The global financial crisis of 2008 damaged western economies, with vulnerable populations hit particularly hard. The crisis highlighted many perceived and actual inequalities in the distribution of globalisation’s benefits, bringing to light how rigged ’the system’ was in favour of ’the establishment’ – bankers, business leaders and political leaders.
The crisis and its aftermath have also understandably contributed to and solidified the perception that the success of establishment players in the pre-crisis days were largely at the expense of the rest of society. Viewed objectively, it’s hard to disagree.
We now face the consequences of both these conclusions. Globalisation is under some attack, with growing public unease about the merits of immigration, free trade and investment. People are turning to ‘non-establishment’ leaders rather than re-electing the very crew who caused them so much pain in the first place. These two perceptions, as well as responses to them, have conflated to some degree, leading to ample opportunity for populists of all varieties to thrive.
This makes it particularly difficult for private businesses to anticipate and prepare for the economic and regulatory consequences of a surge in populism. We believe that the private sector can and must play a critical and proactive role in helping navigate these choppy waters.
Globalisation – the benefits and deficiencies
To do that, we must first acknowledge and promote the benefits of globalisation more widely, as they unquestionably outweigh its shortcomings. There is no doubt that globalisation has contributed greatly to global growth and prosperity over the past five decades. According to WTO figures, rising demand in the global trade of goods and services averaged 6.2 per cent per annum for the period from 1950 to 2007, compared with the average of 3.8 per cent during the first wave of globalisation from 1850 to 1913.
Globalisation has helped to lift over 1 billion people out of extreme poverty over the past two decades – China and India are shining examples – through the expansion of cross-border trade and investment links and more enlightened economic policies pursued by emerging and developing nations. We must redouble our efforts in emphasising the many real benefits of globalisation, even if they are not immediately clear to the beneficiaries.
"We must understand the grievances in our communities, clearly acknowledge the ones which we can impact, and then take deliberate actions to address these concerns"
Reinforcing the benefits of globalisation does not mean forgetting its deficiencies. Despite overall economic progress, income and wealth inequality have risen in nearly every region of the world since 1980, according to a report by the World Inequality Lab . It is clear that certain segments of society have not benefited from globalisation, giving ground to populist leaders who have more successfully publicised the detriments of globalisation and more effectively engaged with voters on their concerns around stagnant wages, sovereignty and immigration, manifesting itself in the UK’s Brexit vote and the US presidential elections of 2016.
Innovation – a more significant challenge?
Whilst reflecting on some of the challenges posed by globalisation, we should perhaps be mindful of a much bigger challenge to our society. Recent advances in automation technologies, including artificial intelligence, autonomous systems and robotics, will have a profound impact on the global workplace.
Often referred to as the Fourth Industrial Revolution, many jobs and professions will be transformed by these new technologies over the coming years. The potential disruption to the labour market, the welfare system and society at large is likely to be considerable. The pace and extent of impact will vary from country to country, but we have already started to see significant structural changes to the workforce with the advent of the gig economy.
How to solve these global issues
So, what do we do? We all know there is no easy answer. We must start by understanding the grievances in our communities, clearly acknowledge the ones which we can impact, and then take deliberate actions to address these concerns. Focussing on financial inclusion, investing in improving financial literacy and financing projects that promote economic transformation and development are obvious places for a bank to start, but we will all have our own ideas on how we can shift societal views gradually but eventually. We will have to demonstrate that we are a force for good for all segments of society, not just the privileged few.
In this age of populism and rising geo-political risks financial institutions, and other corporates for that matter, need to monitor a broad range of non-financial risks, assessing how they may materially impact their strategies, business plans and operations. We are in the business of managing risks and have a number of tools at our disposal including stress testing and scenario analysis. However, these tools are not and will never be a substitute for strong governance, sound judgement and the ability to act swiftly and decisively.
"It is in all our interests to ensure that everyone reaps the many tangible benefits of globalisation."
We will continue to work with both public and private sectors – including through the UN’s Sustainable Development Goals – to tackle the challenges of globalisation and technological disruption head-on. Political leaders have a responsibility to implement inclusive social and economic policies. The private sector must do its part in contributing to sustainable economic growth by acting responsibly and investing in the communities it serves. It is in all our interests to ensure that everyone reaps the many tangible benefits of globalisation.
This article was first published on the Singapore Summit website as part of a collection of contributions prepared by business and thought leaders from around the world attending Singapore Summit 2018.