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Quo Vadis World Economy – I: White Darkness at Davos

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A gloomy mood marked this year’s meeting at the rich club Davos. Women were told to take care owing to the explosion of “sex tourism” in Davos, and many millionaires who advocated for vegetarianism and gender equality flew private planes to Switzerland.

Nevertheless, the atmosphere there was dark. Annually released around the time of the Davos Summit, the World Economic Forum (WEF) Global Risk Report presented shocking findings. We are expected to witness social and environmental crises; the cost of living is ranked as the most severe crisis, and “biodiversity loss and ecosystem collapse” is viewed as one of the fastest deteriorating global risks.

Inflation could lead to stagflation, the socioeconomic consequences of which could be severe, given an unprecedented interaction with historically high public debt levels. Global economic fragmentation and geopolitical tensions could also contribute to widespread debt distress.

As if that wasn’t bad enough, the report went on to predict that technology would worsen inequality, food and fuel crises exacerbate societal vulnerabilities, and declining investments in human development erode future resilience.

Is there any cause for optimism in this dark scenario? For the WEF, there is.

‘Stakeholder capitalism’

“What kind of capitalism do we want?” was asked by Klaus Schwab, a WEF founder, in his 2019 Davos keynote.

Schwab thinks there are three models/answers to address the crisis.

The first is ‘shareholder capitalism,’ embraced by Western corporations. In this model, a corporation’s primary goal is to maximize its profits.

The second model is “state capitalism,” which entrusts the government with setting the economy’s direction and has risen to prominence in many emerging markets, not least China.

Third, of course, is the way Schwab also proposes, ‘stakeholder capitalism.’ In Schwab’s own words, it is a model he proposed half a century ago, positioning private companies as ‘trustees of society.’

The WEF founder argues that the single-minded focus on profits caused capitalism to become increasingly disconnected from the ‘real economy.’ This form of capitalism is no longer sustainable. Instead, large corporations must cultivate ‘stakeholder capitalism’ along with governments and multilateral organizations.

When discussing the transition from shareholder capitalism to stakeholder capitalism, Schwab emphasized the significance of the ‘Greta Thunberg effect.’ For him, the Swedish climate activist has reminded us that adherence to the current economic system represents a betrayal of future generations. Moreover, Generation Z no longer wants to work for, buy from, or invest in companies that lack values beyond ‘shareholder values.’

Now some facts

The WEF-painted bleak picture and its calls for ‘sustainable’ capitalism are close to the truth.

The 2022 Global Wealth Report by Credit Suisse estimates that global wealth will have increased to $463.6 trillion by the end of 2021. This is almost 4.5 times the total worldwide output.

Furthermore, international wealth climbed by 9.8 percent in 2021, much higher than the average growth rate of 6.8 percent witnessed since the turn of the century.

Behind this enormous jump are rising real estate prices and stock market growth fueled by credit expansion. That is to say, a significant portion of the rise in wealth can be explained by the enrichment of the richer in the world.

Indeed, the report estimates that by 2020, a mere one percent of the global population (56 million individuals) possessed 45.8% of all wealth, while the other 2.9 billion owned just 1.3%. This ratio changed as follows in 2021: What one percent of the population now owns rose to 47.8 percent of all the wealth. The richest 13% has 86 percent of the total wealth.

According to the inequality report by Oxfam, just four cents in every dollar of tax revenue collected globally came from taxes on wealth.

Income tax collection from the wealthiest in OECD countries has decreased from 58 percent (in 1980) to 42 percent now.

This rate drops to 31 percent when the number of countries in the sample is expanded to 100. In the same sampling set, tax on capital income, one of the significant sources of wealth for the top 1%, has an average rate of just 18 percent. Only three countries have a higher tax rate on capital income than on wages.

International institutions are also pessimistic

The warnings of IMF Director Kristalina Georgieva before Davos are worth remembering. According to Georgieva, a third of the world will face a recession in 2023.

The OECD revised down the IMF’s forecast for global GDP growth from 2.7% to 2.2%. Arguing that the growth ‘has lost its momentum,’ the OECD noted that risks are skewed to the downside.

The World Bank went even further, projecting the global growth rate to be at 1.7 percent and growth in per capita income in all regions of the world to be lower than in the pre-COVID decade.

According to the World Bank, by the end of 2024, GDP levels in emerging and developing economies will be roughly 6% below the levels expected before the pandemic.

In the WEF’s Chief Economists Outlook survey, economists are even more pessimistic. 18% of polled chief economists in public and private sectors said that experiencing a global recession this year is ‘extremely likely.’

One-third of economists expect a global recession and anticipate that the United States and Europe will maintain their tight monetary policies.

All surveyed chief economists predict Europe to grow ‘weakly or very weakly’ in 2023. For the US, 91% forecasted ‘weak or very weak growth.’

In last year’s survey, these rates were 86 percent (for Europe) and 64 percent (for the United States).

Nine out of ten respondents agreed that corporations would feel the effects of low demand and high financing costs. At the same time, six out of ten underscored the rising input prices. For these reasons, many chief economists expect multinational corporations to reduce operational costs to cut expenses.

Huge dismissals at tech giants

What the economists polled by the WEF thought about multinational corporations has taken place for a while.

Having seen exorbitant stock rises and announced huge profits during the pandemic, technology giants began to ‘update’ their operational expenses due to the severe drops in their balance sheets last year.

Expanding their workforces in tandem with the growth of online activities during the pandemic period, American multinational monopolies, such as Alphabet (Google), Meta, Amazon, and Microsoft, started laying off employees as a primary measure against the shrinking industry.

The number of layoffs in the IT industry has reportedly reached 200,000 since the beginning of 2022, according to the website layoffs.fyi, which tracks releases in the technology sector.

In 2023, 67,268 people would have lost their jobs in this industry. About 51,000 people have been dismissed in the previous several weeks by Meta, Amazon, Microsoft, and Google alone. The only giant in the industry that has not announced a layoff so far is Apple.

The tech monopolies, on the other hand, are wallowing in money. Recently, Microsoft announced its profit for 2022 Q3 as $16 billion. If federal regulators had not stepped in to block the deal, Microsoft would have acquired the video game producer Activision Blizzard last year for $69 billion.

Meta reported a profit of $4.4 billion in the third quarter of 2022, although reporting a 52% decrease compared to last year.

Amazon also announced a decline in profits, but the company still made almost $3 billion in the latest quarter.

Layoffs spread across all industries

However, Silicon Valley giants are not an exception in dismissals.

Software giant SAP of Germany has announced it would lay off 3,500 staff, while chemical conglomerate Dow will fire 2,000 workers. Executives at Dow have said that they will cut costs by $1 billion this year.

3M, another American multinational giant, will reduce its staff by 2,500 on the pretext of falling customer demand.

The toys company Hasbro will lay off 1,000 workers, equal to 15% of its current workforce.

10% of employees will be dismissed at Salesforce, 6% at Spotify, 11% at Vimeo, 3% at BlackRock, and 7% at Goldman Sachs.

In the following articles, I will focus on the situation in the USA and Europe.

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Congress poised to block Trump team’s $1.5 trillion defence budget bid

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The US Congress is unlikely to approve the Donald Trump administration’s record $1.5 trillion defence budget request for the 2027 fiscal year.

According to a report by The Washington Post citing congressional sources, budget negotiations have stalled due to cross-party disagreements.

Roughly 30 US lawmakers interviewed by the newspaper said that defence policy and spending bills had reached an “impasse” following the total collapse of bipartisan consensus and personal friction between members of Congress and US Defence Secretary Pete Hegseth.

The Trump administration aims to divide the requested funding into two tranches, seeking support from a portion of Democrats for an initial $1.15 trillion package while pushing through a second $350 billion portion solely with Republican votes.

According to the report, Republicans have failed to secure even internal consensus to pass this second $350 billion package.

The US defence budget for 2026 stands at approximately $1 trillion, which includes a one-off allocation of $150 billion approved by Congress last year for priority objectives ranging from the development of advanced weapons systems to incentivising the American defence industry.

The new budget requested by the administration foresees a 40% increase in defence spending, covering funding for new weaponry and replenishing stocks of precision-guided missiles expended during the war with Iran.

Defence Secretary Hegseth also asked Congress to allocate an additional $67 billion for military operations, including the conflict with Iran.

The Washington Post noted that lawmakers have very limited time to resolve the crisis, as only 20 working days remain for Congress before the end of the year.

Bill for Middle East military operations mounts

The US proposed that defence spending be taken into account when allocating privileges within NATO.

According to a report by The Hill based on a US Central Command (CENTCOM) assessment, Washington’s expenditure on military operations targeting Iran has risen by more than $3 billion over the past month, reaching $47 billion.

The CENTCOM document indicates that munitions procurement constitutes the largest share of military spending at $29 billion.

Additional costs tied directly to conducting combat operations amount to roughly $12 billion, while $6.1 billion is needed to replace lost military equipment and hardware.

Expenditures for supporting personnel deployed to the region, air transport, communications, and logistical transit in the theatre of operations are calculated at $7.6 billion.

Expenses required to repair and rebuild US military bases in the Middle East were not included in this official cost breakdown.

In July, the House of Representatives narrowly passed a $1.15 trillion defence budget bill by a margin of just 216 votes to 212.

Six Democratic lawmakers voted in favour of the bill, while seven Republican lawmakers voted against their own party.

The Washington Post had previously reported that the Pentagon faced a severe funding shortfall.

The White House had requested an urgent $67 billion from Congress to cover military spending.

The newspaper noted that if lawmakers failed to act, the military would soon be forced to make far more painful concessions.

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Bolsonaro reportedly leaves Brazil on jet linked to scandal-hit firm

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Flávio Bolsonaro fled Brazil on a plane belonging to the fleet of Argentine company Baires Fly, a firm linked to a businessman associated with a convicted drug trafficking conspirator, according to allegations.

The company, tied to an entrepreneur with business links to Federico “Fred” Machado, who faced drug trafficking charges in the US, is also named in a corruption investigation involving disability agency funds under the administration of Javier Milei.

Fórum Investiga, the investigative unit of Revista Fórum, uncovered these connections through court documents and public records in Argentina and the United States.

Sergio Daniel Mastropietro, a commercial broker for Baires Fly, was a business partner of Machado and currently faces money laundering and illicit association charges in connection with the scandal at Argentina’s National Disability Agency (ANDIS).

The company’s role drew scrutiny after the Argentine government confirmed early Wednesday that Bolsonaro entered the country with his wife and two daughters and boarded a private Baires Fly aircraft bound for Guayaquil, Ecuador.

According to Argentina’s National Directorate of Migration, the family crossed the border via the Tancredo Neves International Bridge between Foz do Iguaçu and Puerto Iguazú on Tuesday at 22:50.

The family boarded the plane at 23:30, and the Gulfstream G400, registered as LV-JQW, took off at 00:22 on Wednesday.

The journey followed an order by Federal Supreme Court Justice Alexandre de Moraes seizing Bolsonaro’s passports and barring him from leaving Brazil.

The drug trafficking link traces back to Argentine aviation businessman Federico Andrés Machado, known as Fred Machado, who was accused in the US of participating in an international ring tied to cocaine trafficking and money laundering.

Machado was a partner with Sergio Mastropietro in SO VAIN S.A., a company formed in 2010 for aviation-related ventures. Argentine investigations also documented shared travels, commercial ties, and common Buenos Aires addresses between the two men.

In February 2021, the US Department of Justice unsealed indictments against eight individuals for their roles in an international conspiracy involving narcotics trafficking, money laundering, and financial fraud.

Machado was among those indicted and was identified as an operator engaged in the purchase and sale of aircraft through his firm, South Aviation.

The investigation encompassed a network utilizing US-registered aircraft, several of which were seized in other nations while carrying large shipments of cocaine.

Machado was extradited from Argentina in November 2025 and subsequently reached a plea agreement with US prosecutors.

In August 2026, a federal court in Texas convicted him of conspiracy to commit money laundering and wire fraud.

The initial drug trafficking charge was dismissed as part of that plea agreement.

Machado’s commercial connection is with Mastropietro rather than directly with Baires Fly. The official owner of the company is Luis Grande, who has operated in Argentina’s private aviation sector for decades.

The other scandal involving Baires Fly centres on ANDIS, the agency responsible for providing assistance to people with disabilities in Argentina.

That inquiry examines allegations of contract steering, overbilling, kickbacks, and money laundering in questionable tenders during the Milei administration.

According to documents from the investigation led by federal prosecutor Franco Picardi, two ANDIS providers, Prolite Orthopedics and Probock, transferred 95.06 million Argentine pesos into a Baires Fly bank account on 10 September 2025. That sum represents approximately $62,000 based on exchange rates from 28 October 2026.

The payments occurred after Mastropietro sent the firm’s banking details to Miguel Ángel Calvete, who was identified as one of the figures behind the fraudulent scheme under investigation.

Following those transfers, invoices were issued for the advance purchase of flight hours on company aircraft.

Investigators suspect these commercial transactions were used to lend an appearance of legality to funds derived from irregular public contracts.

Financial tracking uncovered even larger sums. Documents reviewed by Argentine courts show Baires Fly billed five companies tied to the investigated contracts approximately 1.097 billion pesos, or around $720,000, between 2023 and 2025.

This figure reflects registered commercial transactions; it represents a fully confirmed amount of embezzled funds.

On 16 October, federal judge Ariel Lijo ordered formal charges against Mastropietro on suspicion of aggravated money laundering and illicit association.

The ruling also expanded charges against former ANDIS director and former Milei ally Diego Spagnuolo, alongside others allegedly involved in the conspiracy.

Argentina’s Federal Prosecutor’s Office stated that the probe revealed suspected fraud in contracts for medication, prosthetics, and equipment intended for assistance programme beneficiaries.

The airline maintains business relationships with figures across Argentine politics. In November 2023, days after winning the presidential election, Javier Milei used a Baires Fly plane to travel to the US. Luis Grande, the company’s owner, piloted the flight.

In the ANDIS investigation, Mastropietro denied managing Baires Fly or being formally part of the company, saying he acted only as an intermediary arranging aviation services.

The company maintains that it has no connection to the money laundering allegations.

The documents do not show that Bolsonaro was involved in the ANDIS scheme or in any drug trafficking activity.

There is also no evidence that Fred Machado played any role in arranging the flight.

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Rubio outlines Venezuela election plan, says US will not wait two years

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In the United States, the Trump administration has unveiled its plan to support electoral reforms in Venezuela and lead the country toward presidential elections.

US Secretary of State Marco Rubio told international journalists during a press conference on Monday that Venezuela’s current electoral infrastructure was “designed to rig elections”.

As the chief architect of the administration’s Venezuela policy, Rubio argued that this system must be overhauled quickly to enable a valid vote.

According to Rubio, talks between the government of Interim President Delcy Rodríguez and opposition factions led by Dinorah Figuera are moving toward a concrete timetable.

The sides are preparing to appoint a new Supreme Tribunal of Justice (TSJ) before the end of the year, followed immediately by the renewal of the National Electoral Council (CNE).

“We obviously need to use our leverage over the interim Venezuelan authorities to ensure that the process moves forward responsibly. Our goal is to hold elections,” Rubio said, welcoming what he described as “serious progress” in that direction.

The US secretary issued a warning, saying, “Whoever tries to derail the process will do serious damage to Venezuela.”

Speaking at a separate press briefing, an unnamed senior US Department of State official outlined the step to follow institutional renewal, according to a report by the Venezuelanalysis portal.

According to the official, once both the TSJ and the CNE are reconstituted, the Venezuelan presidency will be declared permanently vacant, triggering a constitutional six-month window to conduct elections under “competitive conditions”.

The same official stressed that political guarantees must be provided and media access rules regulated during this phase.

Advocating the inclusion of pro-government factions in the “transitional period”, the official said peaceful democratic transitions often require the cooperation of outgoing groups, citing Spain and Portugal as precedents.

Electoral timetable and judicial work accelerate

Asked about a definite election date, Rubio said the Rodríguez administration had complied with US timelines so far.

Emphasising that they would not wait two years for an election, Rubio said: “That is not going to happen. In the best-case scenario, I have two years and two months left in this job.”

Rubio’s remarks coincided with statements by Dinorah Figuera, who heads the opposition delegation in the negotiations with government representatives.

Figuera had predicted that presidential elections would take place in late 2027 or early 2028.

Meanwhile, during the third round of political dialogue in Venezuela, the parties agreed to review four pieces of legislation governing political participation, pluralism, and the autonomy of political organisations, including the Law on Political Parties, Public Meetings, and Demonstrations.

The discussions also addressed disqualifications from public office and the examination of legal frameworks governing political rights.

In parallel, Venezuela’s National Assembly officially initiated the process to renew all 32 justices of the Supreme Tribunal of Justice.

Applications from legal professionals seeking seats on the court will be accepted from Wednesday, 28 October until Wednesday, 11 November. The fourth round of dialogue is scheduled for 11 to 15 November.

Rodríguez and other senior Venezuelan officials have not yet commented on the US Department of State’s statements.

Machado’s return and convoy controversy

The White House’s assertions regarding Venezuelan reforms and elections coincided with the return of far-right opposition leader María Corina Machado to the country on Sunday.

Supporters of Machado, who had lived abroad for more than a year, called for their leader to be included in the ongoing negotiations.

Responding to questions about Machado’s return, Rubio said he had told the Rodríguez government “weeks ago” that she should be allowed to return to the country unhindered.

Denying claims that Washington obstructed Machado’s return, the Secretary of State said the opposition leader had merely been advised not to travel immediately following the twin earthquakes on 24 June.

Interim President Rodríguez, however, criticised the manner of the opposition politician’s return.

Characterising it as a “show” that could have been avoided, Rodríguez addressed Machado’s journey to Caracas at the head of a vehicular convoy covering 400 kilometres, following her appearance at a church in Lara state amid chants of “freedom” and calls for immediate presidential elections.

“The airports are right there. Let us stop putting on a show. Many people who benefited from this process aimed at peaceful coexistence and from the amnesty law were able to enter the country through the airport’s new transit structures,” Rodríguez said.

The interim president declined to reveal which route Machado had used to re-enter Venezuela.

Machado, who in recent years backed economic sanctions against Venezuela as well as foreign military intervention, left the country in December 2024 to travel to Oslo to receive the Nobel Peace Prize, which she subsequently dedicated as a gift to Trump.

While Machado and her party maintain that the government had previously barred her from returning seven times, Venezuelan authorities deny the allegation.

Asked whether the judiciary would act against Machado, Rodríguez said she hoped to see “remorse and a change of direction” from the opposition figure, adding that the opposition leader could make “some contribution to the country”.

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