The Great Reset By Klaus Schwab And Thierry Malleret

1. Overview

The book, published in July 2020 by Klaus Schwab and Thierry Malleret from the World Economic Forum, is a concise work (250 pages) with only three chapters in addition to the introduction and the conclusion sections:

1. Macro reset
2. Micro reset
3. Individual reset

Chapter 1, the ‘Macro’ reset, evaluates the potential impacts of COVID-19 on five different domains: the economy, society, geopolitics, the environment, and technology. The second chapter analyzes the global reset through a micro perspective by analyzing the pandemic effects on business as well as industries such as healthcare, entertainment, airlines, finance, automotive and energy. The final section addresses the individual perspective. Topics such as collaboration, moral choices, mental health and well-being and consumption are briefly discussed.

2. Macro Reset

The basic idea of the book is that the world needs to go beyond the current limitations and contradiction of capitalism that were prevalent before the crisis. Indeed, COVID-19 offers a window of opportunity to reimagine a new world order through the fourth industrial revolution paradigm. In fact, the world was struggling with several daunting challenges before the COVID-19 crisis: Climate change, environmental destruction, raising inequality and unemployment Climate change, environmental destruction, raising inequality and unemployment to name a few. Unfortunately, COVID-19 has acted as an amplifier of these challenges, therefore they can no longer be dismissed. On the environmental side, the authors relate the causes of the current pandemic with the climate and biodiversity issues.  They, indeed, acknowledge the interplay between environmental degradation, intensive animal agriculture and increasing rates of infectious diseases. Based on this analysis, humanity might be exposed in the future to other zoonotic diseases.

During the pandemic, millions of jobs have been destroyed, and many of them may not come back, especially those held by low-skilled workers.  Companies will, as a consequence, have strong incentives to digitalize and innovate to cut cost and to remain being relevant in the post COVID-19 world. The authors’ position on going back a pre- COVID-19 world is clear: “Many of us are pondering when things will return to normal. The short response is: never”

Going forward, the authors think that world needs to embrace a new kind of capitalism that increases consumer demand for goods and services that contribute to the SDGs, and that rewards companies meeting that “good demand” with economic returns. This paradigm shift supposes to rethink the purpose of a firm through the stakeholders’ theory rather than the narrow and usual shareholders’ approach. At a more macro level, a new approach to capitalism also supposes moving away from GDP as the sole measure of economic growth and prosperity.

Finally, the authors warn against the temptation of returning back to hyper-protectionism or nationalism to correct globalization failures. They rather argue for strengthening global governance by restoring the confidence in international institutions as well as their resilience.

3. Micro reset

In the second chapter, Schwab and Malleret shift gears to a more “down to earth” analysis on how COVID-19 will permanently affect industries and companies. As in the Macro reset section, the authors believe that industries cannot go back to “business as usual”.

The authors start by identifying microtrends that many were in place before the pandemic but that are now accelerating. For some industries “these will prove a boon, for others a major challenge”

• Acceleration of digitization;
• Resilient supply chains;
• Greater interference of governments in the business sphere;
• Stakeholders capitalism and ESG.

Subsequently, the authors move to predicting the future of several industries. However, they acknowledge their analysis’s limitations in terms of providing “a precise account of how each particular industry might evolve” certainly because of the complexity of conducting such predictions. The bottom line is that companies will need a great deal of adaptation and agility in face of swift and unprecedented changes taking place currently. 

• Social interaction and de-densification have effects on travel, tourism, hospitality, entertainment, retail, aerospace and even the automotive industry;
• Consumers’ behavioral changes have effects on retail, real estate and education;
• Resilience (ability to thrive in difficult circumstances) effects on big tech, health and well-being, banking and insurance, the automotive industry and electricity.

4. Individual reset

In addition to macro and micro effects, COVID-19 will have profound and diverse consequences on individuals. Many of these changes may become normalized and part of the post-pandemic period.  A selection of these changes is presented hereafter:

• Has COVID-19 brough people together and rather driven them a part? The examples of past pandemics are, unfortunately, not encouraging! The authors state that “natural disasters, like hurricanes and earthquakes, bring people together, while pandemics do the opposite: they drive them apart. The reason could be the following: confronted with a sudden, violent and often brief natural disaster, populations bond together and tend to recover relatively fast. By contrast, pandemics are longer-lasting, prolonged events that often elicit ongoing feelings of distrust (vis-à-vis others) rooted in a primal fear of dying. Psychologically, the most important consequence of the pandemic is to generate a phenomenal amount of uncertainty that often becomes a source of angst “. However, the authors point out that this time might be different as “we are all collectively aware that without greater collaboration, we will be unable to address the global challenges that we collectively face. Put in the simplest possible terms: if, as human beings, we do not collaborate to confront our existential challenges (the environment and the global governance free fall, among others), we are doomed. Thus, we have no choice but to summon up the better angels of our nature”
• The trade-off between public health and economic growth: The authors believe that “every policy decision will become an exceedingly delicate compromise between saving as many lives as possible and permitting the economy to run as fully as possible”. This decision, they argue are chiefly determined by “underlying ethical consideration that are eminently personal”
• Effects of social distancing and the economic crisis on mental health and well-being:
  • Social-distancing measures worsen mental health issues;
  • In many families, the loss of income will plunge people into the “death of despair” phenomenon;
  • Domestic violence and abuse will increase as long as the pandemic endures;
  • Vulnerable people and children – those in care, the socio-economically disadvantaged and the disabled in need of an above average level of support – will be particularly at risk of increased mental distress.

5. All in all

I do believe that the book is very valuable contribution to understanding the impacts of COVID-19 at the macro, micro and individual levels. Additionally, the book’s simple writing style makes it also easy for the reader to dive into such a complex and technical topic. However, much of the text is geared toward analyzing how things have changed, rather than how things should or will change in the future. The authors advocate for substantial socio-political-economic reforms without offering a roadmap on how to go there. To be fair, making predictions in a complex environment is at best challenging, let alone drafting and discussing detailed strategies in such an environment.

6. Selected quotes from the book

• “Many of us are pondering when things will return to normal. The short response is: never.”
• “A return to business as usual won’t happen because it can’t happen. For the most part “business as usual” died from (or at the very least was infected by) COVID-19.”
• “Our brains make us think in linear terms, but the world that surrounds us is non-linear, that is to say: complex, adaptive, fast paced and ambiguous”
• “Governments, by necessity, take a while to make decisions and implement them (…). By contrast, voters expect almost immediate policy results and improvements, which, when they don’t arrive fast enough, lead to almost instantaneous disappointment. This problem of asynchronicity between two different groups (policy-makers and the public) whose time horizon differs so markedly will be acute and very difficult to manage in the context of the pandemic”
• “History shows that epidemics have been the great resetter of countries’ economy and social fabric. Why should it be different with COVID-19?”
• “Unlike previous pandemics, it is far from certain that the COVID-19 crisis will tip the balance in favour of labour and against capital”
• “Two categories of people will face a particularly bleak employment situation: young people entering for the first time a job market devastated by the pandemic and workers susceptible to be replaced by robots”
• “We should expect the tensions between the forces of nationalism and openness to play out across three critical dimensions: 1) global institutions 2) trade and 3) capital flows”
• “In the coming years, it seems inevitable that some deglobalization will happen, spurred by the rise of nationalism and greater international fragmentation”
• “Tyranny of GDP growth might come to an end”
• “Planned yet adaptive, sustainable, and equitable downscaling of the economy, leading to a future where we can live better with less”.
• “Shareholder value will become a secondary consideration, bringing to the fore the primacy of stakeholder capitalism.”
• “In the post-pandemic era, business will be subject to much greater government interference than in the past.”
• “There cannot be a lasting recovery without a global strategic framework of governance.”
• “The most likely outcome along the globalization–no globalization continuum lies in an in-between solution: regionalization.”
• “In the post-pandemic era, business will be subject to much greater government interference than in the past.”
• “To avoid such a fate, without delay we need to set in motion the Great Reset. This is not a “nice-to-have” but an absolute necessity.”
• “A very real risk exists that tomorrow the world will be even more divided, nationalistic and prone to conflicts than it is today”
• “The world of education, like for so many other industries, will become partly virtual”

Review written by Wail M. Aaminou