Klaus Schwab gets a lot of attention for his idea of the Great Reset. This is something promoted by the World Economic Forum (WEF). It is also something that scares many people.
He is just another in a long line of people who thought they could control the economy. Theories are put forth which is mostly the same spin on the failed policies.
It is also at the heart of most economists. In the end, they mostly end up in the same camp. They are arrogant enough to think they can control what is happening.
Same with gold bugs. Bitcoin Maxis. And Communists.
The Great Reset will fail just like every other feeble attempt.
In this article we will explain why.
Throughout history the business cycle is undefeated. It has never lost yet people still think they can alter it.
Karl Marx believed the elimination of private property was the answer. John Maynard Keynes followed this concept, bringing forth the school of economic thought that bears his name. It is ironic since he spent the last 20 years of his life railing against the theories he espoused when he was younger.
In other word, he admitted he was wrong.
This was a view supported by Arthur Burns who was the head of the Federal Reserve when Bretton Woods collapsed. He, too, said Keynesian had failed.
Paul Volcker even penned The Rediscovery of the Business Cycle.
Central banks, who employ rows of economists, find themselves in the situation where they always have to resort to this approach. There is nothing else for the entire discipline. They cannot admit that it is all outside their control.
It doesn't matter what the type of banking system, the form of money, or the structure of government.
The business cycle always wins. Anyone who claims that can create an economic utopia without some pain is too arrogant to learn from history.
This is the motto of the WEF. Doesn't Schwab realize that communism fell over 30 years ago? Of course, they believe it is only because the U.S. and Europe was not on board. If they can get all to align, it will work.
Again, this ignores human nature.
To start, someone has to own something. So it the population owns nothing, who does? Is Schwab, an academic, going to have nothing? Is Bill Gates giving up his billions? How about Hillary Clinton? Boris Johnson?
We all know the answer to this.
The other problem is humans are predictable. It is why things move in cycles. Our tendency to change is a mixed bag at best.
At the core of this seems to be a flaw in our collective memories. We seem to forget.
When the economy is expanding, and we are moving up the slope from trough, risk is taken on. This occurs in both the markets and commerce. Over time, things get heated, with returns that are stellar. The mindset is this will continue forever.
The warning signs from the past are completely ignored. Businesses and financial institutions take on too much risk. Debt is used for leverage, further exposing the pitfalls to the downside. Individuals follow suit.
Of course, the good times do eventually end and defaults take place. This leads to the descent towards the trough. On this side of the hill, the memories of the expansion are long gone. Look at how people are during bear markets. They act like it will never end.
Both peak and trough have the same mindset. This is why the business cycle is undefeated. Human psychology follows the same repeated patterns.
People like Schwab think they can dehumanize society. This is always the failure in their plans.
Advancement is a result of curiosity. This is why start ups tend to have the breakthroughs and disrupt industries. Large corporations tend to get overloaded with accountants and lawyers. These are not usually the innovators.
The Soviet Union is an example of how the "death of the individual" caused innovation to die. When it collapsed, there was nothing in terms of technology or new insights. The incentive to create anything was removed.
It is a situation mirrored in countries like North Korea and Cuba. Human ingenuity does shine through in those places. The difference is that it is usually applied to survival.
There is a reason why I rail again economists so much. They tend to succumb to the same tendencies. Again, their schools of thought do not matter as much as their underlying systems of belief.
Schwab is right in his view on technology. The fundamental concept of Industrial Revolution 4.0 is sound. Advancements in the digital world are going to affect the manufacturing and distribution process.
Where Schwab errs is in his belief that he can control it. His view is that technology is going to be in the hands of the powers that are, feeding them more of the resources which they will distribute.
Here again, we see a lack of understanding of history. It also goes against human psychology.
We are seeing some of the most powerful technology ever created. The difference is that, over time, it gets distributed around the world. Even in Cuba, a laptop or PC is orders of multitude more powerful than what was in the developed countries a decade ago. While they might be behind compared to the latest and greatest today, it is still potent enough to create programs that can affect millions of people.
This extends to every corner of the planet.
The reason why many major institutions are coming under attack is simply due to the fact that technology is moving further out, providing capabilities that was originally in the hands of the largest entities. We recently covered video and how broadcast television as well as Hollywood are facing major disruption due to the advancement of software.
As the technology grows in power, so does the size of the entities that are going to be taken down.
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