An era of possibility: Renewing economic order and shared purpose

There are few grounds for optimism in a future grounded in nations' collective interests. But it is our responsibility to make it possible.

- Tharman Shanmugaratnam

Singapore Institute of Technology graduates at their convocation on Oct 13. Delivering a lecture organised by the International Monetary Fund at its headquarters in Washington on Oct 15, President Tharman Shanmugaratnam said we must invest more effectively in the young everywhere to help them acquire both applied know-how and the deeply human, soft skills they need in life, and cut back on the overly academic education in most systems.

(ST PHOTO: CHONG JUN LIANG)

Economic nationalism is resurgent. From all indications, it will run a long course.

So too, the open, rules-based order is at its weakest point in 80 years.

The rules were never fully equitable. Major powers, including the architects of the order, were prone to selective adherence. Poorer nations were often given the short end of the stick. Yet, the rules were broadly accepted, and an integrated world economy lifted a billion people out of poverty and brought prosperity everywhere.

But the enthusiasm for openness and international cooperation has dimmed, not least in the advanced economies.

What went wrong?

One reason was the shift in the structure of international trade. In the first decades after World War II, trade grew mainly between richer nations. Over the last three decades, however, North-South trade - between economies with vastly different income levels - expanded sharply. It amplified both the gains and losses from international trade, within the advanced economies themselves.

While overall gains in real incomes ~ including among ordinary working people — vastly exceeded the losses, the pain among those displaced by trade or new technologies was more deeply felt. And the fact that job losses were concentrated in local communities magnified the sense of injustice.