AS we step into a new year, some congratulatory greetings are perhaps in season. But I have been brooding over the holidays, and as I peeped ahead into the global outlook over the coming year, joys simply did not rush into my mind. The best I can offer to everyone is perhaps simply a wishful message for a safe and sound new year. And indeed there is plenty of room for improvement around the world.
Let’s first talk about the “sound” part. What burdens my heart most heavily is still the economy. The global economy remains in the doldrums, and has been so for the past decade. Even China, the global economic locomotive, has for a few years headed into what is called a “new normal” or slowed stage. I have previously emphasized that a “new normal” economy was not necessarily a bad thing for China itself, as China’s mind-boggling fast-paced growth over the past decades has created quite a few bubbling hot spots, from real estate to the stock market, and a slightly decelerated growth has provided an opportunity for the Chinese economy to pause and regroup, improving its quality and removing its “suds” in the process, such that it can be ready for more long-term sustainable growth.
But a slowing Chinese economy spells huge impacts on many other medium-sized economies, especially those with huge trade volumes with China. Southeast Asia has quite a few such economies. As China’s demands for their raw materials lessen, both the macroeconomic and microeconomic incomes of these countries will be affected. As such, many Southeast Asian economies welcome China’s “Belt and Road” regional development initiative as a sort of an investment substitute for such slackening demand. The allegation that the “Belt and Road” was meant to “export” China’s industrial overcapacity did not quite gain traction in Southeast Asia, as some or most of this “overcapacity,” such as building materials for infrastructural development, was precisely what many Southeast Asian countries needed most. If they could be paired with China’s financial assistance as well as expertise, some of these local markets could henceforth be linked up with the global production supply chains.
But undoubtedly, to revive the world economy on an even larger scale still requires the efforts of the United States, whose economy still overwhelms that of China. The current cycle of recession started with the financial crisis in Wall Street, and eventually it will still be a combination of American policy measures and entrepreneurial prowess that will expedite the revival. But to expect American official financial stimulus is at best unrealistic. The political paralysis plaguing the American Congress and the White House has resulted in the impossibility of passing any meaningful financial packages over many years. Even when Donald Trump takes over the White House in the coming weeks, it is still inconceivable that the Republican-controlled Congress would pass a stimulus package that would be in contradiction to their free-market beliefs. In any case, the US government is mired in a huge amount of public debt and would be hard-pressed to squeeze out money for even more public projects.
And then there is the Fed, the American equivalent of a central bank, whose series of counter-recessionary measures are at best debatable. The recent decision to raise interest rates is one such example. Most central banks raise interest rates only when there are clear signs of economy overheating and prices are about to bubble up, so as to encourage more savings and discourage borrowing for business activities. But the Fed seems to be obsessed with the prevention of inflation in the US, and often seizes at any hint of price hikes to raise the interest rate, irrespective of whether the overall economy has been growing steadily. Although the US economy might have improved in recent months, it is still a far cry from being a steamroller. And such an interest rate rise has the additional effect of attracting dollars overseas to rush back to the US, thus hurting the performance of many overseas markets, including those in Southeast Asia.
And now the “safe” part. I am actually less preoccupied with the periodical up-and-down regional tension as well as the jostling between superpowers in the region. Superpowers may brush against each other, but it is very unlikely for them to degenerate into actual war, for they almost all possess the ultimate trump card-– nuclear weapons. War would necessitate that they nuke each other into oblivion several times over, so they would refrain from actually doing so. Smaller countries simply do not have the wherewithal to realistically stand up to the bigger ones, especially during such economically harsh times.
What I truly worry about in this regard are the extremist elements which make use of failed states to develop their prowess and attract followers from all corners of the world, spreading terrorism everywhere. The so-called lone-wolf mode of attacks is especially horrifying, often requiring no actual terrorist-recruitment network, only socially disgruntled individuals self-radicalizing over the internet and carrying out sporadic attacks which elude even the most attentive superpowers. And there is no sign of such horrendous acts abating, with a massive attack just underway in Turkey over the new year.
So, I hope that the new leaders in the US and the Philippines will work harder in the new year to revive their national economies such that the regional and global economy would also gain traction, and that they would be even more resolute in eradicating the scourge of terrorism.