About your landlord…

Today the Department of Statistics issued a press release* stating that the median monthly income from work among resident households had increased by 3.1% in 2010. They state the real increase as being 0.3%. Similarly median monthly income from work for employed households was reported as having risen by 5.7% in nominal terms and by 2.8% in real terms.

I would like to point out that the Consumer Price Index  (CPI) was 4.6% higher in December 2010 compared with December 2009 and that if this figure is used median monthly real  income for all resident households actually FELL by 1.5% instead of rising as claimed. Also median income for employed households only rose some 1% in real terms instead of 2.8% as claimed.

In my article on inflation I pointed out that the CPI for average and lower income households may diverge considerably because of the greater proportion of the budgets of lower income groups taken up by food, transport and housing. In Singapore’s case the high level of income inequality means that average income is considerably higher than median income and thus the CPI may be failing to track the real erosion in their purchasing power.

So median real incomes for resident households actually fell during a year in which Singapore enjoyed record-breaking growth of 14.7%.

Two hundred years ago already an economist named David Ricardo ** produced a theory where he wrote about  how increasing population pressure coupled with lack of technical progress in agriculture would lead to the increasing transfer of wealth to the owners of fixed factors of production, in particular land. This he warned would be at the expense of those who worked on the land who would suffer growing impoverishment. His theory gained much credit as indeed this turned out to be the situation in  China and India and elsewhere for several centuries before industrialisation and land reform.

This government’s policies seem to be aimed at recreating the conditions and events that prompted Ricardo’s theory. Are we in fact living through some form of Ricardian experiment in modern day Singapore. We already have the increasing population pressure he spoke of and the lack of technical progress in agriculture is,  in modern terms, our poor productivity. The only  noticeable difference is that the principal landlord is the government.

These policies need to be reversed because they are clearly not in the interests of most Singaporeans

*http://www.singstat.gov.sg/news/news/press14022011.pdf

**http://en.wikipedia.org/wiki/David_Ricardo

About kjeyaretnam

As a blogger I hope to help imagine a model for a New Asian Nation to bring about a free and fair future for Singapore. I'm a Singaporean born and bred and a Cambridge trained economist who could be broadly described as from the Keynesian school. I'm also a successful ex - hedge fund manager and a liberal opposition politician who contested the 2011 General Election with his party. After economics and politics my greatest interests are history, film and makan!

Posted on February 17, 2011, in Budget. Bookmark the permalink. 8 Comments.

  1. 1992, CPF contribution was 40% capped at $6000.
    4rm 70k
    5rm 110k
    EM 160k

    2011, CPF contribution 36% capped at $5000
    4rm 300k
    5rm 380k
    EC 650k

  2. Shouldn’t the overall CPI increase of 2.8% for the year be used to compute real terms instead?

  3. The key aspect I feel, is that we’ve ceased to be a strongly cohesive society since the 80s/90s. The problem lies in the reality that we are basically an overeducated WORKFORCE who have been crowded out by globalisation in our own small fishtank. Face it: we are increasingly mass producing quantity at the expense of Quality and it is COMPOUNDED BY INFLATION/THE COST OF LIVING which has priced us out of the market because we need high(er) wages merely to SURVIVE compared to our neighbouring countries/competition. It is no less “weakened” by a very bad habit we have of IMPORTING people we need swiftly and not nurturing the talents who remain “hidden” in our local populace. Both Excellent and average students elsewhere take FIVE years (O levels) and THREE years (A levels) to inculcate strong values and a lifelong love for learning in their would-be adults ~> not simply the rushed-through almost production-line like way we “educate” our young, and also the way we live our day in, day out lives here.

    We are too constantly sprinting in what is, a marathon. The Marathoners elsewhere in HK, Sweden, etc, succeed because their societies BUILD intellectual + business stamina, Quality products WITH quantity.
    The societal system we are currently in needs a revamp badly if we to thrive in the market. Just barely surviving and constantly importing to “make up for the shortfall” will eventually tear us apart as a people in our Home. Trust me rich landlords will liquidate their assets and skip town when price overheating worsens ~ > Profits are their main pull and with Asia opening up so dramatically in recent times….who wouldn’t?
    ……We need REFORM!

  4. Thank you so much for the information and sources. I have to say that when I wrote the above I hadn’t realised that Ricardo had already been referenced. That was back in 1972 when even an old dud like me was not yet involved in politics.

    Of course, when I say we are living in a Ricardian experiment I mean that we seem to be creating the conditions of 200 years ago that Ricardo warned against not living in the world he advocated. Goh Keng Swee is lauding Ricardo’s solutions and the free market principles of Adam Smith. It is no surprise that Goh Keng Swee held these views. It is a shame that in the subsequent 40 years ago the PAP lost sight of the original objectives.

  5. The evidence can be found in the third paragraph of Goh Keng Swee’s speech at the Mandarin Hotel on 9 Sep 1972, ‘Town and Gown’, found in The Practice of Economic Growth (Singapore: Federal, 1977 and 1995), p. 241.

    He says, “On economics, too, the third world can learn a lot from ancient teachings. I have said on several occasions that developing nations need not go beyond Adam Smith for guidance on their economic policies. Countries which have advanced somewhat, such as Singapore, can be more daring and adopt David Ricardo as their mentor. Anything later than Ricardo is of doubtful value.”

    However, it should be noted that he was possibly speaking tongue-in-cheek, as he elsewhere (‘Some Unsolved Problems of Economic Growth, ibid., pp. 63-89) mentions Arthur Lewis and Nikolai Kondratieff as laudable influences on his economic perspective.

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