Ethos Perspectives

Possible Discontinuities in the Post-Crisis World

Introduction: The Fate of Globalisation
The ongoing financial crisis presents a timely reminder that globalisation brings both opportunities and threats to Singapore. Over the years, Singapore has benefited from global economic integration, particularly in international trade and finance. At the same time, Singapore has realised that greater integration means greater exposure to a variety of 'imported threats', as we have seen in the Asian Financial Crisis, September 11 and SARS.

While the current global economic crisis might appear to be yet another event in an unending cycle of global upswings and downturns, its scale and magnitude suggest that post-crisis, there could be some substantial discontinuities — highly disruptive changes from current circumstances — in Singapore’s future external operating environment. Commentators such as Joseph S. Nye have diagnosed that globalisation is currently at a crossroads due to the severity of the crisis,¹ while Dani Rodrik has gone so far as to say that the world has already entered a period of de-globalisation.²

This edition of Ethos Perspectives discusses two related questions: What possible discontinuities can Singapore expect in the next ten to fifteen years after a decade of unfettered globalisation? How could our domestic priorities be affected?

Possible Discontinuity #1: Beyond US / China-Driven Growth
Since the 1990s, the symbiotic relationship of China and the US (or "Chimerica", to use historian Niall Ferguson’s term) has been the global economy’s main engine of growth.³ "Chimerica" accounts for 13% of the world’s land surface, 25% of its population, 30% of world GDP and 50% of global growth over the last 6 years.

However, the magnitude of this financial crisis, having put a substantial dent on "Chimerica", is likely to usher in a new global growth model as both countries seek ways to recover. Already, there are signs that China and the bigger, less-indebted emerging economies such as Brazil would recover earlier from the financial crisis because they are less dependent on US consumption than commonly believed, and have so far spent more to stimulate domestic demand.⁴

Implications for Singapore
For an export-reliant economy like Singapore, we will have to seek opportunities to move into new markets that serve as alternative sources of demand. Currently, 61% of Asia’s exports, including China and India, have final consumers in the G-3 economies.⁵ The burgeoning urban middle-class in emerging markets will likely provide a new source of demand, due to higher untapped consumption potential.⁶ In addition, a geo-economic axis between Middle Eastern and North African (MENA) and Asian economies, based on complementary factors of production, could develop.⁷ Furthermore, the long-term trend of much higher energy costs in the future will reduce the competitiveness of manufactured products in Asia for shipment to distant markets such as Europe or the Americas⁸ and precipitate the development of new trade alliances.

Apart from opportunities, Singapore will also need to operate in an environment with greater resource constraints. Notwithstanding the shift away from "Chimerica-driven" growth, the global economy is likely to remain volatile in the short term as major industrialised and emerging economies restructure themselves. In addition, the risk of certain economies pursuing protectionist trade policies, plunging the global economy into a period of prolonged stagnation, remains real.⁹

Hence, we may have to continually prioritise and re-prioritise the way in which resources are allocated — difficult trade-offs may have to be made across competing priorities, with emphasis on, for example, social assistance programmes.

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