Category Archives: Society
Tharman joins the King of Spain in a Royal Elephant Shoot.
Recently the Spanish King was in the news after it was discovered he had been shooting elephants in Botswana. The outrage was not sympathy for the elephants but the discovery that he was on a luxury safari in Africa so soon after expressing his sympathy for the plight of the 20% Spanish unemployed. This demonstration of royal hypocrisy caused an outrage among ordinary Spaniards who had just been told that they will have to endure years of austerity.
Our own ‘royalty’ continue to demonstrate their own brand of hypocrisy, faulty logic and poor understanding of basic economics. Our own Finance Minister Tharman was at a news conference held by the IMF on April 20 where he mentioned an involvement by the PAP government that I had warned of and indeed predicted in this blog back in December 2011.
Last December in (Self-imposed Austerity, http://sonofadud.com/stories-from-the-stairwell/self-imposed-austerity/), I ridiculed the spin of our state-controlled media that, due to the wise governance of the PAP, Singapore had fortunately avoided having austerity imposed on them by external circumstances. I pointed out that the welfare system in the Eurozone countries, even after taking the austerity medicine prescribed for them, in my view mistakenly, by the European Central Bank and Germany, was still far in excess of the meagre and begrudging safety net available to Singaporeans. Statistically we have one of the lowest public expenditures as a proportion of GDP in the developed world on education and health.
Crucially I said,
“Presently the countries that have run large current account deficits for many years, such as the US and many members of the Euro-zone, are acutely aware that the counterpart of their deficits is excessive saving in the surplus countries, mainly China but also Japan, Korea, Germany and of course Singapore. They know this prevents them from being able to achieve satisfactory levels of growth, output and employment.
The Euro-zone has already turned to China and asked the Chinese Government to buy more Euro-zone debt. This has allegedly infuriated many ordinary Chinese who complain about how poor they are compared with the average European. Their anger should be directed at their government which has held down consumption and domestic living standards to create a level of reserves far higher than necessary. This has allowed a situation in which they now find themselves held hostage to the debtor nations.
It is likely that our Government faces the same pressures from the EU to invest in bailing out the insolvent members of the Euro-zone.
Lo and behold what I predicted has now more or less come to pass. On Friday Tharman told the audience that the PAP government had agreed to contribute US$4 billion (about $5 billion) to the IMF as part of a capital-raising designed to bolster the IMF’s resources for lending to Eurozone countries requiring bail-outs.
What hypocrisy! To put it mildly, this may not be especially palatable to ordinary Singaporeans who have constantly done without the safety net available in even the poorest Euro zone countries so that Singapore can build up its reserves for a rainy day.
It is true that our money is being loaned to the IMF rather than the debtor countries themselves. The IMF was at pains to point out that the additional money was not earmarked for any particular region. This is presumably because of the sensitivity that poorer countries are being asked to bail out relatively affluent ones.
It is also true that the IMF has never defaulted on its debts. However this is because the developed countries have always provided it with additional resources when required. It cannot be said to be the equivalent of investing in US Treasuries.
Significantly the US has so far refused to pledge any money. One of the reasons for its reluctance to help is presumably because as a democracy their citizens are unlikely to view favourably providing taxpayer dollars to support the lifestyle of relatively affluent countries. Nevertheless the present round of contributions are likely to be only the beginning if Spain, Italy or even France and the Netherlands were to follow Ireland, Greece and Portugal down the road of debt restructuring accompanied by external bailouts. I find it difficult to see how this can be avoided unless these countries agree to abandon the Euro or the Germans have a change of heart.
If there do need to be fresh bailouts then presumably Singapore would have its arm twisted to make much bigger contributions. Also the increasing austerity fatigue evident among the electorate of these countries will make the next round of IMF-led bailouts much riskier.
As usual, this has all been decided and announced without telling Singaporeans first or debating it in Parliament. The first we got to hear about it was through the IMF announcement on April 20 just as the Spanish people only got to hear about their king’s elephant-hunting jaunts when he was injured.
I’m sure you are pleased to know where the money you earn is going and that whilst our poor get poorer, our lean middle class is squeezed ever harder, Europe’s Royalty continues to party!
While I am not in favour of creating a welfare culture I have always espoused safety nets, counselled against unnecessary austerity and put forward proposals for returning state assets to those who earned them by schemes such as privatising Temasek holdings with a distribution of shares to Singaporeans. I do not see why the savings squeezed out of our long-suffering citizens by an austerity diet should be used to subsidize other countries whose citizens enjoy a higher standard of living and much more generous safety net.
Elsewhere in his remarks Tharman called on debtor countries to put their public finances in order and cut deficits which he said was necessary to put them on a sustainable growth path. His prescription is unfairly asymmetric because it puts all the pain of adjustment on debtor rather than surplus countries like Singapore, China and German. He also demonstrates faulty logic falling for the ‘fallacy of composition.’ It may be sensible for an individual country to try to increase its savings rate by cutting its budget deficit. But if all countries try to do so, then the result will be a catastrophic slump in output and employment. This is the 101 of Keynesian Economics yet it has been forgotten by most politicians worldwide.
Although Tharman was not an Oxbridge scholar for his BA, I know from my conversations with him at Cambridge, where he took his MA, that he used to be a better economist than that. Therefore I would put his espousing of the conventional wisdom down to a desire not to make waves or rock the boat. Unfortunately this group think is something that all our Ministers and PAP MPs learn early on and that million dollar salaries make a difficult habit to break.
That is why we need a democratic revolution in Singapore if we are to ever get genuinely innovative thinking.
Like this:
A repugnant euphemism for rape is no way to safeguard our children
Sex with a child is rape. Whether constitutional or consensual, it is rape. The media may airbrush it by use of euphemisms such as ‘affair’ and blur the edges with talk of ‘seduction’ but it is still rape. When an affair is being conducted there will no doubt be secret trysts, maybe red roses will be sent and love texts, cute teddy bears or sexy lingerie given as gifts, who knows? But where an adult behaves in this manner with a child it is not sexy and exciting, it is predatory and it is called grooming.
Sure some of you may want to argue the boundaries. You may want to discuss variables which make the term ‘rape’ seem alarmist. How about when the age of consent is 16 and the girl is only a few months short of that and her boyfriend is just 17? Is that still rape? Now what if they have already planned their wedding? What if they have their parents’ consent? Sure we can discuss all of these variables within our communities and our society at large but right here and now we have a case which seems clear-cut as far as reporting goes.
The accused is a 38 yr old teacher and the victim was a 14-year-old girl at the time. Compare it to a case in the United States where the accused recently (December 14th) denied all charges.
Sioux Falls man pleads not guilty to rape, alcohol charges in Huron
HURON — A Huron bar owner accused of raping of a 12-year-old and two 14-year-old girls who was later also charged with serving alcohol to minors while out on bond has pleaded not guilty to all charges.
The press there has no trouble in reporting alleged rape as alleged rape.
It is bad enough when a school teacher is involved but similar to cases overseas that have tarnished the reputation of the Catholic church or Penn State University amongst others, an institution where adults are in a position of trust and authority over children has failed to act. What is happening in our schools and what exactly do they think their responsibilities are when a report of inappropriate behavior towards a child on a school trip is dealt with by a warning letter for the teacher concerned? It is difficult to believe, yet alone comprehend why the school authorities took no further action and kept quiet all this time. Again, why did it take the mother’s discovery for the teacher to get fired? Why was a more thorough investigation not conducted in 2008? Was protecting the reputation of the MOE more important than the safety of a child?
There are echoes here of the insouciant attitude of the MOE towards the student Jonathan Wong, already caned for being a Peeping Tom with an interest in young girls, who was still selected to receive a teaching scholarship. Thanks to vigilance by educational authorities in the UK his predilections were discovered and he was sentenced for downloading child pornography.
The point is that we need to have a proper screening system in place. Too often the attitude in Singapore is, “why worry? Nothing can go wrong ” . Until it does, that is and then we lock down the stable door after the horse has bolted. Or in the case of the poor girl who lost her legs on the MRT platform, literally shut the gates. The fact is paedophiles are naturally attracted towards working with children. There will always be (hopefully rare) instances and we shouldn’t take it as indicative of the teaching profession at large . But we do need to protect against it. The Press needs to stop sanitising what is a crime by any definition and the schools concerned ( not forgetting our private tuition industry ) need to take their duty of care to our children much more seriously. Whilst I have no doubt that the legal system will have no trouble dealing out an appropriate sentence the MOE still needs to get its act together. Maybe time to look at bringing in a CRB system such as that used in the UK.
Immigration is the Elephant in the Room
Elephant in the Room
Yesterday the ST gave us a centre-page spread by two vice-presidents of the Economics Society discussing the rise in inequality in Singapore. The fact that one of them is the Chief Economist at GIC and the other is Director of Planning at Resorts World Sentosa might be a clue that we are not going to hear much that is radical from them. You might want to question what insight they will be able to give you into why your ricebowl doesn’t look like your neighbour’s rice bowl. After all someone from GIC is effectively a civil servant, while Resorts World Sentosa presumably wouldn’t like attention called to the fact that the euphemistically named ‘Integrated’ Resorts probably contribute in a small way to rising inequality.
The writers state that the government’s attempt to minimise the cost of social welfare by focusing only on those in the direst need has exacerbated inequality and led to a more divisive society. I use the word “focusing” somewhat ironically as many Singaporeans would say that the aim of government welfare policy is to ensure the eligibility criteria are so tough that everyone is excluded. In fact this is the crux of the PAP theory of your ricebowl that I like to examine in these pages. However, while the authors argue that an inclusive society is better from everyone’s viewpoint and that this is best achieved by universal social programmes, they make the mistake of assuming that the government is actually interested in inclusivity and fostering social cohesion. There are many who hold by outmoded theories of Darwinian competition (though strangely this belief vanishes when it comes to politics or areas of the economy that the government dominates). MM Lee’s famous words, about Singaporeans needing a spur in their side from new immigrants if they are not to become lazy and complacent, spring to mind.
This brings me on to the most surprising – or perhaps not so surprising if you consider the government connections – aspect of their article. They discuss the near stagnation in real median incomes of those in full time employment and absolute stagnation for those in the bottom 20th percentile, even on the government’s own highly selective and possibly biased figures. The use of the base year of 2001 probably flatters what little growth there has been, as incomes declined from a high in 1998 and reached a low in 2001 after the Asian crisis and the end of the dot-com boom. The government’s figures also do not allow for changes in hours worked, which probably rose over this period. For a fuller discussion, please see my article, The Stagnant Society (http://sonofadud.com/2011/10/13/singapore-the-stagnant-society/) for a longer discussion.
However they fail to mention the elephant in the room, which is immigration policy or the lack thereof. Undoubtedly the government’s determination to allow our wages to be determined by those in the poorest economies in Asia has played a major part in depressing real wages, particularly for the lower-skilled workers. Not only was there very little restriction on foreign labour, and no restriction at all for those earning more than $2,500 a month, but there appears to have been lax enforcement of what rules there were and ample loopholes. This has been demonstrated by a recent case where an employer was jailed for putting phantom Singaporean workers on his payroll to allow him to bring in more foreign Work Permit holders.
In his book 23 Things They Don’t Tell You about Capitalism (http://www.guardian.co.uk/books/2010/aug/29/ha-joon-chang-23-things), the Cambridge development economist, Ha-Joon Chang, uses a comparison between the wages of a bus driver in Sweden and one in India. The Swedish bus driver earns around fifty times as much as the Indian bus driver yet it would be hard to say that he was fifty times as productive or skilful. In fact the Indian bus driver probably has the more stressful job or requires more skill, given the state of Indian roads and the density of traffic. The differential between the Swedish bus driver’s wage and the Indian’s is almost wholly attributable to immigration controls. Of course Swedish wages are high to start with because of their much higher productivity in the traded goods sector which is subject to competition. Employers in the non-tradeables sector then have to pay higher wages to compete for scarce labour. Without being able to bring in foreign labour they have little choice.
What we have in Singapore is a situation where the wages of those who can be replaced by cheap foreign labour have been held back or in many cases cut. Even those with higher-level skills have undoubtedly been held back by competition from third-world graduates from India, China and the Philippines, even Eastern Europe. Worryingly there are clear indications that advances in software and machine intelligence are starting to make redundant even highly-paid white-collar jobs in areas such as law and financial services that were hitherto relatively protected from foreign competition. But this government’s open door policy to foreign labour has been the main cause of rising inequality in Singapore.
Whether we have a minimum wage, or a cap on foreign labour (which amounts to the same thing), this is the Elephant in Room whose emissions are causing the inequality. Unfortunately, we risk the Elephant turning into a Raging Bull if the xenophobic ranting in cyberspace is anything to go by. What we need now, and urgently, is some serious and open and reasoned debate on the future of Singapore.
You’ll be dead before you can spend it! Singaporeans enter the 20th year of unnecessary, self -imposed austerity.
Watching the Euro-zone unravel has so far almost been like a moral fable for Singaporeans. Be honest! Who out there isn’t feeling a sense of Schadenfreude? The original Greek or Irish problem on the periphery of Europe and investor flight from European sovereign debt has spread via Spain and Portugal, to Italy and even France, Austria, the Netherlands and Finland.
This moral fable could be said to illustrate the dangers of profligate governments who have bought electoral popularity with populist policies and high levels of welfare spending and are now paying the price. As an economist I would say that the only certain moral to this story is, ‘beware the folly of entering a currency union without a fiscal union’. The rest is open to debate.
In a desperate attempt to stave off default and unlock emergency funding from the ECB and latterly the IMF, those beleaguered states have agreed to scale back their generous social welfare programmes, increase existing taxes and impose new taxes. All of this results in an externally imposed, endless round of “austerity” budgets. As I write it is not only the financial axe that is being wielded. The Euro-zone governments are discussing a solution which will essentially involve a loss of political and economic sovereignty by the countries facing insolvency. This prompted one friend to say that the Germans, by having the most competitive exchange rate when entering the Euro (coupled with a high level of productivity and skilled labour) have achieved a mastery over Europe where Hitler failed.
However, the solution being imposed on the weaker economies would be likely to condemn them to years of lost output and slow growth as compared with higher levels of output and employment in the stronger countries. Without a true political union, which is unlikely to be acceptable to the richer Euro-zone countries such as Germany, it is difficult to see how the currency union can survive longer term.
According to the popular logic of the anti-populists such policies as free health care, free education and old age pensions, lead to a lazy workforce that demands uncompetitive levels of wages. Thankfully for us our wise government has never fallen for the easy route of giving the people what they want (or need or deserve). On the contrary they have ensured that Singaporeans have been kept on an austerity diet almost since independence. Pity the struggling European economies but don’t forget to look in your own backyard when you shed a tear.
We have very little welfare spending (except the ‘ give-aways’ at election time when the government throws around money away in an untargeted manner) and one of the lowest expenditures as a proportion of GDP in the developed world on education and health. Let me repeat that. One of the lowest public expenditures as a proportion of GDP in the developed world on education and health. As we know the expenditure in terms of private money coming from your own pocket is very high indeed with exam success being directly correlated to expenditure on tuition. In Singapore we are proud to have developed a world class system of ‘hire ‘education. As well as the private financial burden we have the devastating personal social costs of long term medication and care required for old age, cancer, chronic illness or disabilities both physical and mental.
Despite the government’s harping on how this has resulted in low taxes for median-income Singaporeans compared with Europeans, these income groups are not really any better off. Europeans generally receive free health care and completely free education -which is mostly compulsory up to the age of 16. (a vital child protection safeguard). Singaporeans have to pay for medical care with Medisave and Medishield and are often forced to top this up or go without treatment because of gaps in coverage or inadequate savings. We also work up to 50% longer hours to achieve living standards on a par with the less affluent Euro-zone countries.
The end result of this scrimping and saving is familiar to all. The Government has run huge and persistent surpluses as a proportion of GDP(between 5% and10% of GDP though in 2007 it was considerably higher than this) for over twenty years. This includes revenues and receipts from current and past reserves as well as revenues from land sales and capital receipts. I believe it is misleading to exclude these revenues and receipts from the Budget. The Government further disguises its exceedingly comfortable fiscal position by using an accounting convention of subtracting both current and development expenditure from current revenues. It then adds back only (at most) 50% of the revenues from the Sovereign Wealth Funds, Temasek and GIC. Our Opposition needs to demand a proper accounting
The high levels of government saving are partly responsible for a current account surplus of over 20% of GDP. Because the MAS intervenes to prevent the Singapore $ rising too far, this is reflected in the growing holdings of official reserves and the overseas assets held by our Sovereign Wealth Funds, Temasek and GIC. It is true that Singapore has avoided a situation where the Government has had to issue foreign currency debt and in fact has a substantial net asset position (particularly when its ownership of 80% of the land is included!). The benefit is that we have avoided the problems of the Euro-zone where the deficit countries are being forced to cut back on spending and raise taxes.
But is this a good thing and does it make our government fiscally wise? In a way that is like saying that a starving man has avoided having a starvation diet imposed on him by voluntarily deciding to impose it on himself first. Some of you will be acutely aware that those holding the food supplies make sure they themselves have a very rich diet. The wonder is that whilst they earn millions of dollars for cabinet roles you agree to tighten your belts, take on extra work, move dad into the corridor, rent out your rooms and die slowly without the dignity of care and medication. If you are still feeling smug bear this in mind. Even with cutbacks the countries embracing austerity programmes will still have almost free public health and education while Singaporeans do not.
There is really no justification for the continual accumulation of reserves and government surpluses once these have reached a level sufficient to provide for a serious crisis. Our Government passed this level some years back but continues to insist on its necessity. Meanwhile CPF holders are being forced to take unilateral changes in the terms on which they can get their money back. This is despite the low returns on CPF savings having been one of the major contributors to the growth in overseas assets. The present generation of Singaporeans has been robbed, supposedly to pay for a future generation of Singaporeans, despite accelerating technological change and productivity growth making all but certain that future generations will be much richer than the present one.
The big question is will we even benefit from our enormous overseas assets? I believe we are fooling ourselves if we think that by actually saving all this money we will get to spend it or that our children will. GIC, Temasek and MAS have yet to come clean on how much it has invested in Euro-zone sovereign debt and how much it stands to lose should there be a debt default in the worst case or just a restructuring. As I said before, there is no-one in Parliament willing or able to demand an account.
Presently the countries that have run large current account deficits for many years, such as the US and many members of the Euro-zone, are acutely aware that the counterpart of their deficits is excessive saving in the surplus countries, mainly China but also Japan, Korea, Germany and of course Singapore. They know this prevents them from being able to achieve satisfactory levels of growth, output and employment. The Euro-zone has already turned to China and asked the Chinese Government to buy more Euro-zone debt. This has allegedly infuriated many ordinary Chinese who complain about how poor they are compared with the average European. Their anger should be directed at their government which has held down consumption and domestic living standards to create a level of reserves far higher than necessary. This has allowed a situation in which they now find themselves held hostage to the debtor nations. It is likely that our Government faces the same pressures from the EU to invest in bailing out the insolvent members of the Euro-zone.
It would be far better if our reserves were spent on benefiting Singaporeans in the first place rather than hijacked by political considerations. That is why I have consistently called for a reduction in our general budget surplus, measured as widely as possible, to a much lower figure, say under 1% of GDP over the course of an economic cycle. The funds could be invested in basic improvements to Singaporeans’ health and education as well as cutting taxes.
I have also called for the privatization of Temasek and GIC with the distribution of shares to Singaporeans. If they are owned directly by the people then it will be more difficult for them to be held hostage to foreign political pressures.
My response to your comment on gridlock and the understanding of the masses.
This article is written in response to a comment I received on my latest article. I thought it was important to respond at greater length than the space permitted for comments.
THE COMMENT:
Chieh Schen Tengsays:
Hi Kenneth,
The parallel you drew is timely. There are many symptoms of groupthink that can be seen from your examples, such as a stereotyped view of the enemy, (whether Woodford or Goodyear), which is one advantage for the group in getting foreigners. There also appears an unquestioned belief in the group’s morality. However, change in the Singapore situation is more difficult and need to come from the masses, which is why I am somewhat less optimistic, for several reasons. First, the masses here do not understand or do not want to understand. Second, it is always someone else’s job to do it. I am still a little optimistic because if the second is solved, the first solves itself. I am somewhat bearish in that after the tipping point is reached (which it will), instead of change, there is gridlock, and the masses get punished in a different way.
MY RESPONSE:
Good points. I agree that currently Singaporeans including those in the Opposition Party ranks are bemused or confused by the notion of democracy, transparency and accountability. The PAP know exactly what it is and that is why they go to such great lengths to hinder it or to muddy the understanding of it. When I entered into politics I said, in an interview published in Today newspaper, that my aim was to “normalise democracy.” By this I hope to address what you call ‘First ‘ in relation to the majority of Singaporeans. I also of course addressed ‘second’ by standing and by example encouraging many others to come forward for the first time. So now we have many new faces. These are the “someone else whose job it is” as you say and you are right to be optimistic.
At this moment we have 6, 7or 8? non PAP Parties broadly on the left and more or less all the same from an ideological point and then The Reform Party in the centre with a liberal ideology. To be more optimistic about the “someone else’s” in Singapore we need to see them start congregating around a set of principles or ideologies until the aims and the philosophies of the different parties are consolidated. Then the people will be more able to understand and they will have true choice.
Currently too much of Opposition politics is about personalities, egos, springing surprises and one-upmanship. The ideology of many Parties in Singapore seems to change according to who is in charge at any one time. The philosophies are not stable. The personalities involved change Parties at the drop of a hat. Not because of deep rooted ideological differences as they would in a developed democratic Nation but purely in the quest for power. Again with the single exception of The Reform Party which is unique in Singapore because it is run as democratic institution ( similar to the NGO Aware) all the Parties in Singapore, including the PAP, operate under the cadre system . Therefore those personalties who are more interested in power, media coverage or promoting their own egos rather than promoting a political ideology must game-play or wait for a weakness in an established Party. If this fails they simply leave, or start a new Party which will have a manifesto identical to the old one in every substantial detail except for the fact that they are now at the head of their own closed circle cadre. Hopefully this is merely a stage of development in our experience of political expression.
When Singaporeans can say, I’m a Socialist, Liberal, Libertarian (or whatever term we have) and therefore I will most likely support X Party because they are the Socialist Conservative or Liberal Party then we will know that we have developed a framework for democracy. We must then deal with the PAP’s mechanisms for preventing that expression from being heard. You finished your comment by surmising that true democracy will bring us gridlock and the masses will be punished rather than rewarded. This spectre of gridlock, currently much in vogue, is one of those PAP mechanisms. It is a more sophisticated mechanism than the old ones. The technique of blatantly threatening people will no longer suffice if Singapore is to keep a place on the global stage. The threat of gridlock has more in common with MM Lee’s assertion during GE 2011 that we would be daft to oust MBT. The people dutifully complied, helped by some sabotage from within the Opposition itself abetted by a Politcal Party with no specific ideology and willing to take any one on board. This very dramatically took the spotlight away from Tampines allowing the government to facilitate the resignation of the very minister they told us we would be daft to remove in a democratic manner.
The first step in normalising democracy is to get people used to the mechanical processes involved. To learn to understand by actually participating in an election so that National Elections are no longer a theoretical exercise.as they are in communist countries and military Juntas. Certainly we at RP played a major role in ensuring that every seat would be contested last GE and our first GE. It is regrettable that the Tanjong Pagar representative did not take up my offer of help including the offer of a Commissioner of Oaths. Had he done so then that team would also have entered the contest and every seat would have been contested. Never mind. By next GE every seat being contested will be a norm for General Elections in Singapore rather than an exception.
So let us now say we reach a stage where we have true Parties with clear, identifiable ideologies and a people who are habituated to the mechanisms of elections and democracy. Let us pass over for the moment the obstacles of GRCs , gerrymandering, The Newspaper and Printing Presses Act, funding obstacles, the Elections Department being in the Prime Minister’s Office , libel laws and self censorship. So despite these obstacles we reach a tipping point. You claim that you fear this will lead to gridlock and that the masses will be punished.
I can’t agree. Gridlock is the new word for Westminster style politics or democratic politics used by those who claim that it is unsuitable to a uniquely Singaporean or Asian culture . That is the whole point of my article. To say that asking uncomfortable questions and an Opposition doing what it is supposed to do will lead to gridlock or chaos is just an excuse for secretive organizations to carry on with a culture of secrecy and prevent shareholders exercising control over the management, in the case of Olympus, or the people of Singapore taking control of their destiny.
Ultimately lack of competition and accountability is a recipe for stagnation and decay. Look at the Soviet Union compared to the USA or Imperial China compared to the West. You say that the masses will get punished if we have democracy. The masses have been punished in Singapore by our government’s focus on achieving easy economic growth through the import of cheap labour and focusing on low technology rather than taking the difficult route of raising productivity. Real incomes have stagnated for the bottom 80%. It was only after we raised the issue of Singapore’s bottom of the league table productivity growth and the disastrous effects of the virtually uncontrolled flood of foreign labour on the incomes of those in the bottom 40% of the income distribution that the government claimed to be reversing course in the last election. While a strong Opposition and the need to answer tough questions may slow down the government’s ability to rush legislation through Parliament, it ensures that the policies we get have been held up to scrutiny first and we get less bad policies, of which Singaporean history offers plenty of examples. It also ensures that feedback on the effects of those policies is heard much earlier and the threat of reverses at the polls forces their reversal.
The criticisms of the US system of government which harp on about gridlock are thus wide of the mark and in fact increased scrutiny and checks on a too powerful executive are precisely what the founding fathers intended. While many in Singapore may point to the time taken to introduce new policies as a shortcoming it has prevented so far at least the quick adoption of the austerity policies that have been so harmful to the European economies.
Fortunately it appears that the tide of history is running in favour of those who favour questioning and accountability rather than secrecy with the rising number of democratic countries in Asia and the protests throughout the Arab world. Even China is not immune as evidenced by the rising tide of public anger over scandals like the high-speed trains accident. The inevitable concomitant of higher levels of education is that people will more control over their own destiny and how they are governed and will be less easy to fob off with the Culture argument. Rather than being punished, a changing political culture will at last ensure that the masses directly benefit from policies enacted in their name.
Like this:
Singapore.The Stagnant Society?
Many years ago I remember seeing a book entitled “The Stagnant Society” which was about the relative decline and low growth rate of the UK. As a result living standards rose more slowly than the more dynamic European economies. There were both economic explanations (a lack of investment) as well as the harder to quantify sociological ones (a rigid class structure which led to both a poorly equipped educational system and a general disdain for manufacturing and trade).
Forty years later Singapore seems to be in danger of falling into the same trap. The problem of relative economic stagnation for the bulk of Singaporeans is highlighted in a report by MOM published this week. (http://www.mom.gov.sg/Publications/mrsd_singaporeans_in_the_workforce.pdf )
Their figures show that real incomes for the bottom 20% of Singaporeans barely increased over the period 2001-2010 while median real incomes rose by only 1.2% p.a. All the growth occurred during the period 2006-2010 which is suspicious. I suggest that there are three reasons why income growth may look better than it in fact was:
- In 2009 the government changed the definition of full-time employment from 30 hours or more per week to 35 hours. This would have provided an immediate uplift to statistics as a section of lower-earning workers was moved from being classified as full-time to part-time employment.
- The number of residents (citizens and permanent residents) increased by 7% over the period 2006 to 2010. If the incomes of new citizens were considerably higher than the median then the median would have risen but there may have been a smaller change in the median incomes of the original Singaporeans.
- MOM use the CPIto calculate the rise in real incomes over this period. However as Secretary General of the RP I had already expressed serious doubts over whether the current method of calculating CPI accurately tracks housing costs. These take up more of the expenditure of lower and median incomes (around 25%) than they do of higher income groups (http://www.singstat.gov.sg/news/news/cpi-jul-dec2008.pdf). The Statistics Department bases its calculation of housing costs on imputed rentals. The Statistics Department’s method of calculation fails to capture the rise in mortgage servicing costs which will be driven by rising prices (HDB Resale Price Index up 70% over ten years). Nor does it capture the depreciation in HDB properties which are only 99 year leaseholds. The rental sector is very small and most Singaporeans have to buy. While rents have fallen over the last few years in line with interest rates the HDB resale price index has continued to rise strongly. Also is the fact that average flat sizes have decreased reflected in the CPI? This is an example of so-called hedonic indices which attempt to track changes in quality of the goods in the basket and reflect these. The lower income groups also spend more of their incomes on food and utilities, the costs of which have risen faster than the general index in the last few years.
The report goes on to say that median monthly income per household member among citizen headed employed households increased by 1.8% p.a. in real terms over the same period. This is a measure that MOM appears to have trotted out specially. However this has even more problems than the first measure. The number of dependents per household has been falling as a consequence of Singapore’s declining birth rate. So income per household member would rise even without any rise in median real incomes.
Even if the MOM’s statistics are accepted at face value there would appear to have been little real income growth for the majority of Singaporeans. However given the caveats above the picture is undoubtedly worse than it appears.
While I would not contend that Singapore is unique in having these problems, the fact is that we have a government which trades purely on its record for delivering the goods economically. That after all is why we are told we need to put up with the lack of personal and political freedom. The government has set itself an ambitious target of 30% median real income growth by 2020. That seems like pure pie-in-the-sky now given the state of the global economy. By 2016 I see the electorate being less forgiving than they were in 2011. Who knows? By 2016 Singaporeans may be much closer to putting a non-PAP government in office for the first time.
Harmony, Gridlock and River Crabs
The Prime Minister has of late taken to warning us that Singapore needs to get its politics right as well as its economics. He emphasised this in his National Day Rally Speech last weekend and again at The Ang Mo Kio- Hougang National day dinner. He clearly feels beleaguered these days with six Worker’s Party MPs in Parliament, a new spirit of confidence among the Singaporean voters and what he views as an unnecessarily politicised Presidential Election. With no sense of irony he urges Singaporeans to play their part in our country’s progress and warns them that Singapore is too small to afford political paralysis.
Getting the politics right is getting the economics right. Look at Communist East Berlin and how it fared compared to Democratic West Berlin despite a huge concrete wall. The PAP policies are preventing Singaporeans from playing a meaningful part in the country’s future just as that wall kept Berliners from crossing over to democracy. We are storing up dissent through the denial of basic freedoms.
Speaking at the Ang Mo Kio-Hougang National day dinner on Sunday evening he added, “And we must have harmonious political system (sic) where we make important decisions in the best interests of Singapore and Singaporeans, and keep ourselves safe in this uncertain environment.
We are too small to be able to afford impasse and gridlock, to have two sides blocking one another so you can’t move, you can’t solve problems, you can’t go ahead. We have to work together.”
The elephant in the room is that hidden behind the phrases ‘going ahead’ and ‘working together’ is the PM’s unwillingness to relinquish any control at all even though this would further progress and harmony. Even the DPM said that he welcomed opposition in Parliament. So what the PM views as an over politicised Presidential election campaign is a direct result of a pressure cooker environment that the PAP have created by denying the people an outlet. Although cyber space is the only place left to them for their voices they clearly can’t be fobbed off with stage-managed, so called interactive, websites and chats. Singaporeans have made it clear that they want debate, transparency and accountability.
In any case, “Harmonious” is often just a euphemism for conformity and control and was the Confucian ideal, the Mandate of Heaven (undermined in practice by the emperor’s exercise of absolute power without accountability), for the relationship between the Chinese emperor and his subjects. A harmonious society was the end goal for the Communist Party of China as announced by Hu Jintao at the 2005 National Peoples’ Congress. While it may have been intended to herald a new emphasis on social goals such as lessening income disparities, in practice it meant a redoubled effort at asserting control over new media and the right to freedom of expression. In fact, so much so that the pinyin for “harmonious” was often transformed by Chinese netizens into the similar word for “river crab”, slang term for internet censorship.** Perhaps when PM Lee talks about needing a harmonious political system, he is hinting at new controls on the new media to prevent what he and the PAP might define as unpatriotic elements?
It is risible that, with just six out of 87 MPs not coming from the ruling Party, the PM is already warning of gridlock and paralysis! Is the PM really saying that we need a one-party state, and no open debate on the PAP’s policies, in order for Singapore to survive, let alone grow? Far from being in a state of gridlock both arms of the US political system for example have worked together to come up with a proposal. And they were at opposite ends of the spectrum pitted against each other, so why can’t the PM openly welcome the people’s choice?
If the PM’s main emphasis is that he and his cabinet need complete control and freedom from the pressure to be responsive to the people – then perhaps they should agree to draw a lower salary more in keeping with remuneration levels in non-competitive and non-stressful environments? The old saying, “if you can’t stand the heat stay out of the kitchen” comes to mind.
Their salaries are explicitly justified by reference to what salaries are in the private sector. But in the private sector the people who earn these salaries have to face intense competition and in the case of public companies, the very public scrutiny of demanding shareholders and activist investors. As an economist I can tell you that at a time of global economic uncertainty we need more scrutiny and debate of government policy, not less.
Activist investors are dedicated to robbing management of an easy life in order to ensure that these CEOs maximise returns. And that pressure on the CEO’s keeps them accountable to the shareholders. That is how it should be under a capitalist system and is the economic justification for the high levels of financial reward. Our PM needs to be able to justify his high salary by reference to how successful he has been in raising living standards for his shareholders, the people of Singapore, not by reference to low-quality economic growth fuelled by a swelling population
If we are all going to be shareholders in Singapore Inc. then we need to make it a model of corporate governance. I have always believed that the best way to achieve this is through more competition, not less, whether that be in the economic or in the political system. Yes, Prime Minister (no pun intended) we need to get our politics and our economic right. This is why there need to be more Opposition MPs in Parliament and the government needs to face a credible threat of replacement at the next election before they will truly respond to our needs.
The solution for a harmonious society is for the Prime Minister to stop being afraid of the voice of his people. He needs to put more confidence in their common sense and in his own ability to sway public opinion without the controls and mechanism currently at his disposal. As a first step I suggest that they look at repealing the Newspaper and Printing Presses Act. Building a democratic society is building a harmonious society. Current attempts to control that and prevent it are making Singapore an outlier amongst advanced and prosperous nations.
The litmus test for the Prime Minister’s commitment to building a harmonious society would be seeing how smoothly he could work with any President chosen by the people, even though that President may have a different ideological viewpoint to his. Two heads, as they say, are better than one.
*http://www.channelnewsasia.com/stories/singaporelocalnews/view/1148283/1/.html#.TlEYrvHoVFs.facebook
**http://en.wikipedia.org/wiki/Harmonious_society
