Brende: There is a lot at stake, so you are moving from like a prosper-thy-neighbour to a beggar-thy-neighbour approach.
PM Lee: Nobody says that. Everybody says that I want to prosper my neighbour, but I have to think about my people first.
Brende: Singapore already saw last year, quite a significant slowdown in your growth. I think you had 0.7 per cent. You are more optimistic about this year and the hit last year, were you paying a price already for this trade war?
PM Lee: Some of it was from slower trade, export markets were less buoyant, some of it was because of electronics slowdown, which was global. There are some prospects that the electronic slowdown will turn around this year, the people in the industry are reasonably optimistic. What we are not sure this year is where the US economy is going - it does not look like it is going into a recession, but nobody has a very good record predicting when economies go into recession.
Brende: A lot of numbers last day yesterday, you heard, probably from President Trump, very positive.
PM Lee: I have no doubt, but does that predict the future? You never know. The turning point - when does the mood change and all of a sudden the people's perspective shift and say, how silly of me, why didn't I see this before? By that time, everybody else has got into a new psychology and things turn. It may not happen this year. If you ask the best opinion they say, chances are not, but the chances are not negligible. But the key thing is, if you have the strategic tensions not being resolved and flaring up again downstream, which can happen, then is not just an impact on the business cycle, it is an impact on the long term trajectory of the world.
Brende: We are witnessing a kind of synchronised global economic slowdown, but we are not seeing any kind of recession at this point. But if there is a recession in the coming years, how worried would you be that we have so limited tools to fight the recession? Can you have more than zero interest rate, you can of course go a little bit of quantitative easing? How much of fiscal muscle is there globally, when many countries are already running with big deficits? What was the lesson learned from 2008 when G20 came together and agreed on very unorthodox tools? Would it be possible to get the same players in the same room and agree on anything these days?
PM Lee: Well that depends on your view, whether things have turned sour because the relationship has soured or whether they work less well together because the crisis is less urgent. If it is a former and you are going through a crisis, and we are not on good terms, well, we have a problem, we cannot cooperate. But if we are squabbling because things are not grave, then when things become grave and minds are concentrated, perhaps we would have no choice but to work together again. I have to hope so. I do not know whether central bankers have run out of ammunition, they say so.
But central banks are not the only policy instrument which governments have. You also have fiscal policy. There are limits, but in fact, there are very respectable and eminent economist like Larry Summers who argued that in the last downturn and in the recovery, fiscal policy was not used enough and people were too worried about running deficits whereas you should have run the deficits, spend the money wisely, not just to feel good or to boondoggle, but to invest in infrastructure, education, things which make a difference, improve your productive capacity, and then the economy will recover and then, in a way, you have got something of a free lunch. I do not generally believe in a free lunch but I do believe there is a role for fiscal policy.
Brende: There are countries that still have huge fiscal muscles though, quite large economies.
PM Lee: Germany, for example, has got a very balanced budget but they have very deep institutional and collective memories of hyperinflation and they do not wish to go in that direction.
Brende: They have their Schwarze Null law - black zero.
PM Lee: Well that is not a bad discipline to impose on ourselves, I mean Singapore has that rule too - not year by year, by term by term of government, namely, that this government, if you are going to run a deficit, you have to first earn the money then the next year you can run a deficit, but you cannot say last term of government ran a surplus and so now I can afford to run a deficit, the country is rich. That is a valuable discipline but you have to apply it in a way which is appropriate to the situation. I think that 2007-08 global financial crisis, in that situation, if you navigate by rules, the chances are you will run into an even more serious problem.
Brende: Maybe if there are no tools and no agreements, you could run into a situation, maybe not. It is such a deep recession, but the much longer one like we had in the 1970s.
PM Lee: Or in the 1930s, because what happened in the 30s was tariffs and counter-tariffs and Smoot-Hawley Tariff Act in America. One of the things that the G20 did after the global financial crisis was to say, we shall not go for this talent retaliation or competitive devaluation, and we shall be in this together and let us try to reflate together, let us bring our monetary policy down and try and coordinate that. You do need that kind of coordination worldwide. We cannot all be running trade surpluses. Whom are we going to be having surpluses against? Antarctica?
Brende: Thank you also for reminding us about the history. We do remember from the history books that in the 1930s, the global trade fell by 50 per cent and the global GDP in few years fell by 25 per cent and they got a real depression. There is a lot at stake.
PM Lee: Followed by a war.Brende: Do you see any silver linings?
PM Lee: Well, if you look at the tech sector, there is tremendous vibrancy and optimism and everybody believes they are going to change the world. They are not all right but some of them will not be wrong. If you look at things like Google, Amazon or so many of the tech companies, or Microsoft, which did not exist 30 years ago and which was not dominant 20 years ago. There are now major players in the world, so nobody knows what the major participants are going to be 20 years from now, and it is going to generate new opportunities but it is also going to generate new problems.
When social media came along, everybody said this is marvellous, this is a way to democratise debate, and everybody has a voice and now we shall have an egalitarian participative, basically Nirvana will have arrived. Now we see what it is like. It does not look like it is Nirvana.
Brende: Can democracy survive social media?
PM Lee: I do not know whether it is democracy surviving but how will human societies adapt to this? Human societies, I mean over many, many centuries have developed to have circuit breakers. A view, an idea develops, it catches fire, a few more people pick it up, it gets tested. Other people may or may not pick it up. Things take time. Gradually, evidence accumulates and then some fail, some succeed, and you move forward. Now, all that is short circuited into one fraction of a second, that length of time it takes to press a button for either Facebook posts or Twitter tweet.
When you speed up the operating cycle like that by 100 or 1000 or 10,000 times, the operating system will malfunction. Human beings are not meant to work like that. Your brain does not speed up 10,000 times. You need time to hoist things in, to mull it over, to think it, discuss it, to test it and gradually to get some grey hair and then you have some better decisions about it. It will throw all that out of the window. I think you need to be very confident that you know what you are doing, and I am not sure that we actually have an answer to that question.
Brende: This platform, companies, scale and size is everything when the winner takes it all in a platform economy. How do you think smaller countries and medium-sized economies will cope with this?
PM Lee: If we can participate in the global economy, then we are part of it. In Singapore, the major platform companies are all in Singapore - Google is there, Facebook is there, the data centres are there, engineers are there. We do not have very many unicorns of our own but we are part of the global economy and part of these major participants.
If there are proper rules which protect participants, big and small, in this environment, then, I think we can make a living. If there are no rules, and all of a sudden you have a Twitter storm or something befalls you in the middle of the night, next morning you wake up and you find you have been devastated. It can happen.
Brende: Prime Minister, thank you so much. I think I am speaking on behalf of all the participants and I would love to continue another 15 minutes to get your insights, but everything good also has to come to an end. Thank you so much for joining us and thank you for your leadership. Thank you.
PM Lee: Nobody says that. Everybody says that I want to prosper my neighbour, but I have to think about my people first.
Brende: Singapore already saw last year, quite a significant slowdown in your growth. I think you had 0.7 per cent. You are more optimistic about this year and the hit last year, were you paying a price already for this trade war?
PM Lee: Some of it was from slower trade, export markets were less buoyant, some of it was because of electronics slowdown, which was global. There are some prospects that the electronic slowdown will turn around this year, the people in the industry are reasonably optimistic. What we are not sure this year is where the US economy is going - it does not look like it is going into a recession, but nobody has a very good record predicting when economies go into recession.
Brende: A lot of numbers last day yesterday, you heard, probably from President Trump, very positive.
PM Lee: I have no doubt, but does that predict the future? You never know. The turning point - when does the mood change and all of a sudden the people's perspective shift and say, how silly of me, why didn't I see this before? By that time, everybody else has got into a new psychology and things turn. It may not happen this year. If you ask the best opinion they say, chances are not, but the chances are not negligible. But the key thing is, if you have the strategic tensions not being resolved and flaring up again downstream, which can happen, then is not just an impact on the business cycle, it is an impact on the long term trajectory of the world.
Brende: We are witnessing a kind of synchronised global economic slowdown, but we are not seeing any kind of recession at this point. But if there is a recession in the coming years, how worried would you be that we have so limited tools to fight the recession? Can you have more than zero interest rate, you can of course go a little bit of quantitative easing? How much of fiscal muscle is there globally, when many countries are already running with big deficits? What was the lesson learned from 2008 when G20 came together and agreed on very unorthodox tools? Would it be possible to get the same players in the same room and agree on anything these days?
PM Lee: Well that depends on your view, whether things have turned sour because the relationship has soured or whether they work less well together because the crisis is less urgent. If it is a former and you are going through a crisis, and we are not on good terms, well, we have a problem, we cannot cooperate. But if we are squabbling because things are not grave, then when things become grave and minds are concentrated, perhaps we would have no choice but to work together again. I have to hope so. I do not know whether central bankers have run out of ammunition, they say so.
But central banks are not the only policy instrument which governments have. You also have fiscal policy. There are limits, but in fact, there are very respectable and eminent economist like Larry Summers who argued that in the last downturn and in the recovery, fiscal policy was not used enough and people were too worried about running deficits whereas you should have run the deficits, spend the money wisely, not just to feel good or to boondoggle, but to invest in infrastructure, education, things which make a difference, improve your productive capacity, and then the economy will recover and then, in a way, you have got something of a free lunch. I do not generally believe in a free lunch but I do believe there is a role for fiscal policy.
Brende: There are countries that still have huge fiscal muscles though, quite large economies.
PM Lee: Germany, for example, has got a very balanced budget but they have very deep institutional and collective memories of hyperinflation and they do not wish to go in that direction.
Brende: They have their Schwarze Null law - black zero.
PM Lee: Well that is not a bad discipline to impose on ourselves, I mean Singapore has that rule too - not year by year, by term by term of government, namely, that this government, if you are going to run a deficit, you have to first earn the money then the next year you can run a deficit, but you cannot say last term of government ran a surplus and so now I can afford to run a deficit, the country is rich. That is a valuable discipline but you have to apply it in a way which is appropriate to the situation. I think that 2007-08 global financial crisis, in that situation, if you navigate by rules, the chances are you will run into an even more serious problem.
Brende: Maybe if there are no tools and no agreements, you could run into a situation, maybe not. It is such a deep recession, but the much longer one like we had in the 1970s.
PM Lee: Or in the 1930s, because what happened in the 30s was tariffs and counter-tariffs and Smoot-Hawley Tariff Act in America. One of the things that the G20 did after the global financial crisis was to say, we shall not go for this talent retaliation or competitive devaluation, and we shall be in this together and let us try to reflate together, let us bring our monetary policy down and try and coordinate that. You do need that kind of coordination worldwide. We cannot all be running trade surpluses. Whom are we going to be having surpluses against? Antarctica?
Brende: Thank you also for reminding us about the history. We do remember from the history books that in the 1930s, the global trade fell by 50 per cent and the global GDP in few years fell by 25 per cent and they got a real depression. There is a lot at stake.
PM Lee: Followed by a war.Brende: Do you see any silver linings?
PM Lee: Well, if you look at the tech sector, there is tremendous vibrancy and optimism and everybody believes they are going to change the world. They are not all right but some of them will not be wrong. If you look at things like Google, Amazon or so many of the tech companies, or Microsoft, which did not exist 30 years ago and which was not dominant 20 years ago. There are now major players in the world, so nobody knows what the major participants are going to be 20 years from now, and it is going to generate new opportunities but it is also going to generate new problems.
When social media came along, everybody said this is marvellous, this is a way to democratise debate, and everybody has a voice and now we shall have an egalitarian participative, basically Nirvana will have arrived. Now we see what it is like. It does not look like it is Nirvana.
Brende: Can democracy survive social media?
PM Lee: I do not know whether it is democracy surviving but how will human societies adapt to this? Human societies, I mean over many, many centuries have developed to have circuit breakers. A view, an idea develops, it catches fire, a few more people pick it up, it gets tested. Other people may or may not pick it up. Things take time. Gradually, evidence accumulates and then some fail, some succeed, and you move forward. Now, all that is short circuited into one fraction of a second, that length of time it takes to press a button for either Facebook posts or Twitter tweet.
When you speed up the operating cycle like that by 100 or 1000 or 10,000 times, the operating system will malfunction. Human beings are not meant to work like that. Your brain does not speed up 10,000 times. You need time to hoist things in, to mull it over, to think it, discuss it, to test it and gradually to get some grey hair and then you have some better decisions about it. It will throw all that out of the window. I think you need to be very confident that you know what you are doing, and I am not sure that we actually have an answer to that question.
Brende: This platform, companies, scale and size is everything when the winner takes it all in a platform economy. How do you think smaller countries and medium-sized economies will cope with this?
PM Lee: If we can participate in the global economy, then we are part of it. In Singapore, the major platform companies are all in Singapore - Google is there, Facebook is there, the data centres are there, engineers are there. We do not have very many unicorns of our own but we are part of the global economy and part of these major participants.
If there are proper rules which protect participants, big and small, in this environment, then, I think we can make a living. If there are no rules, and all of a sudden you have a Twitter storm or something befalls you in the middle of the night, next morning you wake up and you find you have been devastated. It can happen.
Brende: Prime Minister, thank you so much. I think I am speaking on behalf of all the participants and I would love to continue another 15 minutes to get your insights, but everything good also has to come to an end. Thank you so much for joining us and thank you for your leadership. Thank you.
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