At the same time, they panned the idea of higher tax rates for society’s wealthiest
Leaders of the world’s largest and most powerful companies are on edge. A decade after the financial crisis, their businesses are thriving and their pocketbooks are overflowing, but they worry about populism and the threat it poses to the global order they helped build.
Many executives gathered at the exclusive World Economic Forum this week acknowledged that inequality is a major problem fueling populist backlash, and that some middle-class jobs in the West are being lost to trade and automation (even though more jobs overall are being created around the world).
A few business leaders in Davos went so far as compare today’s situation to the late 19th century, an era when tycoons like Andrew Carnegie, Andrew W. Mellon, and John D. Rockefeller amassed huge fortunes while most in the working class toiled under harsh conditions.
“We’re living in a Gilded Age,” said Scott Minerd, chief investment officer of Guggenheim Partners, which manages more than $265 billion in assets. “I think, in America, the aristocrats are out of touch. They don’t understand the issues around the common man.”
The solution to inequality, many in Davos said, is “upskilling” people so that they can obtain better jobs in the digital economy.
“The lack of education in those areas in digital is absolutely shocking. That has to be changed,” Stephen A. Schwarzman, chief executive of Blackstone, told a panel. “That will very much lessen the inequalities that people have in terms of job opportunities.”
Schwarzman, whose net worth is estimated at $13 billion, said it is “up to the grown-ups” to make digital upskilling happen in K-12 schools.
.. His calls were echoed by others, including Ruth Porat, chief financial officer at Alphabet, Google’s parent company; Keith Block, co-chief executive of Salesforce; C Vijayakumar, chief executive of HCL Technologies; and Michael Dell, founder of Dell Technologies.
“All of us collectively can do quite a lot to create opportunities so that everybody is included in this growth,” said Dell, who is worth an estimated $28 billion. “It’s going to require lots of new skills, capabilities.”
Dell said the issue goes beyond K-12 education and that companies need to train workers continuously. His own company struggles with finding enough skilled workers, and poaching them from other companies doesn’t work, Dell added. “You need to hire and train and grow them from within.”
.. In a report released earlier this month, the forum estimated it would cost the United States $34 billion to reskill the 1.37 million workers expected to lose their jobs to automation in the next decade. The forum said 86 percent of the cost “would likely fall on the government.”
“Upskilling is not going to alter the insecurities and inequalities,” said Guy Standing, author of “The Precariat: The New Dangerous Class,” who spoke on four panels at Davos this year. He said most executives still don’t understand what is needed.
Standing said calls for more education and training were a “cop-out,” and that the result would undoubtedly help only a small number of people, which in turn could bring down wages and status in whatever new jobs they went on to obtain.
A study in 2015 by economists Brad J. Hershbein, Melissa S. Kearney and Lawrence H. Summers postulated what would happen if 10 percent of American men, ages 25 to 64, who did not have a bachelor’s degree suddenly obtained one. They found that it would improve pay and job prospects for the men who earned the degrees, but would do little to reduce the inequality gap because the richest Americans have so much more income and wealth.
But millionaires and billionaires in Davos panned the idea of higher taxes, arguing that the private sector does a better job than the government of spending money wisely.
“No, I am not supportive of that, and I don’t think it would help the growth of the U.S. economy,” Dell responded when asked about his views of Ocasio-Cortez’s proposal for a 70 percent marginal income tax on earnings above $10 million.
Dell noted that he and his wife contribute most of their wealth to a foundation. “I feel much more comfortable with our ability as a private foundation to allocate those funds than I do giving them to the government.”
Others argued that their tax rate is already high and that raising tax rates could push people to move abroad or not invest.
“If I look at my tax rate now, it’s probably well into the 60s,” said AECOM chief executive Michael S. Burke, adding that he pays federal taxes, California income taxes, sales tax and a significant property tax. “I think we ought to have a competitive tax rate.”
.. When asked whether corporations should pay higher taxes, executives again criticized the idea. In 2017, President Trump and the Republicans in Congress passed a sweeping tax bill with the largest corporate tax cut in U.S. history.
“It’s an easy fix, I think, for many people to say, ‘Well, let’s just tax,’” Block said during a panel.
By contrast, leaders from academia and the nonprofit world were quick to call for higher taxes and a redistribution of income.
.. An Oxfam report this week found that the share of wealth held by billionaires was increasing by $2.5 billion a day, while the share of wealth among the 3.8 billion of the world’s poorest was decreasing by $500 million dollars a day. While some quibble with the methodology of the Oxfam report, there’s widespread consensus that inequality is getting worse in many parts of the world.
.. “Davos is always in favor of reducing inequality and poverty: locally, nationally and globally — but not if they have to pay for it,” tweeted economist Branko Milanovic who studies inequality at the City University of New York (CUNY).
However, others said it was not practical to look for solutions to the problems of the common man from the top echelons of society.
“There’s an uncomfortable awareness that things are not right, the ecological crisis, the angst out there, the Brexit vote, the Trump vote, but then they come up with these bromide platitudes,” said Standing. “But in a sense, we can’t expect them to provide the answers. They are part of the problem.”
One of the roughly 10 lobbying firms that represent the Saudi government, the Harbour Group, has dropped it as a client, and others are considering following suit, according to people familiar with discussions, as Saudi Arabia struggles with a backlash over allegations that it murdered the journalist, Jamal Khashoggi.
The lobbying firms are privately discussing how to proceed, these people said. But some have already decided that the prospect of continued paychecks from Saudi Arabia — once a prized and profitable client — is not worth the risk to their reputations.
But for financial and technology companies, several of which have multibillion-dollar ties to Saudi Arabia, the calculus is more complicated. Few executives have backed out of the conference, which is called the Future Investment Initiative but is known colloquially as Davos in the Desert.
Uber’s chief executive, Dara Khosrowshahi, was one of the few to announce that they would back out.
.. The Public Investment Fund, a large Saudi sovereign wealth fund, invested $3.5 billion for a 5.6 percent share in Uber in June 2016.
The fund’s managing director, Yasir Al-Rumayyan, took a seat on Uber’s board. Prince Mohammed is the chairman of the Public Investment Fund.
.. Blackstone’s chief executive, Stephen A. Schwarzman, remains an advisory board member and is expected to speak at the conference, which is held at the Ritz-Carlton hotel in Riyadh, where Prince Mohammed locked up hundreds of wealthy Saudis last year in what he called an anti-corruption campaign but critics said was an effort to crush dissent.
.. Jamie Dimon, the chief executive of JPMorgan Chase, is also still planning to attend
.. Peter Thiel, the technology venture capitalist who was once an ally of President Trump and is known for his independent streak, is still a member of the event’s advisory board but had never planned to attend the gathering, according to a person close to Mr. Thiel.
.. Richard Branson, the billionaire British entrepreneur, said that he had suspended his directorship at two tourism projects near the Red Sea and that his space ventures would halt their discussions over proposed investments from the Public Investment Fund... Saudi Arabia has been a coveted client, thanks to its reputation for paying above-market rates and its status as one of the United States’ most reliable allies in an unstable region, which seemed cemented by the ties between Prince Mohammed and the Trump administration... The debates about dropping the Saudi account also reflect the skittishness of the lobbying industry at a time when it has faced mounting scrutiny from federal investigators, including the special counsel Robert S. Mueller III, about how foreign interests try to shape American politics and policy... The highest-paid firms representing the Saudis in Washington are the international public affairs consultancy
- Qorvis MSLGroup, which is being paid $279,500 a month, and the
- Glover Park Group, which was started by former Clinton administration officials and is being paid $150,000 a month.. Another two firms are being paid $125,000 a month —
- Hogan Lovells, which has Norm Coleman, a former senator of Minnesota, as its point person for Saudi work, and
- Brownstein Hyatt Farber Schreck, which has a bipartisan team composed of Marc S. Lampkin, a former aide to the former House speaker John A. Boehner of Ohio, and Alfred E. Mottur, a top fund-raiser for Hillary Clinton’s presidential campaign.
.. Not all of these firms will drop the Saudis. Some are leaning toward maintaining their contracts, in part because they predict that if they were to abandon the country en masse, it could lead to reduced cooperation from the Saudi government.
He heaped praise on Jared Kushner at a private gathering of bankers and corporate executives in December, congratulating President Trump’s son-in-law on the surprise election triumph.
He stood up again in May before a group of corporate leaders on the 39th floor of Citigroup’s offices to remind them of all the good the Trump administration could do for the economy and the country.
.. Stephen A. Schwarzman, the chief executive of the private equity giant Blackstone and the leader of one of the councils, has not been alone on Wall Street in his embrace of the Trump presidency, particularly after the corporate world endured eight years of Obama-era regulation. But in each of these private meetings, recounted by people who attended them, Mr. Schwarzman emerged as one of the president’s most respected and reliable allies in high finance.
.. Mr. Schwarzman’s stature in both the world of finance and in Mr. Trump’s Washington helped Blackstone nail down one of the biggest deals on Wall Street this year — its selection by Saudi Arabia to manage a new $20 billion fund, according to a person with knowledge of the selection process.
In May, while the president was visiting Saudi Arabia, Blackstone announced the agreement to manage the fund, the largest in the world to invest in infrastructure projects. The announcement was made at the royal palace in Riyadh as Mr. Trump and Mr. Kushner looked on.
.. the Saudis had been discussing a possible partnership with a number of other firms as well, and formally decided on Blackstone — a fund-raising juggernaut that manages funds larger than the economies of some nations — only after Mr. Schwarzman had started advising the president.
.. the company’s experience illustrates the incentives that corporate leaders have to develop strong ties with Mr. Trump — the country’s businessman in chief — and the reputational risks associated with those relationships when Mr. Trump veers off course, as he did this past week.
.. Some of the other investment firms that were in discussions about a Saudi partnership, including Brookfield and the Carlyle Group, had more experience in managing infrastructure funds and are still in talks with the Saudis
.. But while Mr. Schwarzman’s alliance with Mr. Trump is new, his ties to Mr. Kushner, the president’s son-in-law, run deeper. Mr. Kushner and his wife, Ivanka Trump, attended Mr. Schwarzman’s 70th birthday party in February at his home in Palm Beach, Fla., near Mr. Trump’s Mar-a-Lago estate.
.. In 2013, well before Mr. Trump was even a candidate, Blackstone financed the purchase of a few warehouses and industrial buildings by Mr. Kushner’s family company
.. Mr. Kushner is also friendly with Jon Gray, a senior Blackstone executive who runs its real estate business.
.. Mr. Kushner and Mr. Gray, a Democrat, have been photographed together at Manhattan social events, and before the election, Mr. Kushner urged the staff at the Commercial Observer newspaper, which Mr. Kushner used to run, to place Mr. Gray higher on its list of “Power 100” real estate executives, according to a former employee with knowledge of the list. In 2016, Mr. Gray was No. 1 on that list.
.. Unlike many people in Washington, Mr. Schwarzman said, Mr. Trump could accomplish tax policy reform and an infrastructure overhaul.
.. Mr. Schwarzman speaks with Mr. Trump as much as once a week, typically about the economy though also about social policy, including a conversation in which Mr. Schwarzman advised the president to continue shielding young undocumented immigrants from deportation
.. Blackstone manages about $370 billion.
Gary Cohn, was upset by the remarks and the trajectory of a news conference Tuesday that was supposed to showcase the White House’s infrastructure plans, aides said. Instead, the event was dominated by Mr. Trump’s fiery commentary about the violence in Charlottesville that left one person dead… John Kelly, the newly minted White House chief of staff who was brought in last month to impose discipline in a fractious West Wing, was also frustrated to see Mr. Trump equate the white nationalists who had chanted “Jews won’t replace us” with the actions of counterprotesters, an administration aide said.
.. Some of the GOP president’s allies said Mr. Trump’s foray into the combustible politics of race will make things tougher as Congress confronts a series of difficult legislative challenges, including lifting the nation’s debt ceiling, passing a budget and changing the tax code.
.. Mr. Trump’s relationship with important congressional allies has already soured. He recently attacked Senate Majority Leader Mitch McConnell (R., Ky.) in tweets for the collapse of the GOP health-care legislation.
.. Blackstone Group LP Chief Executive Stephen A. Schwarzman, who led the Strategic and Policy Forum, called the president on Wednesday to inform him the group was being disbanded, according to people familiar with the call.
.. Various U.S. military leaders at the Pentagon issued their own statements denouncing bigotry, while the Navy said it may consider changing the crest of a ship commemorating one of Confederate Gen. Robert E. Lee’s victories.
.. Mr. Kelly doesn’t have the same command over White House communications. On Wednesday, the administration installed Hope Hicks, a longtime press adviser to the president, as interim communications director while it searches for a permanent replacement.
Speaking to staff at one point earlier this month, Mr. Kelly told the White House team that the best job he ever had was as a sergeant in the Marine Corps. After one week at the White House, he joked with them, that hadn’t changed—yet.