This article first appeared in Forum, The Edge Malaysia Weekly on October 15, 2018 - October 21, 2018

Is the world converging or diverging? In 2001, Chicago historian Kenneth Pomeranz wrote about the great divergence between China and Europe in the 18th century, ending up with the West taking over global dominance. In 2011, Nobel laureate Michael Spence argued that the world was again converging in The Next Convergence: The Future of Economic Growth in a Multispeed World — with China, India and the rest catching up with the West.

With North and East Asia, Asean and South Asia all growing at over 5% per annum, double the speed of the West and accounting for half of mankind, it does look as if convergence is the irresistible trend. But as US President Donald Trump unleashes the US-China trade dispute and closes Chinese access to US technology, and renews America’s focus on rebuilding its manufacturing capacity, it is no longer clear that the gap in income and wealth between the US and China will continue to narrow.

Consequently, is there simultaneous divergence and convergence in the race of the century to global leadership? What is the nature of this confusing trend, and how will it affect emerging markets like Asean?

The purpose of this new series of articles in this column is to map out why we need a 21st-century lens to think through very complex and confusing mega and micro-trends in the global economy. There are no more simple linear, mechanical rules that we can follow, as almost all rules are being dismantled or broken.

Some people argue that we need a complexity lens because most of the problems that the world is facing are highly interconnected, interactive and reflexive. We cannot solve the problems partially but need a holistic approach to a systemic issue. But politically, there is almost no chance of a global government, let alone reach common understanding of what problems should be collectively addressed. Climate change is one area where the US administration has definitely begun to deny. We need simplicity from complexity to grasp what is going on.

Simultaneously, we see that the differences in income and wealth between nations are narrowing, while at the same time the gap of inequality within nations is widening. Polarisation of political views are happening within every nation, at the level of religion, political beliefs, race and identity. The old ideologies of capitalism and socialism are being threatened by new emerging views that are weird in many ways. Coalitions of extreme left and right-wing parties are now common across the spectrum of governments, with Italy being the most recent example.

We therefore need a new narrative and framework for the 21st century that is clearly going to be very different from the old story. It is said that we need to look back in history to look forward, so this narrative will begin first with history.

But as one delves into history, as the colonial borders begin to disintegrate with human migration, how far back do we need to look? Crises are events, but reforms and change are processes. Our memories are more likely to remember traumatic events of fire and fury, but the process of change can be slow and painstaking until they are revealed through the drama of individuals at momentous points of time.

We need therefore to explore and dissect the history of events, as well as why our thinking or worldview changed over time. In this new period of transition, we can no longer project on a linear or logical basis, but seek to look for patterns.

A more recent review of the last 40 years would show some patterns that are discernible.

To some, the current geopolitical atmosphere is eerily like that of the 1970s, when the Cold War lines were drawn very clearly. There was an Iron Curtain surrounding the Soviet Union and a Bamboo Curtain around China. The Vietnam War was still being fought, and Asean was formed from the common interests of the smaller countries in Southeast Asia to become a zone of peace and neutrality (ZOPFAN).

US president Richard Nixon’s rapprochement with China changed the global game — isolating the Soviet Union and opening China to world trade and development. Deng Xiaoping’s Four Modernizations, launched in 1979, created miracle growth, pushing China from a poor country to the second-largest economy, and largest trading nation, in the world.

The last 40 years have witnessed tumultuous change in global circumstances, with South Korea, Hong Kong, China and Singapore reaching advanced country income levels, whereas most of the Asean economies are moving into middle-income and near high-income status. This was an era of growing world trade and East Asia took advantage of the opening of new markets to create the Asian global supply chain.

I was at the World Bank in 1991 when they produced the book on the Asian miracle. But by 1997, the idea that Asian economies could take off smoothly like a plane got a rude awakening with the Asian financial crisis. The initial International Monetary Fund and mainstream Western economist approach was that the crisis economies got what they deserved and orthodox medicine was applied — raising interest rates, devaluation and cutting both the fiscal and trade deficits. The economies got worse rather than better, so the IMF had to reverse its medicine. Ten years later, the US and Europeans adopted extremely loose monetary and fiscal policies, resulting in a decade of asset bubbles and social inequality.

It appears that the law of unintended consequences is unfolding. But why should we be surprised by such unintended (or rather unpredicted) consequences?

This series of articles in The Edge, called Condivergence, reflects my view that we need to abandon the lenses that we have been using to look at the 21st century.

The thesis is very simple. Western social sciences, especially economics, are grounded in Newtonian logic that is linear and mechanical. But physical sciences moved in 1907 to relativity and quantum — a new level of worldview that has been proved to be experimentally verifiable. The forces of nature are more influential on human behaviour than current reductionist economic theories assume.

Mainstream economics became an emperor with no clothes when it neither predicted nor explained how to deal with the global financial crisis, nor the rise of China. The models assumed away climate change and social inequality, and did not factor in technology, geopolitics and even collective human behaviour. The assumption of rational man at the core of mainstream economics was wrong.

Condivergence is simultaneous convergence and divergence. It is quantum and dualistic in thinking, a convergence of ancient Asian thinking and modern Western science. How we get to such a state is the story that this series will unfold.

Tan Sri Andrew Sheng writes on global issues from an Asian perspective

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