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DPM Tharman's 3 ways to save the open economy
GOING global and keeping the economy open are the only positive ways for a country to advance - and to save the system that supports it requires public policies to concentrate more in three areas: regeneration, productivity and education, according to Deputy Prime Minister Tharman Shanmugaratnam.
Speaking on Thursday at the inaugural Singapore-France economic forum hosted by Le Cercle des economists, the Economic Society of Singapore, ESSEC Business School and Paris Europlace, Mr Tharman said the spotlight must go beyond redistributing the fruits of an open economy and help those inevitably left behind.
Mr Tharman, who is also Singapore's Coordinating Minister for Economic and Social Policies, said policymakers should put regeneration as the central focus - regeneration of towns and cities, creation of new jobs, regeneration of neighbourhoods in the urban planning sense.
Things can't be left only to the market, which would leave no chance for those who lose out from the system to bounce back and progress, he said.
The "geographical dimension of technological change and the efforts of globalisation" must be looked into - and "active public policies" should be put in place to offer prospects for improvement.
Mr Tharman told his audience of academics, business leaders and policymakers that there have to be new public-private sector partnerships, partnerships with universities and research institutions "applying research that's related to what companies are doing and how jobs can be created".
On productivity, he noted that remarkable innovations are taking place, especially in the advanced world. Yet the spread of new technologies, ideas and business practices from the leading companies to the rest of the industry has been very slow, for reasons no one understands. And this, Mr Tharman said, has widened the productivity gap, in both levels and growth rates, between the frontier and the rest of the economy.
This not only increases the inequality of profits between bigger and smaller firms, and of wages between workers but also of income in the larger society.
So there's a need to "speed up learning, speed up the latest practices, latest software, latest ideas, latest equipment and latest management practices", according to Mr Tharman.
On education, he noted that the world of work is changing with old jobs being killed and new jobs created. He sees the opportunity to create many technologically enriched jobs and of "augmenting human abilities with technology".
So people have to be equipped with the necessary skills to seize the opportunities offered, Mr Tharman said. But that is a lifelong commitment which requires learning and re-learning, investment and re-investment in skills because technology is ever changing, he added.
Mr Tharman said the central challenge that has to be grappled with is the paradox of skills. On the one hand, employers more than before want people with skills - "not just degrees and certifications, they want people with skills, particularly applied skills", he noted. Yet skills that are in demand don't last as long as they used to. Thus the need for learning throughout one's life.
Mr Tharman's speech was made against the background of "a temptation to withdraw from things global". This temptation is seen in many parts of the advanced world but, he noted, not in the Asia-Pacific region which is home to a very big share of the world's population. Economies in this part of the world still want to open up more.
Mr Tharman said it's inevitable that some people will lose out in today's open system - it's the nature of the system - but most will benefit from it. The right thing to do is to find more ways to help those who lose out. This means "new public-private partnerships, new political culture that's about everyone being in the same boat, that's about inclusivity not just in economic terms but in social terms".
Withdrawing into a closed system may help those who have lost out today, but it will be at the expense of the majority of the people, according to Mr Tharman.
Le Cercle des economists is a body that is keen on stimulating economic debate. ESSEC is a top management school and Paris Europlace is a professional body which supports France-based financial services.