Against the Great Reset: 'The Economic Consequences of the Great Reset'
Continuing today, and for the next nine weeks, The Pipeline will present excerpts from each of the essays contained in Against the Great Reset: 18 Theses Contra the New World Order, to be published on October 18 by Bombardier Books and distributed by Simon and Schuster, and available now for pre-order at the links.
Part III: THE ECONOMIC
Excerpt from "The Economic Consequences of the Great Reset" by David P. Goldman
The Great Reset is not a scheme for implementation in the distant future. It’s happening now, in the form of the most radical transformation of world economic policy in modern history, with the possible exception of World War II. The economic landscape that has emerged after the Covid-19 recession of 2019–2021 is radically different from what preceded it. The world economy has already been reset, and the perpetrators of the Great Reset want to make these changes irreversible.
One-fifth of the industrial nations’ GDP shifted to the balance sheet of governments during the Covid-19 pandemic, by far the biggest and fastest transfer of financial resources to governments in world history. Except for a few communist revolutions, no such transfer of economic power to governments from the private sector ever has occurred and never on a global scale. In 2019, the gross debt of the members of the Organization for Economic Cooperation and Development (OECD) stood at about 102 percent of their combined GDP; by 2021 the proportion had risen to about 122 percent, according to the International Monetary Fund (IMF). That’s an increment of roughly $10 trillion in terms of current U.S. dollars.
That is not the only revolution in economic affairs to occur between March 2020 and the middle of 2021.
- Transfer payments jumped to 75 percent of federal expenditures from 60 percent before the crisis, leaving vast numbers of lower-income Americans dependent on government spending for the majority of their income.
- A handful of technology giants dominated stock market returns, in sudden concentration of wealth not witnessed since Theodore Roosevelt’s administration.
- A massive reordering of global investment priorities in the service of the quixotic goal of eliminating carbon emissions, on a scale so ambitious that it would absorb virtually the entire public and private investment budget of the West for the next thirty years. Not even in wartime has the industrial world been subject to such a radical economic reordering.
This is a utopian experiment as sweeping as the old Marxist vision of state-owned industries directed by a technocratic elite. Like all utopian experiments, it is doomed to failure. The redirection of investment toward the alleviation of supposed manmade climate change will destroy productivity and living standards. The massive increase in taxation proposed to alleviate income equality will crush entrepreneurship and economic growth. The inflation resulting from massive increases in government-created demand will erode the incomes of the least prosperous citizens of the United States and produce the opposite of the result that the Great Reset proposes to achieve, by making the poor poorer. And the destructive consequences of the Great Reset for the productivity of the Western industrial nations may well hand the leadership of the world economy to China by default.
Worst of all, the toxic combination of ballooning government debt and declining productivity is likely to set in motion a global financial crisis worse than the 2008 crash. The structural weakness at the center of the 2008 crisis was the overleveraging of consumer balance sheets, mainly through the mortgage market. The industrial nations relied on the borrowing capacity of governments to control the crisis, expanding the debt of industrial nations and the balance sheets of central banks at a pace without precedent in peacetime. The Covid-19 crisis has prompted an even faster expansion of government debt and central bank balance sheets, and the Great Reset proposes to continue this rate of expansion into the indefinite future. In place of consumer or corporate debt, government debt is now the finance system’s weak link; when the next crisis arrives, there will be no entity in the world with the capacity to bail out governments.
Economists and financiers associated with the Great Reset project argue that there is no limit to governments’ spending capacity as long as central banks suppress interest rates and the carrying costs of increased debt burden. This assertion ignores the most salient fact of the world economy, namely the presence of a strategic competitor to the West with a population half again as large as the combined population of the United States, the European Union, and Japan. China’s
economy measured by purchasing power parity is already one-fourth larger than America’s, and China’s ambition is to replace the United States as the center of the world financial system.
The monetary policy associated with the Great Reset will undermine the role of the U.S. dollar as the world’s principal reserve currency and shift the center of gravity in the world economy to China. The WEF and other elite organizations act as if the advanced industrial nations live in their own bubble. In reality, the Western democracies are in a contest for economic dominance with China. The Great Reset virtually guarantees that China will prevail, with devastating consequences for the United States. With a negative net foreign investment position of $13 trillion and a current account deficit of $1 trillion per year as of late 2021, the United States depends on the willingness of foreigners to hold U.S. dollar investments. China already is promoting its own currency as a substitute for the dollar, and its success would be devastating for America’s financial system.
The WEF’s executive chairman, Klaus Schwab, issued what might be called the Great Reset manifesto in a June 3, 2020, article:
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.” At a time of diminishing tax bases and soaring public debt, governments have a powerful incentive to pursue such action.
Moreover, governments should implement long-overdue reforms that promote more equitable outcomes. Depending on the country, these may include changes to wealth taxes, the withdrawal of fossil-fuel subsidies, and new rules governing intellectual property, trade, and competition.
The second component of a Great Reset agenda would ensure that investments advance shared goals, such as equality and sustainability. Here, the large-scale spending programs that many governments are implementing represent a major opportunity for progress…
Rather than using these funds, as well as investments from private entities and pension funds, to fill cracks in the old system, we should use them to create a new one that is more resilient, equitable, and sustainable in the long run. This means, for example, building “green” urban infrastructure and creating incentives for industries to improve their track record on environmental, social, and governance (ESG) metrics.
The third and final priority of a Great Reset agenda is to harness the innovations of the Fourth Industrial Revolution to support the public good, especially by addressing health and social challenges. During the Covid-19 crisis, companies, universities, and others have joined forces to develop diagnostics, therapeutics, and possible vaccines; establish testing centers; create mechanisms for tracing infections; and deliver telemedicine. Imagine what could be possible if similar concerted efforts were made in every sector.
Noteworthy is Schwab’s reduction of the “Fourth Industrial Revolution” to activities that “support the public good” by enhancing surveillance of the population in the interest of public health. There is a legitimate argument for the use of electronic contact tracing in epidemics, and a number of democratic countries including the United Kingdom, Germany, and South Korea require the use of smartphone software for this purpose. But Schwab’s understanding of the “Fourth Industrial Revolution” component ignores the productivity-enhancing role of artificial intelligence (AI) and Big Data applications to industrial robotics, logistics, the internet of things, “smart cities,” and other technologies that promise higher growth rates. His one-sided emphasis on “health and social challenges” implies a vast increase in the power of the state and of the technocratic elite rather than a broadbased gain in economic productivity.
In effect, Schwab proposes to leave the “industrial” part of the Fourth Industrial Revolution to China...
Next week: an excerpt from "The Great Reset, Feminist-Style" by Janice Fiamengo.