The Great Reset: If Only It Were Just a Conspiracy

National Review Online, November 27, 2020

Klaus Schwab

Writing for The Spectator US, Ben Sixsmith gets to grips with “the Great Reset” now being proposed by the World Economic Forum (“Davos”).

And yes, despite a name that sounds as if it were conjured up in some of conspiracism’s danker fever swamps, the Great Reset really exists:

“The World Economic Forum, which organizes the annual conference [in] Davos, has launched an initiative called, yes, ‘the Great Reset’. It has its own website.”

Indeed it does.

But, after noting the involvement of “partners” such as Apple, Microsoft, Facebook, IBM, IKEA, Lockheed Martin, Ericsson and Deloitte, Sixsmith doubts whether the Great Reset can be seen, as some like to suggest (even allowing for a bit of hype) as “socialist Left Marxist” or a “global communist takeover plan.”

Fair enough, not least because the Great Reset is, in essence, corporatist, not communist. The participation of companies of the type that Sixsmith mentions is, in reality, the participation of certain members of their senior management, using shareholder funds for purposes that have nothing to do with the bottom line and everything to do with the wielding of power within a system akin to a concert, with the state — if not necessarily the government — acting as the conductor.

In the course of an article on the Great Reset I wrote last month, I described corporatism as:

[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 strong 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. — allegedly a bastion of both free enterprise and democracy — is depressing. Looked at optimistically, the BRT and its C-suite cheerleaders are useful idiots. Looked at realistically, they are part 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. It’s something that Klaus Schwab, the WEF’s founder and executive chairman, has been advocating for a long time. A key feature of the Great Reset is the idea that stakeholder capitalism should, one way or another, be adopted.

That would reduce a company’s shareholders to just another category of “stakeholder,” effectively transferring the power that capital should confer away from its owners and into the hands of those who administer it. They are then accountable to, well, it’s not quite clear whom. It’s not difficult to grasp why so many corporate bosses 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 increasingly being 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 process.

Sixsmith takes, in my view, too relaxed a view of what stakeholder capitalism is him. To him, it is “a concept so vague that Facebook, IBM, Lockheed Martin et cetera are free to interpret it quite as they wish.”

Approvingly, he cites Steve Dunning, writing for Forbes: “Firms can go on privately shoveling money to their shareholders and executives, while maintaining a public front of exquisite social sensitivity and exemplary altruism.”

But while removing one possible obstacle to shoveling money to executives (shareholders are a different matter) is a part of stakeholder capitalism’s appeal to managements (bonuses are easier to justify when targets are to grow, say, diversity rather than the share price), it is only one part of its attraction. Much of stakeholder capitalism’s appeal lies elsewhere, whether it is from the social approval that it can generate for a manager who uses his or her role in such a positive way, or in its ability to hand executives power, which they can wield, as noted above, with relatively little accountability now that their responsibility to shareholders has been so diluted.

I don’t disagree with the argument used by Jamie Dimon, the CEO of JPMorgan Chase — an extremely capable businessman, but also a corporatist’s corporatist — that there is need for a stimulus, and sooner rather than later, but there was something disconcerting about the language he used in a recent discussion on this topic:

U.S. politicians are behaving like children by not passing a new stimulus bill that could help Americans whose income has been wiped out by the coronavirus pandemic, JPMorgan Chase & Co Chief Executive Jamie Dimon said on Wednesday at a New York Times conference.

“This is childish behavior on the part of our politicians,” Dimon said about an impasse between Democrats and Republicans over how much additional spending should be authorized.

The two parties should split the difference between the amounts they want to devote to coronavirus relief, he said.

Dimon is entitled to give his opinion, but his tone was not that of a constituent or even a businessman battling for his shareholders, but of an oligarch.

Power is an intoxicant.

Writing for Time in (checks notes) an issue “produced in partnership with the World Economic Forum,” Dimon argued this:

Capitalism must be modified to do a better job of creating a healthier society, one that is more inclusive and creates more opportunity for more people. That means meaningful changes like rebuilding our education system and providing skills training, affordable health care policies, substantial infra­structure investment, and sensible immigration reform and climate policies. That’s just a start.

I am optimistic that this is possible as we enter a new decade. In August, more than 180 CEOs of leading U.S. companies signed the Business Roundtable’s new statement of corporate purpose, committing to creating economic opportunity for all of their stakeholders: customers, employees, suppliers, communities and shareholders. It’s a call to action to do more for everyone who works for us, and society in general.

Many businesses are rethinking their role in society…

Well, the managers of many businesses may be rethinking what role ‘their’ businesses should play, but whether the shareholders, who own those businesses are doing the same thing may be a different question. What, for example, do the shareholders of JPMorgan Chase, who have, largely unwittingly, given Dimon a platform to undermine their rights, think of his pronouncements? And for someone who, on that occasion anyway, rather relished attacking (elected) politicians, Dimon sounded distinctly political, and in a way that suggested that he expected people to pay attention. Yet he has not been elected to any political office, and, as I far as I know, has no plans to be.

With the switch to a corporatist regime well under way, it’s easy to understand why he’d rather not run for office. In many respects it would not only be a demotion, but an undignified one. It’s a messy business, scrabbling around for votes. The politicians Dimon describes as “childish” are nothing of the sort. He may not like how they are behaving, but they are doing what they do because of their analysis of how various constituencies will react to the decisions they make, an analysis that the (unelected) Dimon has the luxury of not having to make. The conclusion they draw may lead to those politicians taking a stance with which Dimon (not unreasonably in this case) disagrees, but the disdain in which he appears to hold them can easily slide into a technocrat’s impatience with the inefficiency of democracy, an impatience felt by quite a few of those who have, over the course of history, succumbed to the corporatist temptation.

Sixsmith has read the dreary and appallingly-written COVID-19: The Great Reset (the book). Schwab is co-author along with Thierry Malleret, an economist and a member of the WEF team. Sixsmith notes, correctly at several levels, that “this is no Communist Manifesto. The Communist Manifesto was a bracing read.” Indeed, I can confirm that The Great Reset is not that.

Sixsmith explains that The Great Reset “considers a world after the pandemic,” a conceit he finds “audacious given that it was written less than six months after the virus had even appeared.” That is to be too easily impressed. Schwab has been peddling his stakeholder prescriptions for half a century. The pandemic is just the latest crisis on which he has hung them. Some of the book does indeed consist of predictions, but for the most part, these forecasts are just an updated, even more ambitious version of Schwab’s perennial wish list.

“If you read The Great Reset in anticipation of some kind of baroque manifesto for world tyranny,” warns Sixsmith, you will be disappointed. “There are no elaborate schemes for globe-spanning coup d’états and techtalitarianism.” The former is true, the latter somewhat less so. Glimpses of dystopia occasionally — or not so occasionally — break through the leaden prose:

In the post-COVID 19 world, precise information on our carbon footprints, our impact on biodiversity, on the toxicity of all the ingredients we consume and the environments or spatial contexts in which we evolve will generate significant progress in terms of our awareness of collective and individual well-being. Industries will have to take note.

However much it is concealed within language that reads as if it had escaped from a PowerPoint presentation for a dismal corporate retreat, The Great Reset is a book with an undeniably authoritarian subtext: “Industries will have to take note.” The book is not without moments of accidental humor, such as when “leaders” (a favorite term, unsurprisingly, in Schwabspeak) ranging from Andrew Cuomo to, uh, “HRH the Prince of Wales” (a duo few should emulate) are praised for their calls to “build it back better” after the pandemic.

To be fair, the shout-out to Prince Charles comes as no great surprise. While Schwab’s career appears to have been based, in no small part, on an entrepreneurial mix of self-aggrandizement and entertainingly unconvincing humility, one constant has been his obsequious attachment to royalty, a mark of his fondness for hierarchy (“leaders”) as well, I suspect, as a sign of his snobbery. The heir to the British throne, a petulant prince whose intelligence is comfortably exceeded by his arrogance, also makes an appearance in the WEF’s self-published account of its first fifty years, the modestly-titled The World Economic Forum: Partner in Shaping History, although in a startlingly atypical instance of lèse-majesté the authors of this grim little booklet manage to confuse him with the possibly even more petulant Prince William in one photo caption. Also featured are HRH King Abdullah II of Jordan, HRH Queen Rania Al Abdullah of Jordan (a member of the WEF’s Board of Trustees, no less), and HRH Prince Turki Al Faisal Al Saud.

Half-blinded by the glitter of all that monarchical splendor, I returned to The Great Reset to learn that “the deep disruption caused by COVID-19…has offered societies an enforced pause to reflect on what is truly of value.”

The reflection, it seems, does not have to last for long. The next sentence reads:

With the economic emergency responses to the pandemic now in place, the opportunity can be seized to make the kind of institutional changes and policy choices that will put economies towards a fairer, greener future.

To their credit, Messrs. Schwab and Malleret are not shy about using variations of that infamous phrase about never letting a crisis go to waste. It pops up at least four times.

Naturally, COVID-19 is “likely to sound the death knell of neoliberalism.” That Schwab and Malleret even use that basically meaningless word reveals both the staleness of their ideas and the nature of the snake-oil they are preparing to apply (sell would imply the consent of the buyer) to a public being informed that it will have to make do with so much less. GDP is unforgivably crude, you see.

Here and there, scattered amid the bromides, are clearer indications of what that fairer, greener future will look like. Helped by “public-sector direction-setting” and “better alignment between public policy and corporate planning,” we ought to expect a future of controls and constraints, where “planetary care will be as important as personal care.” To take a few examples, there will be limits on material consumption, an emphasis on “responsible eating,” on “vacationing nearer to home,” and on “disregard[ing] everything that we do not really need.” It is a picture of a suffocating, joyless society where enterprise is harnessed, the talk is all of “solidarity” and — this will sound familiar — the individual does not get much of a look in.

But then corporatism, which is often framed to look like cooperation, but is all too frequently underpinned by coercion, is like that: “To varying degrees, business executives in all industries and all countries and all countries will have to adapt to greater government intervention.”

And dissenters simply do not exist:

[N]obody would now deny that companies’ fundamental purpose can no longer simply be the unbridle[d] pursuit of financial profit; it is now simply incumbent upon them to serve all their stakeholders, not only those who hold shares.

Nobody.

Leaving aside the fact that, few, if any had argued for (let alone adopted) the “unbridled” pursuit of profit (that is not what shareholder primacy either means or implies), the idea that there is no opposition to stakeholder capitalism stands out, even in a book showing evident traces of the delusional, in its absurdity. Yes, yes, stakeholder capitalism is on the march and Dimon’s on the team, but not everyone has signed up for the assault on property and democratic rights that this doctrine represents.

Equally, to claim that the “pandemic leaves no doubt in boardrooms that the absence of ESG considerations [the vaguely-defined environmental, social and governance criteria that have become the yardstick of “socially responsible” investing, and, by extension, stakeholder capitalism] has the potential to destroy substantial value and even threaten the viability of a business” is nonsense.

Some boards may feel that way, others may not. If the pandemic has changed their minds, it is evidence only of their lack of fitness for the job. There is also the argument that the ‘G’ in ESG is at odds with the ‘E’ and the ‘S’, in that it replaces the objective of a clear, measurable line of accountability to shareholders with a hazy duty to hazily defined stakeholders. On top of this, there is some evidence (a 2016 survey that predates our current era of stakeholder capitalism) that it is the G that adds to performance while the E and the S detract from it.

Oh.

Schwab and Malleret quote some early data showing that the “sustainability sector” outperformed the market in the first quarter of 2020, but concede that some analysts have argued that this may merely have reflected reduced exposure to fossil fuels (the oil price took a hit in the early weeks of the pandemic). Others have maintained that the reason for the outperformance was investors’ rotation into tech stocks — stocks typically with a fairly light environmental impact, as conventionally measured — for “defensive” reasons.

Stakeholder capitalism may be making a nonsense of ‘G”, but, in an article in May, Bloomberg’s John Authers (a writer generally supportive of ESG investing) referred to some research demonstrating, in effect, that some of the companies being sought by “socially responsible” investors contained contradictions between the ‘E’ and the ‘S’:

It is possible that ESG is undermining itself — or at least that the E and the S are in conflict with each other. Vincent Deluard, of INTL FCStone Inc., suggests that ESG funds are people-unfriendly. Tech and pharma companies tend to look good by ESG criteria, but they tend to be virtual as well as virtuous. These are the kind of companies that need relatively few workers and which churn out hefty profit margins. When Deluard looked at how the big ETFs’ portfolios varied from the Russell 3000, the results were spectacular. They are full of very profitable companies with very few employees… A further look at companies’ market cap per employee showed that investing in the current stock market darlings who are making their shareholders rich is a very inefficient way to invest in boosting employment. They include hot names like Netflix Inc., Nvidia Corp., MasterCard Inc. and Facebook Inc….

The problem, Deluard suggests, is that ESG investing, intentionally or otherwise, rewards exactly the corporate behavior that is creating alarm. Companies with few buildings, few formal employees and a light carbon footprint tend to show up well on ESG screens. But allocating capital to them leads to a deepening of inequality, and intensifying the problem of under-unemployment. On the face of it, they aren’t the companies that should be receiving capital if employment is to recover swiftly. If investors want to behave with the interests of “stakeholders” rather than “shareholders” in mind, and that is surely central to the ESG philosophy, then their current approach is directly counter-productive…

Oh.

Schwab and Malleret may see themselves as prophets of a sort, but perhaps they should not be blamed (too much) for failing to anticipate the awkward findings in a paper produced for New York University’s Stern School of Business, which was first posted after the publication date of their book.

The abstract alone raises some difficult questions (my emphasis added):

Environmental, social, and governance (“ESG”) scores have been widely touted as indicators of share price resilience during the COVID-19 humanitarian crisis. We undertake extensive analyses to investigate this claim and present robust evidence that, once the firm’s industry affiliation and accounting- and market-based measures of risk have been properly controlled for, ESG scores offer no such positive explanatory power for returns during COVID-19. Specifically, ESG is insignificant in fully specified returns regressions for the first quarter of 2020 COVID crisis period, and it is negatively associated with returns during the market’s “recovery” period in the second quarter of 2020. Industry affiliation, market-based measures of risk, and accounting-based variables that capture the firm’s financial flexibility (liquidity and leverage) and their investments in internally-developed intangible assets together dominate the explanatory power of the COVID returns models….We conclude that celebrations of ESG as an important resilience factor in times of crisis are, at best, premature.

Oh.

The measurement of relative stock market performance is not an exact science. Different surveys can suggest different conclusions. Nevertheless, if there are companies where, as Schwab and Malleret assert, the directors have decided that there is “no doubt” about the importance of ESG, their shareholders should be consulting their lawyers as well as their stockbrokers.

As would be expected, the Great Reset has, as Sixsmith relates, brought conspiracists out of the woodwork: “The phrase has shot throughout the fringes of Right-Wing Twitter like a virus through a karaoke bar.”

There’s the phrase itself, both presumptuous and menacing. There’s the notoriety of Davos, and there’s Schwab himself, in Sixsmith’s view, “an Ernst Stavro Blofeld lookalike” although to me he bears more of a resemblance to an unctuous, condescending, and scheming prelate.

Writing for CapX, Oliver Kamm is unimpressed by all the conspiracy talk, blaming it on a “loose assemblage of anti-vaccine campaigners and conspiracy theorists, and given a platform by Russian state propaganda.” Up to a point, maybe, but given the contents of the Great Reset, its source, and how it is being sold, it is a surprise that the conspiracy theories that surround it have not found an even greater audience among the crazies than they have.

The Spectator’s Sixsmith warns, rightly, that:

[W]e should always be careful before writing theories off as nuts. It matters that some of the world’s richest and most powerful people are so interested in ‘resetting’ the way we live. You can think what you like about their ideas and activities. It would be foolish to deny their significance.

Indeed. He doesn’t believe that there is any sort of conspiracy and neither do I. The Great Reset is being orchestrated in plain sight, and not by a shadowy group of plotters. But to accept that is not to deny that it may be consequential. As I wrote in my earlier article:

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.

What is striking about the Great Reset is not the scale of its vision, but how often and for how long we have already been hearing, in one form of another, variants of its main themes — the need for drastic action on climate change, “stakeholder capitalism,” definancialization, moving away from the “Anglo-Saxon” model, thinking of “the planet” before we travel, shop or even eat — themes that, in many cases, have emerged from the fringes to take center stage, and not only in front of the Davos crowd.

To Sixsmith, “the elite consensus on ‘the way ahead’ is disturbing.” And so it is. He observes:

[O]ne critic has called Davos an ‘ideological synchronization environment for individuals, corporations, and governments to keep on the same page.’ That is different from conspiracy — but not that different. When bad ideas are adopted internationally by some of the richest and most powerful people in the world, the effect can be the same. The Great Reset might be all the more terrifying for not being a sinister plot.

And even more so as it may well represent too much our future for comfort. It’s long past time to push back. One (very) small step could be for shareholders to insist that their companies’ executives travel to Davos on their own time — and on their own dime.