Sunday, 12 May 2013

Are Singaporeans ideological prisoners?

Singapore needs to rid itself of the false assumptions that underpinned the Reagan-Thatcher revolution
By Kishore Mahbubani, Published The Straits Times, 11 May 2013

AS SINGAPORE undergoes its mighty metamorphosis and develops a new soul and character over this coming decade, one of the biggest challenges it will have to deal with is its position on the vexing and age-old question of "equality". And it would be absolutely foolish for us to believe we will arrive at a new consensus through purely internal discussions. Global trends will influence us too.

John Maynard Keynes was dead right when he said: "Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist." This is equally true of Singapore's policymakers. Hence our ideas on equality have also been affected by the conventional wisdom of the times.

Left of centre

WHEN Singapore became self- governing in 1959, the prevailing ideas of the British left influenced us. Both Dr Goh Keng Swee and Mr S. Rajaratnam had spent time in London and believed that all citizens should be given an "equal opportunity". Fortunately, to defeat the communists, the government demonstrated that it could be better at providing water pipes, health clinics, schools and public housing to improve the lives of the people at the very bottom. This deep and profound concern for the people at the very bottom reflected both an internal political imperative to "win the ground" as well as an external ideological consensus that the best societies were those that helped the poor.

In the 1960s, 1970s and, perhaps, the 1980s, Singapore was clearly left-of-centre. Fortunately, we were moderately left-of- centre and we also believed that markets were the best agency for promoting economic growth. The role of the state was to moderate excessive capitalism and to distribute the effects of economic growth. Long before the word "inclusiveness" became fashionable, Singapore believed that all citizens should be treated equally.

The best symbolic demonstration of this ideological conviction was the decision to build HDB estates in the expensive Holland Village area. To understand how unique Singapore is, ask yourselves in which other city in the region do you find public housing in the most expensive good class bungalow area. And we even built an HDB estate on very expensive reclaimed land in Marine Parade. Our attitude then was that the poor should be given an equal opportunity to live on expensive real estate.

Reagan-Thatcher revolution

THEN came the Reagan-Thatcher revolution of the 1980s. Even though that ideological revolution was sparked by the socialist excesses of the United Kingdom and Europe and the excessively high taxes in the United States, and even though Singapore did not have these socialist excesses, our minds were also influenced by this ideological revolution. Hence, our policies shifted towards right of centre. And we were not the only ones to be ideologically affected. Even the Chinese Communist Party government was affected by this global trend.

One of the most charming stories I have ever heard was told to me by Mr Montek Singh Ahluwalia, currently India's Deputy Chief Planner. In the early 1990s, a group of Chinese economists arrived in New Delhi and described the series of economic reforms that they planned to implement. When they finished, one Indian economist timidly asked: "But do you realise that if you implement these reforms, there will be rising inequality in Communist China?" The lead Chinese economist smiled broadly and replied: "We certainly hope so."

And why did this Chinese economist say this? He did so because the Reagan-Thatcher revolution had convinced economists all over the world that rising inequality would lift all boats. In short, when the rich got richer, the poor would get richer too. There can be absolutely no doubt that the bold economic reforms of then-Chinese premier Zhu Rongji and his team lifted hundreds of millions out of poverty in China. The same was equally true in India.

In its time, the Reagan-Thatcher revolution did a lot of good. Hence, it also permeated thinking in Singapore. We also believed that it was good for the rich to get richer. A symbolic demonstration of this new ideological conviction was the decision to allow a rich gated community to emerge in Sentosa. Since I know first-hand how much some of our founding fathers disapproved of the gated community in Makati, Metro Manila, it provided real proof that our convictions had changed.

No trickle-down effect

WE NOW live in a time where it is becoming increasingly clear that the Reagan-Thatcher revolution has gone too far. Ironically, despite their different systems, both the US and China face strong challenges of rising inequality. The Gini coefficients in both countries have worsened from 0.43 in 1990 to 0.47 in 2010 in the United States, and from 0.35 to 0.47 over the same period in China.

At first sight, the problem may seem worse in the US, where the top 1 per cent have seen their incomes rise by 275 per cent over the past 30 years while the incomes of the bottom 20 per cent have grown by only 18 per cent in the same period.

Yet the big advantage that the US has is that most Americans believe that they can succeed and, equally importantly, many of the extremely rich in America are also extremely generous. As of now, 105 billionaires have signed the "giving pledge" in which they promise to give away more than half their wealth during their lifetime or after their death. I honestly don't know how many Singapore or Asian billionaires have signed such a pledge.

This global trend towards rising inequality has also swept Singapore. Our Gini coefficient has also risen from 0.43 to 0.46 from 1990 to 2010. This is perfectly normal. As the most open economy in the world, we are naturally affected by global trends. In the 1990s, we believed that all Singaporeans would benefit from rising inequality. In the 2010s, we know that this has not happened. Contrary to what the proponents of trickle-down economics suggested, growth in the last decade has made Singapore more unequal.

Hence, the time has come for all Singaporean policymakers to ask themselves a simple question: how many of the assumptions in our minds are still influenced by the Reagan-Thatcher revolution? And if we find some, how do we scrub them out?

The good news is that this process has begun. We should cheer Deputy Prime Minister Tharman Shanmugaratnam's recent statement that the Cabinet is now left-of-centre. And we should cheer the Robin Hood Budget he presented this year. This is exactly where Singapore should be in this current phase of its metamorphosis.

The writer is dean of the Lee Kuan Yew School of Public Policy, National University of Singapore.

Rising inequality may not lift all boats

BEFORE 1980, it was true that when the rich got richer, the poor would get richer too. I am no macro-economist, but I believe rising inequality may not necessarily lift all boats in choppy water ("Are Singaporeans ideological prisoners?"; last Saturday).

I agree with Professor Kishore Mahbubani that Singapore needs to find a way to rid itself of false assumptions influenced by the Reagan-Thatcher revolution.

After 1980, Singapore embarked on tumultuous social and economic changes, which had unintended consequences for many Singaporeans.

First, rapid policy changes altered the parameters for "boat lifting". Our phenomenal gross domestic product growth over the last 10 years failed to trickle down to low-income groups, causing some boats to be lifted while others sank.

Second, the rapid influx of culturally different immigrants altered our social and economic landscape. Ordinary workers were caught unprepared by the sudden changes and suffered as a result.

Third, too-frequent economic restructuring to embrace an open global market has created a state where high income tax rates are replaced by indirect consumption taxes, while prices are allowed to rise freely.

Since 1990, Singaporeans have seen an unprecedented "price tsunami". Singapore is now the world's sixth most expensive city ("S'pore is world's 6th most costly city: Survey"; Feb 5). The poor have become poorer while retirement savings have been devalued by more than half.

Blue-collar workers continue to earn low wages while mid-level white-collar workers are most vulnerable to job loss due to globalisation and technological advances.

Right-of-centre policies saddled the country with one huge problem - 55 per cent of Central Provident Fund members were unable to meet the Minimum Sum of $131,000 at age 55 by 2011.

Can this year's Robin Hood Budget rid us of false assumptions fast enough to give them a lift?

Paul Chan Poh Hoi
ST Forum, 16 May 2013

What being right-of-centre really means

AS THE rich get even richer, the divergence of incomes of the rich and the poor will become more pronounced ("Are Singaporeans ideological prisoners?"; last Saturday). The adage, money grows money, is true.

Of late, platitudinous statements like "narrowing the income gap" and "levelling the playing field" have dominated discussions. What do they mean and are there viable means of achieving them?

To bridge the income chasm, one could try levying proportionately higher direct taxation on higher incomes and transfer the tax revenue to the poor. Radical socialism contrives to eliminate this chasm altogether.

However, achieving income equality in this fashion is unfair. It is anathema and inimical to most people's concepts of fairness and justice. Why should the industrious and intrepid business person be penalised for his success?

One belief espoused by the late British premier Margaret Thatcher was: One should not strengthen the weak by weakening the strong.

Behavioural economists have found that paying all workers the same wages infuriated the hardest-working staff, who were so aggrieved that their colleagues who put in less effort were getting the same amount that they eventually slacked off themselves.

The government's role in society is to try its best to provide equality of opportunity by eliminating arbitrary barriers such as a person's ascriptive social status; it is not to ensure equality of outcome or, in this instance, income. Otherwise, this would be equivalent to the Dodo Bird's verdict in Alice's Adventures In Wonderland, where everyone is a winner and all must have a prize.

Does being right-of-centre mean ignoring the plight of the disadvantaged? Far from it. In Mrs Thatcher's ideal society, everyone must fulfil the obligation to provide for oneself and, having done that, look after one's neighbour. Ideally, society should encourage and rely more on philanthropy than government-imposed measures.

Wong Mun Tat (Dr)
ST Forum, 14 May 2013

Going left-of-centre not right

I DISAGREE with Professor Kishore Mahbubani that the Reagan-Thatcher revolution has gone too far ("Are Singaporeans ideological prisoners?"; last Saturday).

In fact, it has not gone far enough.

The late United States president Ronald Reagan wanted to cut spending and taxes. Yet US spending has increased since, most of it on welfare. Federal spending under President Barack Obama has reached 25 per cent of gross domestic product, exceeding levels seen under former presidents George W. Bush and Bill Clinton.

In the case of the late British prime minister Margaret Thatcher, she had more to do to roll back the Socialist excesses of the 30 to 40 years before she came to power. After Clement Attlee was elected Premier in 1945, he set up the welfare state and nationalised major industries. Mrs Thatcher privatised most of those industries but kept the welfare state largely intact.

Today, Europe and the US are suffering from crises caused by huge, unsustainable government borrowing.

To get elected, politicians, especially those from the centre-left parties, promise freebies like generous pensions, unemployment benefits and free health care - the tripod of the welfare system.

As a result, tax rates are high. But tax revenues cannot fund such generous measures and the countries end up borrowing and becoming heavily in debt; some have even become broke.

This is the root cause of the current financial crisis, and not the Thatcher or Reagan policies that tried to curb the growth of the welfare state.

Hence, I am surprised that Prof Mahbubani wants Singapore to become a left-of-centre country, when it is the centre-left parties of Europe and the US that are most to blame for creating the current mess they are in.

Singapore has done well over the past 30 to 40 years. We have the third-highest per capita income in the world, according to the International Monetary Fund. We have low taxes and zero net government borrowing. In fact, we have huge reserves.

Our policies are broadly correct though there is room for improvement. Let us not make the same mistake as centre-left governments in the West, by creating expensive, unsustainable welfare states.
Tan Keng Soon
ST Forum, 14 May 2013

Wrong to equate public spending with debt

WHILE Mr Tan Keng Soon ("Going left-of-centre not right", Tuesday) made several points in his forceful critique of Professor Kishore Mahbubani's commentary ("Are Singaporeans ideological prisoners?"; last Saturday), they are red herrings.

First, Mr Tan conflated the concepts of "debt" and "public spending". While excessive public spending can result in harmful debt, this does not mean that public spending itself is harmful.

Prof Mahbubani's argument is that increased public spending in the right areas may be appropriate for Singapore, given our current socio-economic conditions and needs. It is precisely Mr Tan's equating of public spending with debt that Prof Mahbubani is calling out.

Second, Mr Tan readily referred to the United States and Britain in his argument against centre-left policies, but ignored successful centre-left-leaning (or even outright socialist) countries such as those in the Nordic region.

These countries have thrived despite relatively high levels of social spending and, in many ways, are better comparison cases for Singapore than the likes of the US and Britain.

Lastly, Mr Tan attributed much of the present economic problems in Europe to social spending. Academic research has shown that this is not the case.

In fact, failing states like Italy and Greece are European nations that spent the least, compared to thriving nations like Germany and those in the Nordic region. The real reason for their failure is misplaced social spending - for example, on inefficient policies to maintain lifelong employment - rather than high social spending itself.

Prof Mahbubani's illuminating article is meant to advance a progressive discourse on shaping our future national policies. Inflexible adherence to misplaced ideological beliefs is what we need to avoid.

Kenny Ching Hwee Seong
ST Forum, 16 May 2013

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