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OpinionComment

The global economy must think – and act – as one, if it is to avert looming disaster

Andrew Sheng says to how best to deal with debt deflation is the elephant in the room, and the world needs – but is unlikely to agree on – a set of international monetary rules that allows it to take action for the collective good

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There is an old African and Asian saying that when elephants fight, the grass gets trampled. The grass gets trampled even when elephants are dancing.
Andrew Sheng
Spring is the time for conferences. I was lucky to join two excellent conferences last week: one in Singapore organised by the Nanyang Technological University’s Para Limes Institute, on “Silent Transformations”, followed by one on “Advancing Asia – Investing for the Future”, organised by the International Monetary Fund and the Indian finance ministry in New Delhi.
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Para Limes is an institute dedicated to complexity studies – the idea that we cannot see the world from partial analysis, but must take into consideration the interconnected whole. Professor Geoffrey West, former president of the Sante Fe Institute (the first of the complexity institutes founded by the scientists who participated in the Los Alamos nuclear programme) and a leading thinker on growth, innovation and urban life, delivered a brilliant view on the sustainability of present growth models.

READ MORE: Don’t listen to the ruling elite: the world economy is in real trouble

Modern life and culture is increasingly urban, because the larger the city, the more efficient the usage of energy and resources, but there are costs in terms of pollution, crowding and spillovers. In other words, growth accelerates exponentially until the economy reaches maturity and slows down, and if there is no longer innovation and change, growth can even become negative. Life follows an S-curve and therefore growth can only be sustained with continued innovation and reform – exactly what the Chinese are attempting.

A broker works at a stock brokerage firm in Mumbai. India is today one of the youngest growth stories. Without doubt, Indians intend to use 21st-century technology to leapfrog traditional forms of growth. Photo: Reuters
A broker works at a stock brokerage firm in Mumbai. India is today one of the youngest growth stories. Without doubt, Indians intend to use 21st-century technology to leapfrog traditional forms of growth. Photo: Reuters
West’s ideas resonated with me during the “Advancing Asia” conference, where the future of India was a major theme. India is today one of the youngest (in terms of demographic labour force) and fastest-growing growth stories. By 2050, it will have the largest population in the world. Without doubt, Indians intend to use 21st-century technology to leapfrog traditional forms of growth, including development through knowledge and services.

READ MORE: Growth target will be met: China’s Premier Li Keqiang as he vows cuts in taxes and red tape

In contrast, the Chinese economy, currently the world’s No 2, is slowing and also ageing. In Beijing, the world sighed with relief as Premier Li Keqiang (李克強) pledged to uphold steady growth, renminbi stability and continuous reform. As oil prices seemed to stabilise at around US$40 per barrel and the US Federal Reserve committed to slower interest rate adjustments, financial markets actually turned back upwards.

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A group of tourists stand by the Bund near the Huangpu river across the Pudong financial district in Shanghai. The Chinese economy, currently the world’s No 2, is slowing and also ageing. Photo: AFP
A group of tourists stand by the Bund near the Huangpu river across the Pudong financial district in Shanghai. The Chinese economy, currently the world’s No 2, is slowing and also ageing. Photo: AFP
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