Home / Opinion / Views /  Opinion | Let us prepare for the Great Reset of modern capitalism

As the covid-19 lockdowns gradually wind down, many around the world remain fearful of what our social and economic future looks like. They are right to worry: we’ve already entered what could become the worst depression in a century. But, while this is likely, it is not unavoidable.

To achieve better outcomes, we need to act jointly and swiftly. We need to reimagine everything from education to social contracts and work, include every economy from the US to China, and transform every industry from oil and gas to Silicon Valley.

What we need is a “Great Reset" of capitalism.

There are many reasons to get this Great Reset underway, but the most pressing and acute one, of course, is covid-19. With hundreds of thousands of deaths, the virus’ death toll is already one of the worst public health crises in recent global history, and the count is bound to rise in the months ahead.

Almost as certain is that the long-term impact of the health crisis on growth, debt, unemployment and well-being will haunt us for years. Already, the FT calculated, global debt has surged to its highest level in peacetime, as has unemployment in many countries, including the US.

And then there are the climate, social and fiscal crises that were already underway. Left unchecked, these crises will worsen. They form the cracks in our social and economic systems and, combined with covid-19, make us fear a post-pandemic world that is even less sustainable, equal and resilient.

In response, we should hit the reset button. During this crisis, old habits, such as car commutes or excessive flying, were disrupted in a matter of days. The temporary fixes that replaced them, such as working from home, showed that a reset is possible.

Equally, the altruism so many citizens have displayed towards the elderly and care personnel, as well as the commitment various companies have made to their stakeholders, show that the will to build a better society exists. Building on this, we could aim for social contracts that ensure fair and equal opportunities, and accelerate “net-zero" CO2 pathways, among other goals. We should seize this opportunity.

How do we make it happen? There are three crucial aspects to the Great Reset: first, steering and nudging the market to create fairer outcomes; second, channelling investments to “build better"; and third, using the innovations of the Fourth Industrial Revolution for good. At every step, governments and businesses have a role to play: we’ll succeed or fail together.

Since the crisis disrupted our economic fabric, governments have taken on a more expanded role. They could use the opportunity to more effectively align taxes, subsidies, fiscal policies, trade arrangements and other regulations, and create the conditions for a “stakeholder economy". We need stronger and better governments, without ideologically pushing for bigger ones.

Governments have a good incentive: their tax base has eroded, while public debt is soaring. They should use this unprecedented situation to make long-needed reforms and ensure distributional equity of the burden of the crisis. They could, for example, re-assess wealth taxes in very unequal societies, end subsidies to the carbon industry and rewrite the rules on intellectual property, trade and competition.

New and expanded investment programmes became available as social and economic life ground to a halt, and these should be used for systems change. The opportunity is huge: the recent €750 billion recovery fund of the European Commission is unparalleled, and equally large stimuli exist in the US, China and Japan. Some private investors and pensions funds, too, can help.

For these once-in-a-generation funds to be a blessing in the long run, they should be used to create a very different system, not fill the cracks in the old one; we should use them to fund “green" infrastructure in cities, for example, or to incentivize industries with a poor track record on environmental, social and governance (ESG) metrics to change their ways.

We have an opportunity to use the technologies of the Fourth Industrial Revolution for good: to address health and other social issues, notably. During this crisis, many companies, universities and others have joined forces in vaccine development, creating testing centres, tracing cases and delivering telemedicine. Imagine what is possible when similar efforts are made in every sector.

To be sure, this Great Reset of modern capitalism can’t happen by making only incremental improvements. We need to reset the foundations of our economic and social systems—and do so in a way that has never been done before. Through conversations we’ve had in recent weeks, we are confident it is possible.

This is a truly an unprecedented global crisis affecting every corner of our world. We have a unique but narrow window of opportunity to reflect, reset and reimagine the world we want for future generations. To seize this opportunity, everyone has a role to play. We ask that you join us. ©2020/Project Syndicate

Klaus Schwab is founder and executive chairman, World Economic Forum

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