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Forbes May 2013

Download this article in FORBES May 2013

by Jennie S. Bev, Santa Clara

According to economist Thierry Malleret, by 2020, the six
global megatrends engendering instability are: unfavorable demographics,
resource scarcity, climate change, geopolitical rebalancing, indebtedness and
fiscal issues, and rising inequalities. We have discussed the first three
trends in the April 2013 issue of Forbes Indonesia.

The fourth trend is geopolitical rebalancing. Despite the popular
belief that the 21st century is Asian, Asian countries have a long
way to go in leading world’s geopolitics. America remains the dominant power,
despite its much lower hard power due to the ongoing slow economy.

The G20 has not been showing any strong leadership and China
has been a reluctant leader. Thus, the past G7 countries have been maintaining
global leadership despite the sluggish economic growth. In other words, a
country’s economic power does not correlate to global leadership.

Whether Asia can be the dominant power is now questionable
because its low-cost advantage is disappearing and post-industrialization and
re-industrialization of the West are strengthening. Indonesia might well be
losing momentum to lead global, or even Asia, power in the next few years due
to various elements, one of which includes the high real cost of doing business
here in comparison with other Asian countries in the form of inefficiencies and
poor infrastructure. 

Indebtedness and fiscal issues will continue to require
structural reforms in U.S., Europe and Japan. However, they may as well
continue to lead the global power with their post and re-industrialization activities.
Policy makers, however, will also continue to juggle the overleveraged global
economy and high unemployment as the “new normal.”

Countries with low debts and low dependence on exports like
India and Brazil are likely to do well. Indonesia, on the other hand, may be
able to sustain economic stability as long as the debt to GDP ratio is low.
BKPM stated that the current ratio is 25%. Maintaining this ratio is key for a
stable economic future. However, like other statistics, its reliability is of
utmost importance, to ensure public trust. 

Rising inequalities is a new trend, which was recognized in
2010 by the World Economic Forum. Out of the six trends, rising inequality
imposes one of the biggest risks. Throughout the world, globalization has
propelled a select few with superb talents and skills at the top of the totem
pole. Japan and Germany have been recognized with “less harsh” equality.
Indonesia, on the other hand, despite its approaching $4,000 per capita GDP, is
notorious for severe inequalities. The U.S. and U.K. with their Occupy Movement
and London Riots have expressed the majority population’s social anger toward
top earners. Their anger stems in a multitude of unequal opportunities resulted
from economic inequality.

Alas, we can’t change how the world turns out in this
interconnected and highly globalized complex world. We can only live prudently,
observe cautiously, steer away from making simple average computations, adapt
quickly, and not rely on the obsolete concept of ceteris paribus. The world is
no longer constant and variables have become too volatile to be accounted for
under an assumption of constancy. 

These six trends might sound like the ending of
a dystopian novel, but these are sincere warnings that we must be aware of.
After all, Darwin posited that those who succeed aren’t the strongest, but the
most adaptive to change.[]

Forbes Indonesia, May 2013

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