The prevailing thinking is that globalization improves the economic wellbeing of the people in the world. Not enough attention is paid to its negative consequences.
One such consequence is the export of the harmful effects of low interest rate to other countries. During the past two decades, Japan had very low interest rates. Speculators borrowed large sums in Japanese currency to speculate in assets in other economies, leading to asset inflation. This has been named as the "carry trade".
Now, the US Dollar has become the currency to borrow for the "carry trade". It has led to the stock and property market bubbles in Asia. Some countries have decided to impose control over the flow of currency to prevent their assets from excessive escalation.
If we want to get back to more stable economic growth, we have to open our eyes and see what is really happening, rather than rely on thinking that globalization, free market and global competition are good. They may be good in some respects but they have negative consequences, which may outweigh the benefits.
Tan Kin Lian
There are certainly both good and bad sides to globalisation. The pertinent issue is it tends to bring more problems for the common ordinary poor people but benefit more the rich and talented.
ReplyDelete(a) With globalisation, jobs move. The talented are no more tied to their home economy and can earn more, they can seek greener pastures or bring back more earnings to their home country.
Even those who are willing to do certain unglamorous jobs like domestic helpers and construction workers can bring home higher earnings than their domestic peers back home.
Globalisation is good for the knowledged-based economy, we learn more skills, to accept foreign cultures and appreciate issues from a wider perspective.
Most important we get out of the Singapore moulded "shell". For instance, we may see why China is even more democratic than our country in various ways even though they are a Communist country. As we see and appreciate other systems, we can also evolve, catch up with other countries and help to improve our own system.
(b)The bad side about globalisation is that it adversely affects those who are less endowed. Hence, we have the common grudge about competition from Foreign Talents in Singapore. Even corporates which are less endowed such as our SME would complain about foreign competition.
The complex issue is that competition actually make us improve, develop and evolve. But the "divide" between the rich and poor aggravates and the income gap widens.
Then the problem is how to ensure competition is "fair" to all, which is one feature I think very worthy of support in various articles here in Mr Tan's blog.
Para 2 & 3 in Mr Tan's article about asset bubbles in Asia was given focus by certain leaders during the recent APEC meeting here. In reality, do we really learn? Seldom!
A good example was reported in Today (26 Nov) that a joint venture between SPH and NTUC had bid S$542 million for the suburban mall at Clementi Town Centre. This is some 42% higher than the next highest bid.
While foreign countries are borrowing "cheap" US$ to buy up foreign assets hoping for future appreciation, why are our home grown corporates joining this fray to speculate and inflate up asset prices in the our suburban property market, even if they do not borrow $US??? And why is our labour movement (NTUC) also a stakeholder in this venture when the average worker is still so concerned about job retrenchment and job prospects in this small red dotted "GLOBALISED" knowledge-based economy.
Is this wasteful bidding to pump our economy? I see no link.
Considering that these are government-linked entities, is our Government closing or widening the divide between the rich and the poor? Singapore is well-known for its costly expensive infrastructures and the need to collect more revenues.
Hence, with due respect to the joint DECLARATION put up by APEC Leaders posted below by MR Tan, we will always see "poor farmers" and the like protesting about DOHA Round etc...against the "RICH" and mighty globalised corporates...Unless all of these "more democratic" countries will adopt and are able to implement Singapore style democracy of "no street demonstration".
The govt knows best how much can be tolerated here, be it property bubbles, stock bubbles, foreign talent intake etc, etc. If they think still not enough, they may even let these increase some more.
ReplyDeleteSo folks need to bear with it or find your way to profit from it, or even escape from it. Sharpen survival instincts when the environment gets harsh.
i think the world underestimated the power of the free market system to bring out the worse in human nature.
ReplyDeletewe have only sample some of the greed and violence in man brought about by the sweeping current of capitalism. could what we have experienced in recent years be a foretaste of worse to come? are we prepared to deal with the masses of disgruntled laborers who wake up to its reality?
in sg, we have contained(with the rule of law and offering of some graces) the disparities though the gulf or chasm is widening at a dangerous level.
but can the rests of the world do so?
i think we are selling a very sick pill to the rest of the world because of our own selfish survival.
i am not sure about the repercussion and impact as we open up to foreign invasion but it will be big when it hits at the core of our being.
but knowing the elites of our society, they will never listen(oh yes they will listen but still push through their agendas) till it is too late.
good luck.
and i forgot to add, the relentless reliant on the growing pressures of the RULE OF LAW( ahem, which we are PROUD and famous for)will bring about this violence - i suspect.
ReplyDeleteDear Mr Tan
ReplyDeleteI refer to your opening statements;
"The prevailing thinking is that globalization improves the economic wellbeing of the people in the world. Not enough attention is paid to its negative consequences."
May I suggest the following questions to help each individual decide if globalization is beneficial:
1. What is good for the company I work for may not necessarily be good for me the employee. Is this true?
2. What is good for my country may not necessarily be good for me the citizen. Is this true?
3. How exactly does globalization benefit myself (the individual) and my immediate family?
Think small. Don't think big as in "how does globalization benefit my company or my country."
Think immediate short term benefits. You and your family need food tomorrow. Not next year or "in the long run". As a famous economist John Maynard Keynes once said "In the long run, we are all dead."
Personally, I'm neutral towards globalization. I keep my focus only on how I can benefit from it.
what is basic of 'economy'?in e 60s 70s or even 80s..what is economy & Y pple fear to face 'economy'?is bygone,economy term nowadays is about how rich a country is;own by a nimble of pple,who holds e realm of economy & i wrote before here,pple; stop working, stop producing & stop being value added in every segment of the 'economy', then there will be no economy & do tell, in African continent; economy is their ability to producing something...so; in SE what is ur economy?immigrants, taxes & ERP..more water & WC taxes, imagine if real SE pple lost jobs or stop working all together, or even for matter of fact, the depression crisis such like 1930 dawn up this island, what do u have..so;observation interesting speaking is;u have no economy, u borrow economy by ur power of money,which is paper in exchange for something..get e point?& real economy are those who value working,living, & find greater meaning to life then just 'paper money'& that e country value each producing citizen as a real GDP, economy...remember this saying.."GDP is good for the country BUT e real GDP of my country is the happiness of my pple.." guess who say this & in every resepct, m a wlling person to bow,work hard & be part of the economy because m one of the GDP & m a value person, not just number.
ReplyDeleteI find it hard to 'blame' globalisation for our ills today. Globalisation is merely a process.
ReplyDeleteI think the real cause is the DECAY of MORALS & ETHICS over a period of time that culminated into what is happening today, with heavy influence from US on the formidable carrier called USS Hollywood. That's how everyone became converted subliminally.
The greatest beneficiaries of globalisation are the not the rich or the elite. Without globalisation, they were already richer. The marginal utility of the increase in wealth for this group is therefore small.
ReplyDeleteRather, the greatest beneficiaries of globalisation are the poor in countries like India or China. Globalisation broke down the barriers to movement and enabled the poor to enjoy an increase in the standard of living. For all its flaws, globalisation helped solve the fundamental problem of alleviating poverty in Third World countries. The fact that a higher proportion of people in the world today can afford to have 3 meals a day as compared to 1977 is because of globalisation.
These arguement would of course be lost on the majority of Singaporeans who tend to have a "me first" attitude towards life.
There are 2 aspects of globalisation : movement of capital investment and labour.
ReplyDeleteCapital Investment
Globalisation is good only if the pursuit of profits are balanced with the overall well being of human and the environment.
Take for e.g., China. It has attracted loads of foreign investment and the country is prospering. But the workers there are normally ill-treated and the environment is compromised with pollution. Farmer's land is also being sold at a ridiculously low price.
So at the macro level, globalisation helps the govt which it can boost its statistics with job growth, however we see that it does not benefit the worker and the enviroment in general.
Labour
With inflow of capital to emerging markets, small and open economies like Singapore feels the pressure of existing companies relocating from its shores and the decline in new investments. To counter this force, it has to bring in cheap and productive labour, hence the deluge of foreigners. The repercussion is that the locals are being priced out of the labour market, and hence creating social problems arising from local unemployment.
To tackle the local unemployment arising from globalisation, it is either i) career switch to service and unattractive jobs and ii) enterpreneurship. For i, the pay is generally low and involve working long hours, which PMETs do not find them enticing, and ii involves high risks as biz might fail.
So I would say that it is going to be challenging time for the next ten years with global economy in a slow recovery mode and globalisation set to intensify since most emerging countries want to attract more investments to boost job growth amidst the economic doldrums. But things shd look better ten years later due to:
i) average wages of emerging countries would rise to a level that is comparable with Singapore's, hence less pressure for relocation of companies here
ii) Global credit problems shd be resolved and there will be a new optimisim and unleash of new investments
iii) China and India would have transformed their economy into more local consumption-based and more jobs for the locals, hence they might not want to go oveseas to country like Singapore to seek employment
I think that globalisation is just a process. Nobody could really setout to globalise the world, but the boundaries just break down gradually through the centuries of invention of ships, airplanes, radios, TVs, movies, computers, internet.
ReplyDeleteSo I think that we can't just point to any politician or any country and say, you're pro- globalisation, that's good; or you're anti-globalisation, that's bad.
Dear Mr Tan
ReplyDeleteYou have written on globalization and corporations a number of times.
May I draw your attention to an award winning 2003 documentary film on the topic of pathological corporate behaviour.
Film is called "The Corporation". Below is the wikipedia link.
http://en.wikipedia.org/wiki/The_Corporation
The law treats corporations as a legal person or entity. The documentary then takes the next logical step.
The film evaluates corporate behaviour towards society in the same way a psychatrist might evaluate an ordinary person.
The documentary compares the profile of the contemporary profitable business corporation to that of a clinically-diagnosed psychopath.
Imagine you are married to a person who considers human feelings to be irrelevant. You are valued only as long as you are economically useful to her. Efficiency not love governs your everyday interactions. And you are discarded once someone else (cheaper, better, faster) comes along. Would you not consider your wife to be a psychopath (or sociopath)?
Anyhow, just for your info., in case you might find it useful in giving you additional perspectives.
Hi Mr Tan,
ReplyDeleteI just want to comment on the US dollar carry trade.
The USD carry trade is the result of loose monetary policies of the US Federal Reserve. Its Fed rate is 0.25% or 0% currently. At this rate, money loses one of its 3 functions which is store of value and this causes problems. The other 2 functions of money is unit of account and a medium of exchange.
When you have zero or close to zero interest rates, human animal instincts will take over. Money is going to shift to higher yield assets (Asia) and things like USD carry trade will happen.
We have to know that low interest rates in the US are set artifically by the US Federal Reserve not the market forces.
My view is that i see more of a link of US government monetary policies a consequence of the USA carry trades.