"How we can tackle the world’s three ‘long challenges’": Transcript of the Inaugural Lecture by President Tharman Shanmugaratnam at the JY Pillay Lecture Series on Governance on 27 November 2024

It requires rebuilding collective belief in the future

Our largest governance challenges, internationally, are now the long ones: where decisions today will determine if we secure people’s well-being not only today but for our children’s generation and those that come after.

Climate change is foremost. Ways must be found to win popular support to accelerate the shift to a low carbon future. It requires a fair transition, one that overcomes the anxieties over costs that have led to pushback within many populations. But it also means overcoming the short-sightedness that is now the norm in most societies, so as to ensure fairness not only today but for future generations.

Likewise, the challenge of meeting the needs of steadily ageing societies, without sending the invoice to the next generation. And so too, dealing with AI – the most profound technological change of our times, with benefits as well as risks that are likely to grow exponentially in the coming decade and beyond. 

We can only address these long challenges by stretching our economic and political horizons. And by finding ways to rebuild optimism and solidarity within our societies, so that people can imagine how the future can be better for all. The collective belief in the future has to be both the means and the end.

Building a realistic optimism

We are starting from a difficult place. Confidence in the future has been on the decline in most societies. They are also more divided. A survey of 19 high and middle-income societies by Pew Research in 2022 found the majority feeling more divided than they did before the Covid-19 pandemic. Only three countries avoided this, including Singapore, where 75 per cent of people felt more united than before the pandemic. On top of all this, confidence in the multilateral order is at its lowest point.  

Yet to tackle problems like climate change, we must first recognise the scale and seriousness of the challenge - not so we add to the mood of despondency, but so we build realistic optimism. 

The world is far behind the actions it needs to stay within 1.5 degrees C of global warming, and to prevent accelerated warming after we hit 1.5 degrees. The best scientific estimates tell us that the remaining carbon budget, or the maximum amount of emissions the world can make so that global warming remains below 1.5 degrees, is likely to be used up in about five years’ time. 

Even more worrying: there is radical uncertainty as to what comes next. The planet is losing its critical buffers against warming – the natural ecosystems on land and in the oceans, that have been soaking up more than 50 per cent of carbon dioxide that the world emits, are losing that ability. It is also beginning to cross tipping points - such as the melting of the Greenland ice sheet, and the shift in the Amazon from being a huge carbon sink to being a net emitter - which can lead to runaway global warming. 

The implications are clear. First, tackling climate change will be much more costly, and vastly more complex and difficult, if we defer action. We must act early, especially to develop scale in clean energy and green technologies, so that they become as affordable and as reliable as what we do with fossil fuels. 

Second, clear and credible public policies are key to achieving this scale and speed that is required. Carbon pricing has to be the centrepiece. It will help catalyse the needed shift in private investments towards green opportunities in every sector, and also provide the revenues needed to support the transition and ensure poorer segments of the population are not disadvantaged. But it is generally understood that carbon pricing, within socially realistic limits, will not on its own be adequate. Targeted regulations in specific sectors, which in many cases such as in aviation and maritime transport will have to be internationally managed, are needed to provide certainty for businesses and spur innovation. 

We also need public investment in R&D and to build out new grids and other public infrastructure for a clean energy future. But higher spending will be a problem in many countries - given already large public debts, and interest rates which are no longer low. They have to find a pragmatic path, to protect future generations from exploding debt burdens, but also protect them from the huge costs that climate change will cause.

Europe epitomizes this challenge. Eminent former leaders like Italy’s Mario Draghi and Germany’s Angela Merkel - who had herself pushed for Germany’s conservative ‘debt brake’ laws when she was the country’s Chancellor - have now proposed that the public sector be allowed to borrow for a transitional period for investments in the green transition and other critical needs.  

Third, and the most challenging governance task: we need international coordination to solve the climate crisis. Otherwise we risk carbon leakage - where higher emitting companies and activities shift to countries with more accommodating policies. But besides their differing levels of political will, the complexity comes from the fact that countries have been using different sets of measures to encourage decarbonization. Europe has been relying on the full mix of carbon pricing, regulation and subsidies, whereas China has introduced only limited pricing and the US has eschewed it altogether. Finding some equivalence between the measures taken by these major emitters so as to determine their ’effective’ carbon pricing rates will be a difficult matter. But it cannot be avoided.  

Reframing the debate

We need a new understanding in trade, investments and technology transfers, to enable the world to benefit from China’s low-cost clean energy technologies, such as its solar panels, wind turbines and batteries. And likewise, to take advantage of innovations in the United States, such as in hydrogen power, carbon capture and other next-generation clean technologies. The key goal must be to maximise scale, affordability and the speed of the global transition, recognising that the world is far behind in the race against climate change. It will be aided by not limiting market access to products and technologies based on where they come from, but instead pursuing the solutions that still exist for win-win economic outcomes. 

We must also overcome the perennial tensions over climate financing for the developing world, which are not getting us anywhere. The debate has to be reframed, from viewing it not as a matter of how much aid should be given from rich nations to poor, but as investment in the global commons that all nations will benefit from. Dollar for dollar, investments in climate transition in the developing world in fact have a more significant impact on global emissions than in the advanced economies.

Blended finance, where we bring together monies from the public sector, the multilateral development banks and the private sector, and where possible philanthropies, is an important way to scale up these investments. That’s why Singapore launched the FAST-P programme this year, to help spur the transition to low carbon in Asia. 

The good news recently has been in carbon markets. Consensus on how to operationalise Article 6 of the Paris Agreement – governing how countries can trade carbon credits - was finally achieved at COP29 in Baku, with Singapore playing the role of co-facilitator. It will also add impetus to efforts to develop a voluntary carbon market with credible standards and verification mechanisms. The challenge is in the doing. An example is the Transition Credits Coalition that MAS is working on, to make possible an early phase-out of coal-fired power plants in Asia.

Finally, we need a new narrative on climate change, that has appeal to populations. Pushback has come from those who feel they have to bear the costs of decarbonisation today, in exchange for benefits to society in the distant future. Part of the solution must be to ensure that adjustments are fair to ordinary households. But decarbonising the economy can itself be a growth opportunity in the coming decade itself – with heightened investments creating many jobs and new businesses. It is an opportunity for clean air today - remember that millions of people each year die from air pollution caused by fossil fuel-based energy, with many more suffering from ill-health. And nature-based solutions will help give populations clean water supply, and provide a buffer against flood and other weather extremities. So while the largest benefits come decades later, the dividends for populations from climate action begin flowing early. 

AI : focus on early wins, and avoiding the worst possible harms

The second looming issue is AI. It presents massive opportunities for improved well-being – from better healthcare to productivity in every sector. But there are also major risks. There are bleak scenarios of how AI will remove a large segment of jobs, including those of the middle class. No one can say for sure that it won’t happen. There is also the prospect of AI systems moving beyond our control, as most AI programmes get to be written by AI itself. And as Henry Kissinger warned in his final book, AI poses a global security dilemma of an existential nature. More immediately, there’s the risk that AI poses for democracy itself, by accentuating misinformation and social polarisation. We already see this today, but it will only grow in the next decade and beyond. 

Yet we must have a sense of realism when we think of how we should regulate AI. There will remain a fundamental mismatch between the pace at which AI is developing and regulators’ ability to set rules around it. We cannot delay AI until we are perfectly sure it is safe; in fact we should assume that there will be some bad. Our approach should be to maximise the benefits of AI and minimise the risk of the worst possible harms to safety and society, and not think we can regulate AI comprehensively to avoid all that could be bad. 

Look for early wins. In healthcare, for instance, through much earlier and better diagnosis and treatment. In learning, with the potential that AI offers for personalised tutoring, through life. In improving farming yields. And in virtually every sector, to improve the productivity of those in the workforce by having an AI tool to augment your own capabilities. 

Further, not every problem created by AI will be best solved by trying to regulate AI. The real solutions to avoid job and income losses, which could come in both advanced and developing countries, lie in other economic and social strategies. We’ve got to double down on preparing young people and the workforce of today for an AI era. Countries may have to introduce new wage subsidies, or use progressive tax and transfer systems to mitigate inequalities. Every society has to be ready with these strategies, to ensure we can benefit from AI whilst buffering its downsides.

Critically too, we will need international cooperation to govern AI. It must involve the US and China talking directly with each other. But we must carry on with the important work of building a broad coalition of interests that can make the most of expertise from every source. 

Don’t send the invoice to the next generation

The third long challenge: preserving optimism as societies age. Almost every higher income country is ageing, and a few emerging countries too. We will see this go further in the next thirty years, changing the nature of society. 

However, many systems of financing healthcare and pensions are unsustainable, and are now likely to pose a major burden on the next generation. Unfortunately, most are also dealing with this challenge late in the day, when a large segment of the population is already retired or close to doing so. Reforms are still possible, but now come at greater political cost, which many democracies are finding insurmountable. 

Healthcare spending will have to go up, if we are to provide quality and affordable care for growing older populations. The costs have to be paid for fairly, across a population. We should start by recognizing that there is no such thing as free health care for people anywhere - even in the systems like the UK where you pay little or nothing when you turn up in hospital, people pay for it  through taxes or mandatory national insurance contributions.  

But a key lesson from most countries is that to keep the system fair, and keep healthcare costs from going up excessively, we have to avoid a heavy reliance on just one source of payments. We need a balance between government subsidies, co-payments by individuals when they are treated, and insurance policies – as we have in Singapore for example. It is also how we ensure that those who can afford it get less subsidies and pay their fair share. 

More importantly, staying healthy and keeping healthcare costs down doesn’t just depend on healthcare systems. In fact, much of it depends on our habits and the social environment around us as we age. Are we staying active? Do we have regular friends? Do we have hobbies? Are we still learning something and staying curious? Are we countering the ageing brain? That’s all critical in staying healthy, and to living long and satisfying lives. And in Singapore, we are very serious about making this possible.

Rebuilding solidarity

Finally, as I mentioned at the start, we have to rebuild the collective belief that the future can be better for all. We have to find ways to get beyond the zero-sum thinking that is now prevalent within many societies – where each group feels that its future is pitched against another. Find ways to address the concerns of segments in each population who feel that the elite do not understand their day-to-day problems. And find ways to rebuild a sense of common humanity, by sustaining the international rule of law and norms of conduct, and by pitching in to strengthen the global commons. 

Yet, solidarity, a sense that our lives are connected and indeed enriched by what we do for each other, is a neglected dimension of democracy. We understand very well the importance of justice, and the freedoms that different democracies are organised around, but it requires something more for democracies to work well in today’s world. Where we’re not just individuals wanting to be equal and free, but we have bonds of reciprocity with each other, and we know it’s those bonds that will help us tackle the challenges we now face and take us forward. 

Solidarity has to be rebuilt into how we practise democracy, how societies are governed, and how we respect each other in our lives.

This is an abridged version of a speech by President Tharman Shanmugaratnam, in delivering the inaugural JY Pillay Lecture on Governance organised by the Singapore University of Social Sciences on 27 November 2024.