Deputy Prime Minister Lawrence Wong highlights the risks of inefficiency and economic stagnation in a geopolitically driven global order during a dialogue with CNN’s Fareed Zakaria.
SINGAPORE: A world where geopolitical considerations take precedence over open trade will likely experience slower economic growth and prolonged inflation, warned Deputy Prime Minister Lawrence Wong during a conference on Monday (Aug 14). Speaking in a dialogue moderated by CNN journalist Fareed Zakaria, Mr. Wong also expressed concerns about the potential impact of this shift on smaller nations like Singapore.
The dialogue, part of the “Reinventing Destiny” conference at Marina Bay Sands, marked the 100th birth anniversary of Singapore’s founding Prime Minister Lee Kuan Yew. Organized by several prestigious institutions, including the Lee Kuan Yew Centre for Innovative Cities and the Institute of Policy Studies, the event focused on issues such as Singapore’s identity, global trade, and relations between the United States and China.
On global trade, Mr. Wong highlighted Singapore’s apprehension over the “siege” of the multilateral trading system. “The global consensus on free trade and win-win economic cooperation is changing,” he noted. Previously, countries did not need to be allies to engage in business. Interdependence, once seen as a stabilizing force, is now viewed with suspicion.
Citing the “McDonald’s peace theory,” which posits that countries with McDonald’s franchises rarely engage in war, Mr. Wong explained that interdependence is now perceived as a vulnerability. “The fear is that interdependence could be weaponized,” he said. This shift may lead to fewer mutual stakes between nations, reducing restraints on unilateral or aggressive actions.
Addressing whether these changes could result in slower global growth, Mr. Wong confirmed that the economic costs of prioritizing geopolitics over efficiency would be significant. For example, a decision by the U.S. to reduce imports from China in favor of Mexico might still involve Chinese raw materials, leading to inefficiencies and higher costs.
“In a world where geopolitics dictates economic decisions, inefficiency, rising costs, and long-term inflation will be the price to pay,” he added.
Turning to industrial policies, Mr. Wong highlighted Singapore’s careful approach to ensure the efficient use of public resources. He warned that careless implementation of such policies by other nations could lead to significant waste and inefficiency.
Mr. Wong concluded by emphasizing the need to balance legitimate security concerns with maintaining a strong system of trade, investments, and interdependence. He urged global leaders to carefully navigate the complex challenges posed by geopolitics and economic efficiency.
