Speech by Minister for Defence, Dr Ng Eng Hen, at 9th Munich Young Leaders Round Table

"A Reset of the Global Order" 

Thank you for inviting me back. I take it that when you invite me back it's because you know, as they say, you had not done a good job (before) so we are inviting you back so you can do a better job. I have been constantly impressed by the quality of the people at the Munich Young Leaders.  Dr Thomas Paulsen tells me that some of your alumni are now attending this Munich Security Conference as Ministers of their country. I think that's a remarkable achievement. But that's a tough question, and indeed one that I hope to deal with. When you are in front of such a distinguished group, it is best to just ask questions and allow you to give me the answers. So that is what I intend to do, but (I would like to first) give some context. 

I thought it would be useful for us, as we frame our thoughts together on your question, just to start with two quotes.  And I (would) like to quote US President Donald Trump at his inauguration. This was 20th January:

"We assembled here today are issuing a new decree to be heard in every city, in every foreign capital, and in every hall of power. From this day forward, a new vision will govern our land. From this day forward, it's going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. 

We will seek friendship and goodwill with the nations of the world - but we do so with the understanding that it is the right of all nations to put their own interests first."

I would like to contrast his remarks with one which Chinese President Xi Jinping spoke at Davos three days earlier to this inauguration, and the first time a Chinese President has done so. And I quote:

"Whether you like it or not, the global economy is the big ocean that you cannot escape from. Any attempt to cut off the flow of capital, technologies, products, industries and people between economies, and channel the waters in the ocean back into isolated lakes and creeks is simply not possible. Indeed, it runs counter to the historical trend.

We should commit ourselves to growing an open global economy to share opportunities and interests through opening-up and achieve win-win outcomes. One should not just retreat to the harbour when encountering a storm, for this will never get us to the other shore of the ocean. We must redouble efforts to develop global connectivity to enable all countries to achieve inter-connected growth and share prosperity. We must remain committed to developing global free trade and investment, promote trade and investment liberalisation and facilitation through opening-up and say no to protectionism. Pursuing protectionism is like locking oneself in a dark room. While wind and rain may be kept outside, that dark room will also block light and air. No one will emerge as a winner in a trade war."

I doubt if anyone here or anyone reading these two speeches can miss the irony when the leader of the ruling Chinese Communist Party - I remind you that China is still ruled by the Chinese Communist Party - staunchly defends the continuation of the global system that the US championed to put in place over the last 50 years, while the new US President signals a change to one predicated on national (US) interests first. So, (regarding) your comments:  Are we entering a new world order? Is this a time for disruption? Is there uncertainty? I think all of us feel the uncertainty, the unpredictability in our regions, and I am glad that it's really a global audience that you have that is represented here.

a. To be fair to President Trump, he is not alone in articulating the need for his country to strengthen itself. You will remember Xi had in one of his first speeches articulated 中国梦, "The Chinese Dream". And to paraphrase 中国强起来, you know, "a strong China". Modi offered India a "clear roadmap" to "rise again" when he became Prime Minister. Abe has called fora "Strong Japan". So every political leader that assumes office wants a strong country. That's always a strong platform. 

And President Trump is responding to domestic pressures and the perception that the US, even though it is the richest country in the World, has not benefitted from globalisation as it should have and it is being taken advantage of. That's (the) domestic perception.

And he is not alone. Again, in Europe, you have candidates from the far-right anti-immigrant political parties, now  (France's 'National Front') candidate Marine Le Pen, and the 'Freedom Party of Austria (FPO)' candidate Norbert Hofer, (who) lost the (Austrian) Presidential election but won 46.2% of the popular vote.

The questions that we'd like to ask ourselves are: Why? Why are these trends of events occurring?

Roots of Anti-Globalisation

I think at the macro-level, all of us understand that globalisation has done more to lift the poor out of poverty than any preceding period. I don't think there is any question (about it). And it is not just in China. Let me just give you some statistics.

a. The average world GDP/capita has increased by nearly 23 times (measured using current US$) over the last half century. (World Bank)

b. Global poverty (defined as earning less than 2011 PPP US$1.90/day) has fallen from 42% (in 1981) to 10% in 2013. (World Bank)

But, I think it is the disruption of jobs that technological change brings. It is the increased mobility of migrants that globalisation brings with it, that has created this backlash. Let me give you some figures to try to understand this aspect of globalisation. And I will use, again, the US because that is (as) I said, President Trump was responding to that.

a. Pre-recession, December 2007, compared to now, 10 years later, the percentage of employed local-born US workers has only increased by 1.0%, over 10 years. While for foreigners, those born overseas, it is about 13%. 13 times (more). (Federal Reserve Bank of St. Louis)

b. Since 2009, the top 1% in the US have seen their income grow by about 8%, and the bottom 99% has grown only by 4%, half as much. (US Internal Revenue Service)

c. And it is not surprising that in Europe, when they took the Gallup poll, Europeans were the most unfavourable toward immigration. Almost more than half said that it should be reduced (52% said it should be reduced, vis-à-vis the world average of 34%). (Gallup)

 
And I think these developments in part explain Brexit, the Trump victory, the rise of the anti-EU, and the anti-immigration parties in Europe.

And in retrospect, I think politically, most countries were - Singapore included  - probably unrealistic to expect our populations to deal with that kind of pace of globalisation, especially when it had to do with migration. I think migration is a big factor. Walk around any major city now, whether it is London, whether it is Munich, whether it is Australia's Sydney, and you have towns that, with such a great influx of migration, it has changed in nature overnight. And I think that this backlash against globalisation is emotional and will take time to resolve.

The Search for a Common Cause - What Cause and Who Leads?

The Chairwoman asked, "Are we entering into a period? Is this possibly a time for a disruption?" I'd like to turn that question into another question, and it is a search for a common cause. In other words, "What is the cause, and who leads?" Because post-WWII, a common cause was forged amongst nations. There was a never-again moment in Europe. There was an emphasis on re-building, creating institutions to prevent further wars, enhancing global trading systems, advancing science and technology. So that common cause, I think, united the world even though there were differences, and particularly the Cold War.

But most importantly, there was a global leader, the US, whose economy and country was not ravaged by WWII. And it was the US that led the free world, as you rightly pointed out, as a hegemon in a quest for 'globalisation', and the ideological struggle against Communism. Now we assume that that is the state of affairs. If you look back, global leadership has never been the norm, has never been the default. In fact, it is regionalism that has always been dominating. In the absence of global leadership, regionalism thrived, and sometimes, with very drastic results. And some of you seated around this table are indeed operating in an environment where there is a regional power, or a regional power that dominates, or philosophies that  dominate. But the US could do it, because at the end of WWII, the US had accounted for around 30% of world GDP. This is a figure unmatched in any historical times, except by China under the Qing Dynasty in the early-1800s (before the First Opium War) (refer to Diagram 1) And I have shown you a map which is very rough, which is quite fascinating.

Diagram 1: Comparison of Largest Contributors to World GDP from 1 A.D. to 2008 (Source: Angus Maddison, The Economist)

a. Largest Trading Country. The US was the largest trading country. In 2006, the US was the largest trading partner of 127 countries. China (was) the largest for 70 (countries). That situation has now flipped. China is now the largest trading partner for 124 countries, and the US for 76 countries. (Reuters)

b. Military Spending. The US now spends as much on its military as the next 11 biggest countries combined (refer to Diagram 2)

Diagram 2: Comparison of US Military Expenditure vis-à-vis Other Countries (2015) (Source: IISS World Military Balance)

And it was this military and economic heft, coupled with the ideology of American exceptionalism, or what was called the "pursuit of liberty", that allowed the US to play that role. And I would say again, this is a significant departure from the earlier Empires that sought territory regionally or influence from just mercantilist motivations. 

History is not entirely enamoured of US successes but whatever the shortcomings of US foreign policy, by 1970s, economic globalisation had recovered to levels before the disruption in 1914 by WWI.

And so Chairwoman's question, today, we witness the evolution of a new World Order, but let me ask this question: Whose vision of that world order will it reflect and of what? What will be that vision? And can the US lead as before? Has America fundamentally revised its outlook, or is this just the "art of the deal", as President Trump says, to get a better deal for the US? 

But whatever the answers to these questions, what has fundamentally changed are the rise of new centres of economic power that you alluded to, and military power in a more multipolar World.

a. GDP.  And I've given you another map, which just basically shows graphically, based on GDP, a return of the centre of gravity for GDP back to Asia. (refer to Diagram 3)

Diagram 3: World Economic Centre of Gravity. (Source: McKinsey Global Institute analysis using data from Angus Maddison; University of Gronigen)

b. FDI.  If you look at FDIs, Chinese outbound FDI has increased from US$20bn, just 10 years ago, to US$114bn. And all of us are familiar with President Xi's "One Belt, One Road" initiative. (refer to Diagram 4)

Diagram 4: China's Global Port Ownership since 1994 (Sources: Kings College, London; Financial Times research; CIA (shipping routes))

c. R&D Spending. The US continues to be the leader but China's spending on R&D could overtake the US'.  I point this out because China's rise is different from previous USSR's. China's rise is predicated on the language of modernity - science, technology and commerce. Very different from (the) autarkic kind of economic model, very different from a centrist policy. One can argue that even for the Chinese economic model now it is centrist, but I think very different from the USSR's.

So, in this multipolar World, you ask, "What is the common cause that countries in Asia, Europe, Central Asia, South America, and the Islamic nations can coalesce to build upon?" 

Can Common Challenges Unite Us?

What about common challenges that unite us?  I think there could be a response that, well, you might not have a world leader but there are enough common challenges that will stir, if you like, various nations into world order. 

a. And I would quote here Red Cross Founder Henry Dunant. He said, "Our real enemy is not our neighbouring country, it is hunger, cold, poverty, ignorance, routine, superstition, prejudice."

So a very altruistic motivation where countries are stirred because of these common challenges. And I think if you look there, there is no shortage of common challenges, whether they are poverty, education, health, gender equality, climate change, international peacekeeping or mutually-assured destruction, nuclear terrorism. So, no shortage. But I'm pessimistic that common challenges can unite in the same way as global leadership.

Because history reminds us that in the absence of a global order and common cause, the default is regional hegemony, and each region basically marches  to its own tune, and I would like to hear your thoughts.

a. And this is where it is worrisome because at the stroke of a pen, the US has pulled out of the Trans-Pacific Partnership, the TPP, that would have united 12 nations that accounted for 40% of the world's GDP. It would have been a very powerful instrument.  

b. And if the US withdraws from the Paris Agreement, which it might (and) which it says it would, I think the effect of any initiative on climate change will be severely dampened and retarded.

Conclusion

So Madam Chairwoman, I haven't answered any question. It is because, you know, this is the zeitgeist of today. You just ponder the imponderables and you ask questions. But I thought rather than give you scenarios and solutions, I would come asking for opinions and views. So, thank you very much.

More Resources

Big Changes to the World Order: Dr Ng