The Great Reset, at the center of the upcoming World Economic Forum in Davos on January 21, 2020 introduced by its founder Klaus Schwab. Will the world be ready to take a cold shower after the Coronavirus?
What is the Great Reset?
Since less than a year on various blogs dealing with economics and politics as well as other sources one can find mention of the Great Reset, a “plan” by a group of very influential people to radically reshape the world we currently live in. See the “Resetting the Future of Work Agenda“.
The core goals of the Great Reset officially would be to help a transition towards a greener economy while resolving at the same time inequalities and excessive national debt loads through debt jubilees and exploring a new type of economics namely “stakeholder economics”.
Non-officially, according to its critics, it would resemble starkly a dark path towards a decentralized totalitarian supra national political system, while also being the enforcer and overseer of a planned economy, with a risk of a repeat of the fiascos of the totalitarian regimes.
Who preaches the Great Reset?
Main architects, core literature and organizations aligning with the Great Reset.
One of the most visible advocates of the Great Reset is Klaus Schwab, the head of the World Economic Forum, and around whom are gathering many influential individuals such as Bill Gates, George Soros, Greta Thunberg, Prince Charles, among the most noticeable.
If we delve into several speeches held by Klaus Schwab as well as several articles analyzing his main books (The Fourth industrial Revolution, Covid 19 The Great Reset…) we can gain interesting insights into some of the recurrent themes that lay the intellectual framework for the Great Reset and stakeholder economics.
The controversial issues
Some of these themes are already at the center of debates and disputes because, according to some, the theorists of the Great Reset see in the fourth industrial revolution an opportunity to annihilate the centrality of the human being in the name of an unspecified collective wellbeing. These are the controversial issues:
- the alleged absence of freedom and the right for a plurality of opinions (i.e. there is no real consideration for including dissenting opinion or letting people refuse this project democratically)
- the suspicion of absence of transparency (i.e. very little interest whatsoever engaging with people, political parties, politicians and even the media at least in an overt way)
- the will to replace our national and sovereign institutions painstakingly fought for and improved after centuries of sacrifices, efforts, hopes and prayers by people and their nations, with instead a conglomerate of international organizations ranging from the UN to other “technocratic”/ad hoc supra-national entities that would “help” lead our societies to a greater prosperity and better management than with our current democratic systems… Without any of its members facing elections or scrutiny as well as diluting our democracy to unacceptable extents
- the suspicion that there is no interest regarding protecting pre-existing rule of law or national constitutions in order to “mobilize” enough resources for this societal experiment private property laws and national legal systems be damned.
- preaching the inevitability and “opportunity” of transhumanism (the merger of man with technology within his flesh) and in particular the use of chips to measure health data, implement biometric ID’s are embraced without questioning. Although this technology could be used as stated for specific and restricted uses like the biometric ID initiative by the UN, it could also very well be the first steps in know how acquisition to establish a real time Orwellian 3.0 world. A present-day example of the scale of abuse that can be imposed on an individual’s right to privacy and freedom is the social credit system in China 1 – 2 – which – fortunately – as of yet has not explored “the potential of transhumanism”. Some believe that it is deeply disturbing that transhumanism is being considered as an authoritative positive foregone conclusion and not as a minority opinion that must undergo deep ethical questioning and review by mankind.
Does the Great Reset offer oversimplified or even misguided solutions?
The Great Reset postulates that our modern western capitalistic societies are in urgent need of a systemic overhaul that would enable us to solve our excessive debt to GDP burdens, inequalities, climate change and technology transformations that affect us.
All of these problems, to some extent would hinge on simplistically being solved by a debt jubilee that would instantly reduce public (state) debt loads to 0% while also potentially abrogating personal private debt for individuals. Could pensions also theoretically be replaced by a universal minimum wage that would be financed by extremely high tax loads as espoused by the radical economist Thomas Piketty? There are even those who see in the theories of the Great Reset a redistribution of assets (for example all housing would return in the hands of the state who would then possibly either rent or redistribute them in some way) or render some sort of a “sharing economy 1 – 2 ” compulsory, encapsulating therefore to varying degrees the quote of Klaus Schwab: “you will own nothing and be happy”.
Critics of these theories point out that all of these solutions would be articulated and imposed through supra-national bureaucracies and international organizations such as the World Economic Forum (WEF), United Nations (UN), Organization for Economic Cooperation and Development (OECD) and others. With the blessing of a number of national leaders who would , according to the same critics, would “abdicate” their role or relinquish oversight and responsibility nationally in favour of this new power structure.
If this were the case, there would be no more referendums, democratic debates or the possibility of rejecting such a set of proposals which, conceived in this way, would still not meet the favor of citizens and could even worsen the post-covid economic stagnation. And then, what would become of people’s self-determination to choose their destinies?
Perhaps the cures advocated/mentioned are severely flawed in whatever way we view them? Or are they necessary and would the peoples accept them?
Let’s see the main controversies of the Great Reset plan.
- Debt, whether public (generally under the form of Treasury Bonds such as T-Bills, German Bunds etc…) or private (loans, mortgages etc…) is held on the balance sheet of major banks and the debt jubilee would result in instant insolvency for the entirety of the banking sector period. The consequence would be a crisis that would make the Lehman crisis a walk in the park. Big tech corporations and the GAFA’s are already moving towards providing checking accounts and potentially their own alternatives to national central bank currencies 1 – 2 and would by natural consequence or design be the great beneficiaries of such an upheaval. This would happen at a time when even the European Union (see EU Commissioner Thierry Breton‘s recent proposal of the Digital Service Act) believes that Big Tech is proving to be dangerous to our personal freedoms while resisting efforts to curb its quasi monopolies and stifling effects on the information economy, their ability to avoid being taxed and many more negative side effects to our societies. More and more, political representatives believe that they are currently part of many problems and if allowed to absorb the financial sector post debt jubilee they would inevitably become too big to fail as part of systemic financial shocks in addition to all other problems they are involved with currently. Hardly a positive outcome.
- Someone can legitimately think of solving inequality by abrogating personal debt while replacing pensions with a minimum universal wage possibly extended to the general population accompanied (or not) by a compulsory sharing economy and/or confiscation/redistribution of assets and a very high tax load to implement all of this. One can make educated guesses where this could lead:
- violating national Constitutions of States and their rule of law prior, during and after the implementation of such solutions, unless confirmed by referendums or coups d’etat.
- a crash in productivity and economic growth due to the postponement of adjustments at the level of the workforce (workers will have less incentives to get back to work as quickly as prior to the minimum wage) and the hampering of investment opportunities by individuals and companies following dramatic tax increases.
- the ensuing brain drain that will be caused by a minimum wage since unskilled labour will be artificially rendered more expensive leading to skilled workers becoming either too expensive for companies or will have an incentive to seek better wages outside the area of application of this great reset.
- imposing the sharing economy model might frighten and anger consumers who are very likely to still want to retain their basic right to retain the possession of what they buy and not relinquish the leverage that they hold in determining the price of goods when they decide to forgo buying a product in order to benefit from a sale at a future point in time (if the demand decreases then offer meets demand at a lower price level). Renting a good could also make a consumer end up paying more in the long term than outright buying and retaining the good with potential medium to long term impact on consumption levels and GDP.
- any dramatic confiscation and/or redistribution of wealth and/or assets will inevitably lead to capital flight. Even if this were to be fought with capital controls of some sorts this would not incentivize a re-ignition of the economy because even in planned economies like the one in the Soviet Union no matter the levels of coercion, one cannot impose entrepreneurship or the use of a person’s capital for economic growth by decree or brute force. Only by leveraging the freedom and ingenuity of individuals while adequately providing a strong rule of law can an economy flourish. Even China (notwithstanding serious doubts over the transparency of its economic data) suffers from the side effects of its State-Owned Enterprises and a dangerous parallel shadow banking system as some of the side effects of its planned economy. If such a path were to be pursued notwithstanding, forcing capital utilization against its natural “invisible hand” will would inevitably lead to misallocation and waste to ever greater degrees as time will pass.
- many other potential intended or non-intended consequences
C) Using the great reset to “build back better” our economies around the green economy and the elimination of fossil fuel industries through a brutal and extreme paradigm shift regulations and policy wise, could entail the destruction or maiming of entire sectors of our economy over time. Industries comprising the car industry, oil and gas sector, air travel industry and many more, all comprising hundreds of thousands of jobs that may not be “switchable” to greener sectors of the economy would be affected. A mismatch between skillsets would be inevitable and compounded by the core economic differences underlining those different sectors (different turnovers, capital VS manpower intensive, etc…). Furthermore, there would be no assurance that the new green sectors arising from this great reset would create immediate economic growth to offset the immediate loss of economic output from defunct non-green sectors if even the skillsets were interchangeable.
Last but not least what guarantee would there be to not have squandered preciously hard earned know how, patents and world market share in those sacrificed sectors? And to the indirect benefit of whom else than our direct competitors who will most certainly not accept to follow this great reset, such as China, Russia, developing countries etc…?
Are there alternatives to this Great Reset?
Are our peoples and political representatives ready for debates on these issues? Why don’t they talk about it? Did they understand that this pandemic is transforming our economy and that the paradigms that supported it are crumbling? Who is responsible for launching a serious and democratic debate? But what could be the alternative responses to the Great Reset?
Let’s see possible alternatives and some reference literature:
- A sort of Marshall Plan, like the one launched after the WW2
- The use of Debt to Equity Swaps in Eastern European countries following the bankruptcy of the Soviet Union in the Czech Republic, Poland, Hungary and others allowed a re-anchoring of their exsanguinated economies to that of the free market economies of the West and were the start of a success story. Could this be replicated in our troubled present times where we face similar challenges (excessive debt, excessive public sectors, stagnating productivity and the need to liberate resources for the re-dynamization of the private sector)? There exists a literature of texts that can offer empirical insights on how to tailor suit an answer to our current problems as well as various scholars and writers in this field such as the former head of Princeton Economics, Martin Armstrong as well as others…
- And, what about the conversion of sovereign debt bonds into “perpetual bonds” redeemable at the option of government and that pay a fixed exchange rate between 2-3%? The core problem of the current debt saturation is twofold: on the one hand as time goes on and the debt rollover increases it becomes increasingly difficult to find the resources inside a national economy to repay the increasing principal leading to the need of further debt issuance, and on the other interest rates are impeded from rising beyond 0-1% nominal interest rate (and therefore national economies face negative real interest rates after inflation is taken into account), otherwise the interest on the debt would skyrocket. Due to the interwoven nature of principal and interest within a treasury bond and their presence as one of the bedrocks of our global financial system, perennial bonds would offer in essence at the very minimum 4 key advantages:
- Avoiding a systemic banking crisis due to the destruction to their balance sheets if sovereign debt were to be cancelled outright
- The benefit of “freezing” the principal on the debt making its future disposal easier all the while respecting international transparency and accountability standards
- Enabling central banks leeway to reduce intervention in the Bond Markets and Forex/currency markets, liberating resources for aiding the real economy with economic growth and innovation all the while respecting if needed price stability goals (like in the case of the ECB) around a 2-3% interest rate boundary.
- One positive consequence of central banks being able to use again 2-3% interest rates would be the possibility of savers to not be subject to real negative interest rates entailing a loss of their savings and disposable income any longer while increase their disposable income and consumption potential over time without needing to either invest beyond their “comfort/risk zone” in risky investments such as stocks or complex financial instruments or on the opposite spectrum non-economic growth producing assets such as housing.
Calibrating our Western World/EU response to the post covid crisis will entail the need for more transparency and democratic debate than ever before since the end of WW2. And perhaps not greater degrees of transhumanism, or even worse authoritarianism, or unelected technocratic organizations that override democracies and the will of its people.
The efforts being pooled together by Klaus Shwab and his followers appear to be driven by great determination, as he speaks of them at the World Economic Forum annual conferences, and is the subject of his interventions in many prestigious conferences and in his books that arouse great curiosity.
What is worrying is that lucid analyzes by an engineer-economist lead him to consider mankind as a battery chicken farm, not as an intelligent species that, up to now, for better or for worse, has grown, evolved and was able to repair its own mistakes with shared rules and without authoritarianisms.
Indeed, his ideas for achieving the goals he indicates contain sometimes common denominators of totalitarian ideology. This is the case when he advocates the merger of state and industries, or the lack of interest towards the freedoms of individuals to dispose of their bodies as they see fit and to administer themselves with democratic sovereignty, rule of law and through debate.
These ideas have been unchallenged and unaddressed for too long and their lack of interest in openly and transparently engaging the main democratic actors of our free societies such as the medias, political parties, and the people is very disturbing and wrong.
Only recently have there been signs of awareness that, without deep reflection, historical materialism (materialistische Geschichtsauffassung) can again condition the progress of our civilization. As previously mentioned, after 20 years, the EU is trying to find its identity in a world dominated by the Tech Giants, with the rewriting of European rules to prevent an Orwellian society from settling in Europe.
The financial crisis of 2008, which then became economic and now, by contrast, the economic one due to the pandemic that will soon become financial, certainly require a rethinking of the models used up to now.
We would do our societies a great disservice by postponing or giving up the debate. Or thinking of shortcuts, although shared by some powerful individuals who have had great personal success well as their companies, but who have also built financial and technological monopolies that are occupying the spaces left uncovered by our societies in difficulty.
Mankind is not a technological experiment, as some even assume. We are human beings who must remain masters of their destiny.