Evolution and Inflation
By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 10 July
2008, 7.45 am and 7.20 pm)
A 150 years ago this month, an idea, more radical than
Karl Marx’s theory of capitalism, was set loose onto this
It happened in July 1858, when members of the Linnean
Society met in London to hear about a new theory which has
caused more offence and trouble than any other in
I’m referring to the theory of natural selection,
which is widely attributed to Charles Darwin. Put simply, it
says that in the natural world, the fittest will survive and
will eventually evolve into new species.
Take for instance, the dinosaurs. Many believe that
sudden changes in the earth’s climate some 65 millions years
ago led to their extinction. But their story does not end
Since the 1970s, new findings point to the view that
dinosaurs were not completely wiped out. It is possible, that a
branch of the dinosaur family tree survived and evolved into
the beautiful birds we see around us.
Today the world is threatened by inflation. If it
leads to hyperinflation, which can be defined as inflation of
more than 50%, it can be as devastating to the global economy
as climate changes to dinosaurs.
I’s easy for the Singapore motorist to think that this
week’s rise in ERP rates, of up to 100 percent, is a clear case
of hyperinflation. But this is nothing compared to the 9
million percent inflation rate registered in Zimbabwe
Just after the First World War, Germany went through
one of the worst cases of hyperinflation. At its peak in 1923,
prices rose as high as 3 billion percent. That’s equivalent to
prices doubling every 49 hours.
So bad was inflation that workers were paid three
times a day. And they were given half-hour breaks to rush to
the shops with their bags of money to buy something, anything,
before the paper money they held halved in value, yet
Germans in the lower-income groups were not the only
ones who suffered. The middle class also suffered. This is
because inflation wiped out their savings. The poor were spared
this fate because they had no savings.
In the later stages of hyperinflation, people would
abandon the money economy and turn to bartering. To survive,
Germans living in cities exchanged their prized possessions
with farmers, for the basic necessities of life.
Stories were rife of farm houses stuffed with grand
pianos and elegant furniture. These were handed over by the
city dwellers, in exchange for a chicken or a dozen eggs. In
the end, the German economy collapsed.
Today’s inflation has not caused any economy to
collapse yet. But rising prices are changing our lifestyles and
the way we do business. Those big petrol-guzzling SUVs will
soon be replaced by more petrol-sipping mini cars. Like the
ancestors of birds, whether we survive or not depend on how
fast we adapt.
Certainly, in this painful process, some of us will
survive and come out looking even better. But, it will be at
the expense of others.
Charles Darwin in his book “The Origin of Species”
tells us that we tend to forget that, the beautiful birds
singing around us live on insects and seeds. They are therefore
constantly destroying other life forms. In turn, these birds,
or their nestlings, are destroyed by other beasts of
Darwin would have told us that the global economy is
no different from nature. As he wrote “all nature is