The great reset must place social justice at its centre

europeansting.com/2020/07/29/the-great-reset-must-place-social-justice-at-its-centre/

World Economic Forum July 29, 2020

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with
the World Economic Forum.

Author: Mark Doumba, Managing Director, Enovate Capital

Wealth needs to be more broadly redistributed.

Governments will need to intervene more to ensure better and fairer outcomes from
private sector investments.
New institutions need to incorporate profound reforms to ensure better racial
integration.

Capitalism as we know it needs to be reformed. The growing discontent at the ideology that
has created so much wealth and progress on the one hand, and yet so much inequality and
instability on the other hand, is causing increasingly frequent social disruptions across the
world. The COVID-19 crisis has laid bare most of these dysfunctions, ranging from uneven
access to healthcare, education, economic opportunities, and social progress, to growing
inequality among and within nations and racial and ethnic groups. At the centre of these
multiple crises lies the tension between privilege and meritocracy.

1/24
From a global economic perspective, capitalism, as the dominant economic system since the
end of World War II, has played a substantial part in fueling inequalities within and across
nations.

After decades of austerity policy imposed by the World Bank and the International Monetary
Fund (IMF) on Latin American, African and other lower-income economies as a false cure for
recessionary cycles, rich countries’ responses to the macro-economic effects of the COVID-
19 crisis have spectacularly rejected the public sector restraint sold to developing countries
as foundational to post-war capitalism.

Indeed, advanced economies have resorted to unprecedented unconventional and counter-

cyclical policies to boost economic growth through public spending, leaving the balanced
budget approach as an afterthought.

According to the IMF, G20 countries have collectively spent $9 trillion on stimulus in the first
half of 2020 – more than 10% of the world’s GDP. Government leaders argue that this
approach was essential in maintaining economic and social stability and yet, not all countries
had the privilege of fiscal and monetary policy space required to emulate this response.

2/24
In hindsight, there is evidence that the widespread use of austerity plans on developing
countries has cost them billions of dollars of output, millions of jobs, and years of stagnant
growth that have contributed to the great divergence between the rich countries and the rest
that we observe today.

Given the compounding effect of past investments, the poor policy prescriptions of the 20th
century have contributed to widening the gap between high and low-income economies so
vastly that only proactive and broad based interventions can help narrow it again. Forget

3/24
laissez-faire and the invisible hand.

From a global social perspective, there is growing discontent from the 99%. The need for
social justice is taking centre stage as wages have grown only marginally when compared to
the income and wealth of the 1%.

Growing unemployment and job instability have created resistance against immigration,
globalization and labour-replacing automation. Education has not only remained static and
become unfit to train workers towards upward social mobility, but it has also done poorly at
preparing workers to face the wide ranging challenges that stem from profound and rapid
change in just about everything.

Years of under-investment in public infrastructure have eroded the quality of public services.
That is not to forget long-standing issues that relate to climate change, food security,
geopolitical tensions and systemic racial injustice. Over the past two months, the death of
George Floyd has spurred mass protests in the United States, France, Great Britain and
Australia among many other countries. Countries with a colonial past that have failed to
ensure full racial integration and to actively combat systemic racism will suffer from sustained
social unrest and national identity crises.

With all that said, there is an urgent need to design institutions that can address the wide
ranging imperfections of the world as we know it. A new social contract that accounts for the
specific challenges and histories of each country but that also aims to ensure that “a rising
tide lifts all boats” is needed to lay the past to rest and pave the way to a better future.

In the post-COVID-19 world, there are three features that will need to be fully institutionalized
as part of the new local and global social contract.

1. Capitalism and socialism will need to merge

Firstly, the slow death of capitalism does not equate to a resurgence of communism.
However, rethinking capitalism, or giving capitalism a “Great Reset” as World Economic
Forum Chairman Klaus Schwab has suggested, means that capitalism and socialism will
need to merge to create a productive and inclusive economic and social model.

Wealth has become abundant, thanks to capitalism, but it now needs to be more broadly
redistributed, as socialists have long called for. In particular, there is an urgent need to
recouple the wealth of financial markets with the real economy.

The great divergence of the recent decades, both among and within nations is, in large part,
due to the rise of intangible assets (tradable securities and intellectual property) and to
income from privilege (inheritance, income from accumulated capital, and pre-existing social
conditions such as networks of wealth and power associated with race, gender, religion, and
culture) compared to the stagnant productivity growth observed in the real economy.

4/24
If Jeff Bezos was a country, his net worth of $172 billion as of 5 July 2020 would rank as the
third wealthiest nation in Africa after Nigeria and South Africa, but ahead of Kenya;
controlling more money than the majority of a region of 54 countries and 1.2 billion people.
The introduction of a tax on passive income and wealth is essential in a world where
individuals are more wealthy than nations.

Above a certain level of wealth, more income in the pockets of ultra-high net worth
individuals becomes less productive and less fair for the economy as a whole than if it were
to land in the pockets of workers.

Indeed, a number of economists have argued that inequality leads to economic instability.
One mechanism by which this happens is that the rich consume a smaller proportion of their
income than the poor. They save money which people on lower incomes would spend. This
leads to a reduction in aggregate demand, which in turn leads to unemployment. Therefore,
wealth creation and income redistribution can reinforce each other. Both need to be equally
important in the post-COVID institutional context to ensure economic justice.

2. We must improve coordination between the public and private sector

On social justice, there is a fundamental need to improve coordination between the public
and private sector in order to ensure both equity and efficiency. Despite long-standing fear of
an “efficiency-equity tradeoff,” in reality both features can coexist, and we can do better on
both measures than we are doing now.

The push to support market-based incentives to accelerate the privatization of everything

has enabled governments to cut public spending in favour of private investments. In
advanced countries, this has led to an increase in the costs of many essential goods and
services that have traditionally been free to citizens, through mechanisms such as toll roads,
tuition hikes, and ballooning medical fees. This trend also led to the erosion and exclusion of
public service quality to those most in need.

In the new institutional context, governments will need to intervene more to ensure better
and fairer outcomes from private sector investments. One way this can be done is by
introducing a universal basic income (UBI) funded by taxing wealth and passive income, and
by making better use of public savings.

High-income countries have the resources to make this possible. In developing countries
however, resources are scarce, and both unemployment and informality rates are high. Too
much of the economic activity falls within the domain of the public sector and it results in
inefficient and insufficient public spending on infrastructure, employment, education, and
health; which often crowd out private sector investments.

Governments in low-income countries can do better if they pull in private investment to

finance profitable projects and push public finances to fund projects that have low economic
but high social value to ensure that services are always accessible to the most vulnerable

5/24
groups.

Furthermore, there is a need for more decentralization to allow municipalities to intervene

more effectively at a local level, and for the central government to invite the private sector to
invest and manage select infrastructure projects as public-private partnerships. Ultimately,
the best way to optimize social investments on public finances in developing countries is by
ensuring that governments provide an enabling environment for entrepreneurship and private
investment activity to flourish and create wealth that is fairly distributed among investors,
workers and the state.

3. We must improve access to equal opportunities

On systemic racism, new institutions need to incorporate profound reforms to ensure better
racial integration and to rectify centuries of accumulated prejudice to colonized countries and
to minority groups, especially black and brown communities. It is important to acknowledge
“white privilege” and to break the myth of pure meritocracy that has persisted for too long as
an explanation for not only the divergence in outcomes between rich and poor countries, but
between rich and poor people along all dimensions of society.

Centuries of prejudice cannot be reversed within one or two generations. Leaders of the new
institutional order must proactively design mechanisms to improve access to equal
opportunities and to social and economic accelerator programmes. These initiatives need to
be macro in scale. Programmes such as affirmative action are well-intended, but they remain
defensive and tactical interventions to improve the odds for black and brown communities.
The work at hand is not about the 3-5% of students in elite colleges of the world who are
black; it is about making growth, progress and social upward mobility systemic within the
black and brown community.

This can be done by shifting the focus from “giving a hand” to these communities to
empowering them with large-scale public investments to level up access to conditions on a
par with those of more privileged communities. For example, public investments directed at
improving the infrastructure in black neighbourhoods would increase the value of real estate
for black owners, improve the quality of education and healthcare and help build a
community of more affluent residents who would have a vested interest in perpetuating
generational progress.

With some exceptions, such as South Africa, and India (given its caste systems and
particularly the exclusion of Dalits), the rationale for such demographically motivated
investments in developing countries is not as necessary since the population is
overwhelmingly composed of disadvantaged groups. Nonetheless, the need for more social
investment and for more socially-conscious policies, such as local content and indigenization
rules, is equally important to expand access to racial justice. These initiatives, such as the
Black Economic Empowerment in South Africa (BEE) program, have helped empower

6/24
previously the marginalized, but they have also been criticized for distorting markets and for
concentrating wealth, power and influence in the hands of a small group of people. New
programmes in this vein must not replicate these mistakes.

Systemic injustice is the defining challenge of our era of capitalism, and COVID-19 has
brought it to the surface. Underneath the abundance of the few lies a high degree of inequity.
Meritocracy does exist, but it is important to distinguish outcomes driven by privilege from
those resulting from meritocracy and to diagnose contexts where privilege hinders
meritocracy.

It has been in the interests of capitalists to promote the virtues of meritocracy and to
downplay the extent of injustice and prejudice. Poor countries and poor people aren’t poor
because they don’t work or try hard. In many instances, poverty and exclusion comes from
working in a system where the weight of privilege outweighs the possibility for hard work to
translate into social mobility.

coronavirus, health, COVID19, pandemic

What is the World Economic Forum doing to manage emerging risks from COVID-19?

The first global pandemic in more than 100 years, COVID-19 has spread throughout the
world at an unprecedented speed. At the time of writing, 4.5 million cases have been
confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business,

environmental, societal and technological challenges and opportunities are just beginning to
become visible.

To help all stakeholders – communities, governments, businesses and individuals

understand the emerging risks and follow-on effects generated by the impact of the
coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and
McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A
Preliminary Mapping and its Implications – a companion for decision-makers, building on the
Forum’s annual Global Risks Report.

The report reveals that the economic impact of COVID-19 is dominating companies’ risks
perceptions.

Companies are invited to join the Forum’s work to help manage the identified emerging risks
of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks
Outlook: A Preliminary Mapping and its Implications report here, and our impact story with
further information.

New institutions need to level the playing field and to actively intervene not to reverse the
past (as what is done is done) – but to build a future where people of all racial, social, gender
and economic backgrounds can excel and be judged “not by the circumstances in which they

7/24
were born, but by the content of their character” to paraphrase the famous words of Dr.
Martin Luther King, Jr. The spirit of his words continues to echo in our era, and we must let
them guide our actions – especially our investments and policies – now more than ever.

This blogpost was originally published by the Harvard Kennedy School Review.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

8/24
How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person

a year

Refugees now make up 1% of the world’s population

UN sounds alarm as Venezuelan refugees and migrants passes three

million mark

Female representation is a weapon against patriarchal prejudice

Tragedy of Mediterranean deaths continues, as seven drown, 57

rescued: UN migration agency

9/24
Polish PM chooses to focus on economy, amid questions on rule of
law in Poland

Here’s why the world’s recovery from COVID-19 could be

doughnut shaped

What’s needed to protect food security in Africa during COVID-19

Millions denied citizenship due to ideas of national, ethnic or racial

‘purity’: UN rights expert

10/24
Closing the gaps in accelerating women’s rights: The role of
medical students

Give a chance to the brothers of Ailan: reception of refugees

in Greece

What are the real targets of EU’s efforts to fight tax evasion?

Occupational safety and health in a changing world of work

11/24
The final countdown towards achieving 2030 Agenda

Eurozone guarantees all banks with…taxpayers’ money

A Sting Exclusive: “Entrepreneurship in the Coronavirus (COVID-19)

era” written by the Vice-President of Junior Enterprises Europe

Commission welcomes agreement on the Connecting Europe Facility

to fund greener, more sustainable transport and energy networks,
and digitalisation

12/24
Europe is now practically divided as in the Cold War

Fostering intergenerational solidarity and cooperation through age-

friendly environments: the right answer to Europe’s
demographic challenge

Alcohol abuse kills three million people a year, most of them men –
WHO report

Myanmar: Departing UN rights expert still hopeful for

democratic transition

Return of Kuwaiti property by Iraq, signals hope of ‘full

normalization’ between nations: UN Chief

‘Violence, atrocities and impunity’ reign throughout Libya, ICC

prosecutor tells UN Security Council

13/24
COVID-19: MEPs call for measures to close the digital gap
in education

The world is too complacent about epidemics. Here’s how to change

European Banking Union: no one is perfect

Multilateralism’s ‘proven record of service’ is focus of first-ever

International Day

Afghanistan probe: ‘at least 60 civilians’ killed after US military

airstrikes on alleged drug labs

5 ways COVID-19 has disrupted our sleep

14/24
Here’s why e-mobility must be at the heart of the green recovery

Tobacco-free public space – how is the European law executed in

my country?

This is why we should test everyone for COVID-19

GSMA outlines new developments for Mobile World Congress

Shanghai 2018

15/24
To tackle climate change, we need city diplomacy

Successful third issuance of EU SURE bonds by the

European Commission

We have a space debris problem. Here’s how to solve it

We need greater protection for our oceans. We can’t let politics

stand in the way

16/24
With half of Somaliland children not in school, UNICEF and partners
launch education access programme

“Only through energy policy we can trigger competitiveness”. The

Sting live from #EBS2015: Energy Union – When will it happen?

Member states jeopardising the rule of law will risk losing EU funds

Coronavirus: EU channels further support to Nepal and repatriates

EU citizens

‘We need to do more’ to transform the world, deputy UN chief tells

African audiences

17/24
Eurozone’s sovereign debt not a problem anymore?

Climate change: What is COP26 and why does it matter?

Business management: how can you introduce new ideas?

GSMA Mobile 360 Series – MENA in Dubai, in Association with The

European Sting

18/24
Protection of workers from biological agents: how to classify COVID-
19

“Our house is on fire.” 16 year-old Greta Thunberg wants action

Commission’s action against imports from China questioned

President Michel’s MFF proposal not acceptable for Parliament

19/24
Mergers: Commission approves the merger of Fiat Chrysler
Automobiles N.V. and Peugeot S.A., subject to conditions

This is how New York plans to end its car culture

Fostering global citizenship in medicine

A Sting Exclusive: “Delivering on the Environmental Dimension of

the new Sustainable Development Agenda”, Ulf Björnholm
underscores from UNEP Brussels

20/24
Worldwide UN family celebrates enduring universal values of
human rights

COP21 Breaking News_07 December: “The world is expecting more

from you than half-measures”, UN Secretary General Bank Ki-moon
cries out from Paris

Parliament sets conditions on EU-China investment deal

A male gynecologist in Iraq: red line violated

Zimbabwe ‘facing worst hunger crisis in a decade’

21/24
5 things to know about the US opioid epidemic

FROM THE FIELD: One teen’s journey from refugee camp to US

school principal

More Stings?

Eastern Partnership: a renewed agenda for recovery, resilience and

reform underpinned by an Economic and Investment plan

Rule of Law: start applying budget conditionality immediately

NextGenerationEU: European Commission endorses Slovenia’s €2.5

billion recovery and resilience plan

22/24
EU-Republic of Korea trade grows twice as fast under
trade agreement

EU Digital COVID Certificate enters into application in the EU

Long-term vision for rural areas: for stronger, connected, resilient,

prosperous EU rural areas

Defence Industry: the Commission kick-starts the European Defence

Fund with €1.2 billion and awards 26 new industrial cooperation
projects for more than €158 million

Consumer protection: Commission revises EU rules on product

safety and consumer credit

23/24
EU-UK relations: solutions found to help implementation of the
Protocol on Ireland and Northern Ireland

Enhancing EU’s disease prevention and control capacity

A Continental Political Party

The need for a united Europe

Material and human garbage

24/24