Tuesday 10 September 2013

When Big Government gets even bigger

By Han Fook Kwang, The Sunday Times, 8 Sep 2013

Get ready for Bigger Government.

That's the message I am getting lately from an already Big G, including from the Prime Minister at his National Day Rally.

It will mean a government intervening more often than it used to, expanding the role and scope of the state.

In the areas Mr Lee Hsien Loong touched on in his national address - housing, health care and education - expect a much more interventionist government using every available policy tool in its arsenal to plug the gaps.

He didn't quite put it that way, but the implications were clear when he assured Singaporeans that their needs would be taken care of: Don't worry, he stressed repeatedly.

When a government tells the people not to worry, it usually means it is going to become bigger and more active.

The thing though is that Singapore has been there before.

Big government, small government - it's a conundrum that many countries go through, swinging from one extreme to another.

In the early years after independence, Big G was the mantra as the country developed its economy and infrastructure to provide the people with basic needs.

No one argued with the dominant role of the state. It knew best, could pick winners for the economy and deploy resources to meet national goals.

Indeed, it would be cited as one reason for Singapore's rapid and extraordinary progress and transformation.

Then in the 1980s, the Reagan-Thatcher ideological revolution swept the world with its free market and small government approach.

Singapore leaders, either seduced by the logic of the argument or already chastened by the limits of what Big G could achieve, followed suit.

Those were the years when the free market ruled - government-owned companies were privatised, hospitals restructured, departments corporatised.

The market triumphed because it knew how to allocate resources efficiently and priced everything correctly, so the new mantra went.

Perhaps no country could apply this new religion to its public policies as vigorously and extensively as the Government here, and with as much effect.

You know what can happen in a small, tightly ruled place like Singapore - when the Government says jump, people ask: How high?

So tenders and market pricing and competitive bidding became the default mode for almost everything from certificates of entitlement to buy cars, to the pricing of Housing Board flats, and even the setting of ministerial salaries and the allocation of pre-school creches in HDB void decks.

The 2008 global financial crisis that wreaked economic havoc worldwide exposed the scandalous excesses of the market and persuaded many governments to rethink how they should regulate with a heavier hand. And so the pendulum swung back, and the conventional wisdom now is that while the market may still weave its magic, governments need to act, sometimes forcefully, in areas where the people have to be protected from its sharp edges.

So, are we back to the Bigger G of the 1960s and 1970s?

It is obviously a very different world now, and a more active state may not produce the same spectacular results.

There are at least three pitfalls that Bigger G has to watch.

First, the people's needs are more diverse and they have vastly different expectations.

A government that wants to do more in this more complex environment has to be crystal clear what its role is.

When it is not, Bigger G can end up tying itself in knots and wasting precious resources.

The executive condominium penthouse sold at $1.6 million earlier this year is as good an example of Bigger G folly as you can ever find.

What business has any government, big or small, to be providing multi-million-dollar subsidised penthouses?

But when there is a clear public need - such as in providing universal health-care insurance as announced by PM Lee - Bigger G can be a wonderful invention.

Especially in Singapore where the Government is usually able to deliver what it promises.

Second, Bigger G is good only if the underlying policy is correct and sustainable.

If it is not, it can make a bad policy worse.

When the Government decided to spend $1.1 billion to improve the bus services provided by SBS and SMRT, many questioned the policy of funding two publicly listed companies with so much taxpayers' money.

It was an example of Bigger G in action, intervening, it argued, in the commuters' interest.

But the larger question is whether Singapore's public transport needs are best served by these two companies, which are accountable to their shareholders, who expect a healthy financial return.

In other words, is the basic policy that resulted in these two companies being given the licence to provide public transport correct?

If it is not, and a more fundamental change is needed, Bigger G, with $1.1 billion in hand, may merely postpone the problem and make it more intractable in the future.

Billions more may then be needed, which would make Bigger G even bigger still.

Third, will bigger government result in a people even more dependant on the Government instead of taking matters into their own hands?

Already, with Big G involved in almost all aspects of life here, many worry about what it has done to the people's capacity to solve their own problems.

It is different in other societies such as Japan, Taiwan and South Korea, where the people are more resilient because they know they cannot depend on the government all the time.

I have argued in an earlier piece that at this stage in Singapore's development, it needs to expand its people sector so as to promote a stronger sense of community.

I hope Bigger G doesn't mean a smaller space for the other sectors.

The Government isn't unaware of these pitfalls.

PM Lee ended his speech with a note of caution that this new approach was not without risks and had produced unwanted outcomes in other countries.

He cited the case of the United States, with the highest health-care spending in the world but with results worse than in many developed countries, including Singapore.

Finland, too, had one of the most comprehensive protections for workers but is now saddled with youth unemployment of 20 per cent.

Can Singapore avoid their mistakes?

Or will it one day rediscover the limits of Bigger G?

It has happened before.

Risk of over-reliance

Already, with Big G involved in almost all aspects of life here, many worry about what it has done to the people's capacity to solve their own problems.

It is different in other societies such as Japan, Taiwan and South Korea, where the people are more resilient because they know they cannot depend on the government all the time.

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