There has been a lot of talk about the Great Reset in the the last few months. I thought I’d dive in and take a closer look at what the Great Reset is, what it means for the world we live in and how you can protect your freedom.
The Great Reset is a term coined by Klaus Schwab, founder of the World Economic Forum.
If you don’t know what the World Economic Forum (WEF) is, it’s an annual event that usually takes place in Davos, Switzerland where global leaders such as billionaires, government officials, politicians and other influential elites meet to discuss the future of the world.
The WEF has been criticized for a long-time and attracts demonstrations each year in the small mountain village of Davos where the event is traditionally held. The World Economic Forum takes place under military protection by the Swiss army. All of Davos is locked down with riot police and street controls.
(Davos during the Word Economic Forum by Keko)
One thing that attracts a lot of criticism is the fact that the event happens behind close doors and is invite-only. It’s not a democratic process where “regular” people can chime in or cast a vote. It’s self-proclaimed elites from government, business and banking, meeting to discuss matters that impact everyone in a non-democratic way.
The WEF has recently received more scrutiny because of its 2020 annual meeting which they titled “The Great Reset”. The event was held virtually due to Covid-19. Some clips of the event are available on YouTube.
Klaus Schwab, the founder of the WEF, co-authored a book with Thierry Malleret in 2020 called Covid-19: The Great Reset. Schwab wrote a few other books including Stakeholder Capitalism and The Fourth Industrial Revolution. I decided to read all three books to dig deeper and gain a better understanding of what the Great Reset is.
My findings are broken down in this article.
In order to demystify the Great Reset, we first have to understand stakeholder capitalism. The ultimate agenda of the Great Reset is to abolish shareholder capitalism and replace it with a system of stakeholder capitalism.
Stakeholder capitalism is a form of capitalism in which profit generation for the benefit of shareholders isn’t the only goal of a company.
Instead of just creating value for shareholders, the premise of stakeholder capitalism is to serve the interests of many different stakeholders: Employees, local communities, future generations as well as the environment as a whole. A company must provide value to all stakeholders that are directly or indirectly affected by the business’ activity.
Stakeholder capitalism isn’t something new: It existed before 1970 in the United States. And it currently exists within most parts of Europe. It’s not a different economic system but rather a shift in focus, values and philosophy regarding how a company should be run and which interest groups a company should be responsible for.
In the 1970s Nobel prize-winning economist Milton Friedman popularized shareholder capitalism in the United States.
He argued that the only social responsibility of a business is to “use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”. This could be summed up as the “neoliberal” approach to capitalism. It emphasizes that the free market left on its own will inevitably optimize for the greatest good of all market participants.
Instead of letting markets take care of themselves like Milton Friedman, as well as proponents of the Austrian School of economics and other economists suggest, Schwab wants to combine self-regulating markets with social and environmental interests.
In other words: He believes the market doesn’t create the greatest good for as many people as possible when left alone. It leads to income divides and causes environmental havoc. The richer are getting richer while the poorer are getting poorer. At the same time global warming is accelerating and reaching a point of no return.
For Schwab and the WEF, the current form of capitalism is unsustainable. They are calling for a more “sustainable” capitalism.
More on what that means and how they intend to create this later in this article.
Some people have suggested that Schwab and the WEF are trying to lead the world towards a socialist or communist economy. Schwab doesn’t explicitly talk about this in his book Covid-19: The Great Reset. He mentions that shareholder capitalism, the predominant system in the west, and state capitalism, the predominant system in the east, both created prosperity for a short period in history but aren’t sustainable long-term.
He proposes stakeholder capitalism as a third alternative to shareholder capitalism and communism. He gives a few examples as to how companies and nations can implement the stakeholder principle. One example he brings up is the Swiss system of direct democracy that allows people to vote directly on referendums. But he says that each nation and company has to figure out for themselves how to implement the stakeholder principle within their borders or organization.
Overall, the way Schwab defines stakeholder capitalism is relatively vague and leaves room for interpretation. He does emphasize several times that the post-Covid world goes hand in hand with a return to stronger governments.
In the chapter called “The return of big government” he says:
Looking to the future, governments will most likely, but with different degrees of intensity, decide that it’s in the best interest of society to rewrite some of the rules of the game and permanently increase their role.Klaus Schwab on the Great Reset
According to Schwab, private companies and the free market wouldn’t have been able to deal with the Covid-19 pandemic on their own. Governments had to step in and impose restrictions, lockdowns and vaccine mandates to keep the virus in check.
It becomes clear that the WEF’s envisioned stakeholder capitalism includes more government control.
How does the Great Reset play into all of this?
Schwab views the Covid-19 crisis as an opportunity to accelerate the transition to stakeholder capitalism. While stakeholder capitalism has been the goal of Schwab and the WEF before the pandemic, they believe the timing is perfect to make the leap.
The world is already responding to the pandemic: Our lifestyles have changed, people are working from home, businesses had to care less about profits and more about the health of the population (an example of “stakeholder” principles in action) and governments stepped in and imposed restrictions.
For Schwab and the WEF, this social, economic and individual disruption is the perfect gateway into a new era of capitalism. A “sustainable” capitalism based on stakeholder principles.
This, in a nutshell, is what Schwab and the WEF refer to as the “Great Reset”.
The “sustainable” stakeholder capitalism Schwab and the WEF envision seems to be a merge between free-market capitalism and state capitalism. A world where companies, three letter agencies, governments and a bunch of other unclearly defined stakeholders call the shots.
The fear is that it might turn into a highly-technological “surveillance economy”.
Schwab talks about the “Fourth Industrial Revolution” a lot, which is a term he uses to describe artificial intelligence, augmented reality, virtual reality, cryptocurrencies, the metaverse and things of that nature. While these technological advancements could improve our lives, when combined with stakeholder principles, the fourth industrial revolution could turn into a dystopian future.
Digital vaccine passports and contact tracing give us a taste of what this might look like. During Covid-19 businesses were forced to shut down for the greater good of other stakeholders (for example old and vulnerable people, employees etc.). Many businesses went bankrupt because they were forced to focus on stakeholder interests above the self-interests of the business owners and shareholders. Combine this with technological advancements such as digital vaccine passports and contact tracing: Technology can be used in conjunction with stakeholder principles to surveil business owners, employees and customers and make sure they are acting in alignment with stakeholder interests.
In other words, you’re not allowed to go to work, or open your store, or be a customer of a particular store unless you have a digital vaccine passport. And if you have been “traced” to be in contact with someone who has Covid-19, you are not allowed to engage in these activities either.
This is an example of combining stakeholder capitalism with what Schwab calls the Fourth Industrial Revolution.
There are other examples as well which in some cases have already been implemented in China:
Schwab talks about how central banks printed money to deal with the Covid-19 crisis. Today, governments are creating their own Central Bank Digital Currencies (CBDCs). China was the first country to launch their CBDC. These CBDCs are programmable and digital versions of the fiat currencies governments already issue.
While some of these digital currencies are based on blockchain technology, they have little to do with Bitcoin. CBDCs provide governments with all sorts of new ways to track and control what we do with government-issued fiat currency.
For example, let’s say you receive a stimulus check from the government. With CBDCs, you would receive a digital wallet from the government. The stimulus check would be directly “air dropped” into your government-issued wallet. But since it’s a programmable, digital version of fiat currency, it can have traits that cash and bank deposits don’t have. Maybe the government only wants you to spend the stimulus check within a radius of 50 miles. This means, if you try to spend the money in a different state or country, your payment might get declined.
Or maybe the stimulus check can only be spent on certain pre-approved goods and services. You would’t be able to invest your stimulus check into stocks or bitcoin but only buy groceries and household goods with it.
It can get even more dystopian of course: Let’s say one day we all have digital passports that are linked to our CBDC wallets. Every digital dollar that is spent is tracked and also what it is spent on. Together with AI algorithms, the environmental impact of every purchase is calculated and reflected in an environmental footprint score. If your environmental footprint gets too big, you are punished by not being able to spend money on products that might have a negative environmental impact.
For example, you might have already purchased the allowed quantity of meat for the week. Your environmental footprint score turns negative, reflected in your digital passport. As a result all payments for meat products are declined for a week.
Social credit scores already exist in China and it looks like they’re coming to the United States and western nations.
Another example of what this might look like: You’re driving above the speed limit and are caught in a speed trap. The radar automatically takes a photo of your license plate and runs a scan against all other registered vehicles. It discovers that the vehicle is registered to you and deducts some points from your social credit score.
Additionally, instead of getting an invoice for your fine, the fine is automatically subtracted from your CBDC wallet without you having to take any action.
The way stakeholder capitalism existed in the United States until 1970 is pretty benign. But when combined with technology, it can form the perfect surveillance economy.
In the chapter called “Technological reset” Schwab briefly discusses some of the risks of dystopia, but then concludes:
Dystopian scenarios are not a fatality. It is true that in the post-pandemic era, personal health and well-being will become a much greater priority for society, which is why the genie of tech surveillance will not be put back into the bottle.Klaus Schwab on tech surveillance
It seems like for Schwab a tradeoff between privacy and stakeholder interests is necessary. In order to create value for all stakeholders, we as individuals must give up some of our privacy and accept technological surveillance as a permanent fact after Covid-19.
As Milton Friedman famously said, “nothing is as permanent as a temporary government program”. The true danger lies in a scenario where things like a state of emergency, increased government control and technological surveillance become the new normal. Or the danger, to use Schwab’s own language, is that the “genie of tech surveillance” isn’t put back into the bottle.
Who decides what stakeholder interests are?
During Covid-19 it was mainly governments that called the shots. Or maybe it will be global elites during their annual World Economic Forum in Davos.
However you put it, all of this comes at the price of personal liberty and privacy.
While Schwab talks a lot about income and wealth inequality and the growing divide between the rich and poor, he doesn’t seem to understand, or simply ignores, the fact that inflation is one of the main driving forces behind wealth inequality.
When central banks print money, those who own assets such as stocks, real estate and cryptocurrency become richer because the prices of these assets inflate.
On the other hand, those without assets who only hold fiat currency (which can be said for most people who are “poor”), are losing purchasing power as the currency they hold is debased.
Schwab claims in Covid-19: The Great Reset that we haven’t really seen inflation in the past years. This is of course incorrect, and a few pages later he himself admits that asset prices have inflated. The thing about inflation is that it always depends on what you measure and how you measure it.
If you’re measuring stock prices, real estate and other assets, there has been massive inflation since the large-scale Quantitative Easing programs in 2008. If you look at an artificial instrument like the “Consumer Price Index”, it might seem that inflation has been inexistent or low. But then again, if you adjust how inflation was measured a few decades ago, the United States has experienced double digit year-over-year inflation.
Nobody knows the true inflation numbers, but having a discussion about inequality without talking about inflation, or to sweep the fact that inflation is a major contributor to inequality under the rug, is ignorant at best and hypocritical at worst given that most WEF participants have amassed a huge amount of wealth which they store in assets that benefit from inflation.
Seigniorage is the profit that is made by those who have a monopoly on money production. This is of course governments and central banks. The difference between the paper value of money and the face value of money is profit in the pocket of governments.
Those who are closest to the printing press, such as big banks, politicians and Wall Street profit as well. When a company, or an individual, receives freshly printed money, they can spend it before everyone else. Since they can spend the money before it has circulated in the economy and caused inflation, the purchasing power of those close to the printing press is always higher than that of the masses.
This is why inflation can be thought of as a hidden tax. Or in the words of John Maynard Keynes himself:
By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.John Maynard Keynes on inflation
This wealth confiscation happens because the purchasing power of governments increases at the expense of the purchasing power of citizens. Those who receive freshly printed money such as banks did during bailouts of 2008 benefit as well.
Schwab and the WEF got one thing right though: The current form of capitalism that exists today is unsustainable.
But it isn’t necessarily unsustainable for the reasons Schwab mentions in his book. And as has been demonstrated, it remains highly doubtful that combining stakeholder principles with the technological advancements of what Schwab calls the Fourth Industrial Revolution is desirable
While this article doesn’t claim to have all the answers, we cannot attempt to fix the economy, environment or society without taking a close look at how our money works. After all, money is the most fundamental building block of our economy. And we cannot have a discussion about sustainability without talking about the sustainability of money itself.
We currently live in a debt-based, inflationary capitalism where money must gradually lose value and prices must gradually increase with time.
This is why central banks usually target year-over-year inflation of 2%.
It is thought that an inflationary capitalism is necessary: Our money must lose value to prevent hoarding. If prices were to go down, and money increased in value, nobody would spend it. When money gradually loses value, it encourages citizens to spend it which is thought to stimulate the economy. In other words, inflation incentivizes consumerism.
At the same time, inflation means that consumer prices as well as the prices of goods used in manufacturing steadily increase. But there is also a phenomenon called “price stickiness”. This means that fast price increases tend to be unpopular and bad for business.
Instead of immediately increasing prices to keep pace with the devaluing of currency, businesses keep their prices “sticky” for longer by degrading the quality of the goods used in manufacturing. Instead of using more expensive material, they opt for cheaper and lower quality material.
This allows businesses to provide products at similar prices, or only slowly increase prices, despite the monetary inflation that is taking place.
As a result, we can observe two trends:
In other words, inflation encourages us to buy more useless cheap stuff. (The kind of stuff that clogs our oceans).
Inflation leads to a high time preference in people: We satisfy our needs and wants today and are more preoccupied with our well-being now than in ten or twenty years from now.
This type of thinking and lifestyle is not only encouraged by inflation, but it has become deeply embedded in our culture.
We create debt that we expect to pay back in the future. By taking on this debt, we can live a good life now at the cost of a distant future.
This can be observed with credit cards. But it’s also the philosophy governments adopt with deficit spending and money printing.
The truth is that our debts have grown so big that they cannot be repaid: The United States government will never be able to repay its debt. It is trapped in a debt spiral that’s caused by the high-time preference of the inflationary capitalist system we live in.
We need to stimulate the economy by buying useless cheap stuff. And governments need to stimulate the economy by issuing more debt to prevent financial markets and the economy from melting down.
It doesn’t take a genius to see that this isn’t sustainable.
And it’s not a surprise that we treat the environment the same way we treat our debt. We keep kicking the can down the road and postponing the problem to “someday”. But we expect that “someday” will never happen or someone else will then deal with the problem. And as such, we keep up the farce of a debt-based, inflated capitalism that is spiraling out of control. A system that has to grow bigger and bigger every year and is wreaking havoc on the environment.
The truth is that one day the debt has to be paid. And it will either be paid through hyperinflation, which means the currency in which the debt was issued is debased to the point where the debt essentially evaporates. But if that happens, the currency and the economy collapses until a new currency is introduced that people trust.
Or on the other hand, the debt will have to be “paid” in the form of deflation which is the thing every economist, politician and central banker is trying to avoid.
Deflation is when prices decrease. This leads to hoarding behavior: People stop spending money because they want to wait until products are even cheaper, which results in economic depression.
Central banks all around the world are running away from deflation and depression by issuing more debt. But this isn’t sustainable. The debt cannot be rolled indefinitely without facing consequences and eventually having to repay the debt in some form.
Technology is deflationary by nature.
Even Schwab recognizes that technological innovation is only going to accelerate at this point. This means that deflationary forces of technology will only grow stronger. The current inflation and debt-based monetary system will pull in one direction while deflationary technology pulls in the opposite direction.
Given that the current monetary system is under a lot of pressure already, and technology isn’t going to slow down anytime soon, a deflationary “reset” seems plausible at some point in the future. This doesn’t mean it will happen tomorrow or even in the next decades. And it certainly won’t be an easy or pain-free transition.
But at some point the current inflationary capitalism might have to cave under the growing pressures of deflation and the economy has to return to a sound money that can’t be debased.
The monetary technology for such an economy already exists: Because of its capped supply, Bitcoin is deflationary in nature.
The big problem with such a shift is that it would be extremely painful. Neither economic depression nor runaway inflation should be taken lightly. But we might have kicked the can down the road for so long that at some point our debts catch up with us. Should this be the case, we can only hope that such a reset will be as peaceful and gradual as possible.
I don’t have all the answers, but it seems apparent that stakeholder principles and technological surveillance are neither immune to inflation nor the deflationary pull of technology. The Great Reset as proposed by Schwab and the WEF seems to be just another attempt to keep the lid on an already out-of-control inflationary capitalism. But if we dig deeper, there is nothing “sustainable” about this proposal. It would just be a more dystopian version of our existing “mixed economy” with a tendency towards more surveillance and state control.
The future of the world and economy cannot be decided behind closed doors in a small village in Switzerland. It must start with an open discussion about the root causes of the current economic problems.
We have to dig deeper than terms like “shareholder” versus “stakeholder” and demystify the way money, finance and the economy works in the first place. For most people, the economy is a giant mystery. And since they don’t understand the economy, they can’t participate in crafting a solution or voicing their opinion.
This is why education is so important: Only by getting more people educated and de-obfuscating the economy, money, finance and monetary policy, we can foster a global dialogue and shape the future we want to live in.