The economic, political, strategic and cultural dynamism in Southeast Asia has gained added relevance in recent years with the spectacular rise of giant economies in East and South Asia. This has drawn greater attention to the region and to the enhanced role it now plays in international relations and global economics.

The sustained effort made by Southeast Asian nations since 1967 towards a peaceful and gradual integration of their economies has had indubitable success, and perhaps as a consequence of this, most of these countries are undergoing deep political and social changes domestically and are constructing innovative solutions to meet new international challenges. Big Power tensions continue to be played out in the neighbourhood despite the tradition of neutrality exercised by the Association of Southeast Asian Nations (ASEAN).

The Trends in Southeast Asia series acts as a platform for serious analyses by selected authors who are experts in their fields. It is aimed at encouraging policy makers and scholars to contemplate the diversity and dynamism of this exciting region.

EXECUTIVE SUMMARY

Key Concepts

The basic question is what kind of society do the majority of voters want? From there, the society can consider specific sectors — such as education, healthcare and infrastructure — and move on to decide whether public or private ownership is preferable. How the key concepts are tackled depends to a large degree on how equality and fairness is perceived.

A society is, broadly speaking, a network of individuals, organizations/ institutions and businesses kept together through congruent interests, analogous political goals and a sense of fairness. It costs money. The large majority must feel better off inside than outside, after having paid their share of expenditures to finance common activities.

It may well be that some of them would be even better off by moving to another society or community or country, but there are at least two barriers. First, they may be better off economically in a different country, but suffer significant personal and psychological “costs” from living outside the culture they were raised in and understand — their identity, values and group associations. Second, moving costs money as well and brings uncertainty and the risk of a net loss.

The challenge is how to maximize the level of goods and services, minimize the number of people and capital in non-productive sectors, and generate the highest possible social coherence. We want to minimize the number of people who feel socially and culturally outside or sidelined.

The Global Outlook Horizon, 2030

Over the next fifteen years, new or accelerating trends in debt, demography, urbanization, global savings, innovation, productivity and energy will transform the global power structure, with unprecedented speed, magnitude and impact.

Debt: Debt will lower the rate of global growth and limit the room to manoeuvre, especially for Japan, the United States, Britain and South Korea. In 2013 the Bank for International Settlements (BIS 2013) analysed how much fiscal tightening major countries will need to make in order to achieve a sustainable position in their public debt by the year 2040. For the United States, the figure was 14.1 per cent, for Japan 14.9 per cent, Britain 13.2 and Korea 11.9. The eurozone countries — often considered to be languishing in a debt trap — presented a much more promising picture. Germany was expected to need only an additional 3.4 per cent of fiscal tightening, France 5.4 per cent, Italy 4.0 and Spain 11.4. China, meanwhile, will need 2.5 per cent and India 3.7 per cent.

When it comes to private corporate debt, it is the emerging markets and developing economies (EMDE) that appear to be in a more vulnerable position, compared to developed countries. Their share of world corporate debt has risen steadily in recent years, while in the industrial countries there has been a slight deleveraging in this segment of debt (The Economist 2015).

A more immediate concern is the proposed interest rate hike by the U.S. Federal Reserve, which threatens the position of industrial economies and EMDEs alike, though in different ways.

Shift in Parameters: Imperial Power,Hyperpower — The Response of the United States

Al-Qaeda and the Islamic State announce a new kind of empire: Values-based empires kept together across political borders by shared and common values, anchored in religious beliefs. This runs counter to the operation of geopolitical power as seen over the last couple of centuries, which explains why existing powers (the United States and Europe) find it so difficult to respond and react to them. Since the end of the Cold War, the United States has been by far the strongest power, but has not been able to transform that status into a long-term strategy, either to maintain U.S hegemony or to shape another global power structure. Military power is still effective, but less so than in the past. The lesson that only values-based empires can endure has not been learned.

The Middle East in general, and the so-called Islamic State in particular, may be the barometer of what is to come: Values overcoming economics and military power. The political structure in this part of the world — invented after World War I and revised after World War II — is artificial, neither rooted in history nor reflecting indigenous tribal power, ethnicity or religious relationships. Groups that had fought each other for centuries suddenly found themselves inside the same political framework, with the expectation that they replace hatred with friendship.

Ownership

Industrialization created enterprises which operated locally, and constituted a bond between owners, citizens and the local community. This belongs to the past. Very few major enterprises operate in a local environment. Blurred ownership means that owners take no interest in local communities. In many cases, those owners are financial or investment funds, looking for a surge in the stock price so they can get out with a quick profit, with no interest in the long-term future of the company they own.

The world is moving into a new kind of corporate capitalism — combining a concentration of financial power with comparatively few corporations controlling communication, increasing anonymous ownership, a business sector decoupling from the public sector and the population, the breakup of big corporations, and the movement of employment out from large corporations. The expansion of ICTs and globalization have also contributed.

This is a model the world has not seen before and does not fully understand. Yet it entails massive social and economic upheavals.

The business sector no longer sees much reason for working inside a social contract with the government and the population. On the contrary, it looks upon the government as a cash cow to take over burdens it is unwilling to shoulder itself, and the population as a mass of consumers to be squeezed.

One of the principal causes of the global economic crisis was the financial sector's success in convincing the government and the population that deregulation would stimulate economic activity and bring benefits to all. What happened was something very different. The financial sector used deregulation to undertake high-risk, high-return operations, and reaped the profit without preparing for rainy days. The crisis was largely a result of reckless lending.

Over the last two decades, three issues have occupied my mind:

1. Has the digital era segmented or united the world? Has instant access to data and global networking made people more broad-minded and tolerant of diversity, or has it merely reinforced the views of likeminded individuals?

2. People accept globalization when it delivers prosperity and winners outnumber losers. But will globalization be more resented and resisted as the world enters a long period of slow or no growth?

3. How can in-groups that share common values deal with out-groups that don't? Is it possible to be truly inclusive without demonizing those that are outside the tent?

My modest aim in this book is to dissect these questions from an historical perspective — to see how far the world has come, and what lies ahead if current trends continue.

So, let us begin with history.

From 1618 to 1648 Europe was torn apart by a devastating and ruthless war. It was waged with a fanaticism nourished by religious extremism, which absolved soldiers who committed atrocities because it was God's will and done in God's name. Out of this debacle came the Westphalian system, giving rise to the nation-state.

Fundamentally, the conflict in Europe was about who should have the right to define ethics, norms, values and behavioural patterns in a Europe baffled after Martin Luther's challenging of the Catholic Church, and still struggling to digest the social repercussions of the information revolution inaugurated by the printing press and movable type.

The global picture today resembles this earlier situation in many ways — the religious fanaticism, the chaotic warfare and social breakdown all speak to our liveliest fears of today, especially when their effects can be multiplied by the sinister use of modern weaponry and technology.

The Thirty Years War put Europe on the road to a unique constellation of military power, economic influence and political thinking. The main thread was the jump from the local to the national level. People lost their affiliations to smaller communities and stopped knowing or caring about their neighbours. This initiated a long march towards dehumanization, denaturalization and high power distance. Before the Thirty Years War, “power” was rarely exercised outside the local level.

On the evidence of the other social sciences and recent brain research, it is quite clear that human beings are not the Homo oeconomciusof economic myth and that the pursuit of happiness is not inextricably linked to money. Fulfilment or “happiness” are deeper and longer-lasting feelings than those derived from material consumption — primarily because they bring in the human factor, and let human beings see and feel that they do something for others.

Aaker et al. (2011) conclude that, “To get maximum happiness out of time, people need to use it in ways that cultivate personal meaning and social connections. Although the time spent strengthening your relationships with friends and family is likely to bring the greatest happiness, it is also possible to derive pleasure from 1) spending time with people not typically associated with happiness (e.g., workplace friends)…