Vijay Eswaran is back with the third part in the Touchstone series on his blog. To read the earlier parts, please visit www.vijayeswaran.com/blog
Expectation has been the fundamental cause and a very central factor in this current economic crisis that we are all facing. Expectation drove the markets to unheralded heights, just barely 18 months ago. Expectation drove commodities including Oil and Gold to unprecedented stratospheric heights that brought us to the precipice of an energy crisis an year and a half ago. And it is expectation that we have to deal with, conquer and rationalise if we are to do anything at all with restoring and recovering confidence at a global level.
Confidence is ultimately the first and probably most crucial point of the recovery process. It cannot be in the words of Tengku Razaleigh Hamzah--arguably one of the architects of Malaysia’s economic success-- a hollow confidence. But a confidence based on clear appreciation of our prospects. The primary lesson the global economy learnt is that false confidence based on irrational hope leads to collapse, disillusionment and pessimism.
Thus, one must first come to terms with reality, embrace it, appreciate it, analyse it and then adapt to the harsh new realities. It’s only then we begin to recognise that the Tsunami has hit, the world has changed and there is no going back. There is only moving forward.
The long-term path to prosperity is through increasing income and expanding business opportunities through productivity and building a drive and propensity to innovate. We need to recognise that the world is essentially still the same. That, in essence, all that has happened is a balancing of the forces that drive the global economy back to even keel. Prior to this, we have tugged, pulled and manipulated the economy out of shape to suit various political and profit motivated strategies and game plans, not realising that there is a global ramification for anything that we do.
The pundits would like to blame either globalisation or capitalism as one of the causes of this current situation. Globalisation as I have previously stated is not a process that just evolved in the last decade or two but one that has been around since the beginning of man. Since man began to trade.
Globalisation expanded through every conquest by every empire in the history of mankind. From the East, the Silk Route, carried the knowledge, cultures and traditions of Asia to the West, bringing along exotic foods that became commonplace in western dinner fare, such as the humble noodle. The noodle, which began its journey from southern India in the form of ‘idiyappm’, was carried across the Himalayas into China, evolving into various forms of noodles, becoming the mainstay of Chinese cuisine. Then, continuing its journey, travelling back with Marco Polo via Venice into the western world emerging as the wondrous world of Pasta.
The courts of the Roman emperor had representatives from Africa, the Middle East and even India. The courts of Kublai Khan had representatives from Europe, the Far East and even the distant lands touching the coasts of Africa. The courts of Emperors Ashok and Akbar has translators for Mandarin, Hebrew, Arabic, Greek and even Portuguese. Thus globalisation in one form or another has existed from the time that one caveman swapped his battleaxe for an eating utensil.
But what has happened in the last four decades has been galvanised into a tremendous pace of activity and growth, merely by the fact that the population of this world has already doubled from the time I was born, till today. Arguably, it has tripled. That by itself has put tremendous pressure on the process of globalisation. Hence, anything happening in the sphere of business in one corner of the world has its echo in another. Just like the other G word- Global Warming- the Global economy when manipulated, fights back.
Let’s take a look at the other so called cause of the economic crunch - Capitalism. It is supposedly either the boon or the bane of all the economic travails of the planet depending on who you are talking to at the time. The fact that although the United States has endeavoured to practice a certain managed form of capitalism within its own sphere, it does not in any sense of the word mean the free economy prevailed or was in play at that time. A free economy by definition requires a free flow of information, resources and labour inclusive of skill sets and technology, all of which were skewed if not controlled or manipulated to some extent. Thus by no stretch of imagination can one lay claim to the existence of a totally free economy, which is the basis of a Capitalist market, anywhere on the planet. A partially controlled market will only yield partially controlled results. And the longer the controls are in place, the greater the repercussions. Hence, an adjustment had to take place eventually leading to the events of today. Thus, arguably both globalisation and capitalism cannot have been causes of this current state of inequity.
What we have done is sacrificed growth for social equity resulting in massive differences between middle and high class incomes. This has been further exacerbated by us shielding ourselves from learning and changing, which is the basis upon which economies grow. There has to be a systematic change in behaviour or knowledge which has been very much lacking. But all is not lost.
To paraphrase Tengku Razaliegh one more time, each major crisis is either an important opportunity to transform the economy or a major setback to national ambitions. The question is whether our policy making or policy implementing apparatus is set up, motivated and ready to learn from the crisis. Ultimately it is a question of the capability of government and governance. While this may come across as a rather harsh reading, the reality is harsher. The recession is an opportunity for those who are ready to re-gear and retool their economies. It is a time for bold, imaginative steps. It’s time to light the fire under our feet to make transformative improvement in governance and politics.
We don’t just need another stimulus of another ‘package of spending here and there’. What we need is a chance to implement bold projects with an economic purpose and strategy behind them. It’s a once in a lifetime economic challenge and it needs to be met with a visionary sense of purpose. There is a crucial need to restore confidence in our basic institutions, in the political leadership, in the integrity of our administrative systems, in our implicit respect for the rule of law. With all of this in place, a confidence can and will emerge. Economic statistics are mere indicators of activities and expectations. Hence, with the fundamentals in place confidence will emerge renewed and restored and indicators will reflect that. In the words of another great philosopher form the East, Confucius, “A journey of a thousand miles begins with a single step.” Each step will naturally evolve into the next. And with every portion of the journey completed, the next portion becomes even more possible.
In life merely keeping up is moving backwards. The art of surviving is about thinking one step ahead. The art of preparation is about being at least two steps ahead. The art of success begins three steps ahead.