October 31, 2014
Atop liquid mountain
For the Herald
Five tech firms holds US$387 billion in cash
THE HAGUE — A footnote amidst last week’s stampede from a number of the world’s larger emerging economies showed exactly where to go to find a treasure chest brimming over. It has become a cliché to say that global economic shifts produce winners and losers. But an exploration of the innards of bank accounts belonging to a select few technology companies show that the last years of supposed economic paralysis around the world have also handed unfettered riches to a few.
Between them, five tech corporations, among them Apple, Microsoft, Google and Samsung, are holding US$387 billion in cash. This is just the most concentrated part of a store of banked money reaching US$2.8 trillion that is held by non-financial firms, twice the sum recorded a decade ago. Detailed in a report from Deloitte in the run-up to the wealth fest of the World Economic Forum in Davos, the amounts are in themselves eye-catching, but the pinnacles of financial might are astonishing.
Thus, tech firms are not just omnipresent, gushing effortlessly into our time and privacy as if these were items we have long sought to do without. While being cool, they are also rich; while being humane and libertarian, they are also not unlike a darkened citadel in Mordor. If it wished, with close to US$150 billion, Apple could spend its way to hosting 15 Olympic Games, or for that matter ease a national currency crisis with a flick from its dough. As it is, a small part of the cash is due to be poured into the physical embodiment of the company’s spiritual essence — a giant silver ring to be built in thick forest in the Californian city of Cupertino, costing US$5 billion , and no doubt primed to receive the first contact from an alien life-form.
None of this is to say these tech firms do not deserve their good fortune. No customer has been coerced into purchasing touch-screen technology. Many people derive purpose from these appliances, or at least solace in the idea that they can download their brain functions until bedtime. Crime is down across the West. Should these companies actually ever spend their money, then we might all frolic light-heartedly into a new golden age, 1960s but digitalized and hand-held.
Some of this optimism might have rubbed off on the invitees at Davos. Despite the turbulence affecting the Argentine peso and Turkish lira, the mood at the event appears to have been permeated by a return to confidence. A common opinion among the snow-bound dignitaries, such as Bank of England governor Mark Carney, was that a little bit of volatility was overdue, and possibly no bad thing.Whether this counts as a global conspiracy or not, a run from emerging economies would certainly appear to have its supporters in capital-hungry Europe. It might also encourage the sort of behaviour shown by Dilma Rousseff in her first outing to Davos as Brazilian president, when she gave the assembled what they most like to hear from a head of state: undying love. “Brazil desires and needs this alliance with national and foreign private investment,” she told a packed house.
However, it is one thing to treat the flight from emerging economies as a manageable storm with benign side-effects — and which, in the greater Davos scheme of things, may come second in importance to a slight tilting away in Chinese industrial production. It is quite another to grapple with the dilemma which this year’s Forum has been posed by its CEO, Klaus Schwab. “We cannot afford the luxury of allowing the next era of globalization to generate as many risks and inequalities as it does opportunities,”Schwab asserted.
A failure to manage these risks, he warned, might eventually spell catastrophe. “We are in a situation in which the places in which the spark could fly are many, and there will surely be more.” What seems to have emerged as the Davos response to these chronic issues, however, is a pall of silence. Just as street protest movements such as Occupy were chided for failing to provide sound policy advice, it is extraordinarily hard to find a clear response to global disparities beyond a few philanthropic deeds and an insistence on the forward path.
And here is where the spin of emerging economies plays a potentially significant role. Should the problems encountered in Argentina and elsewhere prove contagious, then the one unconditional ally of finance and business in the quest to globalize might start to get cold feet. For whatever regrets may be voiced in Davos over the unemployed in Europe, or the underclass of the Islamic world, one feat of the globalizing economy has been undeniable. The rise of the super-rich has gone hand in hand with the ascent of a huge middle class cohort in large developing economies, most notably Brazil, India and China. In place of trying to excuse their extraordinary gains in recent decades — the world’s 85 richest people now own as much as the poorest 3.5 billion, according to Oxfam — the global elite can justify themselves with a job well done in bringing millions of poor along with them.
According to journalist Chrystia Freeland, the argument was recently heard during a board meeting of a major US investment fund. “If the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile one US citizen drops out of the middle class, that’s not such a bad trade.” Before a domestic public, however, the point tends to be kept under wraps.
If these new middle classes really begin to suffer, then none of the Davos confidence of 2014 will last long. But for now, the risk is a distant one. Currency turmoil can be confined. And we can all await the effects of the great tech cash mountain, even if the cool firms end up taking the dystopic shape foreseen in a new novel by Dave Eggers. The Circleis about a tech company that offers all-seeing interconnectedness to those who let themselves be seen in everything they do. It resembles the new Apple HQ. It also resembles Davos at its worst. For while Eggers’ firm promises freedom, it delivers the exact opposite.