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US President Donald Trump points to guests calling his name from the galleries following the State of the Union address on January 30 in Washington. Trump’s chaotic first year might be a sign that calm is on the way. Photo: Getty Images

Will the chaotic age of Trump lead to a shift in our understanding of the world?

Andrew Sheng says mainstream political and economic thinking has undergone an upheaval over the past decade without arriving at a consensus on our understanding of the world. Donald Trump’s election and his chaotic first year make the need for a paradigm of mutual understanding more urgent

Donald Trump
The new year is always a good time to think about the future. Last year was a year of prosperity and low market volatility. Unlike 2007, when the subprime crisis broke out in the US, there seemed to be a synchronised recovery in the advanced countries, after a lost decade of slow growth and low productivity, while the emerging markets also appear to have recovered some export strength. Financial markets in January 2018 celebrated and then corrected rapidly in February.
No one has escaped this globally synchronised price correction, including China’s A-share market, even though the Chinese economy seems to have stabilised on many fronts and is growing at its “new normal” pace of around 6 per cent.
Last year was also a year of reflection. US President Donald Trump’s first year in office shook the confidence of the US establishment in its ability to absorb change, for better or worse. Trump’s “America first” policies have challenged many established ideas of free press, free trade, rule of law and a welcoming attitude towards immigration. Even allies are wondering what is going on in foreign policy, as US policies in the Middle East, Russia and East Asia are undergoing dramatic shifts.

But underlying all this confusion, certain broad trends indicate that the world is already shifting rapidly not only in power, but also thinking and behaviour. One thing is certain – history will not move in straight lines, but there are patterns or rhythms that suggest a major paradigm shift is taking place that we all need to understand.

The term “paradigm” was used by historian and physicist Thomas Kuhn to describe basic concepts and experimental practices of a scientific discipline, which include embedded assumptions, beliefs and interpretation of facts. There are, of course, different paradigms in religion, philosophy, politics or social science that compete with each other. For example, there are essentially two main paradigms in economics – Keynesian philosophy that calls for more state intervention and neoclassical thinking that advocates self-correcting free markets and minimal state interference.

Kuhn’s major contribution was introducing the concept of a paradigm shift in which the accepted or dominant paradigm gives way to new and competing ways of thinking.

How China’s development story can be an alternative to the Western model

The US National Intelligence Council’s Global Trends Report to 2030, published last year, recognises that by then “there will not be any hegemonic power” because “power will shift to networks and coalitions in a multipolar world”. This implies that the mainstream conventional political and economic thinking is both shifting and being challenged from multiple directions.

After all, it is the way we think that shapes our daily decisions. Intellectual capture happens when the media shapes the way we receive information.

President Xi Jinping (right) greets Indian Prime Minister Narendra Modi (left) as Mexico’s President Enrique Pena Nieto looks on at the 2017 BRICS Summit in Xiamen, Fujian province, last September. The past decade has witnessed the rise of powers alternative to the US. Photo: EPA-EFE
There is already a crisis in the accepted paradigm of mainstream economics, which failed to predict the 2007-2009 global recession in the advanced countries and was deficient in offering good solutions and policy options. The past decade also witnessed the rise or revival of alternate powers, such as China, India, Russia and Islamic nations such as Indonesia. As a result, alternative paradigms create what is known as “paradigm wars”.
History will not move in straight lines, but there are patterns or rhythms that suggest a major paradigm shift is taking place that we all need to understand

But so far, while most economists accept that the old model is broken, no consensus has been reached on the new winning paradigm. Most agree that the old theories are incomplete, flawed or unrealistic, and there are a whole array of competing ideas, but none with superior analysis and predictive power. Like religious debates, there are heated arguments over fundamental questions, beliefs and choices, so that no clear leader is emerging from the polarised and confusing discourse.

In a remarkably prescient 1999 paper, “ Scan Globally, Reinvent Locally” Nobel laureate Joseph Stiglitz went to the heart of what went wrong with the established paradigm, broadly clustered under the term “Washington consensus”. The consensus was more an ideology for free markets, including capital flows, democracy and rule of law, including best practices that were universal for all economies. More often than not, the standard wisdom from the Washington consensus was pushed onto developing countries without sufficient understanding of how it suited the local economic, political and social conditions in the country.
What Stiglitz correctly emphasised was that while the internet has spread explicit or general knowledge widely, the developing countries need to digest such knowledge to adapt and fit it to their own implicit or local knowledge. Such knowledge is “tacit” (personal or local) knowledge or expertise, which philosopher Michael Polanyi distinguishes from explicit or technical knowledge that can be transferred. In other words, the “one size fits all” policy recommendations of the Washington consensus do not fit all societies. Each society must learn from its own experience, and search and experiment to adapt foreign knowledge and technology to best fit local conditions.

In the face of unknowns, each person, institution, society or state must learn how to use available expertise, theories, experience and knowledge to adapt to the changing environment. We have now accepted that, in practice, all societies and economies are complex adaptive systems that evolve according to different pressures, events and forces, not the mechanical and broadly static models depicted in neoclassical economic theory.


In short, the main mathematical and methodological tools of the mainstream economics profession have remained essentially Cartesian and Newtonian in thinking, whereas the mathematics, physics and biology disciplines have already moved to Einstein’s theories and quantum ideas that embrace relativity and uncertainty.

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Ideologically, the “first best” or optimal policy recommendations suited the dominant Washington consensus from a political perspective. Moving away from “first best” to “best fit” would mean that alternative ideas, policies and tools would be pursued, under conditions of uncertainty.


The new paradigm of complex uncertainty and its policy dilemma was identified by Stiglitz: “The world is embarking on an experiment – a closely integrated global economy which is striving for global governance without global government. If this experiment is to be successful, it will be based on a process of global consensus building.” But no consensus is possible following Trump’s “America first” policy, which has opened up a more confused, perhaps chaotic, environment of policy rivalry, that could lead to conflict and mutual destruction.

Luckily, quantum theory suggests that chaos is often a sign of change towards a new order. In the new year, we can only patiently await the unfolding of this new, exciting and perhaps dangerous new era.

Arriving at a narrative of common understanding and mutual respect is more important than ever in this age of warring paradigms.

Andrew Sheng writes on global issues from an Asian perspective