The Ukrainian Week: How COVID-19 pandemic will change the global economy?
Chandran Nair: I have been asked this question many times. But for me more importantly is what must change? Because a lot of people are thinking of how the pandemic will change the world but not many of them actually have a plan of what we must do to avoid such situations. That’s why it’s more important to understand how we got into this mess. And I think that the economic models and political systems in many parts of the world do not allow us to look in the mirror and answer this question.
If we are to learn from what happened, then there are several lessons. First, in my view, we got to this point by not recognizing the unique features of the XX-th and XXI-st centuries, which is essentially the first time in human history when human population starts to peak. Secondly, we are confronted with climate change. Third, we have so much technology and yet we are not able to separate technology from its purpose in relation to social good. So, the technology is overreached. Fourth, we have crisis in the way we have organized our economic systems. We can call it capitalism or whatever but we have organized our economic systems to be at war with planetary constraints. And I don’t speak of this as an environmentalist. I speak from a scientific-based point of view as a person who understands the limits. We have an economic model that has no limits, which is premised on a utopian view of growth through extraction, underpricing and externalization of true costs. And on top of that now we are recognizing that we have resource constraints and need to understand them.
The COVID-19 is just a warning. First warning we got. It means that human beings have transgressed all the natural systems in the pursuit of an economic model to a very narrow sense of what is prosperity and economic progress. That was a very Anglo-Saxon view of economic growth and that was exported most extremely to the American model. And we have reached the state where we need to understand that it cannot go on. If we understand that then we can discuss how the world will need to change.
I live in Hong Kong, a very crowded part of the world. With great politeness I often refer to my European friends and say you have no idea of what the world looks like if you live in Munich, Zurich or somewhere in Austria. You have to come to the places like India with some 1.5 billion people and see their conditions of living, then you can understand that this is actually the future of humanity and ask what are we going to do. To all this discussion that the future is digital etc. I recently coined a phrase to say that the future is biological, not digital. And COVID-19 is exactly a biological phenomenon. The virus does not have a cell but is essentially attacking biology which is the human being. And the human being is relying or existing on the functioning of biological systems. But at the end human being has advanced so much with technology that he is attacking the biology of the Earth. And COVID is unleashing the biology of natural systems on human civilisation. So, we really have to reconfigure what we do and then define what we would mean by human progress.
TUW: In 2018 was published a Report to the Club of Rome “Come On!”, which highlights the key imbalances in human development. There have been many related discussions in Davos etc. and it seems the vision of the problem is pretty clear. But when it comes to solutions and instruments there is a tiny progress. Why is that and what do we have to do?
ChN: I’m a member of the Club of Rome and we have many esteemed members. And that’s where the differences in opinions start. My book ["The Sustainable State: The Future of Government, Economy, and Society”] in many ways radical, non-liberal, non-Western view of what the solutions are. I was at Davos this year, also attended numerous other forums dominated by Western speakers. There the minority or the most privileged parts of the world were talking on how they were going to save the world. But they have no idea of how the real world looks like.
So, the question is what do we do? In my view, that is the most difficult thing for the Western liberal society to analyze. Because they are very unaccustomed to the view of collective welfare versus individual rights. So, you can see the ideological struggle in the world between the West and say China because the West completely does not understand China, it refuses to understand that this is one of the oldest civilizations in the world, a very well-organized and mature one.
The West typically looks for solutions in this way. There must be more democracy apparently there will be more solutions. Free markets must work, but we should limit growth through monetary and fiscal instruments, which no one in the world understands apart from Western economist because a lot of this is mumbo-jumbo. So, you’ve got democracy, free markets, and then you got that you should not interfere with individual choices because people are smart. And on top of this is technology, and a belief that somehow the human ingenuity will find solutions to all of the problems, and everything will be all right. If you put that all together, financial innovation, technology, democracy, and no restrictions extorting freedoms and rights, something will happen. But nothing happens. My point is that the West is in denial because it refuses to acknowledge that there is a need to redefine rights and freedoms. That’s the crucial point.
In my book I argue that in the rest of the world we don’t value things the same way because most people don’t have the basics. I say that the most basic human right is not the freedom of speech, which for westerners seems to be the most important because they already have the toilet, water supply, the roof and the food. But the majority of people don’t have this. For me the most basic human right is safe and secure food, water and sanitation, a roof over one’s head, public health and education. To provide that the whole discussion about environment constraints and emissions has to be recalculated. Let me give you an example. There are 600 million Indians without a proper roof over head. If all of them were to have a home this would take 500 years. The amount of materials needed to produce a home for those Indians is huge. That’s why Western solutions to how to reduce carbon emissions will not work in India because it will need to create emissions in order to provide people with basic rights to life. Then you have to add 300 million Pakistanis, 250 million Indonesians, 1.5 billion Africans and you’ll see what I mean.
So, the carbon emissions are going up because those peoples right to life is fundamental. If we agree that they have these basic rights, we still have to deal with the existential threat to climate. My view is that we are well past fighting climate change and now we are at the point where we have to discover how bad it’s going to be so that we can restrict the amount of damage, and how we have to live within it’s constraints. The richest societies will find ways to live with that. They can build walls, this and that. They can invest in fancy technologies and pretend they reduce the emissions. The poor societies are so low in their carbon emissions that they are going to have to increase them because you can’t build all these things without more emissions.
Then the question is which economic and political model will we pursue to allow them to have that? The economic model becomes very important because it says that not everybody can have everything. You can work hard but you cannot go and build a big house in the forest because it’s not possible any more. We are going to have to make certain restrictions. Then you have to build a political system around a constrained planet and to moderate prosperity. Now in the Western world the idea that you can tell people how you should live is unacceptable. That’s where the depression comes from. Because the system has to recognize very tough rules which need to be imposed on all societies to meet the green target of the vision so that we don’t collapse. The European and Western systems do not want to talk about tough rules. They use the fantasy of technology and economic instruments. They don’t talk about we must change everything from the point of view of interventions in people’s choices.
Look at China and India, two biggest countries in the world. Where are the tough rules going to come from? They come from the state institutions. They cannot come from years of negotiations within the EU and all kinds of wealthy economy financial instruments because we have to act fast. The Chinese system is able to act. The Indian system cannot act. The difference is in its political systems. The Indian problem is democracy because its democratic system is so corrupt and there’s no long-term view there. The Chinese system is long-term. A president can make a decision for decades. Once it’s put in place, they work towards that and when the next president comes they don’t overturn that because they have the system. This is a problem for the West. You have to have a strong state to make tough rules. I’m agnostic to the way you call democracy this or that. But it needs to be long-term. Democracy is weak in the context of existential threats.
TUW: Do we need something like a global government to impose tough rules?
ChN: We can have a global governance as a system of agreements and we must have them. But I think the idea that the global governance can deal with climate change is absolute fallacy. Because the global systems are always led by Western nations. It is easier for the European Union to build a global system rather than to do something themselves. Quite often global agreements are a nice way for rich countries not to do anything.
Global agreements still depend on local actions. Everyone signs up to the Paris agreement but each country is doing things locally. So, if you have a weak government locally you can sign the global agreement but you can’t do anything. If China signs up to something they can do it because they are organized. And for India it’s very difficult. The United States also signs up but never do because it’s an extreme form of capitalism and democracy which enshrines the individual rights.
So, I don’t think it’s about global, it’s about local. Countries act understanding the science and saying this is not for the world, this is for us. So for India they’ve got to do it for themselves. 25 years ago when there were climate change negotiations India and China were saying that the westerners were trying to put all these new rules to keep them down. About 10 years ago that changed. They listened to scientists and understood that it’s not about developed countries but about themselves. So, all these countries know the problem. But the difference is if they can act? Can India act? No. Why? Because of democracy. China can act. And we see in Europe a lot of talks but little action.
I’m not anti-democratic. But what is democracy? If democracy is a form of governance to create outcomes that essentially serve the people, then I would argue China is more democratic because its system works, especially when it faces existential threats. That doesn’t mean that the Chinese system doesn’t have any problems.
TUW: Pandemic increased the divergence in economic growth between the East and the West because the former is better in coping with COVID-19. Do you think this discrepancy will be significant?
ChN: I think COVID-19 made a couple of things very clear. First of all, liberal democracies in which people like the UK, the US are accustomed to the fact that there are freedoms, don’t care about people. Europeans and Americans have never had to feel an existential threat like this in the last 70 years. They always thought that diseases will go to those places like China, Africa etc. They continued to pollute believing that their democracy is protecting them from everything. They didn’t realize that their protection was economic dominance and military power. But this time when COVID-19 hit them was something that no one could see. They were caught completely because they were drunk of this notion of freedom.
Many in Asia do not understand why is it that the Europeans and Americans cannot go for 3 months without going to a restaurant or bar. Why do they feel they must have these pleasures even if it will increase the risk to others? It’s a different culture. In Hong Kong we had no lockdown but we have set strong conditions. From day one everyone in Hong Kong wore a mask without any questions.
In the Eastern cultures we have belief in authority. The Western world today is so reluctant to accept that in reality China acted in the strongest and the most efficient way by closing down Wuhan with 50 million people. And that was within the first 2-3 weeks. We have discipline. Everyone follows rules.
That comes back to the state. In my view the state is not just a dictator, a chancellor or a president. It’s a contract of trust between the citizens. They understand that in the absence of institutions everything breaks down. In advanced liberal democracies where people have never felt threats for so long they got an understanding that as long as they go and vote every 3 or 4 years they are great. But they don’t understand the social contract because they are protected by virtue of economic power over the rest of the world. So, they don’t understand what the notion of the state is.
The Asian countries are better because there is a respect to authority. It’s very important to understand. Even in India people do not automatically question authority like in the West. People understand that in the absence of authority you’ll have chaos because our recent history teaches us this. Chinese civilization is rooted in understanding of order and authority. It’s not the American system, which in comparison is so juvenile in its history and has a view of freedom that is coming to haunt it. So, it took the virus to reinstate the state as an instrument for society to organize. That’s the most important thing that people have learnt from the pandemic.
TUW: If Asian countries especially China keep high growth rates they will soon change global economic and trade balance. Can they use this global dominance to lead the world to tough rules and to implementation of solutions to existential threat?
ChN: I think this is a fundamental question. Geo-economic power cannot be the future; you have to understand the society. The problem is not just in Western capitalism; we have to reorder ourselves. And there is a discussion about this going on in China.
There is one thing many westerners don’t understand and the Chinese say this all the time. China is not interested in being the number one most powerful nation in the world. I think for the Western mind this is a strange concept. Because in the West power is everything. The Chinese are not interested in replacing the United States and in controlling the world.
This is a real misunderstanding. If you look at the history of China and India they never wanted to be number one. This is not their interest. And most people don’t understand that at least 500 million Chinese are still poor. So there are many issues. When China talks about development it talks about what is needed to be a partner in the world. Of course, when it becomes more strong, it gets more influence. But it’s not the influence China wants to use to dominate other countries. Philosophers trying to help and advise China always warn about accidentally becoming a dominant imperial power. And the Chinese philosophers today are mainly talking about this. They don’t want to be a dominant power. The Americans constantly say they are number one; they are an indispensable state. In fact, in Asian culture you cannot talk like this. This is shameless. For the Asian culture to even say this is to actually make yourself low. You are a low person to talk like this. The higher you are the more you talk slow and humble. While in American culture it’s completely different and aggressive. European culture used to be like that too but after the World War II I think the Europeans learned a lesson about aggression.
And many westerners say the dictatorship is coming. No. Countries like the Chinese model because they see how this big country of 1.3 billion people provides the greatest improvement in human condition in human history. 500 million people lifted out of poverty in 30 years. How? They want to learn.
The main points of the Chinese system are the following. First, it organizes itself around the central government. It does not allow for distortions in the political environment and the intervention of religion. People say that you cannot practice religion in China. This is a complete nonsense. I’ve been to places in China where I’ve seen more mosques than in my home country Malaysia. The Chinese system says you can have your religion but you don’t bring it onto the street to divide people and you cannot be political. The second thing in the Chinese system is real objectives. This year is the end of Xi Jinping objective to end poverty. He is working hard but the Western media never talk about this. Third, only competent people must be put in the right positions. No incompetence. So they deal extensively with this issue of competence. Very competent people are placed and they have to deliver KPI’s. I think that’s the difference. That’s why other countries like the Chinese system because they see the results.
TUW: Taking into consideration the Asian success stories what would you suggest for Ukraine to enhance its development?
ChN: I’ll tell you what I often say to many Asian countries. First, we must have our own ideas. I often say that we are subservient. Our best people go to Harvard Business School and learn how the world is flat. Then they come back with silly ideas about how investment banks work and are even critical to all economies in Asia. So, we have no ideas. I state that these ideas came from a wholly different area of exceptionalism, finance etc. and when the world’s population was half what it is today. So, you have to have a vision for your own country.
When you have a vision of your country it doesn’t mean that you start being protectionist. But you look at the leverages of your capital (natural, human etc.) and also decide on what you want your society to be because this choice will result in changes of cultural, economic, natural norms. You have to understand this. If you simply rely on globalization, and this is what business schools consider the best thing, then you will lose yourselves. Globalization should not be over-rated. It has been going on for thousands of years. But now it has become a concentration of economic power in the hands of a few. So, you have to choose rather than rely on globalization. Don’t take ideological sides, don’t be a part of any bloc. Decide what is the vision for the next 30 years, not 100 years, and where you want to go. Then you choose which part of globalization, what technology to accept.
COVID-19 showed us that much of the global supply chain is very weak by design and that many countries are not self-sufficient in food. In the Philippines and Malaysia we eat rice three times a day but we don’t even have our own rice, we import it. We are the countries that historically grew rice for hundreds of years. So, I say to all the governments before you guys go and build fiber optics and set the green light for the Industrial Revolution 4.0, please grow rice. Use the best technology in doing this, create an economy that gives jobs. Then no matter what happens you will at least have food.
Chandran Nair is a businessman, founder and CEO of Global Institute for Tomorrow. Was born in 1954 in Malaysia in Indian emigrants’ family. In 1987 received his master’s in chemical engineering from Asian Institute of Technology, Bangkok. In 1991-2004 was director at Environmental Resources Management, an environmental consultancy that grew into a multinational. In 2005 launched GIFT, an independent think-tank that explores various issues while providing consultancy and training services. Also, he has served as Adjunct Professor at the Hong Kong University of Science and Technology and the Lee Kuan Yew School of Public Policy in Singapore. He is the author of several books and a frequent contributor to media outlets including The Financial Times, The Guardian, The Huffington Post and The New York Times.