Lee Kuan Yew: The world is truly a global village

By Lee Kuan Yew, Published The Straits Times, 17 Mar 2012

WE IN Singapore are grateful that we have, so far, been buffered from the economic turmoil in Europe.

Singapore's gross domestic product last year reached US$259.8 billion (S$329 billion), or US$50,123 per capita. The economy, which grew at 4.9 per cent last year, is expected to grow modestly at 1per cent to 3 per cent this year. Greece's debt crisis, which could destabilise other European economies, could also set back Singapore's growth because its economy is heavily dependent on exports to the United States and the European Union (EU), particularly in electronics, information technology products, pharmaceuticals and the service sector.

Had Greece borrowed in drachmas instead of euros, lenders would have been cautious in lending to such a high-risk borrower, and Greece would have had to pay higher interest rates to reflect the risk of a depreciation to its currency. If Greece defaults on its debts or withdraws from the euro zone, the contagion could spread to other member countries, with widespread repercussions and upheavals. Germany and the stronger EU economies might come to Greece's rescue, but what if similar problems crop up in Spain or Italy?

With 27 independent finance ministers and with each country having its own separate and independent policies, the euro zone was bound to run into problems. The only way to resolve them is to form a deeper union, granting a central controlling authority the power to resolve conflicts between member countries, like the way the Federal Reserve Bank and the US Treasury function in the US.

Similar interdependent linkages have prevailed between governments. China's Premier Wen Jiabao, went to Europe in June last year to visit Britain, Hungary and Germany. Seven months later, Germany's Chancellor Angela Merkel visited Beijing to meet Mr Wen and seek China's help with the Greek debt crisis. China has US$3.18 trillion in foreign exchange reserves. If the EU becomes mired in Greece's economic difficulties, China's exports to Europe will decline. Now is a good time to invest in distressed and undervalued European assets, euro debts and euro bonds.

The Europeans have been told that the euro problem is their problem, that it should be solved by Europeans. At present, the US is not in a strong enough position to rescue the euro. However, modern technology has linked the economies, markets and stock exchanges of the world, so no country can be insulated from problems occurring elsewhere. One tap on a computer keyboard can send markets spiralling down.

Only large continental countries with huge populations like China's and India's can ramp up their domestic consumption to avoid being much affected by the current economic turmoil. The impact may also not be as severe on the US because it is the world's largest economy and relies on the domestic consumption of its large, high income-earning middle class.

When I was a child - one of eight - in the 1930s, it took me two hours to travel 6km by bullock cart on dirt tracks from my home in Bedok to my grandfather's rubber estate at Chai Chee. Today, that same trip takes 10 minutes by car on paved roads.

The change in communication methods is also astonishing. As a student in Singapore, I used to wait on Fridays for ships to dock so I could pick up copies of British magazines that were over a month old. Now, they arrive via a 12-hour direct flight from London. And when I was a student at Cambridge University in 1946, letters to and from Singapore took five days. Now, they also travel on that 12-hour flight. But even easier and faster is sending instant messages and receiving replies via SMS, BlackBerry, Skype or Google Chat.

Communication and transportation technologies have changed the world. The poorer populations in Asia and Africa do not enjoy the comforts of life that most Americans and Europeans do, but because of technology they are aware of what others have that they do not. It's no wonder there's an endless line of legal and illegal migrants crossing borders to improve their lives. Professional middlemen - or 'snakeheads', as they are called in China - can arrange to sneak mainland Chinese into Britain and the EU by various ingenious means, including packing people into shipping containers. These desperate migrants want only the chance at a lifestyle their homelands won't be able to provide for decades.

There's no going back to what was.

We cannot disinvent the airplane, BlackBerry, iPhone or iPad. These inventions have made the world a true global village. And the richer countries will always have groups of ethnically different peoples from poorer countries seeking entry and then putting down stakes in their midst.

This article first appeared in the March 26 issue of Forbes Asia magazine.

The column is rotated among the writer, former prime minister of Singapore; David Malpass, president of Encima Global; Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations; and Paul Johnson, eminent British historian and author.