Excellencies
Distinguished Guests
Ladies and Gentlemen
I am all that stands between you and your dinner, so I’m afraid that puts me in a very uncomfortable position. In Singapore, food is almost a religious item. But unfortunately, the other paradigm we have in Singapore is that there are no free meals. And since I haven’t paid for my dinner tonight, I have to pay by trying to justify my existence tonight by making what I hope will be a useful speech.
I bid all of you a very warm welcome to this year’s Trilateral Commission Plenary Meeting. Professor Joseph Nye, everyone in Singapore knows you. You don’t know how difficult it is for me to have to make a speech in your presence. But nevertheless, as I said, I’m here to welcome you, and I think this is a very timely gathering of some of the most strategic minds, and it’s occurring at a very critical juncture. A critical juncture, not just for Singapore but indeed, all over the world.
We are living in unsettled times. Many things are happening all over the world, and the informal title for my speech today is shamelessly an adaptation of a snowclone from Bill Clinton’s 1992 Presidential campaign – “It’s the technology, stupid”. And let me try to construct a hypothesis that it’s all about technology, stupid. We’ve heard about the Fourth Industrial Revolution. We know that the digital revolution is transforming the way we live, work, play. It’s disrupting jobs. It’s causing middle-class angst. It’s making people afraid that the smaller world is not one happy global village, but indeed, a smaller world is one in which competition stares you in the face every day. No job is safe. And in fact in human history, it’s the first time everyone feels like a minority. For most of human history, we’ve lived with people who looked like us, smelled like us, ate our food, prayed to the same god. It was only the intrepid travellers like you, who met people who are different. But in this day and age, everyone is suddenly conscious that even if you’re a majority in your hometown or your country, you don’t have to go very far to be aware that you’re a minority. So there’s a deep-seated sense of insecurity.
But I actually wanted to take a step back, take a longer zoom lens on history, politics, and economics. If you go back a thousand years, a thousand years ago, China had developed what it called its Four Great Inventions – in Mandarin 四大发明 (sì dà fā míng). What these four inventions were, in AD 1000, was the compass, paper, printing and gunpowder. It’s also worth remembering that in the 10th century, Europe was still in the Dark Ages. The Middle East was celebrating the Golden Age of Islam. And back in the 10th century, China was estimated to account for between 25% and 30% of the global economy. And we’ve heard about the Ming ocean-going voyages, we’ve heard about Zheng He. Huge ocean-going fleets traversed obviously the South China Sea, the Indian Ocean, reached the coast of Africa, and some perhaps mythological, even to America. But subsequent to that, in the 15th and 16th century, due to internal court intrigue and political pressures, these ocean-going Treasure Fleets were destroyed by 1525, and China turned inwards.
What happened after that is instructive. The Industrial Revolution began primarily in Britain, with technological innovations including the creation of the spinning jenny, the steam engine, the initial version the atmospheric steam engine by [Thomas] Newcomen, subsequently improved by James Watt. And the steam engine basically replaced human and animal labour, and it became a mechanical process. There were subsequent waves of technology since then – steelmaking, shipbuilding, electricity, and of course oil, in the last century. I say that since Meghan [O’Sullivan] is here in front of me. And what this Industrial Revolution did, was that it gave Europe enormous wealth, and disproportionate power. And it’s not an accident therefore, that today I stand before you speaking English. The point is the technological edge that was given to England, continental Europe, and that the ultimate heir of the last Industrial Revolution was obviously the United States of America. If we fast forward now, to the end of the Second World War, it’s clear that America was the chief beneficiary, the winner of that Industrial Revolution. And we saw American dominance, both militarily and in civilian technology, and what Professor Joseph Nye has called “soft power”. But the point is that it originated from a technological edge, and the way society was organised.
After the Second World War, we saw a Golden Age. A Golden Age of prosperity. In 1960, the United States’ share of global GDP was about 40%. And when your share of global GDP is 40%, it is in your own interest to underwrite the global economic world order, as we know it. And it was to be a system defined by free markets, free trade, global economic integration. We called it the Washington Consensus. What has changed since then, is that whilst the United States remains the predominant military and geopolitical power today, its share of global GDP has fallen to 25%. Now, I’m a believer in the vitality of the United States, and I think the United States’ GDP will continue to grow. But I think what is inevitable is that the United States’ share of global GDP will continue to fall. Now, I said earlier if your share of global GDP is 40%, it is worth your while, unilaterally if need be, to underwrite that world order. At 25% and falling, it is a completely legitimate political question within the United States to ask yourselves, is it worth your while to unilaterally underwrite the world order? I say this so that it’s not just about President Donald Trump, but that President Trump actually reflects a larger, legitimate political question – the question that the United States will have to answer.
Now, this shift from a liberal world order, co-created and underwritten by the United States, has also had profound impact on the rest of the world. And to be honest with you, many countries have benefitted from the rules-based, open and inclusive global architecture. And in fact, in a paradoxical way, one could argue that the biggest winner from this world order, has been China. China’s economy has taken off and they have been able to lift about 800 million people out of poverty since 1990. Its GDP per capita has risen from US$90 in 1960, to over US$8,000 in 2016. And China is not just earning more. China is climbing up the technological value chain, and companies like Tencent, Alibaba, and Huawei, amongst others, are creating and exporting high value, quality technology. And some say that this transition may even position China to embark on “true leapfrog innovation”. So, many people expect that China will become the world’s largest economy, perhaps by 2032 or so.
India, its GDP currently is only about 20% of China’s. But its growth, because India is coming from a lower base, is expected to be higher than China’s, at least this year and perhaps, for the foreseeable future. What most people don’t appreciate yet, is that India will likely be, or will almost certainly be, the most populous country in the world, by 2025. And, unlike China, it has a young demographic, and it could be the largest source of middle-class growth in the next two decades.
Even if you look within Europe, at France… let’s start with Japan and Germany. Ironically, these countries were supposed to be the “losers” of the Second World War. But they successfully rejuvenated their economies from the ashes of the War to become the economic powerhouses that we know today. We need to give credit to the Marshall Plan, passed in 1948, which provided economic assistance to war-torn countries in Europe to build up human capital, reconstruct damaged infrastructure, and to finance investments. The establishment of the European Coal and Steel Community, which was the immediate predecessor to the European Union, further consolidated peace in Europe, and enabled them to focus on economic growth and human development. The greatest achievement of the EU is to make war unthinkable, at least in Western Europe. And whatever the travails Europe is going through, we should always give the EU credit for their enormous achievement. The economic reforms introduced by the Allies in Japan, together with the incredible work ethic of the Japanese people, contributed to the revival of the Japanese economy, and there was a time when there were many books written about “The Japan That Can Say No”. Of course, we know that something happened in 1991 and the bubble burst. My own theory is that 1991 also happened to be the year that the Japanese workforce peaked, now 25 years or more later, the Japanese population is shrinking. In other words, the other subtext beyond technology is fertility. The fertility of people make an enormous difference to economic vitality.
If you turn now to Southeast Asia, all of you are now in Singapore, in Clifford Pier. This was a pier where many of our ancestors would have landed, and their first footfall to Singapore as they came off ships. Everything you see behind me, the land, buildings – if you were here 12 years ago, you would not have seen any buildings. If you were here 30 years ago, this was just the sea. Everything you see in front of you is an act of human imagination, will and investment.
The US has had a long-standing presence in Southeast Asia, and the US paid in treasure and blood in Vietnam. But that sacrifice to stand against the rising tide of communism in the 60s and the 70s, gave countries like Singapore – non-communist countries – time and space to develop and grow and prove that export-oriented, free market capitalist system works. And in Singapore, our per capita GDP increased from US$500 in 1965 to now more than US$50,000 in over 52 years. ASEAN’s poverty rate fell dramatically from 47% in 1990 – I’m now talking about the entire 10 countries of ASEAN – the poverty rate fell from 47% in 1990 to 14% in 2015. And ASEAN’s per capita GDP grew from US$100, when it was first established in 1967, to over US$4,000 in 2016. So today, ASEAN is a region with tremendous potential. We are a prime investment destination, and if we just keep our wits about us, we are set to become the fourth largest single market in the world by 2030. We have compound annual growth rates of 5% over the last decade, and we can increase that. We have 630 million people, of which 60% of whom are below the age of 35. We are young; we have not yet harvested our demographic dividend. And that’s why we project that we can be the fourth largest economic zone with a combined GDP of US$10 trillion by 2050.
So, what you see here in this part of the world is the very real, positive impact of globalisation. But I share Dani Rodrik’s concern that those of us who have been campaigning for free trade and economic integration have been somewhat guilty of overstating the case. Whilst it is true that the net impact of globalisation is positive, the political fact is that there are winners and losers. One serious consequence of both globalisation, and the fact that we are in the early phase of another digital revolution, is that in fact, there is a period of greater inequality. In fact, if you think about the waves of technological innovation in America, there is often a Gilded Age, and it takes time for the new means of production to be commoditised, be democratised, and then a middle-class arises. So, I believe we are now in a new digital Gilded Age, and one consequence is greater inequality. In other words, whilst globalisation and technology have benefitted everyone, it has not benefitted everyone equally. And for those of us in politics who have to canvas for votes, we all know too well, that it is your relative position, rather than absolute performance that counts. So globalisation has accelerated disruptive change, widened income inequality, caused great job anxiety, especially amongst the middle-class, and even in many advanced societies, you’ve seen wage stagnation, even for relatively middle-class segments of the population. So today, if you accept my theory, my hypothesis that we are living in a new Gilded Age, today the names you hear about are not Rockefeller and Carnegie. The names are Brin, Page, Zuckerberg, and Bezos – the new digital oligarchy. And we are witnessing a widening social divide; we should not be surprised when we face the voters to see an increasingly unsettled, sometimes disgruntled, vocal population who are demanding a more equitable share of economic gains. And in the face of such disaffection, free trade has become an easy scapegoat. Part of the reason why there has been a retreat from globalisation, even by its foremost advocate, I believe it’s because the mitigating measures that we all should have taken have not been adequate, sustainable or sufficiently convincing and reassuring to the population. We therefore need to embark on a fundamental rethinking of how our political and economic and social institutions, which were created, frankly, during the last Industrial Revolution, even the usual political categories of right and left, welfare states versus a free-wheeling open economy. All these actually originated from the last Industrial Revolution. If you believe that there is a new revolution going on, we must expect equally gut-wrenching changes to traverse our societies, our politics, and our workplaces.
Anyway, I don’t have all the answers and there certainly isn’t time because dinner is waiting for you, but I thought I should share with you three aspects of the Singapore Government’s philosophy or approach to dealing with these challenges. First, we believe that governments bear primary responsibility for enabling all citizens to succeed. Now, what this means in practice, is governments have to invest in infrastructure and governments have to invest in training and education. And more so, because the speed of change is so fast in this new revolution, the old model that education is something you do before you start work, and frankly the old model that even going to university – four years and a summer holiday each year – you would never operate that way if you have an efficiency-driven model going at internet speed. So in Singapore, we are restructuring our education systems, we are paying attention to adult education – we have a programme called SkillsFuture. We are putting in serious money, and we are also putting money into individual citizen accounts for them to access training and courses, which will be relevant not just for current jobs but for the next job, because we expect everyone to probably have two or three jobs in their lifetime.
The second aspect is that we believe it is the government’s primary responsibility to invest in research, development, and enterprise, and to facilitate co-investment in research by the private sector. If you think about the internet, so much of what we take for granted, is because of the initial investments by the United States government through DARPA [the Defense Advanced Research Projects Agency] to develop research-related technology. A lot also occurred because of the moonshot. That level of investment in basic research, in institutions, in universities, can only be led and should be led by government. In Singapore, we set aside S$19 billion dollars over five years to fund some of these efforts. We’ve also started AI.SG, which is a project exploring the use of artificial intelligence to address healthcare, urban planning and other public services needs. We are constantly thinking about the impact that artificial intelligence, robotics, biotechnology will have on jobs, people and society. And how to apply this, and how to make sure our people are not in a futile contest with robots, but hopefully enough of us will master those robots, who will be programming those robots, who will leading the cutting edge on this. Because otherwise, the alternative – closing yourself, building walls, shielding yourself from foreign competition – will not work.
My third and final point is that we cannot and should not abandon the global rules-based world order that, for 70 years, based on openness, free trade, multilateral institutions, multilateral rules, and economic integration has brought the peace and prosperity that we take almost for granted today. As Singapore is a small nation with an open economy, whose trade volume is three and a half times our GDP, in Singapore when we say we stand for free trade, it’s not a negotiating or debating point. It is our lifeblood. Because we are small, by definition we also have to believe in an open and inclusive and rules-based multilateral trading system. And as I’ve said earlier, almost all countries, especially in Asia, have prospered under this system. But unfortunately today, the global consensus on the benefits of free trade has been ruptured. Some see economic multilateralism as a zero-sum game. Some have begun to doubt if we can further benefit from economic integration. Even the foremost advocate, I think, has lost some self-confidence, and therefore is looking to withdraw from competition. So the prevailing political climate has made it unfashionable to pursue a trade liberalisation agenda. But we believe we need to stay the course. We think that unilateral actions and the fact that they will elicit a counter reaction, a tit-for-tat, we think trade wars are a very bad idea. We need to avoid measures that ultimately will inflict pain on ourselves, will lead other countries to retaliate, and undo the formula for peace and prosperity that has worked for 70 years. At the same time, we need to acknowledge that the world has changed, and we need to evolve with it. The balance of economic influence has altered, and even the current financial institutions that have played such a major role in economic stability over the last 70 years – the World Bank, the IMF [International Monetary Fund], the Asian Development Bank – these institutions were set up after the Second World War in order to help stabilise the world, prevent shocks, disruptions. And if you think about the economic policies that prevailed in the interwar period, beggar-thy-neighbour, competitive devaluations, trading blocs, we’ve been through all that before. Now these institutions, some people called them Bretton Woods institutions, made a difference. But, and here I will have to be slightly undiplomatic, the World Bank and IMF was very much underweighted as far as Asia was concerned. Especially for China, and for India. It was only in January 2016 that the IMF increased China’s vote share to 6 per cent. It reduced the American vote share from something like 16.7 to 16.5 per cent. But where was the proportionality before? We should not have been surprised therefore, that China proposed the AIIB – the Asian Infrastructure Investment Bank. And because we are pretty hardnosed realists, we recognised that there was a need for this at the time, and it reflected that there is a change economic centre of gravity towards Asia. My point is that if these multilateral institutions do not accommodate the new dynamic changes in reality, then alternatives would be created. But the longer term narrative is that we would all be better off if we had multilateral institutions where everyone participated, and felt the sense of fairness, and that we could reform to reflect new realities. And rules, even if they have to be rewritten, should be rewritten in a consensual, multilateral way, and not on the basis of “might is right”, or “I’m bigger than you”. Again, the world has been through all that before. So my plea, is that even as we live through a revolution, even as we witness enormous changes, which have been brought about paradoxically by very enlightened policies over the last 70 years, we must not lose our malleability. We need to make changes where they are necessary. We need to prepare our people for an enormous, exciting ride ahead, but we also need to double down, double down on free trade, economic integration, a multilateral approach, international institutions, and a multilateral, rules-based regime.
I have to say a few words about ASEAN, since we are chairing ASEAN this year. And I just wanted to end with a story that in 1967, when ASEAN was formed, it was a motley crew of non-communist, less developed states in Southeast Asia. The original five members even had major political differences, even conflicting territorial claims. Nevertheless, our political forefathers felt that “if we do not hang together … we will all hang separately”. And so we formed ASEAN and got together, embarked on that journey of economic integration, free trade, inducted the latest technology, accessed global markets, and were in fact beneficiaries of globalisation before the word was coined. So I hope I haven’t given you any indigestion, but some food for thought, and I want to again welcome all of you for being part of this conference. Thank you for gracing us with your presence and your wit. Thank you.
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