MAS: «There is a Real Risk of a Submerging World»
The risk of emerging economies becoming «submerging» ones is real, said Monetary Authority of Singapore chairman Tharman Shanmugaratnam, who urged collective efforts to avoid potentially disastrous global consequences.
«When you think about the future of the world economy, it's fundamentally about whether the emerging world will continue to emerge or whether it is going to submerge,» said senior minister Shanmugaratnam at a virtual conference hosted by DBS this morning.
Two-thirds of growth in the last decade was powered by emerging economies – including one-third from China – and they are expected to remain as the key global engine in the future. But the ongoing pandemic has tested their economies which may lack the say ability to boost fiscal spending compared to their developed counterparts.
«[T]here is today, a very real risk of a submerging world. I say this not rhetorically,» Shanmugaratnam added. «It is a very real risk that the gains we made over two to three decades are going to unravel and we are going see consequences which are not merely economic.»
Not Just Economic
The potential consequences of a collapsing emerging world could also be social, political and geopolitical, Shanmugaratnam added. Possible outcomes could include more forced migration and the export of political extremism. The fight against climate change and the current or future pandemics will be even more difficult.
Given the global implications for rich and poor nations alike, Shanmugaratnam urged greater international cooperation to prevent emerging economies from becoming submerging economies.
Transitionary Policy
According to Shanmugaratnam, policy objectives should be focused on three main areas: preventing an economic collapse; preventing permanent loss of skills and other social capital; and allowing for growth. He specifically underlined the third point, noting that while the transformation of certain industries like aviation or tourism will be apparent, others will not be as obvious and immediately easily identifiable.
«Beyond those broad-brushed descriptions of the future economy, there is very little that is known,» he said. «Visibility is not there.»
«Prevent Humanity from Descending to Hell»
But in aiming to prevent destruction, Shanmugaratnam stressed that international cooperation has historically had the tendency to lead outcomes astray. He specifically quoted former UN Secretary-General Dag Hammarskjöld and said: «The aim of global cooperation and multilateralism is not to take humanity to the heavens. it is to prevent humanity from descending into hell.»
«[But] the natural tendency for global competition is for increasing friction, for rivalries, and for a descent into the wrong things,» Shanmugaratnam said at the «DBS Asian Insights Conference 2020».
«And we have to fight like hell to avoid that from happening.»
