Predicting the Next 40 Years

By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 16 July 2009, 7.50 am and 7.20 pm)

The downturn in US housing in the past two years led to the collapse of many Wall Street firms. Global asset prices are down substantially. And thousands upon thousands have been laid off.

It’s reasonable to feel that American capitalism as a practicing ideology is deeply flawed. Worse, many feel that the US economy is going down the drain.

Forty years ago, this feeling could not have been more different. Because forty years ago American capitalism was about to emerge as the dominant ideology.

On that day, 16 July 1969, everyone who had access to a radio or television, set aside everything they did to witness the launch of the first manned mission to the moon.

Over the next five days, all eyes were riveted onto the Apollo 11 mission. Then on 21 July 1969, Neil Armstrong and Buzz Aldrin became the first two humans to walk on the moon.

It was one of those defining moments of the 20th century, bringing all together in one shared experience. On that day, all who looked up at the moon knew that there were two men walking on its surface.

The success of the Apollo 11 mission not only signaled the superiority of US over Soviet technology in the race to the moon. It also demonstrated the superiority of American capitalism over Soviet socialism.

This was the critical issue in those days. People very much wanted to know then whether capitalism or socialism would bring the most economic and social benefit.

Over in China forty years ago, this question must have been asked as the whole country was dragged down by the intensity of its disastrous Cultural Revolution.

Over in Singapore forty years ago, our export-led growth capitalism was being embraced as the solution to unemployment and the planned withdrawal of British forces in 1971.

The world did not know then what was happening inside the Soviet economy in 1969. But with the benefit of hindsight, we now know that the high cost of the race to the moon was one of the factors that began to crack open the deep-seated structural problems in the Soviet economy. In 1991, the Soviet Union finally collapsed.

In the years following the Soviet collapse, American capitalism grew to dominate the world. But, today, more than a year after the credit crunch began, many wonder whether American capitalism is still relevant.

Worse, many wonder about the true state of health of the American economy. Is it so weak that it’s on the path towards collapse, just like the Soviet economy was on its path towards collapse in 1969?

What will the global economy be like forty years from now in 2049? Some have predicted that by then, the Chinese economy would dominate the world. If so, we would be able to observe how the ideology of “socialism with Chinese characteristics” affects the world.

Then again, perhaps we might not see a dominant Chinese economy. The US economy could recover and hold on to its dominant economic position, just as it did before in the 40 years after the Great Wall Street Crash of 1929.

In any case, most long range predictions of the economy tend to be wrong. Why do I say that? Because we are dealing with human beings. Just try to predict what your spouse will do to you next week.