Who will drive Asia’s animal spirits?

Faced with unprecedented shocks from the pandemic, Great-Power rivalry, wars and social protests as well disruptive tech change and very complex regulations, the Asian private sector is buffeted and prone to “liquidity preference”, not investing for the long term and in some cases, even cutting back debt. — Bloomberg

THROUGHOUT history, humanity’s creativity, innovation and daring have come from “animal spirits” leading it out of adversity. In his 1936 General Theory of Employment, Interest and Money, English economist John Maynard Keynes famously saw that psychology played a great role in economic behaviour.

“Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.” Written at the height of the 1930s Great Depression, Keynes was clear-sighted to know that the market cannot shake itself out of a downward spiral in confidence. It took “animal spirits” – the courage to act when inaction is dangerous – to get the economy out of the quagmire (defined by Keynes as a liquidity or confidence trap).