THE ‘GREAT RESET’ AGENDA
Samantha Amerasinghe focusses on the importance of stakeholder capitalism
The Davos Agenda 2021 hosted by the World Economic Forum (WEF) was somewhat different this year; it didn’t take place on the snowy slopes in Davos but virtually. But it was arguably the most important Davos of our times as the pandemic has laid bare several critical issues that require us to reset our priorities to rebuild a better post-COVID world.
With global policymakers and business elites unable to engage in their usual schmoozing, and with no champagne, canapés and espressos to cloud the reality of the global crisis, the focus was on the agenda’s Great Reset initiative. By this we mean a reset of ‘stakeholder capitalism,’ with shared prosperity, solidarity and cooperation at its core.
The pandemic and climate risks dominated the Davos discussions in January. WEF’s recent Global Risks Report 2021 highlighted that due to COVID-19, the risk posed by infectious diseases jumped to first place from 10th in terms of impacts over the next decade, closely followed by climate action failure and other environmental risks.
Despite the inevitable fallout from the pandemic, climate related matters comprised the bulk of this year’s risks. There are mounting concerns that as economies begin to recover this year, emissions will soar.
Spurred by the alarming climate crisis and growing social challenges brought about by the pandemic – such as rising inequality and stakeholder capitalism – the popular management theory from the 1950s and ’60s that focussed on the needs of all constituents and not only shareholders is gathering steam.
The pandemic has accelerated the need for a ‘great reset’ of capitalism. Clearly, polarisation and inequities introduced by COVID-19 are growing larger. As the crisis is prolonged, inequality is widening the gap within and between countries.
COVID-19 will have serious long-term consequences for economic growth, public debt and employment. Global government debt has been spiralling upwards, unemployment has skyrocketed and according to the IMF, global growth is estimated to have contracted by 3.5 percent in 2020.
Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year (the IMF has projected a global growth rate of 5.5%), renewed waves and new COVID-19 variants pose concerns for the outlook.
This uncertainty will undoubtedly exacerbate the social and climate crises, unless we build new foundations for our economic and social systems.
As for the Great Reset agenda, it contains three main components. The first is promoting more equitable outcomes and creating conditions for a ‘stakeholder economy’ through more coordinated efforts from governments on the tax, regulatory and fiscal policy fronts. This might include reforms such as the withdrawal of fossil fuel subsidies, and new rules governing intellectual property, trade and competition.
The second component focusses on investments advancing shared goals such as equality and sustainability. This means countries with ambitious economic stimulus plans – such as the US, China and Japan – should focus on building green urban infrastructure, and create incentives for industries to improve their environmental, social and governance (ESG) track records, for example.
Finally, the third component entails harnessing the Fourth Industrial Revolution’s innovations to support the public good – especially by addressing health and social challenges.
The period from 2016 to 2020 was probably the warmest five years on record, according to climate experts. To avoid an irreversible tipping point, world leaders at Davos pledged to accelerate efforts to meet or exceed the Paris Agreement goals.
President Xi Jinping reiterated China’s pledges to slash carbon emissions by 65 percent by 2030 and achieve carbon neutrality by 2060. Both are significant commitments as the country emits a quarter of global greenhouse gases.
President Joe Biden ensured that the US rejoined the Paris accord on day one of his presidency. His aggressive climate plan aims for a 100 percent clean energy economy and net zero emissions by 2050.
Biden’s climate agenda is expected to form the cornerstone of key policies in energy, industrials (automobiles, machinery and manufacturing), agriculture and technology, as well as being a key plank in foreign policy dealings with China. The achievement of these ambitious climate goals will depend on how the US-China relationship evolves.
Xi last addressed Davos in 2017, presenting himself as the champion of free trade. Fast forward to 2021 and his speech was once again widely anticipated as it would set the tone for relations with the US over the next four years.
He mirrored his previous rhetoric, positioning China as an important player in a ‘new multilateral world order’ with the United States in a weaker position as it continues to struggle with the pandemic.
Calling for a return to multilateralism, Xi warned against a new Cold War and urged global cooperation to fight the pandemic. Refraining from making discriminatory and exclusive standards, rules and systems that separate trade, investment and technology will be pivotal to rebuilding a better world in the post-pandemic era.
Davos will be held in two phases this year with face-to-face meetings scheduled for May in Singapore. By then, we may have more clarity on how Sino-US-relations will play out, and whether governments embrace stakeholder capitalism (the most important lever of the Great Reset) and translate rhetoric into meaningful action.