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The Need for a New Global Policy

Author(s): Andrew Sheng

Date: Oct 18, 2016

Theme(s): Finance & Macroeconomics, Sustainability

Publications: Opinions & Speeches

Distinguished Fellow Andrew Sheng calls for a new narrative to restore a sense of balance to global policy.

Last month, I depicted human society as a three-legged stool with its stability founded on each leg – economics being the income and wealth-generation part; politics framed the bargaining between different groups; and the social or philosophical leg relating to individual identity, beliefs and values that hold society together.

These three subjects are exactly those offered by Oxford University’s degree course in philosophy, politics and economics that has prepared many civil servants, politicians and leaders of the world. Policymakers trained in specialist disciplines tend to have tunnel vision on how to address social problems.

The U.S. presidential debates showed how the world is in an existential crisis. We do not know who to believe, who to trust and what information is reliable. Can we trust Hillary Clinton – she who can talk about human rights in the same breath as “we came, we saw, he [Muammar Gaddafi] died?” Gaddafi may have been a tyrant, but after he was deposed, Libya has become a mess. Can we trust Donald Trump, who seems to think everything is a business deal or everyone is to be groped? Everywhere, politics has become toxic, with bitter infighting and even armed conflict.

The mood at the recent World Bank/IMF annual meetings in Washington was strange, to say the least. The U.S. economy seems to be recovering, but the buzz was all about the presidential election. It used to be said that if America sneezes, the rest of the world catches pneumonia. Currently, America is the only advanced economy that seems to be on the road to recovery, but there is panic that Trump will actually become president.

Europe is still in anguish over immigration, while Germany worries whether Deutsche Bank will actually have to pay a US$14 billion fine from U.S. financial regulators, roughly the value of the bank’s market capitalization. It is no coincidence that European tax authorities are imposing a US$14 billion tax bill on Apple.

The one piece of good news about the IMF annual meetings was the inclusion of the renminbi in the standard drawing rights basket of currencies, with a higher weighting than either the yen or sterling.

Sterling suffered a 6 per cent flash crash on October 7, as Prime Minister Theresa May announced a “hard” Brexit. With Britain’s fairly large current account deficits and fiscal deficits, she has little room for policy errors.

It is a relief therefore that the Chinese economy appears to have found good support at current levels of growth, though many observers worry about the fast growth in debt.

Across the world, there is little support for global public goods as individual insecurity tends to blame foreigners for all their problems. I asked an influential economist in Washington why U.S. experts tended to criticise everyone else for their failings but their own. The answer was that U.S. economists were frustrated with toxic domestic politics, and how their reductionist free market ideology missed the complexities of institutions, income inequality and climate change. They were blind to their own blindness. Many policymakers inside the Washington Beltway cared only about how global policies served U.S. interests and whether these could be approved by a paralyzed Congress. In reality, the polarization of politics has meant globalization is receding, mainly because Americans are beginning to look inwards.

Many pundits lament the leadership deficit; there is little trust in any politician, exemplified by how the U.S. presidential candidates are both multimillionaires. It is not surprising that the other 99 per cent are angry, disillusioned and support populist candidates.

What the world lacks most is not more economics or politics, but a philosophy about individual and community identity in a world in the grip of radical change. We are all insecure because our present values are challenged by these rapid changes, from terrorism, fanaticism and massive migration to disruptive technology, dysfunctional politics and corruption in morality.

From America to Zimbabwe, we need a new narrative to find our sense of balance. We simply do not have a philosophy for the 21st century.


This article first appeared in the South China Morning Post as
 In a world racked by radical change, we need a new philosophy of common identity on October 14, 2016.

The views expressed in the reports featured are the author’s own and do not necessarily reflect Asia Global Institute’s editorial policy.