Preparing For A Less-Friendly World

At the recent G20 Summit in Korea, PM Lee Hsien Loong rightly called for the G20 group of nations to work together towards policy measures that will sustain global economic growth. Unfortunately, as the aftermath of the meeting showed, his urgings fell on deaf ears as the Americans went ahead with QE2 despite opposition from China, Brazil and others. It looked to me like 'every nation for itself' and the possible outcome would be some kind of 'Nash equilibrium' when it comes to the trade and currency war situations.

As I have written before, I believe that we are moving into an era of reverse globalisation where there will be more friction of various kinds between countries. Here in Singapore, based on public information, it would appear to me that the government's economic assumptions are still predicated upon the continuation of the old free-trade system that has started to unravel since the 2008 financial crisis, with only a change in leadership from the developed world to Asia. What I would hope to see from our government is first an acknowledgement that we could be going into a rough period in the international scene, followed by concrete policy measures to prepare for such a possibility.

Realistically, I don't expect any change in our national economic thinking any time soon. Neither the government nor the opposition parties appear to have considered the risks of the era of reverse globalisation, at least not publicly.