Global Insights Series acts as a bridge, featuring world-renowned, innovative and macro thinkers. This will primarily focus on finance and economics whilst also exploring other dimensions of the economic crisis in politics, civil society, human morality and sustainable development.
This series is envisaged to focus on vital issues of our day and also on trends we believe may be emerging in Asia and the world in an age of globalization during a time of unprecedented global economic change.
The financial crisis is not a transitory event, but the end of an era. It was not caused by a failure of regulation in a few advanced countries, but by powerful forces in the world economy: overconfidence, due to a false in belief in "the great moderation"; global imbalances, rooted in failures of the global monetary system, the savings glut, particularly China's, and an over-reliance on export-led growth in Asia; a mistaken monetary policy doctrine; a reach for yield in the context of low returns on safe investment; sins of regulatory commission and omission; risky financial innovation; and a breakdown in risk management.
The world is far from recovery. Policy-makers have done what was needed to stop a depression. Massive changes will be needed in the relationship between demand and potential supply across the globe, as well as far-reaching reforms at the global and national levels. If these are not made, the next stage is likely to be a crisis in the dollar and public debt in a number of advanced countries, particularly the US. That could even mean the end of this era of globalization.
5.30 pm Registration
6.00 pm Welcome Remarks by Assoc. Prof. Simon Tay,
Chairman, Singapore Institute of International Affairs, Schwartz, Fellow, The Asia Society
6.10 pm In Conversation with Martin Wolf, Financial Times
Moderated by Assoc. Prof. Simon Tay,
Chairman, Singapore Institute of International Affairs, Schwartz, Fellow, The Asia Society and Lin Xue Ling, Presenter/Producer, English Current Affairs, Channel NewsAsia
6.55 pm Q & A
7.10 pm Cocktail Reception
7.45 pm End of event
Martin Wolf is Associate Editor and Chief Economics Commentator at the Financial Times, London. He was awarded the CBE (Commander of the British Empire) in 2000 for services to financial journalism. Mr Wolf has been a forum fellow at the annual meeting of the World Economic Forum, in Davos, since 1999. He was made a Doctor of Letters, honoris causa, by Nottingham University in July 2006. He was made a Doctor of Science (Econ), honoris causa, by the London School of Economics in December 2006. He was made a Doctor of Science, honoris causa, by Warwick University, in July 2009.
Mr Wolf was joint winner of the Wincott Foundation senior prize for excellence in financial journalism for 1989 and 1997. He won the RTZ David Watt memorial prize for 1994. He won the “Accenture Decade of Excellence” at the Business Journalist of the Year Awards of 2003. He won the “Ludwig-Erhard-Preis für Wirtschaftspublizistik” (“Ludwig Erhard Prize for economic commentary”) from the Ludwig Erhard Stiftung (Foundation) for 2009. He won “Commentariat of the Year 2009” at the Comment Awards, sponsored by Editorial Intelligence.
His most recent publications are Why Globalization Works (Yale University Press, 2004) and Fixing Global Finance (Washington D.C: Johns Hopkins University Press, and London: Yale University Press, 2008).
Over the course of a 75-minute dialogue, Mr. Martin Wolf, Associate Editor & Chief Economics Commentator of The Financial Times shared his insights and views on the global economic crisis and how it has changed the world. Mr. Wolf spoke frankly with moderators Ms. Lin Xue Ling of Channel NewsAsia and Assoc. Prof. Simon Tay of the Singapore Institute of International Affairs, as well as with members of the audience.
Mr. Wolf’s views centred around three key themes: that the world has not yet emerged from crisis, that Asia will continue to lead the recovery, and that there will be a “tricky transition” as the global economy rebalances.
In examining the current state of the global economy, Mr. Wolf began by pointing out that some aspects of recovery are already evident. The near total breakdown of the credit markets is clearly over, and there is renewed capitalization of the global banking system.
Yet although some stabilization is evident, Mr. Wolf said that the world economy is still immensely far from any sort of state of operations that resembles pre-crisis norms. He pointed out that this is the greatest fiscal stimulus that has ever been employed, and it has resulted in levels of deficit comparably only to those found during war. Despite low interest rates, he cautioned that there has yet to be a strong private-sector led return of demand. His guess is that such demand is still years away.
Mr. Wolf cited Dubai as an example of problems endemic to the global economic system that extend beyond the “subprime-related” structural problems. He likens to the recent Dubai crisis to a big commercial real estate project plagued by bad debt. Mr. Wolf feels that, similar to Dubai, there is a large amount of as yet unrecognized bad debt in the world, and that the frequency defaults will increase.
On the subject of stimulus withdrawal, Mr. Wolf cautioned that there is a huge danger of creating bubbles if governments withdraw stimulus too late, but that there is an equal danger of an early withdrawal sending economies straight back into recession.
Regardless of government policy, Mr. Wolf stressed his belief that the greatest opportunities for future growth lie in Asian economies. Among them, he said, China has emerged as a relative winner from the financial crisis. However, he cautioned that to avoid the stagnant growth that befell Japan in the 1990s, China must remove bad debt, decrease “mythical” production and inventory accumulation, and shift its economy more towards stimulating domestic demand.
Mr. Wolf clarified a consequence of China’s rise: he predicts a small trans-Pacific trade skirmish. If the domestic situation in the US doesn’t improve and high unemployment rates persist while China continues to flourish with a high trade surplus, US protectionist pressures will emerge. Mr. Wolf stressed he does not wish this to happen, but if America wishes to reduce its budget deficit, it’s unavoidable that curbing trade with China will be a part of it.
Nonetheless, Mr. Wolf called it “inevitable” that the Asian economies would collectively soon be the world’s largest. However, he pointed to the longstanding differences between Asian countries as a reason why there will not be a unified “Asian” century- only perhaps a “Chinese” one. Managing such differences, he said, would be crucial.
The global economic crisis has highlighted many challenges: not only must developed economies restart their economies, they must also accommodate the rise of emerging economies, especially those in Asia. Meanwhile, inflation, regulation, currency exchange and other macroeconomic policy questions continue to complicate. In pointing out these difficulties, Mr. Wolf said that he was “not a pessimist, but a realist.” Nonetheless, he predicted enormous opportunities for Asia, and said that “there is no reason why living standards [in Asia] shouldn’t be completely unrecognizable ten, twenty years from now.”
Still, he cautioned the audience. “We’ve postponed Armageddon,” said Wolf, but “the story isn’t over”.
“It will be a tricky transition.”
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