The focus of my remarks today will be on the implications of these global trends for the emerging market economies in general, and the East Asian region in particular and the potential for achieving enhanced growth in this more challenging environment. Ladies and gentlemen The recent decade has also witnessed a dramatic change in the form and nature of the globalisation process. The initial waves of globalisation in the form of trade have been followed by globalisation of corporations and in the recent years by globalisation of financial flows. While it has been acknowledged that these developments have brought more complex and new risks, their impact is significantly more pronounced and far reaching for emerging economies. In this environment, emerging economies have been presented with a global landscape in which their very ability to participate effectively in the globalisation process has been rendered increasingly more difficult. Globalisation is not a new phenomenon for the East Asian economies. Indeed, the globalisation process has been an important element in the remarkable growth and prosperity that has been achieved by the East Asian economies. East Asia was able to ride the successive waves of globalisation in the 1960s, 1970s and 1980s. Many of the economies experienced a quantum leap into the industrialisation process as trade flows expanded at double-digit rates during most of this period. While the East Asian economies benefited from this global trend, the economies have not however, been immune to external shocks arising from shifts in international demand.
We eventually learned from that experience that there really is no trade-off between growth and employment and inflation, except possibly in the short term, and that stability, defined as consistently low inflation - and achieved by keeping overall demand continuously broadly in line with the underlying structural, supply-side, capacity of the economy to meet that demand - is a necessary condition for sustainable growth. We learned that governments cannot sensibly seek to achieve their social objectives - however worthy they may be - by simply borrowing, or “printing”, the money to finance their expenditures, but need to balance their current receipts and expenditures over the economic cycle, borrowing only to finance productive investments. And we learned that the task of shorter term economic stabilisation was most appropriately left to the operation of monetary policy. That, very broadly speaking, is today’s macro-economic orthodoxy not just across a broad part of the political spectrum in this country but in most of the rest of the world. Now many people were initially sceptical about this change of emphasis - no doubt some still are. Fiscal responsibility, including tight control over all forms of expenditure, for example, on social security and pension provision, and on health and education - and monetary policy directed specifically at consistent stable, low, inflation - all sounds somewhat austere. What in particular does it mean in terms of its impact on the poorer sectors of our society? Well I don’t for a moment suggest it is the solution to all our problems.