. But neither wants to increase intervention, nor do they want
higher taxes-which would simply delay recovery still further. There is a
sense of a process we have to go through. The second is fear of a backlash:
how long will so many people tolerate this degree of economic sluggishness
without populism taking hold?

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Received on Sat Feb 5 18:25:30 2011

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