DPM Tharman: 20th century strategies won't fix today's economic ills
He warns of loss of faith in market-based meritocracy
Policymakers must look past the strategies of the second half of the 20th century if they are to deal with the challenges of the 21st, Deputy Prime Minister Tharman Shanmugaratnam has said.
He warned of an "ebbing of hope and optimism" and the loss of faith in market-based meritocracy in advanced economies.
And in developing economies outside of East Asia expectations of a catch-up in productivity and incomes with the advanced world have not been fulfilled, he said.
Mr Tharman was delivering the 18th Annual Stavros Niarchos Foundation Lecture on Strained Bedfellows: What We Can Do To Make Open Economies Inclusive, at the Peterson Institute for International Economics in Washington on Wednesday.
He warned of a social culture of decline resulting from the pessimism.
"If today's world of productivity and wages is tomorrow's world, it is a terrible future," he said. "I don't see it as socially sustainable."
Even if "productivity optimists" are right, and there is a resurgence of productivity, the way the market works now will see winners taking the most and many more people losing jobs, said Mr Tharman.
Such a situation would also not be socially or politically sustainable.
If today’s world of productivity and wages is tomorrow’s world, it is a terrible future.Deputy Prime Minister Tharman Shanmugaratnam
"And it will alter the quality of democracy," he warned.
Strategies to address these challenges must be more positive and progressive, and must improve the workings of markets, Mr Tharman said, warning of a closing window of opportunity.
Declining lifetime income - or wage stagnation - since the 60s and 70s was changing a former sense of togetherness into a sharp decline of trust in others - a sense of "them and us".
In many multi-ethnic societies, especially, a surge in ethno-nationalism is being seen, he added.
There must be more active intervention to help people and towns regenerate themselves so new jobs are created when old ones are lost, and towns that go down can at least in part recover, he said.
"We have got to find ways of speeding up learning, speeding up the diffusion of new knowledge and practices."
Schools and colleges must reform to adequately prepare young people for the real job market, Mr Tharman said.
Some companies have taken the lead to help their small and medium-sized suppliers adopt new technologies - both as economic strategy and out of social responsibility, he added.
Investing in "the social foundations of economic dynamism" would increase the chances of mass prosperity for the vast majority, Mr Tharman said.
It is the only way to "restart social mobility".
Get The New Paper on your phone with the free TNP app. Download from the Apple App Store or Google Play Store now