Vivien Shiao , Issues behind trade war are the real problem: Tharman
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THE biggest problem the world will face in 2019 is not simply the impact of the US-Sino trade war, but the failure to address the domestic issues that underpin them, said Deputy Prime Minister Tharman Shanmugaratnam on Wednesday at the Bloomberg New Economy Forum.
"Across the advanced world, a very broad middle of society is seeing very little improvement in their lives. Young people, especially, are frightened of the future - they are worried about their jobs of the future," he noted. "They are also worried about the fact that there's no sustainable solution today for pensions and healthcare financing, and they will have to foot the bill."
Mr Tharman was addressing business and thought leaders at the closing session of the two-day forum held at the Capella Singapore on the topic "The Year Ahead". He was part of a panel, along with International Monetary Fund (IMF) managing director Christine Lagarde and Bloomberg founder Michael Bloomberg.
According to a poll of the audience on the top issue next year, 68 per cent indicated the trade war, followed by 22 per cent who were worried about the global economic slowdown. Some 8 per cent cited climate change.
Mr Bloomberg, arguably the most cynical among the panel, called the current trade spat "done for show".
"I think that in the end, China and the US will get back to some normal kind of trade, but with a bit more acrimony at the beginning, and then we will move on to the next subject," he said.
When asked if there is likely to be a breakthrough in US-China trade relations during the upcoming G20 summit in Argentina, Mr Bloomberg remained sceptical.
"I think we will make an agreement to agree, and then I think nothing gets done after that. Because you need to make hard decisions and nobody's willing to do that," he said.
The trade war was also top of mind for Ms Lagarde: "I'll be concerned about not just the trade war, but consequences that it will have on many countries around the world, not just the US and China."
But she pointed out that even before the trade war began, the middle class across the world has seen their incomes stagnate, resulting in "a large malaise".
With globalisation and technological advancement seen as exacerbating the situation, the key to overcome job disruption is to invest in education and training workers, the panellists said.
Ms Lagarde said: "I personally don't believe there will be a net loss of jobs, but there will be a transition period during which people will be affected."
"If we don't (invest in education) now, the transition period is going to be far too long to cope with, from a political and sociological point of view."
Ms Lagarde also pointed out that Singapore has a "great programme" on the education and training front.
Mr Tharman emphasised that this takes a lot of effort: "Not only in gearing up the young for a very different future, but working with middle-aged people, or (those in their) mid-career, who already have jobs to keep upgrading them for jobs of the future."
He said that there will be a "better chance" that there will be a net positive of jobs if systems are re-oriented to meet this need.
"But if you keep looking into the crystal ball and wondering what is going to happen, it is going to be a net negative," he added.
Another "looming challenge" that Mr Tharman highlighted as sorely neglected in politics is pension and healthcare financing.
"The fact that it's not part of the political narrative today, it's not part of democratic politics in most countries, is even more worrying because it means we face a major threat down the road," he noted.
For example, in 20 years' time, each working person in Germany is likely to pay half of his or her monthly salary for pension and healthcare financing, he cited.
"If we don't focus democratic politics on the issues of the future, the future is going to undermine democratic politics," he added.
Ms Lagarde agreed with his assessment, noting that it is a complicated issue politically. In her seven-year experience in the IMF, pensions have been a major issue for many countries.
"If nothing was done in reforming it (pensions)... many of the systems we had to deal with, we are heading straight to the wall, with no sustainability," she said.
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