Date posted: 3/12/2020 5 min read

Will technology send capitalism back to the 1950s?

The fusion of technology and financialisation will reshape the purpose of business, says strategist Viktor Shvets.

In Brief

  • Viktor Shvets claims in his book, The Great Rupture, that traditional liberal capitalism is on the way out.
  • He believes the best outcome is not less government, but actually more government.
  • He also envisions a return to the corporate objectives of social responsibility to the nation, society and employees.

By Stuart Ridley

Viktor Shvets left the Soviet Union in 1979 because he saw greater opportunities in the West and its finance industry, which was experiencing a “merger of the two hurricanes of Information Age and intense financialisation”.

It was the beginning of the deregulation of global labour, product and capital markets: in many people’s eyes, the golden years of liberal capitalism.

Forty years later, Shvets claims in his book, The Great Rupture, traditional liberal capitalism is on the way out. Social attitudes are shifting from the baby boomers’ obsessions with efficiency, freedom and choice to millennials’ and generation Z’s emphasis on fairness and equality.

While some boomers may rage against the dying light of individualistic ‘greed is good’ capitalism, their world really started to sunset more than a decade ago, explains Shvets. And the younger generations – which make up more than one-third of the electorate – will soon be in the majority.

“Young people are seeing declining premiums for education, disintermediated jobs, wars, global financial crises and now a pandemic. They want to go back to the values of their grandparents, which emphasised community spirit and support – and they are asking the State to do a lot more.”

Viktor ShvetsPicture: Viktor Shvets. Image credit: Virgile Simon Bertrand.

“Young people are seeing declining premiums for education, disintermediated jobs, wars, global financial crises and now a pandemic. They want to go back to the values of their grandparents, which emphasised community spirit and support.”
Viktor Shvets

By comparison, when boomers came of age, hippies were saying it was time to “tune in, turn on, drop out”. They wanted freedom from state control but benefited from free (or heavily subsidised) education, freer markets, and easier-to-access career opportunities.

“The silent generation called them hippies, socialists, communists, disruptors, all sorts of stuff,” says Shvets. “Now boomers are calling millennials and generation Z exactly the same words, because today’s young people want community support, basic income guarantees and help in skilling up to cope with disrupted markets.”

Is more government the answer?

The disruptions to markets caused by the merger of technology and financialisation during the golden years of traditional liberal capitalism were fourfold, observes Shvets. They created disinflation rather than the hoped-for inflation, narrowed growth corridors for economies and companies, massively increased income and wealth inequalities, and made valuing financial assets extremely hard – growth stocks have outperformed value stocks for almost two decades.

“We’re living in the age of declining returns on humans and conventional capital, and rising returns on digital and social capital,” says Shvets. “Technology has progressed far enough that humans aren’t key productivity drivers any more. So you have reduced marginal utility and reduced marginal pricing power. That can create feelings of irrelevance and disappointment, which in turn leads to social and geopolitical disruptions.”

The best outcome, suggests Shvets, is not less government, but actually more government, with economic policies funded directly by central banks.

He believes a strong public sector funded by a central bank could help societies navigate the next several decades by delivering on policies such as a universal basic income guarantee, universal healthcare, addressing regulatory issues associated with the massive proliferation of technology, and making education more accessible and purposefully focused on creating well-rounded people (not just vocational qualifications).

“The question then becomes: ‘Do we need a much stronger disruption for people to finally compromise?’”

How accountants can contribute to a fairer society

It’s high time businesses moved on from the 1990s mindset that the dominant objective of businesses was to create shareholder value, suggests Shvets. As economies change, he envisions a return to the corporate objectives of the 1950s, where businesses have a social responsibility to the nation, to society and to employees.

“And there are more expectations on businesses now not to pollute and not to avoid paying tax. So, the concept of accountability shouldn’t disappear.

“It’s not so much that you just comply with certain laws. Accountants have a role to perform in keeping businesses in check because society will demand it... So many functions are done more efficiently and precisely by machines. So the only advantage humans have is our humanity.”

“Accountants have a role to perform in keeping businesses in check because society will demand it.”
Viktor Shvets

Viktor Shvets short biography

  • Shvets was born in Kiev, which at the time was the capital of the Soviet Ukraine.
  • Attended Kiev University of Trade in the 1970s.
  • Migrated to Australia in 1979 and completed two degrees: Bachelor of Economics at University of Sydney and Master of Commerce degree at the University of New South Wales.
  • He started work at Coopers & Lybrand, Sydney.
  • His four-decade long career in investment banking has taken him around the world, including roles in Sydney, Melbourne, Hong Kong, London and New York, while working at Barings, Deutsche Bank, Lehman Brothers, DLJ, Credit Suisse and Macquarie.
  • He currently works as a global strategist at Macquarie Securities in Hong Kong, and is a frequent commentator on CNBC, Bloomberg and other media outlets.
  • Authored The Great Rupture: Three empires, four turning points, and the future of humanity, released in 2020 viktorshvets.com.

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