February 10, 2025
JAKARTA – As 2025 dawns, the world seems to be entering an age of anxiety, reminiscent of one hundred years ago, the period between the two World Wars. That period saw the German hyper-inflation of 1923, the rise of Hitler, and the Great Depression that caused jobs to vanish and incomes to plunge.
As I write my first column for Herald Business, the world’s politics is polarized, democracy is witnessing a setback in many places, the share of income of workers in the GDP of most countries is falling, and economic inequality is at an intolerable high. All this is not a natural calamity about which we humans can do little. To turn the world around from the brink of this existential risk will not be easy but is not impossible.
In this fractious world, Asia has a special responsibility. In continental comparisons, Asia’s economy stands out. There are richer nations in North America and Europe, but Asia has the lead in growth rates. The continent’s growth performance over the last fifty years has been remarkable, like Europe after the Industrial Revolution. Go back to 1970. Barring the notable exception of Japan, Asian countries had per capita incomes well below $1,000. By 2023, per capita income (all in US dollar) was: India 2,485, Indonesia 4,941, China 12,614, S. Korea 33,121, Japan 33,766, and Singapore 84,734.
More importantly, much of Asia seems poised for another growth sprint. Given the global situation, nations around the world are facing challenges right now, and Asia is no exception. Nevertheless, they are in better shape than most other parts of the globe. Most Asian countries are doing well on savings and investment rates. In particular, China has made large investments in electric vehicles (EVs) and other environment-friendly goods and services. This will help China be a major player in the world that is evolving.
Just as the Industrial Revolution changed the character and content of GDP, I believe the world will see a major shift caused by the digital revolution. Two sectors which are bound to be in the lead in the new world will be health and education. India is well-poised on the first, with one of the world’s largest pharmaceutical industries. In education, South Korea is a global leader. If we look at the intellectual patents being granted by all countries, 4 Asian countries appear among the top five: South Korea, Japan, China and India, with United States the only non-Asian country.
Despite these economic advantages, Asia has one handicap compared to America and Europe. It is politically much more heterogeneous. One reason why North America and western Europe could work together, for instance, during the Bretton Woods conference in 1944, to help create a uniform financial architecture for the world, and set up the International Monetary Funds and the World Bank, was because of their shared political ideals.
Ranging from one-party Communism in China and Vietnam, though military authoritarianism in Myanmar, to electoral democracy in Japan and Korea, Asia is a potpourri of political systems. We all have our preferences for the ideal political system. However, to wait for that to happen is a recipe for inaction. What Asia needs now is to create a “salad bowl” forum of nations for cooperation. Like in a bowl of salad, there will be distinctly different elements, but nevertheless there will also be a unity of purpose.
There are examples of multilateral initiatives with global vision from Asia. One of the most prominent was the Bandung Conference of 1955. Led by Indonesia’s President Suharto and India’s Prime Minister Jawaharlal Nehru, the Bandung conference was organized by a group of heterogeneous Asian countries with representations from different parts of the world. Its main focus was political, mainly to nurture the non-aligned movement among nations that had newly broken from colonial rule, but it also had ambitions of nurturing economic cooperation among these nations.
Asia is in a position to restart such an initiative, where countries respect the differences in their internal political institutions (or at least are reconciled to these differences for now) but have a common aim–for peace and for a world economy that is growing, sustainable and equitable.
One key reason for much of our troubles today is inequality. Extreme inequality is bad enough, but in today’s digital world, where one can use one’s wealth to capture the platforms of information and influence, the rise of inequality goes hand in hand with the trampling of democracy and voice. As few people become wealthy beyond imagination, the masses not only lose in terms of their relative wealth, they lose their voice and become cogs in the wheel.
Oxfam’s report, “Takers not makers”, released on 20 January 2025, draws attention to the stark unfairness of the today’s economy. The report calculates that 60 percent of the wealth of billionaires comes from inheritance, cronyism and capitalist capture. Hence, “most billionaires wealth is taken not earned.” The problem is getting worse. Another Oxfam report shows that just 8 men own half the wealth of the world.
I am sure a time will come, when our descendants, looking back at today’s world, will be shocked that we tolerated so much inequality, in the same way that we get shocked by our ancestors who tolerated slavery and forced labor.
The trouble is that there are limits to what any nation can do individually. Excessive action can lead to the flight of capital. Each nation should do more, but what is really needed is a collective, multi-country effort to coordinate fiscal policies and taxation to create a more equitable world, where a few people do not capture the world’s wealth.
Hope comes from the fact that nowadays we are hearing calls for redistribution of income from rich people who are likely to themselves lose out by such initiatives. As Abigail Disney, Emmy Award-winning filmmaker said, “It’s hard to be optimistic about what lies ahead … but if officials want to do something to ensure the stability of our democracies, they need only find the political resolve to once and for all tax wealthy people like me.”
Asian countries are in a position to take the lead on multilateral initiative to restart the engine of global economic growth. With their recent success in scientific research, STEM education and EVs they can contribute to sustainable development. And with a little bit of resolve, they can also take on the challenge of inequality and work towards coordinated policy to make sure that no individual is rich enough to capture government and muzzle the voice of ordinary people.