History shows that the deepest economic and social changes occur in the aftermath of major crises, catastrophes or conflicts. They have catalytic, disruptive effects on existing orders, creating new realities and different ways of thinking about the future. East Asia is now in an important phase of its history. Christopher M Dent specially for the East Asia Forum.
There is currently an understandable preoccupation with how quickly the East Asian economy can recover from the COVID-19 crisis. At the same time, it is crucial to keep in mind how future generations will look back at this period and judge our actions — and inactions.
This moment in history will ultimately be framed both by what preceded it and what came after. Was the chance taken in the 2020s to put the region’s economy on a more sustainable path? This could prove to be the most defining decade of the 21st century.
The COVID-19 crisis is occurring at a time of fervent populist nationalism when the prospects of reliving a late-19th century-style era of ratcheting up geopolitical tension, trade protectionism and superpower rivalry are very real. The lack of international leadership and cooperation in addressing the pandemic is all too evident. The institutions underpinning the post-1945 international economic order are under severe pressure in the current era of Trump, Putin, Xi, Bolsonaro and Duterte.
Crises expose the flaws and limitations of poor leadership, but also the qualities of good leaders such as New Zealand’s much-lauded Jacinda Ardern. Crises can bring out the worst in humanity but also its positive attributes of compassion, creativity and adaptation.
Writing recently in the Financial Times, Nobel economics laureate Amartya Sen argued that a better society can emerge from the lockdowns and that ‘the need to act together can certainly generate an appreciation of the constructive role of public action’. East Asia has demonstrated success at transformative public action. Over recent decades, the region has raised more people out of poverty than any other period of human history. In the years to come, East Asian countries have the opportunity to realise new transformative goals and take a lead on developing new public actions, policy ideas and innovations to improve people’s lives.
For now, governments in East Asia and elsewhere are focused on fiscal stimulus measures to shore up national economies as private sector business activity collapses. While these interventions are rightly addressing economic emergency issues such as mass unemployment, business bankruptcies, credit flows and funding frontline health and other essential services, longer-term recovery issues also need to be considered.
In many East Asian economies, the private sector’s recovery could be slow and patchy. Some of the region’s industries could be radically reconfigured while others experience severe contraction, but virtually all will need financial and regulatory support from government.
With significant financial risks and challenges lying ahead — most notably for developing economies — where will new public investment and incentives for private investment be targeted?
This is where climate change — a much bigger existential threat — becomes highly relevant. The COVID-19 pandemic has made us even more aware of our ‘risk society’ predicaments, and thrown in sharper relief the future consequences of choices we make now.
New investment should be directed towards building a more decarbonised, climate-friendly economy to put us on a more sustainable path. East Asian governments should not be providing recovery assistance or incentives to shore up dirty 20th century technology industries such as coal or other fossil fuels. This is the ‘historic moment’ to move on to a brighter, cleaner future.
East Asia is at the forefront of developing and producing new green technologies, but it is also a carbon-intensive core of the global economy. The decarbonising challenges are enormous, especially in the region’s burgeoning urban-industrial areas.
But the solutions are also there and becoming increasingly affordable. Clean energies such as renewables and electric vehicles are rapidly scaling up, but still represent small shares of their sector totals. Wind and solar currently account for only 8 per cent of world electricity generation, and electric vehicles a tiny fraction of global car sales. Energy efficiency is another key area where East Asia could make huge decarbonising investment gains with the ‘triple-win’ of lower production costs, reduced pollution and improved quality of life.
East Asian companies also have a part to play by developing more comprehensive environmental and social governance policies. More and more firms are embracing the idea that they do not simply exist to make their owners money but rather are organisations with a civilisational purpose. There is scope for new forms of transformative developmental partnership to emerge between government and business in East Asia in tackling interlinked sustainability challenges.
Despite current geopolitical tensions, the COVID-19 pandemic reveals the global connections that bind our destinies together. Tribal nationalism is counter-productive, especially in a functionally-integrated and interdependent world. Any pursuit of ‘national interests’ is best served by international cooperation and diplomacy.
This is a historic moment for East Asian nations to work together through multilateral institutions — including ASEAN, the China-Japan-South Korea Trilateral Cooperation Secretariat, APEC and others. It may not be until later this year that East Asian regional and wider international cooperation efforts can coalesce and focus on collaborative recovery endeavours. We are still in the early phase of this historic crisis, but it is a crisis commonly shared and experienced. This should create fertile ground for collective, transformative action.
Christopher M Dent is Professor of Economics and International Business at Edge Hill University, Lancashire.