Those of us who diligently follow financial forecasts know that the place to turn to chart the course of the economy over the next 12 months is Davos, Switzerland, the host city of the annual World Economic Forum each January.
Rule of thumb: Listen carefully to what the assembled business and political leaders predict and then take the other side. Or as American economist Kenneth Rogoff said in 2020:
“No matter how unlikely it is, the most likely event to happen is the opposite of whatever the Davos consensus is.”
“I think this negative talk about MAGA is going to hurt Biden's election campaign.”
—Jamie Dimon, CEO of JPMorgan Chase
It's hard to find a single explanation for the long history of Davos attendees missing signs of impending global recessions or confidently forecasting recessions that never come (among other errors).
But a jamie dimon interviewchairman and CEO of JPMorgan Chase & Co., broadcast Wednesday morning on CNBC offers a clue: potentates and plutocrats arrive at Davos without the faintest idea what they're talking about.
While basking in the spotlight of a CNBC kiosk with snow-covered Davos evergreens behind him and serious, parka-clad CNBC anchors in front of him, Dimon vented some remarkably delusional judgments about current affairs and politics recent.
Dimon's general view on politics was that Donald Trump was not that bad of a president and therefore Democrats should be more careful about attacking him and his supporters. “I think this negative talk about MAGA is going to hurt Biden's election campaign,” he said.
Dimon tried to get into the minds of MAGA supporters. “I don't think they're voting for Trump because it's family values,” he said.
“Be honest,” he said. Trump is “a little right about NATO. A little reason about immigration. He grew the economy quite well. The tax reform worked. … I don't like the way he said things about Mexico, but he wasn't wrong on some of these critical issues, and that's why they're voting for him.”
We'll have to unravel some of this ourselves, because Dimon's CNBC interlocutors sat silently as he spoke. If they dared to ask “how is he right?” those questions and their answers did not appear in the broadcast. Let's start.
Is Trump “a little bit right about NATO”? While president, he told members of the European Commission (in Davos!) that “if Europe is under attack, we will never come to help you or support you,” according to Thierry Breton, a French commissioner. He said Trump added: “By the way, NATO is dead and we're leaving, we're abandoning NATO.”
Trump's repeated promise to withdraw from NATO led Congress to insert a provision in the annual Defense Appropriations Bill that prohibits any president from leaving NATO without two-thirds approval of the Senate. The law, including that provision, was signed into law by President Biden in December.
If Dimon was referring to Trump's pledge to withdraw or his denigration of the mutual defense provision of the NATO treaty, which commits all NATO members to defend themselves against an attack against any of them, then Dimon's statement contradicts his own opinion on the need to support Ukraine against Russia in the CNBC interview.
That battle “is about freedom and democracy for the free world,” Dimon said, urging American political leaders to explain to voters why it is necessary to support Ukraine. Ukraine “may be about whether the world will be free and safe for democracy for a hundred years.” Ukraine is not a member of NATO, but supporting a European country under attack is obviously incompatible with leaving NATO.
Immigration? Trump's most recent notable comment on this issue is that immigrants are “poisoning the blood of our country,” delivered at a Dec. 17 rally in New Hampshire. Was he “somewhat right” about that?
The Trump administration's immigration policy encompassed the notoriously inhumane practice of family separation, under which thousands of children were forcibly separated from their families on this side of the southern border; Around 1,000 children remain missing. Was that “kinda right”?
In October, the Biden administration settled a lawsuit over the policy by allowing families to remain in the United States while they search for their children and pledged to end family separations for eight years.
Dimon stated during the interview that securing the border is imperative. He was not asked or mentioned who is responsible for blocking a sensible immigration policy. It's Trump's party: The House Republican caucus refuses to accept an immigration deal unless it includes draconian provisions that would ban nearly all asylum and mandate construction of a border wall, something Trump failed to accomplish. himself during his four years in office. .
Did the tax reform work? Without a doubt, the 2017 tax reform worked for taxpayers like Dimon and for corporations like his. But there is no discernible evidence that he achieved what his Republican backers claimed were his goals: growing the economy and raising so much government revenue that it would “pay for itself.”
As a percentage of gross domestic product, federal tax revenues plummeted after the 2017 tax cuts to 16% in 2020 from 17.4% in 2016. The tax cuts also had no notable effect on wages, despite of Trump officials' promises that average wages would rise. increased between 3,000 and 7,000 dollars per worker.
The study that predicted such an outcome, Republican economist Bruce R. Bartlett observed in Senate testimony last May, was “more of a public relations document than a serious analysis; once its purpose was fulfilled and the legislation enacted, it was forgotten.”
However, the tax cuts had a notable effect on the world Dimon occupies. The average tax rate paid by his corporation, JPMorgan Chase & Co., fell to 24.5% of net income in the five years since the cuts, from 38.6% in the five years before they were enacted. .
It may be true or at least debatable, as Dimon said, that Trump “grew the economy pretty well.” But there is no doubt that in many ways his record pales in comparison to that of his successor.
In the first three years of his term, leaving aside the pandemic year of 2020 when employment plummeted, Trump achieved average annual job growth of about 289,000. In the final two years of Biden's term, leaving aside the post-pandemic year of 2021, when jobs rebounded strongly from the previous year's losses, jobs grew by an average of 481,000 a year.
One can only speculate as to the source of Dimon's views on MAGA politics. He is a very intelligent and accomplished executive; No one without his ability and insight could have been CEO of the country's largest banking company for 18 years and its president for 17. Much of what he has said during that period was worth listening to, especially when it comes to business, economics and finances.
However, when issuing political proclamations, he seems like someone out of his lane. It is not unusual for someone so accomplished in a field and so wealthy to feel the urge to stray into topics far beyond their field of expertise, especially when their opinions are publicly sought by sycophantic interviewers. Who could resist?
This is also why the arrogant predictions that come out of Davos year after year are so ridiculously unreliable and the vision of the future so confusing.
In 2022, for example, the then-president of FTX.US, the U.S. unit of the cryptocurrency company, told attendees that the company was in a “very good situation” and had so much capital that it would soon seek acquisitions. The following year, its founder, Sam Bankman-Fried, was accused of fraud and the company went bankrupt. That same year, Davos was certain that a recession in Europe was inevitable; It hasn't happened yet.
In 2008, no one in Davos realized that the subprime mortgage crisis was exploding and would therefore produce a major recession. In 2016, no one in Davos expected Trump to win the election or for the United Kingdom to organize Brexit, its departure from the European Union. The following year, Davos organizers were so mortified that they even scheduled a session on why the assembled experts got it so wrong.
The fact is, assembling a crowd of successful but self-important luminaries to forecast the future is a fool's game. They are wrapped up in their own worlds and isolated from what is happening on the ground.
They are also not used to being challenged in public. One of those rare moments occurred during a panel at the 2019 meeting, which discussed a proposal from Rep. Alexandria Ocasio-Cortez (D-N.Y.) for a 70% tax rate on income over $10 million. of dollars.
Panelist Michael Dell, the computer entrepreneur, scoffed. “Name a country where that has ever worked,” he said.
Dell's fellow panelist, economist Erik Brynjolfsson (then of MIT, now of Stanford), chimed in immediately. “America,” he said. “From about the 1930s to about the 1960s. … And those were actually pretty good years for growth. … There are actually a lot of economics that suggest it won't necessarily hurt growth.”
Dell had nothing to say. However, the panel's moderator, Heather Long of the Washington Post, did. The top tax rate exceeded 70% only “briefly, in the 1980s,” she said.
Not so. The top tax rate in the United States, as Brynjolfsson said, exceeded 70% from 1936 to 1982, peaking at 94% in 1944-1945. And those decades spanned some of America's most prosperous periods.
But to misunderstand something so fundamental? Over the 53-year history of the World Economic Forum, that has become a tradition.
