Tuesday December 30, 2008
Year of the adept and the realistic
By KARIM RASLAN
The imploding global economy will tax leadership abilities to the full as nations worldwide seek to come to grips with the downturn.
AS 2008 comes to a close and we look forward to the year ahead, the imploding global economy will be the dominant issue for leaders the world over.
No one has escaped the downturn as policymakers respond to an unprecedented collapse in demand, tightening credit conditions, corporate and banking failures as well as the inevitable job losses.
With the private sector in retreat, governments have no choice but to step into the breach and drive up demand. In short, they are the only one with “game” in town. Here in South-East Asia, as minor players in the global game, our leaders will need to be adept and realistic. Because of our relative powerlessness, we have to anticipate and then ride the waves created by others.
We need to minimise the devastating impact of the recession on our populations (by adopting unorthodox solutions like currency controls if need be) while also working hard to deepen linkages among ourselves, as well as with regional giants like China and India. The time has come to formalise the long-discussed and much anticipated Asia-Pacific institutions. We need to carve out a distinct regional future.
At the same time, leaders – especially in the First World – will need to re-educate their peoples as to what constitutes good housekeeping. It’ll be a painful process for the millions who are paralysed by fear and anxiety over their future.
Decades of sizzling growth have left US and European consumers horribly over-stretched and woefully ill-prepared for the downturn. Whole swathes of Americans from southern California to Florida are reeling from foreclosures and bankruptcies. In-coming US President, Barrack Obama will be endeavouring to revive the American economy with his stimulus packages. Perhaps more importantly, he’ll also need to inject a sense of hope and purpose into a society unused to dealing with economic shocks.
He must head off a deflationary cycle while also teaching the American population the value of good old-fashioned accounting and the principles of self-discipline, namely: spend less than you earn, save money for a rainy day and make investments you understand.
Still, I have no doubt that Obama’s extraordinary rhetorical skills as well as his calm, deliberate and highly disciplined leadership style will deliver results. Hopefully, he’ll also manage to resist the inevitable call for (disastrous) protectionist policies.
However, it’s very hard right now not to be condescending about Americans, especially as they’re in the midst of nationalising whole chunks of their financial sector and bailing out their so-called manufacturing “champions.”
However, we in Asia need them to succeed. We may loathe and detest outgoing President George W. Bush, but the US is just too big to fail.
We will go down with them if they fail, as they’re the ultimate consumer of our elaborate manufacturing supply chains. In short, Obama’s task is nothing less than the revival of global demand. Still, we in Asia cannot be absolved of responsibility for this downturn. We have been complicit in America’s consumerist binge. We continued gorging on US Treasury and debt instruments long after they were no longer feasible.
Our export-driven economies must now deal with a shrinking US demand. Sadly, no country, no corporation and certainly, no individual can sustain year after year of negative cash-flow. In short, the boom was a mirage, and we’re all going to suffer for our collective foolishness.
Over the next few months, countries like the US and the UK – among the largest debtor nations in the world – will have to readjust to their diminished status. There will be a round of competitive currency devaluations (led by the US dollar and pound sterling) as countries seek to acquire an export-led advantage. This will deepen the gloom.
At the same time the culture of greed and fear will exacerbate speculative flows of funds as investors run from currency to currency and asset class to asset class. These flows will be highly destabilising and dangerous especially for smaller nations. The economic downturn will put pressure on existing political fissures in all our societies. Here are some of the projections I’ve laid out for 2009.
>In Thailand, the face-off between the urban elite and the rural poor will remain unresolved. New Prime Minister Abhisit Vejjajiva will seek to ease these tensions with the implicit support of the Palace.
However, his lack of an electoral mandate will undermine attempts at reconciliation with Thaksin Shinawatra and his allies. Thailand’s political impasse is similar to the Philippines’ stark socio-economic divide. With polls slated for 2010, former President Joseph Estrada – the darling of the poor – will start moving to regain office. This will create deep unease among the dominant Forbes Park elite and incumbent Gloria Macapagal Arroyo.
> Indonesia’s electoral cycle will also swing into action in April as thousands of legislative positions go to the polls. Ibu Megawati Sukarnoputri’s PDIP party will lead as Golkar falters. Nonetheless, President Susilo Bambang Yudhoyono will remain the front-runner for the highest office. However, the republic will be extremely vulnerable to economic squalls and a dramatic shock in 2009 could jeopardise his chances of re-election.
>Head south of the Causeway and Singapore’s PAP will be trying to minimise the impact of the recession on the republic’s underclass (its “HDB heartlanders”) while the much-lauded foreign talents, many of whom are in the financial services sector, head off to greener pastures.
>Meanwhile back in Malaysia, incoming premier Datuk Seri Najib Tun Razak will be faced with a resurgent Opposition, not to mention a truculent and distrustful population scrutinising Umno’s style of governance. Moreover, the Sarawak state polls will be another task at hand for the ruling Barisan Nasional.
We are set for an interesting 2009. Remember that while economic issues will dominate, vast government stimulus packages will make the control of the political apparatus extremely valuable for the unscrupulous. It will be a challenging year, but as we see the worst of humanity, the better angels of our nature will surely come to the fore as well.