Saturday, 27 October 2012

When market values rule society

By Willie Cheng, Published The Straits Times, 26 Oct 2012

FORTY years ago, Mr S. Rajaratnam, one of modern Singapore's founding fathers, warned against the "moneytheism" trend of the day. Singaporeans, he said, should not become "a people who know the price of everything and the value of nothing".

Some would say that his concern is still relevant today, if not more so.

If Mr Rajaratnam were alive today, he might remark on the extent to which we have placed a price tag on everything in sight:
- Having a baby. Each baby born can result in a cash bonus of between $4,000 and $6,000, plus matching contributions to the child's savings account of up to $12,000. 
- Citizenship. Singapore citizenship can be accelerated for wealthy and talented foreigners. For example, an entrepreneur with a proven three-year business track record and an investment of at least $2.5 million can apply for immediate permanent residency with citizenship after two years. 
- Sports wins and losses. Singapore athletes stand to receive cash awards of between $5,000 and $1 million for winning medals at international events such as the Asian Games and Olympics. Conversely, the S-League will fine the last two football teams $30,000 and $50,000 for finishing at the bottom of the table. 
- Right to own a car. Certificates of Entitlement (COEs) to own a motor vehicle for 10 years are auctioned twice a month. The most recent winning bids for COEs for cars ranged between $71,000 and $87,000. 
- Queue places. Those who can afford it can get around the first-come-first-served system of long queues for the latest gadgets, property launches, et cetera, by paying others to queue for them. Some attractions such as Universal Studios have "express queues" which have shorter waiting lines for higher-priced tickets.
The number of monetised items adds up when you start listing the various kinds of financial inducements (fees, levies, penalties and rewards) that government agencies, private companies and even social sector organisations have created to influence the behaviour of citizens, employers, employees, customers, suppliers, volunteers, and donors. In other words, just about anyone.

The triumph of the market

MONETISATION is, however, only part of a broader trend of marketisation in which the principles, practices and values of the free market system are being adopted in what traditionally were non- market areas.

A core market principle, for example, is competition. Thus, we now have competition in public health care (health-care clusters), education (school rankings, then banding), public transport (multiple bus and rail operators) and even the social sector (sales pitches for grants and other contests).

Marketisation is most evident in the public sector in two instances. The first is when functions which typically could be provided by the state (for example, kidney dialysis and special needs education) are devolved to non-state players. The second is when state-run enterprises such as telecommunication, utilities, airlines and national lottery are divested to the private sector in the way Singapore has done over the last two decades.

Marketisation is also increasingly evident in the social sector.

We have the rising trend of social enterprises (hybrid organisations with business and social missions), impact investing (investing in social enterprises and inclusive businesses) and venture philanthropy (applying venture capital approaches to philanthropy).

There is no doubt we operate in a market economy, and there are merits in the market, including efficiency. But should all aspects of society be subjected to the market? This, in fact, is the subject of a recent book by Professor Michael Sandel of Harvard University.

Prof Sandel believes that, over the last three decades, we have "drifted from having a market economy to being a market society". He defines a market society as "a place where everything is up for sale (and) where market values govern every sphere of life".

The morality of markets

BUT then, just what is wrong with markets and putting up everything for sale? After all, the conventional wisdom is that the market is the most efficient way to allocate scarce resources?

Prof Sandel points out two moral concerns of markets: inequality and corruption.

The first concern rests on the unfairness and inequalities that arise when all types of goods are commodified and money becomes the necessary, sometimes the only, means to obtain these items.

He argues that when money can buy more and more - including political influence, improved health care and better education - then, having money matters more and more. The consequence is that the poor will be systematically disadvantaged and marginalised in the new market places.

For example, in an education system where outside tuition is expected by teachers and where lessons are delivered through computers, those from poor families without the means and time to afford tuition or home computers will be disadvantaged.

Increasing inequality will lead to a divided society. When we have separate, shorter lines for those who can afford them, the affluent and those of lesser means will live increasingly separate lives. The class-mixing institutions and public spaces that forge a sense of common experience and shared citizenship are eroded. The result is a more materialistic class-based society.

Prof Sandel's second concern is the corruption of social values when market norms displace valuable non-market behaviour.

Contrary to what some economists maintain, he argues that markets are not morally neutral. Turning certain goods into commodities can corrupt the very value of those goods. For example, when parents and schools give monetary rewards for academic results or good character, children may see learning or good behaviour as a service that demands remuneration, rather than something that is intrinsically valuable.

Prof Sandel believes that policymakers will discourage altruistic social values if they leave everything to market forces. The moral imperative for doing "the right thing" will be lost. For example, if carbon trading is implemented, a country or company may feel entitled to pollute the atmosphere with more carbon once it purchases the pollution permit.

Singapore: market society?

THE financial success of our market society is without question. Whether measured in gross domestic product per capita, proportion of millionaires, or any of the slew of economic-related key performance indicators, Singapore is usually among the top, if not at the very top.

But are we also - using the terminology of the market - paying too high a price for this success?

Income inequality has risen, while social mobility has declined over the years. We have the dubious distinction of having one of the biggest gaps between the rich and poor whether measured by the Gini coefficient, or by the ratio of income between top and bottom deciles. Thus, there have been calls for, and a policy shift towards, "inclusive" growth to better focus on more equitable distribution of income and levelling up of lower-income workers.

The devaluation of social values is harder to measure. Certainly, the recent emergence of the Nimby (not-in-my-backyard) syndrome, our vaunted kiasu trait and the long-held Singaporean aspiration towards the 5Cs (cash, car, credit card, condominium and country club) are more aligned with the market values of self-interest, survival of the fittest and utilitarianism.

The recent debate on the disparity of monetary rewards for Paralympians versus Olympians shows our obsession with the economic aspects of life as opposed to, in this case, valuing the innate character building and community bonding aspects of sports.

There is a silver lining in the cloud though.

First, the world at large is pushing back against the forces of excessive capitalism. The increasing support for the sustainability agenda, higher forms of corporate social responsibility and impact investing are manifestations of the emergence of a more compassionate form of capitalism.

And Singapore is taking notice. Pockets of the economy and society are moving in that direction.

While our volunteerism and philanthropy rates lag significantly behind the West, they are, nevertheless, rising.

A recent OCBC Bank survey showed that a new set of 5Cs is emerging: control, confidence, community, career and "can-do".

There is increasing talk of a national happiness index, not just GDP, as a measure of progress. In the first citizens' dialogue of Our Singapore Conversation, many expressed a desire to be No. 1 in happiness. (Yes, by wanting to be No. 1, we remain stubbornly competitive - a market trait.)

Reversals of marketisation- based policies have begun. The recent educational reforms include the removal of banding for secondary schools, and for schools and examinations not to be run on the basis that students will have tuition. In explaining the changes, Education Minister Heng Swee Keat said: "Extreme meritocracy and competition can lead to a winner-take-all society, with the winners thinking little of others."

We should ask ourselves where markets do and do not belong. We should ask where market-based approaches and values are not suitable from a national and social standpoint.

We should ask hard questions like whether natural monopolies (such as mass public transport and telecoms infrastructure), or merit goods (such as pre-school education and preventive health care) or morally hazardous activities (such as gambling) should be owned and managed by the state instead of being run by private operators, most of which are focused on profit maximisation.

We should ask harder questions like whether market-driven values such as "individual responsibility" need to be tempered, in this case, in favour of those who do not have the resources to exercise the individual responsibility. This will lean towards greater welfare for the lower-income.

Yes, we have gone far down the road of market-based thinking as the default in solving everyday problems. Like the proverbial frog in a pot of water that slowly warms up to boiling point, we have allowed market forms and norms to progressively creep up on us over the last few decades.

But it is not too late to stop ourselves from completely selling our collective soul to the market.

The writer is a former managing partner at management and technology consulting firm Accenture. After a career in the market economy, he now sits on the boards of several commercial and non-profit organisations, and is the author of Doing Good Well.

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