Thomas Mann, the German Nobel laureate and author of The Magic Mountain, made Davos famous for its mystical and curative powers. For him, it was a sanatorium to overcome the disease, psychological stress, and damage inflicted by modern life. In some ways, it remains so.
These are my personal impressions as a former executive board member of the inside, albeit they are but a snapshot in time. Davos is many things to many people, but it remains a curiosity. It was also, according to many accounts, the place Bill Clinton got the bug and started his own Clinton Global Initiative—seeing gold in them thar hills.
Today on its 50th anniversary, Davos is synonymous with a different kind of cult. It is the cult of business celebrity; elites from every avenue of life, every industry, every country, leaders and wannabes who will do anything to be seen there, especially during the last week of January, when the World Economic Forum conducts its annual meeting.
They pay over $70,000 just to be invited, or $1 million to be members, according to The Guardian. It has become the hub of political, economic, cultural, and every other kind of power imagined by postmodern globalist man. In fact, it is about the emergence of what the ringmaster at Davos calls “Davos Man,” (he actually borrowed the phrase from the late Harvard professor Samuel Huntington) a kind of ubermensch who can transform the world. Nietzsche would be proud.
This wasn’t always the case. After World War II the German part of Switzerland in the far eastern part of the land and up in the rugged mountains was underdeveloped. Skiing, new hotels, and better train service brought in more tourists, but it wasn’t until a half nutty, half brilliant professor of business policy brought his European Management Forum there in 1971 that it started to take off.
In its own words, the WEF is on a mission: “The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional, and industry agendas.” Over the course of its history, the World Economic Forum has achieved a limited record of accomplishment in advancing progress on some key issues of global concern. It has also placed itself as the epicenter of New Age globalism—a new ideology. Globalism is not the same as the gradual process of globalization, which sees countries involved in more and more trade and investment across borders. Globalism is a movement toward and a belief in one-world government.
The WEF logo itself puts the organization in the very center of the globe’s sphere; and Herr Professor Dr. Schwab is the “Wizard” of this “Oz,” behind the curtain, who makes the whole thing run—just as in the movie.
The Davos Model
Every year now, for five decades, high in the wintry alpine resort of Davos-Klosters, Switzerland, the world’s elite convenes under the auspices of the World Economic Forum. They have what is termed “convening power.” It’s all over the news. But not much is really known about the organization—the convener. Everyone sips schnapps and talks about the future of the globe under the banner “Rethink, Redesign, Rebuild.” The “Re-” word is always the operative phrase! Be sure to use it in every sentence and you can pass “Go.”
True, Davos can be cynical and trite. The best thing to be said for it is perhaps, as I once put it in the Weekly Standard, that it does not really believe the answer to the world’s problems is more Marx. But they do come close. Davos phrases abound: rethink economics, redesign governance, put (European) socialist values back in business, promote financial literacy, the future of this and that, risk abatement, and on and on. Frankly, while the WEF is full of suggestions, most of them are half-baked.
Here is a sample insight from Davos: “At times of panic credit markets have a tendency to freeze.” Here is another: “The bubble forms when expectations exceed reality.” Cue the applause from the civics class.
The WEF applauded the public rescue of banking and government-inspired guarantees (bailouts), and their mantra has been “print more money” and, when in doubt, “strengthen regulatory measures.” We also need much more “coordination” to defeat systemic risk, according to the Davos line. Did Keynes really get it right? Is Big Government good government? Do markets always fail when left to their own devices? These questions are verboten in Davos—for the hallmark of all believers here gathered is that government is the solution—perhaps assisted by some special council, formed of course by “FOK”—friends of Klaus (Schwab).
Davos wants to tame the “animal spirits” of the market, which are not good and must be tamed. Their authority on this is none less than the turncoat, George Soros, a former robber baron and greenmailer who saw the light. Radical stakeholder capitalism enters left stage, with improved statistics, and a Sarkozy or now Macron–style Commission on Measurement of Economic Performance and Social Progress. We can change accounting as we know it and have a perfect “global solution”—a super–International Monetary Fund. At Davos it is always a globalist solution. Besides dumping the dollar, the world must also have “international consensus” since the United States has been so naughty and learning to share power and give up control can be difficult. But it is necessary.
For Davos Man (and occasionally now a woman or two), an all-powerful global central bank will run money, ignoring notions of national interest; but like gun ownership, the spread of capital will also need to be controlled. We will also need a Tobin carbon tax collected by the United Nations. Bill Gates’ version of “creative capitalism” flies well here, and he goes to Davos every year—where he preaches that we must all “give back” and invest entirely on a social basis. His zeal is perennially featured these days, now that he’s retired from bad, old Microsoft.
Ironically, in the end at Davos—powerful and lucre filled as it is—money is the great taboo; it’s what leads to subprime lending and to bad capitalism. Realizing that the love of money is the “root of all evil,” a “competent global economic citizenry” must fight the inherent flaws of capitalism. If we don’t fight capitalism, we are warned, we could end up with Chinese-style authoritarianism.
At Davos, it’s repeatedly said, we can’t do “business as usual” any longer, and most certainly America, who started all this money madness and interventionism, cannot dictate since the United States is no longer a “hegemon.” A thin veil of anti-Americanism lurks behind a lot of the content at Davos. It is a cabal of multilateralism with an impresario professor as its progenitor.
It’s interesting to note that, through all the sermonizing and flagellation at Davos, short shrift is given to the classical virtues and religion. Instead, the underlying credo here is the need for more confidence in global government, since finance is an imperfect tool for managing risk in an uncertain world.
I went to Davos for the first time in 1988 as a special guest of Herr Dr. Schwab (K-man to his friends). It was fascinating and certainly involved many leaders and business types, mostly from Europe and especially the Third World. Some were on the make and others on the take.
Throughout 1989 Schwab courted me, had me to dinner over and over, invited me to meetings, and pressed me to give him advice on how to stretch the goals and involve both more CEOs and particularly top Americans from all walks, across all sectors and in every major industry group. In his thick, German accent he would say, “Vell, Ted, kunt vie change die velt?” He wouldn’t stop and at one point stuck his lieutenants on me as well. One was an attractive woman with long, dark hair, an American named Gail Bidwell. She was good looking and bright, and she and her German counterpart, who was ill with cancer, both kept calling on me in my office at the U.N. Schwab had Lester Thurow (economists refer to him as “less than thorough” for his popularizing tendencies) over from MIT. He invited me to lunch. The minister of finance was in from Pakistan; could I spare time for “an interesting” dinner? The head of the central bank of XYZ was here; could I convene in a few hours? No end.
By 1990 he had asked me to serve on some loony council and to help prepare the agenda for the next annual meeting. What were the “veally big questions, mit ein Q” going to be? He asked in his dreary, thick accent.
His staff was mostly low-level flunkies and hangers-on, very young, no higher degrees, just yes-men and plenty of women (many were sexy and were randy with the professor, I later discovered), as well. They reported directly to the Wizard of Oz, as we referred to him behind his back. I was pitching in, adding key names, and, eventually, they asked me to moderate some sessions at the big confab.
My boss at the U.N.-Geneva, Hinteregger and others, were slightly jealous as they were not invited. The head of the U.N. was there, and increasingly more and better CEOs were attending. With my invitations we got some of the top Americans to join the ranks. Even Coca-Cola came, and they brought so much Coke with them it could have filled entire lakes with that fizz.
Schwab also had an in-house rag, a glossy vanity magazine with lots of pictures of leaders at his meetings and articles by those same leaders. It had a goofy look and name: World Link. The idea was to link world leaders permanently. He also devised a failed electronic system to do the same that was well before its time. He called that Welkom. Way too Germanic, I thought. Schwab got me to write a few pieces for his publication, on the U.S. economy and on reform in Eastern Europe and published them with my picture. It was all rather flattering.
The organization was, however, far too Eurocentric, and he knew it and wanted to break out and step up. He knew of my background, history, and work in academia, industry, on Wall Street, in politics, and as a diplomat. He wanted my help and convinced me that we could work together. Pronounce that in German three times!
When we talked privately, Schwab said we were both “thinkers and doers.” He liked to ask that trick question of people: which are you, a thinker or a doer? Pick one and you were wrong. Now, I was warned that Schwab used people, ran through directors like water, and was a first-class name-dropper. Some said there was no substance in his doings, just frills, a media fest. He was a pompous windbag to some. In checking him out I found out some things I didn’t like. He was a German (born in Ravensburg, 1938 where Hitler had come to power), not Swiss, reportedly with strong ties to those who fled to Switzerland. Like Waldheim, he had Nazi-youth in his résumé and tried to hide it. Davos has always been known as a place for the rich and the sick; that much is well established. Not much has changed!
The two most secret items at the World Economic Forum were the budget and the VIP list and its attachment, noting their “guests,” i.e., who they were sleeping with. The budget was not a public document, and it showed the income at well over $100 million. Less than half came from membership fees . . .
The Nazi Party in Switzerland was headquartered there. In 1936, a famous assassination of Wilhelm Gustloff, the top Nazi in all of Switzerland by a Yugoslavian Jew named, David Frankfurter was in all the international headlines and made the Nazis machine irate. The Nazi connection in Davos is noteworthy given the now established Swiss complicity in the German war effort, hidden accounts, stolen goods, holocaust victims, and the anti-Zionism that continues to this day. The World Economic Forum even in recent years has itself called for the boycott of Israel (before it retracted it). Schwab was in total cahoots with the Swiss government. In fact, the Swiss Federal Council paid many of his bills
Why? Because the WEF strategy was to get people to Switzerland to invest there, to bank there, and to use its central location and supposed neutrality. It was all a clever public relations tool or ploy for the Swiss.
Schwab lacked good American connections and didn’t sell particularly well in the CEO corner offices with his thick accent, professorial look, and all this mystical (we called it Davosian) talk about a better world and partnerships for this and that, which sounded like and were mostly “you give us money and we make you a member; more money and you can be a higher-order member; more yet, and you’re on some board.” He was, simply put, what some people call an old-fashioned snake oil salesman.
But the companies were buying from Arthur Andersen to A. T. Kearney to Booz Allen Hamilton and hundreds more. The membership consisted of more than 1,001 companies; some were only midsized but from all over the world. He sold memberships as a way for them to meet other members. Clever. Too clever? He took some hits as a grandstander and then many more from the anti-globalists on the Left and Right. Protests mounted in the tiny ski village, and he had to get the Swiss troops to guard everything.
At a certain point at Christmas 1990, Schwab had me to dinner at his own house in Cologny with his wife and children. It was one of those Swiss chalets on the lakeside, quite large and immaculate. He asked me at dinner if I would consider some arrangement whereby, I could join him and go onto the executive board full-time. Money was no problem; he said they would match what I was being paid, although that amount was the highest paid to any employee, so I should keep it quiet. I would get six weeks’ vacation, home leave, and could travel anywhere in the world I needed to go. The offer was interesting, but I had a job, and the term was set. I said I’d think about it and wanted to work with him in some fashion. Klaus is a hard person to say no to, as he is so fawning. He also makes it appear that the noble mission to save the world that he has created is, well, missionary work.
I had to tell Hinteregger, and I knew it would break his heart. So, we worked a deal out whereby I could spend a portion of my time working on WEF affairs and gradually shift over. By the end of the following year, I would switch teams and play for Schwab and the Davosians and appease the gods of business. Schwab meantime had to do some fast moves to get me a Swiss work visa and to tell the U.N. he would not poach any more people. He also went to his Geneva bankers and arranged for me to not only get a mortgage but to get the right to buy a house in the Canton de Geneva. These were not small things. The WEF as a Swiss Foundation has lots of pull with the cantons, especially where it is based, and in Graubünden, where Davos is situated. It is not a lightweight by any means.
I became not just involved but seminal to the Davos planning and helped set the themes and choose the speakers. Klaus and I made many trips together to the United States and other capitals to get the heads of state and captains of industry on board.
I was brought into the super-secret World Wide Web brainstorming on the future forecasts of the global economy. Those sessions brought together chief economists from leading organizations, banks, and certain economic ministers to spin a story about what lay ahead and where the challenges lie.
At Davos itself, I was a panel moderator of a half dozen sessions and in the big stage held forth as the questioner or respondent on the big economic sessions. My favorite one included the likes of the chairman of the U.S. Fed, the CEO of a global bank, the CEO of Salomon Brothers, my old pal John Gutfreund, the new head of the bank set up for Eastern Europe, a leading French intellectual, the president of the World Bank, and the CEO of Moody’s, the rating agency. I beat up on each of them but let John off the hook. I ended by having each of them play the role of one of their counterparts and tell the “honest” truth. It was a hoot and brought the house down in laughter.
I suggested to Schwab that because we had so many bankers from around the world going to Davos, we should create a World Financial Services Forum meeting as a subset. He was afraid of that for some reason, I think because he did not speak “financese.” We decided to have a governors’ meeting with CEOs alone and then on the last day open it up to the entire financial services industry. It succeeded wonderfully and completely sold out. I chaired both sessions and played Phil Donahue at the latter, with a roving mike, sticking it literally in people’s faces to get instant responses. Everyone wanted to go to Davos, and this was a new way to include more people, and most critically, collect their lucrative fees. The head of Citibank wondered out loud why nobody had done this before. He knew it was a cash cow.
Bringing in Cold War Adversaries
The two countries that were weakest in representation at Davos were the United States and the USSR (until it broke up in 1992).
I was given a mission. The United States was the easy part. Getting the right people, the stars, the CEOs, and the think tank heads and members of Congress and the administration was just a matter of pecking away and showing them the materials and noting the benefits: personal and institutional. The toughest sell was their most precious commodity—their time itself. But with spouse programs, superb skiing, Audi driving schools, and all the socializing and partying, who wouldn’t want to join the world’s greatest schmooze fest in an Alpine village? Besides, it was tax-deductible, and the fees were paid to a foundation!
The most powerful elites in the history of the world all gathered in one place? And that place is Davos? The media certainly ate it up. They enjoyed themselves and the after-hours drinking and dancing more than the participants themselves. They came in droves. It made their jobs easy having so many world leaders in one small town, captive to give “exclusive” interviews.
We let companies break stories there. Countries could do the same, but usually only those who had paid some huge tab to sponsor a reception, a gala (complete with famous rock bands), or initiate some new policy announcing it to the world. Turkey’s then prime minister asked to be admitted to the EU one year, which caused quite a stir; they even made peace with the Greeks. The Alpine countries announced an initiative to save the Alps another year. The Aga Kahn announced his new Central Asian University. The West Germans announced the unification there and the bold one-mark policy. It took the roof down. The U.N. unleashed a program for corporate citizenship there. Every year the U.N. or World Bank came up with some new, far-fetched proposal. Most of these initiatives lasted about a year, some two, and then fizzled out, soon to be replaced with a new, far more urgent one. They too fizzled in about the life span of a newt.
The other country that was underrepresented was the USSR. They were suspicious of market capitalism and didn’t quite know how to use such a forum. But when glasnost hit and the leaders bent to the West, the doors swung wide open.
I was sent to Moscow three times, and twice with the perky Maria Livanos, who was Klaus’s go-to girl. A rich, bossy, very organized Greek who lived for the Davos energy boost. She was a real groupie. We talked the Soviets into both sending a high-level delegation with top ministerial leaders to interact at Davos, but also into doing what we called a “country forum” in Moscow that would bring hundreds of investors and their companies to learn more about the opportunities and changes sweeping their country. We said cash in the form of foreign direct investment would flow the next week. They ate it up. We ate too much caviar! I even bought—well, traded Marlboros for—a few extra pounds of the fish eggs to eat at home. A box of cigs would buy just about anything in the USSR in those days.
The first Soviet delegation to appear at Davos was in 1990, and I was asked to be their official host. I went to the Zurich airport tarmac to greet the Aeroflot flight arrival on a red-carpeted runway. When he stepped off the plane, their delegation head, the all-powerful Arkady Volsky, head of all industry in the USSR, gave me a bear hug and presented me with the most beautiful Russian red fox hat you have ever seen. He greeted me in a dacha-like laced, Russian accent. With him were 20-odd CEOs of all the giant Kombines, oil and gas, autos, agriculture, steel, timber, minerals, you name it. A few of their top pro-market economists who spoke good English were also along for the ride and the free show.
The Forum paid their freight completely, and boy could these guys—only one translator female—drink! It was a demanding group, but we bonded, and everyone wanted to meet and hear from them. Volsky’s sole demand was that they be put up at a good hotel with a swimming pool. He was a daily swimmer. We accommodated. We also organized a giant powwow with a Soviet at each table of eight, and the room was so overflowing that people were gathered around the outer walls. Everyone at Davos wanted to know what the market opening meant for him or her and their corporate interests in a future Russia.
Six months later we put on the show in Moscow, and more than 250 Western business leaders seeking to do business in the new Russia eagerly attended and paid big bucks (OK, Swiss francs) to be there, to have dinner in the Kremlin and to seize the day. Deals were struck and relations enjoined.
At that time many of the pundits wondered about the future of perestroika and Gorbachev, our man in Moscow. One of my favorite little stories about one of these visits to Moscow in this time frame, in the dead of frozen winter, was the accommodation we were given. Volsky’s people, for safety and effect, in a chauffeured ZIL limousine, met us at the airport. Rushed off to the elite Little Oktoberist hotel, we were greeted like VIP party members of the Politburo.
I don’t think any foreign dignitaries had stayed at this small, elite, off-limits Party hotel before. It was posh and filled with goods in a non-Soviet sort of way, but it was meant for upper-echelon apparatchiks from the nomenklatura. After a late dinner and the obligatory Stoli, I checked in for the night. At about 2 a.m. my phone rang, and I awoke from a deep sleep. I couldn’t figure who would be calling me at such an hour. It was a soft woman’s voice, and she said with a delicate Russian accent, “Do you vant kompanie?” My brain lit up and I shot back and spontaneously answered, “No, and I don’t want photos, either” and hung up. They were still the old Soviet Union.
At lunch the next day, I had a reserved table arranged with Boris Fyodorov, who had a Western education from, of all places, the University of Glasgow (Adam Smith’s birthplace), and he had just become head of the central bank. He was polite, had good questions, and seemed somewhat embarrassed.
We had caviar, the best from the Caspian Sea, the finest Soviet champagne, and Georgian red wine. We had three delightful courses of fish, beef, and pork with roasted fresh potatoes and many vegetables. Dessert was a fine chocolate torte, served with strong coffee. It was the best meal I had ever had in the Soviet days. When the bill came, he took it after I pleaded to pick it up. The cost was 78 rubles. The exchange rate may have been one to one officially, but we got ours for exactly 78-to-1. The elegant lunch cost all of one dollar. How long could this last? I wondered. Was the USSR ready to implode?
Behind the scenes at Davos and in the various country capitals, however, real business got done. At Davos and at the country forums around the world, real businesspeople, top executives, paid hard cash not to be photographed or just for bragging rights—well, not entirely; they came and spent money to get access to important people to do deals.
The Global Bazaar of the Bizarre
I was involved in dozens of those in Eastern Europe, India, Brazil, and most prominently, in the United States. The U.S. forum had been poorly attended and deadly dull. It was hard to get top speakers. These things are a dime a dozen in Washington and happen nearly every other week. So, we reinvented the U.S.S. country forum, and I got all of my old pals and their bosses, and their bosses’ bosses, to come, if only for a few hours. It had a who’s who cast. With these players we were able to bait the hook and pull in all the gullible Europeans and Third Worlders who badly wanted closer access to the real American leaders and power brokers. It worked and became another cash cow. We held it at the Willard Hotel and it oozed power.
Behind closed doors is where all the collusion and cartelization took place, ha-ha. At Davos, two bankers met from UBS and Swiss Bank Corp, and later you read of a merger. The steel company of Holland sold out to their counterparts in India. Investment dollars flew like sand in the desert wind. The Japanese wanted plants in America; hello Mr. Governor (you give tax holiday, let’s shake on it). The Chinese wanted factories, and they lined up from Nortel to Motorola just to shake hands. Big Pharma met and colluded on patents and pricing. Did I see that? I swear the oil companies had a cartel going. And ADM it was said, cooked the price of corn fructose, right there. Want to sell airplanes? Autos? You name it, even armaments. It was a global bazaar of high-altitude wheeling and dealing with high price tags. And Schwab got not just praise but perhaps a cut—or at least more sponsors in the process.
There were closed dinners only for Goldman Sachs clients and lunches with Price Waterhouse where the latest and greatest author on some exotic subject held sway. The Business Exchange office had people waiting to get in to make appointments with a potential supplier, vendor, or joint venture partner. There was a fee for that service; did I mention it? You could rent a Soviet reformer or a university president; any and everything was for sale. Jeff Sachs, the notorious Harvard economist, was there rounding up country clients for his reform and anti-IMF packages. Whenever we heard he had signed someone up, it was time to “short” the countries’ debt, as I knew his advice would lead in just one direction—down.
Bono and the movie star set were parading as intellectuals and begging for donations for their favorite causes. Angelina Jolie in a hot tub, some swami in a headdress talking about inner spirituality, and a German theologian talking interfaith dialogue—it was so Davosian.
It was all there like a marketplace, the Agora. Mr. Zia, have you met Mr. Singh? Oh, you two are enemies? Well, not here in Davos. We all get along and do business. Jews and Arabs not allowed to meet? Everyone had a so-called “project” to sell. No one knows that here. And all the while the cash registers are going cha-ching for the impresario, the Wizard of Oz. They were not just stroking his ego and bowing to Swiss acumen but coughing up fees, donating again and again.
There was a lounge in the upper reaches of the huge concrete Congress Hall and a busty Texan, a former Miss Texas, I believe, worked it, serving coffee of every delight and catering to the “needs” (need to ask) of the delegates, as well. Massages, rubdowns, she knew how to please, and the lounge always seemed full for some odd reason, even at eight in the morning.
It was hard to keep going at that pace for days on end. There were partying, receptions, and dancing late at night into the wee hours of the morning. Is that the young Mr. Baja I see dancing with the Swissair stewardess(es)? Did I mention Klaus handpicked the prettiest stewardesses, and they were assigned to Davos as escorts? A lot of older men had that thank you, madam look on their faces in the morning briefings. There was considerable one-upmanship, too. Who has the biggest wallet, deal, and penis, kind of talk.
One final tale at Davos involved a former employee journalist, an Irish-American from Chicago, who drank far too much. He also laughed a lot.
John had taken a job at the International Labor Organization in Geneva as a press officer after his Davos stint, and he invited me to dinner one night at a less-than-reputable restaurant in Paquis near the red-light district. He had someone I “had” to meet. When I got there, we had drinks at the bar, and he took me to a backroom to meet Sergei, a Russian. We broke bread and exchanged pleasantries.
Near the end of the meal, he said, “I have an offer for you; would you be willing to work for us in exchange for money? We like your access to people, leaders, and businessmen, and it could be of use to us.” I got up and said on leaving, “No thanks, and I don’t appreciate such KGB solicitations.” John seemed disappointed, as he clearly was on their take.
The two most secret items at the World Economic Forum were the budget and the VIP list and its attachment, noting their “guests,” i.e., who they were sleeping with. The budget was not a public document, and it showed the income at well over $100 million. Less than half came from membership fees; more than half was an outright line-item gift from the Swiss federal government, and that didn’t even include the vast sums of money that were spent on security, military, and otherwise.
When some protests materialized one year, those costs went through the roof. Best of all was the super-secret list I mentioned above. I once, in jest, joked that I had mistakenly given that list to the press. By leaking it to the equivalent of People magazine, the world would know the next day who was in bed with whom, both boys and girls, and notice that many were, well, not exactly married. No one thought it was funny, but of course, I was only kidding.
The other favorite story I can personally relate is the battle over pricey real estate. Naturally, the biggest CEOs and heads of states wanted the best rooms. What’s new? But there are only so many of them to go around in a small ski village like Davos. Or next-door Klosters, which was viewed as second-class. They came at a steep price, and priority went to the loudest complainers. The president of Peru was lodged in prime top-floor space in the best, Hotel Belvedere (and with a mistress, I might add). When the CEO of Salomon Brothers at the time arrived, he had shabby accommodations, unfit for the king of the money game. In a normal diplomatic protocol, a head of state would outrank a CEO, but not at Davos. We kicked the president out of his room with apologies so we could please and satisfy the CEO and his perky wife, Susan. Money talks and power walks. Wicked Solly traders probably shorted Peru’s debt the next day just to rub it in.
The lesson in this Swiss power tale is, simply, never trust before you verify. It worked well for the Gipper, after all.