A few days ago, I had the chance to attend a luncheon in Madrid, organized by the Instituto de Empresa, with a talk by the Vice Prime Minister, and also the Finance and Human Resources Minister, of Singapore, Tharman Shanmugaratnam
Prior to occupying his present political posts, Mr. Shanmugaratnam studied at the London School of Economics, earned a Masters in Public Administration from Harvard, and began his career at the Monetary Authority of Singapore, where he rose to become CEO. From there, he went on to preside over the International Monetary and Financial Committee, an internal organization of the IMF and, since 2007, has been Singapore’s Finance Minister.
It was a very pleasant lunch, during which Mr. Shanmugaratnam shared his vision of the situation the world is currently going through and his thinking as to why. Furthermore, he did so with the added merit, as he demonstrated throughout his talk, of not working from notes. He explained he had come prepared to talk with an audience of post-graduate students and had found himself in front of one made up of businesspeople and managers. Still, he spoke for over an hour in a clear, concise, and well-organized manner, without, at any time, referring to his papers, a script, or anything similar.
For the rest of this post, I’ll try to summarize everything he told us:
The first thing he talked about was the need for, and importance of, confidence to create growth. If there continues to be a lack of confidence among people in the USA and in Europe, then it will be hard to rebuild growth in the long term. Something which has been especially evident over the past few days!
As well as confidence, it’s also important to understand the world is increasingly globalized. But globalization implies a huge risk it appears very few people understand: some win and some lose. A globalized world is a competing one. Especially so at the moment, where competition is hotting up for resources that appears to be increasingly scarce. If politicians do not intervene decisively in this process, the consequences could be very damaging. In a global environment, the future of society and, particularly, nations should not be placed in the hands of unregulated financial systems, where speculators circle like sharks. The authorities and the law should protect citizens and do so without excessive interventionism.
Clearly, we are facing a moment of great change in our understanding of social, economic, and political relations worldwide. Something that, while I was listening to Mr. Shanmugaratnam, made me think about the end of the 18th century, when the world underwent such radical changes in such a short time, which, subsequently, transformed society into what we, 250 years later, now know. It seems that the cycle which began then is now coming to an end and we are starting to see the first signs of a new era.
But let’s get back to Mr. Shanmugaratnam’s remarks. Governments should lead the way, ahead of private companies and markets, to seize the opportunities offered by the crisis. They should take on a much larger role, but need to do so with better ideas than those they are currently proposing. Emerging nations have serious structural problems, something which is well known, and developed nations have, for the most part, enormous financial problems in the short and long term, and also serious demographic challenges.
At this point, the debate about austerity and growth begins. But we need to look beyond that and not see things so simplistically. It should not be limited to making policies that drive demand and consumption, which has already been shown does not work. But neither should we limit ourselves to policies designed to build, change, or improve infrastructure. Because that does not work, either. Rather, we should work in the short term, with a long-term vision. To do so requires a focus on the individual. On citizens. We need to develop competitiveness, foster creativity – which, as Einstein rightly noted, is only born in times of acute stress – and modify the way states think, as they currently think solely in terms of fiscal and liquidity stimulation and accept deficits as normal.
Once again, it’s about putting the individual first. Something that should always be taken into account when talking about globalization is the personality of each of the states concerned and, within them, of each of the citizens who make up those states, and so we need to work towards a vision of social and economic project, not just on competitiveness.
The days of business as usual are over and done with. Markets cannot, and should not, define the rules of the game. What happens when they do is clear and is profoundly unjust. And individuals, who are increasingly aware of the power in their hands, are becoming increasingly unwilling to stand by and watch. The passivity that most people have shown, to date, can no longer be counted on in the future.
States have to start thinking about acting in areas where, until now, they have not done so:
1. Facilitating social mobilty: this affects education, entertainment, employment, and family opportunities.
2. Investing in people: making the most of opportunities and not qualifications.
3. Promoting local culture and, where there is none, helping it to develop.
4. Focusing on capacities that add value and are the most unique.
5. Promoting social unity among citizens.
Our future wealth and well-being is at stake. We have to learn to redistribute all over again. And that is where states have to play a role they have tried to ignore of late, given the mistakes made in the 20th century. But if we are to succeed, resolve the problems we face, and give a peaceful and cohesive future a chance, we have to focus on the community, on the individual, and on the reality that surrounds us.
And we have to remember that although history can be an asset for nations and their people, it can also be a problem if it is not correctly managed. We cannot lose sight of the importance of helping the middle class and, at the same time, cannot give up on putting into place the necessary infrastructure to grow and let the middle class expand. We are facing a major change of cycle and those who are best placed to manage that change will, without doubt, be the middle class. In that sense, China could well turn out to pose a significant problem.
Young people must be seen as a demographic dividend, but are they prepared to be so and are we preparing them to be so? India, which is often considered a nation with a bright future, also presents a significant problem: only 50% of its young people have access to higher education. And that is also the case in Africa, in Latin America, and in the Arab countries.
Let’s leave all of these issues on the table for each of us to reflect upon…
In any case, it was a fantastic lunch and a fantastic opportunity to get to know a person who I consider to be truly extraordinary.