Can we trust markets to solve our problems? This may well be the defining question of our time.
Until recently, policymakers especially in the West, believed that markets were better than governments in finding good solutions to social and economic problems. This was the intellectual legacy of the famous Reagan- Thatcher revolution. The 2008-2009 global financial crisis, however, was clearly a result of excessive reliance on market wisdom. Today, there is a deep new questioning among public intellectuals and policymakers about the balance between the role of markets and of government.
This issue of Global-is-Asian is timely as it touches on this fundamental question of our time. In America, for example, there is a ferocious and ongoing debate between the Obama administration, which believes that government should intervene to provide minimum health insurance to all, and the Tea Party advocates who believe that markets should provide health insurance, not the government. By pointing out how both government intervention and market mechanisms have their shortcomings, the article by M. Ramesh and Wu Xun make a valuable contribution to a key global debate. It also illustrates Singapore’s own struggle to find the right balance between markets and the government.
Many other Asian countries are facing this challenge. The Indian economy has slowed down considerably because the government has not freed its markets sufficiently. China’s leaders have also announced after the recent significant Third Party Plenum in November this year that China would now pay greater attention to markets structures in a bid to stimulate growth. According to Xinhua news agency, the market will now play a “decisive” role in allocating resources. In this context, it is wise for Razeen Sally to remind us that markets have intrinsic strengths – freedom and allowing the flourishing of individuals. Asia’s successful economic growth is also a result of the blossoming of ideas and innovations and the strengthened animal spirits that flow from the creation of open markets.
Nobel laureate Amartya Sen spoke wisely, when he said (at a visit to the Lee Kuan Yew School of Public Policy) that for societies to succeed, we need to balance the invisible hand of free markets with the visible hand of good governance.
Even if we have agreement on the right policy prescriptions (already a gargantuan task), the implementation of the right policies will not be easy. Many good public policies fail because of bad implementation. This is why public policy education to strength this “visible hand” is vitally important. Good public policy education of course, is not just about implementation but the whole enterprise of strong governance, of guarding the guards while pursuing the good life for society as a whole. Both governments and markets require good governance.