International

A Useful Pandemic: Davos Launches New ‘Reset,’ this Time on the Back of COVID

Flags during preparations for the annual World Economic Forum meeting in Davos, Switzerland, January 19, 2020. (Denis Balibouse/Reuters)
Why it is capitalism that has to be reset is unclear.

COVID-19 is a bad disease that has been used to breathe new life into bad ideas. And so it comes as no surprise that the World Economic Forum (“Davos”) is deploying the pandemic as an argument for what it labels, with characteristic modesty, “The Great Reset” initiative:

There is an urgent need for global stakeholders to cooperate in simultaneously managing the direct consequences of the COVID-19 crisis. To improve the state of the world, the World Economic Forum is starting The Great Reset initiative.

Even if we pass over the presumption of the reset’s name, this is a small classic of the prose of soft authoritarianism. There is an “urgent need” that must be met. There is to be cooperation and management, the world is to be “improved,” and all of this is to be put in place by “global stakeholders,” — a conveniently vague phrase, with more than a suggestion of democracy bypassed about it.

I was disappointed not to see “dialogue” anywhere in this paragraph, but a quick glance at the bottom of the screen puts this right, and delivers an extra treat:

In the run-up to the Annual Meeting, the Forum will host a virtual series: “The Great Reset Dialogues.”

These dialogues are a joint initiative of the World Economic Forum and HRH The Prince of Wales.

During these dialogues, various key stakeholders will discuss core dimensions of The Great Reset.

Prince Charles! That these dialogues are a joint project of the WEF and the entitled idler next in line to the British throne is another reminder that democracy is no part of the Davos game. However admirable some of Charles’s, “initiatives” might be, if there’s anything distinctive about his beliefs, it is a distaste for the modern. This may occasionally coincide with good judgment, but it is mainly nostalgia for an era in which princes had a place and the people knew theirs. His dreams of a pre-democratic idyll complement the post-democratic thinking that has been a hallmark of the WEF (and its predecessor, the European Management Forum) for decades.

More specifically, Charles’s reactionary fantasies and the WEF’s plans for a technocratic future can unite around corporatism, a hydra-headed ideology with origins in the premodern, and a very mixed past — sometimes benignly (it influenced the formation of West Germany’s social market economy) and sometimes not (it was an important element in pre-war fascist theory.) The different forms corporatism has taken make it tricky to define with precision, but they share a common core: the conviction that society should be organized by and for its principal interest groups — let’s call them “stakeholders” — intermediated by, and ultimately subordinate to, the state. The individual does not get a look in.

Recently, one expression of corporatism, “stakeholder capitalism” has won powerful support on both sides of the Atlantic. This might be expected in Europe, but that it has been taken up by the Business Roundtable and many leading firms in the U.S., supposedly a bastion of both free enterprise and democracy, is depressing. Looked at trustingly, the BRT and its C-suite cheerleaders are useful idiots. Looked at realistically, they are representatives of a managerial class grubbing for the power that flows from other people’s money.

Stakeholder capitalism rests on the notion that a company’s management owes a duty to more than its shareholders. Its proponents rely, too often for it to be a coincidence , on a ‘misunderstanding’ of how companies operate and, for that matter, on a highly selective reading of what Milton Friedman wrote in a seminal 1970 article (now much reviled by the WEF and its acolytes) for the New York Times Magazine, including this:

In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.

Friedman’s critics tend to “forget” those last six words.

A properly-run firm will, of course, pay attention to the needs of its customers, its workers, and the community in which it does business (three examples of stakeholders, in Davos terminology) out of simple self-interest. Indeed, it’s behavior entirely compatible with Friedman’s views.

But this is not enough for the apostles of stakeholder capitalism. They want to enforce the principle that a company’s shareholders — its owners — are just one category of “stakeholder.” This transfers the power that capital should confer away from its owners and into the hands of those who administer it. They are then responsible to, well, it’s not quite clear who. It’s not difficult to grasp why so many corporate managements are enthused by stakeholder capitalism.

But stakeholder capitalism is a betrayal of democracy as well as of shareholders. The power it gives to managers is used to support an agenda influenced by a cabal of activists, NGOs, representatives of the “international community,” and politicians too arrogant to go through the usual legislative channels.

Klaus Schwab, the founder and executive chairman of the WEF, has been making the case for stakeholder capitalism for half a century. In December 2019, some months before the full extent of the pandemic was visible in the West, he wrote the Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution, a document of laughable bombast, but sinister implications.

Thus, among other features of the model company, we learn that:

It acts as a steward of the environmental and material universe for future generations. It consciously protects our biosphere and champions a circular, shared and regenerative economy…Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives. Executive remuneration should reflect stakeholder responsibility.

As for multinationals:

Corporate global citizenship requires a company to harness its core competencies, its entrepreneurship, skills and relevant resources in collaborative efforts with other companies and stakeholders to improve the state of the world.

And who defines “improve”?

Not, I reckon, the voters.

In an article that accompanied the manifesto, Schwab wrote that:

Business leaders now have an incredible opportunity. By giving stakeholder capitalism concrete meaning, they can move beyond their legal obligations and uphold their duty to society. They can bring the world closer to achieving shared goals, such as those outlined in the Paris climate agreement and the United Nations Sustainable Development Agenda. If they really want to leave their mark on the world, there is no alternative.

The reference to “leav[ing] a mark on the world” was, as an appeal to vanity, a clever touch. But even cleverer was the presentation of assumptions and unanswered questions as unchallengeable statements of fact. Even if we leave aside Schwab’s blithe recital of the world’s “shared goals,” — a phrase that likely made Xi Jinping (an honored guest in Davos in 2017) either laugh at Schwab’s gullibility or applaud his cynicism — there is the issue of the “duty” that companies allegedly owe “society,” a duty explicitly expressed as going “beyond legal obligations,” and thus, we must assume, set by some mysterious other. We never discover who.

Schwab is correct that stakeholder capitalism is “gaining momentum,” something he attributes to the “Greta Thunberg” effect:

The young Swedish climate activist has reminded us that adherence to the current economic system represents a betrayal of future generations, owing to its environmental unsustainability.

Perhaps Thunberg will join Al Gore as a member of the WEF’s Board of Trustees one day. For now she has to make do with the adulation of the Davos set as well as some support from the Global Shapers Community, “a network of young people driving dialogue, action and change,” founded by the WEF.

Schwab has promoted coercive environmentalism since, almost, his Forum’s earliest days. In the 2020 edition of its history, the WEF recounts how:

After having provided a platform for the Club of Rome report, The Limits to Growth, which attracted a great deal of publicity for the 1973 meeting, the Forum intensified its emphasis on environmental issues.

That the predictions set out in that report have proved wildly (and famously) inaccurate goes unmentioned, but who cares? Schwab’s preoccupation with environmentalism, I’d guess, owes more to its use as an instrument of social control than to any worries about the Earth.

And now COVID-19 has, like Thunberg, been drafted into Schwab’s crusade:

The Covid-19 crisis, and the political, economic and social disruptions it has caused, is fundamentally changing the traditional context for decision-making. The inconsistencies, inadequacies and contradictions of multiple systems –from health and financial to energy and education – are more exposed than ever amidst a global context of concern for lives, livelihoods and the planet. Leaders find themselves at a historic crossroads, managing short-term pressures against medium- and long-term uncertainties.

Quite why the pandemic has changed the “the traditional context of decision-making” is as hazy as the verbiage that embarrasses that paragraph. What has been exposed are not the “inconsistencies, inadequacies and contradictions of multiple systems” but the inconsistencies and inadequacies of the WEF’s key constituency, “leaders.” The claim  that among the “systems” that have shown themselves lacking in “energy” is an indirect reference, presumably, to climate change, a phenomenon or a fear regularly exploited by Schwab in an attempt to win wider acceptance for his brand of technocratic corporatism.

No crisis should be allowed to go to waste, and so the WEF chatters excitedly of a “unique window of opportunity to shape the recovery.” Its initiative will:

Offer insights to help inform all those determining the future state of global relations, the direction of national economies, the priorities of societies, the nature of business models and the management of a global commons.

Say what you will about the WEF, a self-proclaimed “partner in shaping history,” its ambitions are not small, as the next section in this passage reminds us:

Drawing from the vision and vast expertise of the leaders engaged across the Forum’s communities, the Great Reset initiative has a set of dimensions to build a new social contract that honours the dignity of every human being.

Somehow, I suspect that this reset has more to do with handing power to “leaders” — that word again — than honoring the “dignity of every human being,” a pretty concept difficult to reconcile with a worldview in which most people are regarded as victims, bystanders, or members of a “purpose-driven community,” — a truly emetic phrase.

Follow the link from the reset’s “microsite” to a somewhat expanded section explaining why “now is the time for a ‘great reset’,” a section that is less interesting less for the “now” (as noted above, Schwab has been preaching ever more elaborate versions of the same sermon for a long time now, and indeed admits that COVID-19 is merely the “most urgent” reason to act), than the shape that this reset should take:

The world must act jointly and swiftly to revamp all aspects of our societies and economies, from education to social contracts and working conditions. Every country, from the United States to China, must participate, and every industry, from oil and gas to tech, must be transformed. In short, we need a “Great Reset” of capitalism.

Why, in the wake of a colossal failure of governments, it is “capitalism” that has to be reset is unclear, as is how “the world,” that imaginary polity, will take such far-reaching decisions. But democracy won’t have much to do with it.

After the customary nod to the “climate crisis,” we come to the nub. Schwab’s schemes (“We must build entirely new foundations for our economic and social systems”), are admittedly ambitious, but “this is our best chance to instigate stakeholder capitalism”, and:

One silver lining of the pandemic is that it has shown how quickly we can make radical changes to our lifestyles. Almost instantly, the crisis forced businesses and individuals to abandon practices long claimed to be essential, from frequent air travel to working in an office.

The Great Reset, writes Schwab, “will require stronger and more effective governments,” but “this does not imply an ideological push for bigger ones.” Up to a point: The essence of corporatism is that government acts in coordination with interest groups. Nevertheless, the latter are subordinate to it. The Great Reset “will demand private-sector engagement every step of the way.” And if some in the private sector say that they would rather not?

But this is to quibble in the face of magnificence:

The Great Reset agenda would have three main components. The first would steer the market toward fairer outcomes. To this end, governments should improve coordination (for example, in tax, regulatory, and fiscal policy), upgrade trade arrangements, and create the conditions for a “stakeholder economy.”

This stakeholder economy will involve more globalization — Davos is gonna Davos, if you will — and more taxation. Tax “coordination” is a bone tossed to those OECD stalwarts that hate tax competition from smaller, less rapacious nations or tech companies not paying their “fair share.”

And the reset may, “depending on the country . . . include changes to wealth taxes.” Translation: Countries that don’t have them should introduce them, and countries that do have them should increase them.

The second component of a Great Reset agenda would ensure that investments advance shared goals, such as equality and sustainability.

Shared by whom?

The final component, Schwab’s harnessing of the “fourth industrial revolution” (automation, AI and more) is relatively innocuous, but that it is even mentioned is further evidence of how little the Great Reset relates to the coronavirus, and how much it is simply a repackaging of Schwab’s longstanding objectives.

In a recent article (skillfully dissected by Richard Morrison for NR’s Capital Matters), Schwab explained how the Great Reset would be dedicated to exorcizing that phantom known as neoliberalism:

Free-market fundamentalism has eroded worker rights and economic security, triggered a deregulatory race to the bottom and ruinous tax competition.

As Morrison observes, “this will come as puzzling news to scholars of government regulation.”

Schwab then asserts that “today’s consumers do not want more and better goods and services for a reasonable price. Rather, they increasingly expect companies to contribute to social welfare and the common good.”

Perhaps Schwab, who holds “17 honorary doctorates, and national medals of honour, including the Grand Cordon of the Order of the Rising Sun of Japan, the Grand Cross with Star of the National Order of Germany and the Knight of the Légion d’Honneur of France” and has “been knighted by Queen Elizabeth II (Knight Commander of the Order of Saint Michael and Saint George (KCMG))”, should get out more.

Ordinarily, such talk could be dismissed as the ramblings of an elderly vain, pompous eccentric who had spent rather too much time convincing himself of his own wisdom (Schwab is 82). The WEF describes itself as a forum “where incipient changes in the world are first discerned . . . [and] where ideas for changes that have shaken the world have been conceived or refined.” Sadly, there’s some truth to this: The WEF matters.

But back to the boasting:

[The WEF] evolved from a modest yet groundbreaking attempt to bring European corporate managers and their stakeholders together to discuss business strategies into an organization that today is widely regarded as the world’s foremost multi-stakeholder platform for addressing the most pressing issues on the global agenda.

Quite who sets that “global agenda” or quite why they have the right to, remains unclear, but, to the WEF, the issues are always “pressing,” and “crisis” is always with us.

Here’s Schwab, back in 1982:

The crisis symptoms which we discussed here in the last years have reached such a scale during 1982 that we can only feel relief that there has not been a disaster.

Fast forward to 1997 (my emphasis added):

Governments’ margin of manoeuvre is today seriously limited by the crisis of credibility and moral authority that most industrialized countries are going through. . . . What we need urgently is a convergence of efforts by political, business and labor leaders.

When the financial crisis struck in 2008 — say what you will, that was a crisis — Schwab, according to the WEF’s history, wrote in the London Times about “the opportunities that the downturn offered,” opportunities that included — you guessed it — a switch to stakeholder capitalism:

“The management of an enterprise has to serve all stakeholders. This goes beyond serving only the shareholders; it means that the management has to lead the enterprise as the trustee of all stakeholders and not just the appointee of the shareholders”… I hope that the conscious adoption of a business ethos based on the comprehensive and long-term stakeholder principle, instead of the one-sided, short-term shareholder principle, becomes one positive outcome of this crisis.

That those despised shareholders one-sidedly contribute the equity capital essential for any business doesn’t seem to count for much. Nor does the fact that those shareholders are ultimately paying for their managers to attend these WEF junkets in the first place.

A month or so later, at the Davos meeting itself, Schwab maintained that:

“If we recognize this crisis as being really transformational, we can lay the fundaments for a more stable, more sustainable and even more prosperous world.”

2012 dawns and Schwab writes (my emphasis added):

Capitalism, in its current form, no longer fits the world around us. . . . A global transformation is urgently needed and it must start with reinstating a global sense of social responsibility.

WEF’s language is that of corporatism whether it is the repeated references to “stakeholders,” the hallelujahs to “the collaborative and collegial Spirit of Davos,” or the emphasis on the “convergence of efforts by political, business and labor leaders.” It is language that suggests that there is little room for dissenters — voters, say, with their unruly discord or shareholders with their unseemly greed. To be “collegial” implies membership of a shared association, with shared values, shared rules, a shared place in the inside, and a shared acceptance of the internal hierarchy.

It doesn’t hurt that this club has established a privileged position within globalism’s opaquely assembled governing class. The WEF has been designated by the Swiss government as an “international institution for public-private cooperation,” granting it, according to the WEF’s history, “the privileges enjoyed by other international organizations, such as the International Committee of the Red Cross (ICRC) and the United Nations.”

Privileges.

The WEF boasts of one thousand “partner companies” in, of course, “initiatives,”  working “in collaboration with governments, international organizations, civil society and academia.” And “it has concluded with the United Nations a strategic cooperation framework agreement, making it a privileged partner in addressing the Sustainable Development Goals.”

Privileged.

So, the WEF matters, and so will its Great Reset. If a recital of some of what the forum has achieved or enabled is not proof enough of that, the list of politicians, businesspeople, and other prominenti who attend its conferences, sign up for its partnerships, and subscribe to its initiatives ought, surely, to do the trick. But the WEF is not at the center of some vast conspiracy. Dr. Schwab is Dr. Disturbingly Influential, not Dr. Evil.

The WEF acts as an amplifier and supporter of the soft authoritarianism of the globalist governing class in waiting — and not always in waiting. But it is a part of that ecosystem, not its controller. And the Great Reset is both a product of Schwab’s imagination and a summary of the corporatist ideas that have been floating around that class for a long time, from the focus on stakeholders, to the often cranky environmentalism, to the rejection of shareholder primacy, something seen as an “Anglo-Saxon” aberration, particularly when linked to “finance.”

Thus, in 2008, France’s president Sarkozy announced “that the present [financial] crisis must incite us to” — wait for it —  “refound capitalism on the basis of ethics and work. . . . Self-regulation as a way of solving all problems is finished. Laissez-faire is finished. The all-powerful market that always knows best is finished.” I was surprised at the time to read that it had even begun, but I was rather less surprised that Sarkozy was talking like this. In his Testimony (2006) he had already attacked “stock-market capitalism” and called for a dirigiste, protectionist regime in France. Schwab has no time for protectionism, but he must have been impressed by Sarkozy’s skill at combining the climate campaign with mercantilism: “Exports from countries that do not respect environmental rules [should] be taxed according to how much they pollute.” A decade and a half later, the EU is close to introducing a “carbon tax” designed to reflect the amount of carbon emissions attributed to goods imported into the bloc, unless, perhaps, they come from countries with a carbon-pricing regime compatible with the EU’s.

The Great Reset will be with us for a while. Given how its themes fit so neatly within the dirigisme of both the emerging globalist ruling class and its domestic counterparts, it is likely to make considerable headway. Stakeholder capitalism, intertwined with “socially responsible” investing, is on the march, not least thanks to Larry Fink, the CEO of BlackRock (the world’s largest asset manager) and another WEF trustee. Its pace will only pick up in the U.S. should Joe Biden, who has caricatured shareholder primacy and described it as “an absolute farce,” be elected president. Meanwhile, Kristalina Georgieva, the IMF’s managing director (and, good heavens, another WEF trustee) has called (in an article that carried the sub-headline that “now is the time to take advantage of this opportunity to build a better world”) for more green investment. A week or so before, she had addressed the WEF on the Great Reset, thanking Prince Charles and Schwab “for bringing us together.” Georgieva’s predecessor at the IMF, Christine Lagarde, now president of the European Central Bank (that’s the way these things work) and, good lord, yet another WEF trustee, is injecting green priorities into the asset purchase scheme designed to help the euro zone withstand the shock created by COVID-19. And, with the Central Banks and Supervisors’ Network for Greening the Financial System (a network in which then Bank of England governor Mark Carney, a, you guessed it, WEF trustee, played an important role), other central banks have been working on “nudging” financial institutions in a more — how to put this — “climate aware” direction for a while. Yes, this is an obvious example of mission creep and, no, it lacked democratic approval. Again, that’s the way these things work.

The way that these things also work is that the media is asked to step up. Time has not been the only outlet to cheer on the Great Reset, and the WEF will not have complained about its performance:

The COVID-19 pandemic has provided a unique opportunity to think about the kind of future we want. TIME partnered with the World Economic Forum to ask leading thinkers to share ideas for how to transform the way we live and work.

Top on the list of contributors was Schwab, writing what he usually does about “neoliberalist ideology,” and, as his wont, dropping a few names, including this one:

In September, my belief that a more virtuous capitalist system is possible was reaffirmed by an initiative of the forum’s International Business Council led by Brian Moynihan of Bank of America. They released the Stakeholder Capitalism Metrics: nonfinancial metrics and disclosures that will be added (on a voluntary basis) to companies’ annual reporting in the next two to three years, making it possible to measure their progress over time.

Other “leading thinkers” included the incoming CEO of Citigroup, talking about diversity rather than the company’s share price (as I write, trading about where it was in mid 2016), Tony Blair, architect of many disasters (but here making some sensible points) and, inevitably, a couple of royals, albeit on the lam, Harry and Meghan, “working to educate others about the role that online communities can play in people’s lives offline.”

However, COVID-19 is no one’s puppet, not even Schwab’s. The virus’ persistence has meant that 2021’s Annual Meeting will be held not in the Alps in January, but just outside Lucerne in May:

The meeting will focus on the solutions required to address the world’s most pressing challenges. Global leaders will come together to design a common recovery path, to shape “The Great Reset” in the post-COVID-19 era and rebuild a more cohesive and sustainable society.

We will always have Davos.

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