Bringing the holistic thinking of the East to bear on market failure in the West

PUBLISHED : Saturday, 07 July, 2012, 12:00am
UPDATED : Saturday, 07 July, 2012, 12:00am


Life is a journey of different cycles. Travelling last month with old university friends - an Indian from Zambia, two Americans, a Spaniard and two from France - made me realise that communication between East and West remains a gulf to be bridged, despite our common use of the English language and English education.

Do East and West think differently? The answer must be yes, if you define the East as the Asian continent and the West as Europe plus America. Globalisation has integrated thinking and promoted universal standards because many Asian intellectuals are Western-educated. Many social objectives, such as the pursuit of wealth, power, justice, global peace and happiness, are universal. But the reality is that the concepts of justice, faith, liberty, social status and values are very different.

The late French historian and philosopher Fernand Braudel classified the world into four contemporary civilisations - Western, Muslim, Far Eastern and African. To Braudel, civilisation, rather than culture, is defined by geography, society, economies and ways of thought. Within the Western world, there were three sub-groups - Europe, America and Soviet. He identified four civilisations outside Europe - China, India, Japan and the Maritime Far East that includes Southeast Asia and Korea.

The study of civilisations is important. In 1993, the American political scientist Samuel Huntington argued in his famous essay, and later book, The Clash of Civilisations, that there is a shifting balance of power between civilisations, particularly between Western universalism, Muslim militancy and Chinese assertion. Huntington believed the 'clashes of civilisations are the greatest threat to world peace, and an international order based on civilisations is the surest safeguard against world war'.

The irony is that, even as Europe struggles with its debt crisis, the whole world was uniformly cheering Spain and Italy in their football final broadcast in HDTV. Technology today has transcended cultures and civilisations, but deep national, ethnic and religious divisions lie under the surface.

It is always controversial to debate what is different between East and West, especially since Western intellectuals are beginning to question whether the West is in decline. Princeton political scientist Robert Keohane, in his recent review of the debate on American decline in the magazine Foreign Affairs, correctly asked: 'Will the instabilities in the global economy exposed by the 2008 financial crisis be corrected or merely papered over and thus left to cause potential havoc down the road?'

Analyses in the aftermath of the crisis suggest that there is a gradual but perceptible reappraisal of the basis of mainstream Western economic thinking. What went wrong that led economists, regulators and policymakers alike to fail to predict and manage the current crisis?

The current analytical framework stems from Rene Descartes' pioneering scientific thinking that argues that the behaviour of the whole can be understood entirely from the study of its parts. This led to the specialisation of scientific disciplines, centred on rational, reductionist and linear analysis.

In contrast, Eastern thinking is holistic, diverse, eclectic and complex. The late Cambridge Sinologist and biologist Joseph Needham considered the key words for Chinese thought to be 'order and pattern' within the one gigantic whole 'organism'. Chinese practitioners, ancient and modern, think in terms of whole systems that are subject to the binary forces of yin (negative) and yang (positive) that interact in a continual process of change and evolution.

As University of California physicist Fritjof Capra has pointed out: 'Analysis means taking something apart in order to understand it; systems thinking means putting it into the context of the larger whole.' Mainstream economics assumes human economic behaviour is rational, but crowd behaviour clearly can be very different and often the opposite. The whole is obviously more than the sum of its parts.

The trouble with systems thinking is that it is much more difficult to make predictions that are multi-dimensional, complex and non-linear. This is probably why Eastern thinking has long been thought to be mystical and non-scientific. Fortunately, the arrival of super-fast computers, complex non-linear mathematics and the internet has allowed us to mine 'big data' of human behaviour, so that we can today see graphically the architecture of markets and the process of change, such as the large-scale transactions in financial markets that have pattern, some orderly, some chaotic.

Such data maps suggest to me that the financial crisis essentially articulates the painful unfolding of major systems change on a global scale. Western markets based on debt are proving to be unsustainable.

Non-Western emerging markets reflect the flip side of Western models and experience. We cannot study our markets in isolation. Specifically, Asian markets are inextricably tied to Western economies through complex 'connectors' with dynamic feedback mechanisms, namely global supply chains and financial and social networks. We urgently need a better framework to chart these turbulent times and manage evolving complexity.

Andrew Sheng is president of the Fung Global Institute