by Gary Alexander
January 24, 2023
While all eyes and ears are on the 3,000 elite dreamers and their nearly 2,000 private jets in tony Davos, Switzerland, last week, a smaller group of economists meet every year – first in Mont Pelerin, a small town above Lake Geneva in western Switzerland, and now in various cities around the world. They arrive by commercial planes, taxis, or rail cars, for the most part, and they don’t pontificate about the climate.
This modest Swiss civil war masks a serious conflict over control of the world of economic ideas, as chronicled in a 1998 book by Daniel Yergin and Joseph Stanislaw, “The Commanding Heights: The Battle for the World Economy.” (Yergin is also author of the definitive book on energy: “The Prize: The Epic Quest for Oil, Money and Power,” winner of the 1992 Pulitzer Prize for Non-Fiction. Both are exceptionally thorough, delightful reads. “Commanding Heights” also became a 2002 documentary).
This battle is basically a tug-of-war between freedom (represented by Mont Pelerin) and collectivism (Davos), with the book title based on a Vladimir Lenin quote at the 1922 Soviet Congress, when he said that he and the Politburo would always control the commanding heights (key segments) of the economy.
It’s a fair fight on the Swiss map. Davos is 1,052 meters above sea level, 92 miles from Zurich, with 10,000 people, speaking German. Mont Pelerin is 1,080 meters above sea level, 53 miles from Geneva, with 3,100 people, speaking French, but it’s not a fair fight in the press. The scribblers love Davos.
Mont Pelerin was launched primarily by expatriate Austrian economists in 1947, and Davos was launched in 1971 by a German technocrat, Klaus Schwab, who still runs the show at age 84. According to Yergin and Stanislaw, Keynesian economists (the Davos crowd) dominated the 20th century from FDR through Carter, with the bright shining moment for the “Austrians” being the 1980s under Ronald Reagan in the U.S. and Margaret Thatcher, Prime Minister of Great Britain from 1979 to 1990. Dame Thatcher admired Mont Pelerin’s founder and first President (1947-59), the Austrian, Friedrich von Hayek (1899-1992).
Economic freedom worked well in the 1980s and 1990s, first for Reagan, then Bush Sr, then when Bill Clinton co-operated with a Republican landslide in Congress to declare, “The era of big government is over,” saying he would “end welfare as we know it.” By 2000, we had balanced budgets from 1998 to 2000. By contrast the Bush Jr, Obama, and Trump years brought dismal growth, less than half of 1980-99.
Decade Real U.S. GDP Growth Two-term President and Dominant Congress
1981-1990 +38.6% Ronald Reagan (Rep) and Democrat Congress
1991-2000 +40.2% Bill Clinton (Dem) and Republican Congress
2001-2010 +18.8% George W. Bush (Rep) and Republican Congress
2011-2020 +17.9% Barack Obama (Dem) and Republican Congress
Real Gain, 1981-2000 = +94%; 2001-2020 = +40%; Source: Bureau of Economic Analysis (BEA)
Score those first two decades for Mont Pelerin, as 22 of Reagan’s top 76 economic advisors were Mont Pelerin Society members. In addition to Hayek, other co-founders of the MPS were Austrian economists Ludwig von Mises (1881-1973) and Karl Popper (1902-1990), Jewish refugees from Hitler’s Anschluss, and Americans at the Chicago School of Economics, Frank Knight (1885-1972) and Milton Friedman (1912-2006). As you can see, they lived to an average 91, so they had that edge over Keynes (1883-1946).
Founder Hayek dedicated his 1944 best-seller “Road to Serfdom” (condensed in Reader’s Digest in April 1945, the month FDR and Hitler died) to “The Socialists of All Parties.” In its “Statement of Aims” on 8 April 1947, Mont Pelerin scholars were worried about the dangers facing civilization, in this statement:
“Over large stretches of the Earth’s surface, the essential conditions of human dignity and freedom have already disappeared. In others they are under constant menace from the development of current tendencies of policy. The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power. Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own.”
The first meeting of the MPS was held in conjunction with the first meeting of the International Trade Organization in Geneva in the fall of 1947, the group, which drafted the General Agreement on Trade and Tariffs (GATT), one of the founding freedoms that created prosperity in the postwar world.
Another world-changer on board the early MPS was German Chancellor Ludwig Erhard, who helped rescue the postwar German economy through currency reform. Recent prominent members include former Czech President Vaclav Klaus and eight Nobel economic Laureates, including Vernon Smith.
Davos Lacks Focus, Becoming More of a Mad Hatter’s Tea Party
“A land was full of wonder, mystery, and danger. Some say, to survive it, you need to be as mad as a hatter. Which, luckily, I am.” –The Mad Hatter” in “Alice in Wonderland” by Lewis Carroll.
The World Economic Forum was founded in 1971 by Klaus Schwab, a business professor in Geneva, just below Mont Pelerin. Schwab invited 450 executives from various Western European corporations to Davos that February. It has since expanded to about 3,000 participants, 500 or so accredited press, and around 1,500 private jets, with 5% of the jets flying less than 100 kilometers (62 miles) to land in Davos.
(Can’t anybody drive or take a train ride within gorgeous Switzerland anymore?)
It was a tough contest for the craziest speaker – the Mad Hatter’s award – this year, but perhaps the U.S. Special Envoy for the Climate (Climate Czar), John Kerry, qualifies. In his talk last Tuesday, he had this to say about “destructive growth” vs. his brand: “If you look at the way we live, the incredible sort of destructive process of growth the way we interpret it — not as enlightened growth, but as a sort of robber baron growth,” the result, he said, is half the species on Earth have already been killed, referring perhaps to a 2020 study that postulated that global warming would eliminate half of the planet’s species by 2070.
I looked it up. That study said that if temperatures rise 0.5 degrees Celsius (less than 1 degree Fahrenheit) about half of the world’s species would become locally extinct. If temperatures were to rise 2.9 degrees Celsius, nearly all (95 percent) of species would become locally extinct. Kerry concluded, “When you start to think about it, it’s pretty extraordinary that we — a select group of human beings because of whatever touched us at some point in our lives — are able to sit in a room and come together and actually talk about saving the planet. I mean, it’s so almost extraterrestrial to think about ‘saving the planet.’”
“Extraterrestrial” says it all – Mad Hatter material. I’m a docent in our local Historical Society. Our little island was under more than a mile of ice 16,000 years ago. That’s when the Siberian-Americans (now called Native Americans, or First Americans) made it over the Bering Sea ice bridge. Within 2,000 years, all that ice melted as the earth warmed by almost 20 degrees and the world’s oceans rose by 200 feet.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Then we iced up all over again and the warming repeated all over again from 10,000 to 8,000 BCE. This early oscillation was far more dramatic than anything projected now. We have recently found giant bison bones on a nearby island, so I image some big mammals went extinct, but nowhere near 95% of species.
Scare sells. On CBS Sunday Morning (January 8), a special report said that “a new NASA report says sea levels along U.S. coastlines are expected to rise as much as 12 inches by 2050…. By 2100, 13 million Americans could be displaced.” Their maps showed shores on all U.S. coasts receding by dozens of miles all along California’s coast, the Gulf Coast, and all up the Atlantic coast, displacing 13 million of us.
I live on the Salish Sea, Washington State, where today’s tide (January 22) is +9 feet to -3 feet, a range of 12 feet. I live just above “Flat Point,” where land costs a lot more than my higher lot. Millions of beach lovers don’t seem to believe they will become refugees within 30 years – the life of a typical mortgage.
Clearly, these Davos delegates don’t believe all they say. For those why buy into the scares of today, I’d say: Imagine what the world will say about today’s hypocrisy 200 years from now. Imagine an annual convention of southern slave owners in the 1820s meeting each year in, say, Richmond. They drive their caravan of carriages north, but with their slaves driving the horses, and slaves cooking and tending to their needs. They talk for five days about how awful slavery is, but they sadly must keep it up until a new system can be found, by others, so that they can be paid for their slaves. In the meantime, they must keep meeting like this, in slave-driven caravans for 50+ years, due to all those smaller slave (SUV) owners.
If the Davos crowd were serious, they would only meet by Zoom, and never charter a private jet again.