Davos Man, page 15
These details garnered little attention among the French public until January 2020, when Macron conferred the ultimate distinction on the president of BlackRock France, Jean-Francois Cirelli, elevating him into the ranks of the country’s Legion of Honor. The head of the local branch of the world’s largest asset management company was now officially a national hero.
The pension reform plan had already stirred up a vociferous protest movement. On the barricades, the public acclaim for the BlackRock chief appeared to validate every suspicion about Macron: he was a tool for international finance; the President of the Rich selling out the public interest by funneling national savings to Davos Men.
Nearly one hundred protestors stormed BlackRock’s office57 in Paris, accusing the company of a conspiracy to seize public wealth. They spray-painted anticapitalist slogans on the walls and carpets before the police arrived to make arrests.
BlackRock protested that it was an innocent bystander. “We deplore the fact58 that our company continues to be caught up in an unfounded controversy driven by political objectives,” the company said in a statement. “We reiterate that BlackRock has never been involved in the current pension reform project and does not intend to be.”
But whether and how BlackRock had lobbied for pension changes notwithstanding, Fink’s company was certain to benefit from any shift of French savings into the stock market by dint of being the largest money manager on the planet. Buying almost anything in the global marketplace—stocks, bonds, mutual funds—presented the likelihood that BlackRock would capture a piece of the action.
Davos Man had won the day. Macron’s party had the power to institute his pension alteration, histrionics aside.
Despite his perpetual humiliations, the taunting names, and the accusatory slogans, Macron had produced no less than a revolution: France was now governed by the same principle that had spurred upward mobility for billionaires from the United States to Britain—the idea that the key to national salvation was making life more rewarding for people like Larry Fink.
The Cosmic Lie had so comprehensively captured the globe that it was even shaping economic policy in the ultimate bastion of social democracy—Sweden.
Chapter 6
“Every Stone I Looked Under Was a Blackstone”
How Davos Man Conquered Utopia
As a special rapporteur on housing for the United Nations, Canadian human rights lawyer Leilani Farha traveled the world, documenting the impacts of financial players trading housing like fungible commodities—the evictions and foreclosures, the trauma for families forced to abandon homes and neighborhoods, the rootlessness and despair.
In Prague, Farha learned of a building full of Roma, a vulnerable minority group long subject to extreme discrimination. They were being pushed out by a new development and threatened with imminent homelessness. Farha was surprised to discover that an American company was an investor in the project. She soon encountered the same firm in Germany, Spain, and the United States.
“Every stone I looked under was a Blackstone,” Farha told me. “They were ubiquitous.”
Blackstone was the world’s largest private equity firm. It was in control of an unrivaled global collection of real estate—a landlord mercilessly devoted to the extraction of profit. Over the years, Blackstone’s cofounder, Stephen A. Schwarzman, had applied his inexhaustible drive to assemble a business empire like no other.
Through a series of holding companies and joint ventures, Schwarzman’s firm had taken control of apartment blocks, houses, and office buildings in cities around the world, employing the same basic playbook: Buy cheap, in communities where tenants were vulnerable. Raise rents, impose fees, and flip the assets to someone else.
It was a model that had proved bountiful to Schwarzman’s shareholders and traumatic to the communities in which he operated.
Blackstone was present even in Sweden, the supposed paragon of enlightened social democracy. The company had invested with a local partner in a low-income community on the outskirts of Stockholm, where tenants were outraged about diminished service, exponentially higher rents, and evictions.
Farha found this astounding. Sweden was by reputation the sort of country that seemed engineered to prevent the predation of billionaire landlords.
But that notion was fast becoming out-of-date.
Like nearly everywhere else, Davos Man had captured the upper hand in Sweden, persuading the government to slash taxes for the wealthy. Economic inequality was widening. Public services were stretched, sowing popular unhappiness. This had created an opportunity for a right-wing party with roots in the neo-Nazi movement, the Sweden Democrats. The movement was gaining support by blaming Sweden’s problems on immigrants. Much like in France, Italy, and the United States, this formulation proved highly effective in capturing votes, but its explanatory power was misdirected. It provided a reprieve to the real culprits for Sweden’s troubles—Davos Men like Schwarzman.
Among the sources of unhappiness in Sweden was the difficulty of finding affordable housing—a reality that reflected how Schwarzman and other billionaires had upended the real estate market.
In March 2019, Farha and another U.N. special rapporteur focused on human rights wrote a letter addressed to Schwarzman personally.
“The financialization of housing1 is having a grave impact on the enjoyment of the right to adequate housing for millions of people across the world,” their letter declared. “As one of the largest real estate private equity companies in the world, with $136 billion of assets under management, operating in North America, Europe, Asia and Latin America, your practices are significantly contributing to this.”
The letter directly cited a neighborhood Farha had visited in Sweden, where tenants had been pushed out by higher rents. It accused Blackstone of applying “significant resources and political leverage to undermine domestic laws and policies”—specifically, stripping away rent control laws.
Blackstone defended itself with impeccable Davos Man logic. Its real estate ventures were not the cause of distress. They were, in fact, the solution.
“We share your concern about the chronic undersupply of housing in major metropolitan centers around the world,” the company wrote, “and are proud that Blackstone has contributed to the availability of well managed rental housing by bringing significant capital and expertise to the sector.”
There comes a point in nearly any conversation about economic inequality where someone starts talking about Sweden.
Among those in favor of government playing an active role in tackling social problems, Sweden serves as shorthand for an ideal approach. It operates on the so-called Nordic Model, the economic setup that prevails throughout Scandinavia, enjoying exalted status among many economists as a proven means of softening the rough edges of capitalism. The model retains the virtues of market forces—innovation and competition—while putting a floor beneath society, preventing homelessness and destitution.
The key has been a shared willingness among Sweden’s people to pay some of the highest taxes on earth in exchange for generous public services. Health care and education are universally available and furnished by the state. When a baby is born in Sweden, the parents are guaranteed 480 days of leave, to be divided between them. That policy, combined with government-provided childcare, has enabled Swedish women to work2 at higher rates than in nearly any other country.
Unions sit down with employer’s associations to hash out contracts that establish basic pay scales, with everyone clear that workers are entitled to a representative share of the profits. When people lose their jobs, they gain comprehensive unemployment benefits and access to a remarkably effective job training program.
Americans tend to view our own winner-take-all system as the genuine form of capitalism, while dismissing the Nordic variant as nanny state socialism. But this is backward. Capitalism as practiced in the United States has been hobbled, not promoted, by the nation’s minimalist social safety net. How many laid-off steelworkers might be able to train for more productive careers if a year of college did not cost as much as a BMW? How many startup companies never come into being because Americans are dependent on employers for health care, making people afraid to try something new?
In Sweden, government officials like to say that they protect people, not jobs. They allow the markets to sort out which businesses succeed and which fail, while ensuring that workers are cushioned against the consequences.
In 2017, I visited a mining operation in the center of Sweden, where truck drivers were slated to be replaced by self-driving vehicles. Crews that used to journey into the frigid mineshaft, inhaling dust and exhaust fumes, had been superseded by a handful of workers who sat inside, using joysticks to control robots that physically extracted silver and nickel.
In much of the world, automation was a source of terror for working people, a direct threat to their paychecks. Robots never got sick and had no interest in spending time with their families. “Frugality drives innovation,”3 Bezos had once said. He was putting that principle to work in developing drones to replace delivery drivers and robots to take over from warehouse workers. In many countries, unions were mobilizing in resistance to automation.
Not in Sweden. The miners put stock in the Nordic Model4. They expressed faith that if their company gained greater flexibility to proceed with automation, that would lift profits, and they would wind up sharing the gains.
But that faith rested on the assumption that the Nordic Model would itself endure. And that proposition was confronting a stiff test in the form of Europe’s largest per capita influx of refugees.
The refugees were arriving from some of the most troubled places on earth—Syria, Somalia, Afghanistan, and Iraq. They bore physical and emotional scars. They required housing, health care, mental health counseling, and job training. Their children needed schools. All of these things cost money.
The traditional willingness of Swedes to finance extensive public services had long rested on a basic understanding: everyone had to work.
Many of the newcomers would face difficulty forging careers in Sweden. They didn’t speak Swedish, and often lacked education.
“People don’t want to pay taxes to support people who don’t work,” said Urban Petterson, who held a seat on the local governing council in the town of Filipstad, in the lake country west of Stockholm. “Ninety percent of the refugees don’t contribute to society. These people are going to have a lifelong dependence on social welfare. This is a huge problem.”
These sorts of stereotypes were common among Petterson’s party, the Sweden Democrats. Its members tended to write off migrants as lazy parasites, despite the fact that most were busily studying Swedish and training for careers. The party was exploiting the migrants as an opportunity for a needed makeover. It was recasting its racist rejection of multiculturalism as a form of fiscal rectitude.
As we sat in a cafe in the center of town in June 2019, Petterson spoke of budget math in describing his opposition to immigration. But the longer we spent together, the more he betrayed his basic discomfort with the presence of Somali women pushing shopping carts on the streets of his town.
“These groups don’t have the same language,” Pettersson said. “They have different religions, different ways of life. If there’s too many differences, it’s hard to get along. It’s interesting to meet someone from another country for half an hour. But if you’re going to live together it’s tough.”
The Sweden Democrats had emerged from the political wilderness to capture mainstream status. The party had run third in national elections in 2019 on the strength of the message that integrating refugees was a drain on the treasury.
In Filipstad, the local government had initially embraced the refugees as a solution to a budget problem. Surrounding iron ore mines, once a major employer, had been shuttered in the 1970s. The town’s population had been halved from twenty thousand to ten thousand, as people left in search of work. Those who remained tended to be older, requiring expensive health care. Looking after senior citizens was a core responsibility of municipal governments. With the tax base shrinking, who would pay to take care of the grandparents?
In the designs of the government, the refugees would fill the gap. Most of the people arriving needed public support, but their children would grow up speaking Swedish. They would be educated in Swedish schools, making them fully capable of forging careers. Their taxes would finance needed services.
“This doesn’t shake the Swedish welfare model in any way,” Claes Hultgren, the municipal manager in Filipstad, told me. “Rather, when we have succeeded with these people, they will be a huge resource.”
Decades of Swedish experience suggested this was true. The problem was that the government was not following through with the needed support.
The first refugees began arriving in Filipstad in the 1980s, mostly from the Balkans. The current wave had begun in 2012, cresting in 2015, when 160,000 people applied for asylum. Sweden was a country of 10 million. This was the equivalent of 5 million people arriving in the United States in a single year.
The national government bused them en masse to Filipstad, taking advantage of the availability of empty housing. When municipal officials expressed concerns about the costs of integrating so many, the government sent money covering the first two years. After that, the cash stopped on the understanding that the refugees would by then be ready for work.
But that was delusional. The first arrivals had included doctors and other skilled professionals, who were easy to integrate. The later arrivals were far more challenging. As I visited in 2019, the town held 750 working-age refugees. Five hundred had never completed high school, and 200 were illiterate.
“The state keeps saying we need to prepare people fast,” said Hannes Fellsman, who ran the municipal training programs. “That’s impossible. You have to educate them.”
In my meetings with Sweden Democrats, every conversation about immigration seemed to begin with careful talk of government allocations before veering to their revulsion over Sweden becoming a more diverse society.
Another member of the Sweden Democrats on the Filipstad council, a bus driver named Johnny Grahn, groused about the cuts the town had been forced to make as it expended more on the refugees. It had eliminated a coordinator for activities at a senior center. People were enduring interminable waits for dental care.
“There is almost a collapse in the system,” he said. “All of these cuts are made to balance the budget, which is right now being dominated by welfare. When there are so many people arriving who don’t work, the whole thing falls apart.”
Then he told me about the mosque that had been constructed in town. The early morning call to prayer was waking longtime residents, Grahn complained. Preschools were “inundated” with refugee children, he said. Violent crime was increasing.
“We are talking about people who don’t want to learn Swedish, and don’t want to enter society,” he said. “Integration isn’t just about us helping them. They have to want it.”
This sort of nonsense collapsed upon meeting nearly any migrant who had endured the journey here.
In the south of Sweden, I spent an afternoon with a refugee from Afghanistan named Babak Jamali. Six years earlier, when he was only thirteen, he had fled the war in his native Afghanistan, riding in the trunk of a car through Pakistan and into Iran. There, he found construction jobs for $2 a day, while he squatted in half-finished apartment blocks. Lacking legal papers, he was perpetually vulnerable to police who would shake him down for bribes. He hired a smuggler to truck him into Turkey, and then to Greece. He rode buses up the Balkan peninsula and eventually to southern Germany. Another Afghan refugee told him life would be easier in Sweden, so he caught a train to the city of Malmo.
For the last year, he had been living with an artist outside the town of Horby, in an old brick house that lacked plumbing. By law, he could not work while his asylum case was pending, so he was studying Swedish, attending classes six days a week in the hopes of eventually training to become an electrician. To get to class, he walked fifteen minutes up a dirt road—even in subzero winter temperatures—and then waited for a bus to town. One driver refused to pick him up, forcing him to wait for the next bus. Sometimes, passing drivers hollered at him, telling him to go home.
In the pie charts assembled by officials tasked with managing refugees, Jamali presented as the worst-case scenario—the sort of person most likely to draw indefinitely on the beneficence of the taxpayer. He had not completed middle school and spoke very little Swedish. But that profile masked the reality that he had navigated terrifying obstacles to get here, and was intent on working toward a career. Surely this was testament to intelligence and drive.
“I want to live the way other people live,” he told me.
The racism that infused the Sweden Democrats was not incidental to their view of public finances. It was the driver of a growing aversion to paying taxes, a sentiment that threatened the Nordic Model. The spirit of collectivism began fraying once the beneficiaries of community largess included large numbers of people who were different from the majority.
A similar erosion of solidarity was fundamental to understanding the antitax rebellions in the United States, beginning in the 1980s. Racial integration prompted the white power structure to dismantle public works.
In the American South, the ending of racist Jim Crow laws in the 1960s had begun the exodus to the suburbs by white families seeking distance from Black communities. Dependent on their minivans for transportation, professional-class white families balked at paying taxes that financed services like public transportation.
By the 2010s, as the United States sought to escape from the Great Recession, unemployment offices in cities like Atlanta and Nashville were full of African American men who could not reach available jobs. Many lived downtown, while work had gravitated to the suburbs. The public bus did not bridge the divide.
