[9mm_fan]

Remember Obama's "Yes, we can" speech. In Singapore context, it is more appropriate to have a "Why we can't..." speech.

Two scores and seven years ago, our forefathers had nationhood thrust upon them. Little in the kitty, no oil in the ground and no gold in our vaults, we had only people with working hands and an island entrepot economy sustained carried on the backs of coolies. This was the humble beginnings of our nation from which our grand metropolis emerged.

Today Singapore is the wealthiest nation on earth....on paper. An average income that surpass Switzerland and per capita wealth that puts the Germans to shame. In just over 4 decades we went from living in wooden attap dwelling to million dollar homes. From worrying about food to worrying about obesity. From vacations in Malaysia to vacations in Europe. Singaporeans drive the most expensive cars in the world. Splurge on the most expensive wines, handbags and shoes - the Sauvignon Blancs, the Louis Vuittons, the Ferragamos. All this material wealth wrought by our worship of the capitalism. Capitalism has delivered, to some, the Singapore Dream. This dream in its most extreme form - a home in Sentosa Cove, a couple of Ferraris, children in private schools then Ivy League universities. We also have the highest paid leaders in the world.

Along side this vast wealth, among countries in the developed world we see the oldest working cleaners, the lowest paid bus drivers, the lowest paid kindergarten teachers, the lowest paid cashiers and lowest paid factory workers. Its like 2 parallel universe. So is it true our cleaners, bus drivers and cashiers are the least productive in the developed world that is why they are paid so little? Why is it these people deserve so little for doing the same jobs as their counterparts and our leaders are paid triple their counter-parts in other developed countries for doing exactly the same job.

I want to spend some time to explain to you "why we can't" pay these Singaporeans more and our leaders and the rich less under our current economic system.
This is about "why we can't...."

Our wealth is build and always been build on the back of labor that is cheap. Be it the 70s when we started attracting investments from Japan,USA and UK, our main selling point is hardworking people willing to accept low pay. How else do we attract capital?
In the 1980s, the National Wage council pushed wages up too quickly, we immediately see a repercussion - a recession due to loss of competitiveness. In the 90s, Singapore flew on the back of the electronic boom. Wages rose. China emerged as a cheap labor competitor. In order to continue attracting, we started opening the floodgates to foreign workers so that capital will still keep coming.

The heart of this model is dependence on foreign capital as driver of growth. Therefore the need to keep cost of labor low to keep it coming. But there is a clear conflict when China became part of the global eco-system. In order to grow, we have to keep labor so cheap, that growth no longer benefits a large section of the labor force whose wages became stagnant. The Singapore economy and society became split as a result of these changes - those lodge up in the hierarchy benefiting from the capital inflows and profits generated by exploiting this cheap labor. I say exploit because labor rules became relaxed Singapore workers are easy to fire, easy to retrench, no minimum pay protection, no pension, no medical benefits, no union....So the Singapore society became split between high and low income groups, rich and poor, labor and higher management. The PAP style policies to keep growing by importing labor is like a wedge driving the society apart in the center. Those who benefited from the influx hence embrace foreigners and those who suffered from it - now labelled as negative, xenophobic people by the leadership - further driving apart our society apart. The strategy now is to force this group to accept their suffering and their disadvantaged position.

This whole system is unsustainable, just like the slave economies of Confederate states in old America. When there are 400,000 workers in Singapore cannot make enough wages to support themselves and their families and depend on state Workfare to survive, something is wrong...very wrong. Today there is a band-aid of wealth transfer + workfare costing us $8B per year in social spending. This number will grow as the income gap grows, cost of living rises, and the need for social spending rises. There is nothing in our model - now made worse by dependency on foreign labor- that will lead to a good outcome. If the income gap keep growing, the social spending will rise because these workers cannot make enough when they work and they can't make enough to retire. Like one PAP MP once said these lower paid less educated workers are not going to just die off and solve the problem.

Our current $3B budget surplus will disappear and we will have to eat our reserves to keep going or raise taxes. Like Obama vs Romney hard choices will have to be made. But one thing you cannot do in a system where voting is still used to select leaders is to cut the minimal type of social spending in Singapore. If the govt did not give out Workfare, 400000 workers will not make enough to live - what do you think will happen at the ballot box?

In summary we have an economic system dependent on cheap labor i.e. low wages, this generates the need to raise our social spending, which in turn leads to a shift in our fiscal position from surplus to deficit. It is also an unequal system where there are too many working for low wages and a small number positioned high up in the wealth ladder creating significant advantages for their next generation. It has already destroyed our so-called meritocracy. Wealth transfers + social spending will eventually put us in fiscal dilemma - these should be done as a temporary stop gap measure so that we can find a way out.

How do we break this cycle -> high income gap--> Need for more social spending--> need for more foreign investments---> need more cheap labor---> even higher income gap. The model is generating very bad outcomes for a growing number of wage earners....a rising burden for the state...a social divide that is increasing, The whole sustainability of the system is in question. There is also a falling fertility rate to contend with. This vicious cycle also means the financial outcomes for a growing number of Singaporeans will worsen - unable to retire, shrinking middleclass, worries of medical costs, worries about cost of living. The social spending merely prevent families from drowning in hopeless poverty putting their heads just above water to take a breath.

The PAP solution to all this IMPORT MORE WORKERS. Look at the cycle...importing more workers is part of the vicious cycle. ..IT WILL NEVER LEAD TO BROAD PROSPERITY...only maintain the advantages of those who are today wealthy.

There are a few ways to break the cycle:

1. Stop importing more foreigners - live with the current size of workforce. No other country needs to expand workforce at the rate we had in the last few years.

2. Generate homegrown industry, drive domestic demand and investment to stop dependence on foreign capital.

3. Innovate, raise productivity and wages.

Unfortunately, none of the above will happen as long as we are in the current economic model. Businesses will pressure govt to stay on the vicious cycle and keep us in this loop. Some Singaporeans who are doing well because they are well positioned do not care about others will lobby to keep this system. Economists such as Lim Chong Yah has recommended wage shock therapy so we can go to (3) innovation, productivity...and force the wage gap to close. He idea and the basic principles of his idea was rejected by the PAP govt that tends to side businesses. But the more we enter the vicious spiral, the harder it is go get out....the more the PAP will stick to the model because problems become harder and harder to solve - they rather not solve it.

"WHY WE CAN'T" .....WE CAN TALK AND TALK...CONVERSE AND CONVERSE until the cow come home. But the boundaries preventing change is all there until we find a leader with strong and great vision to guide us out of this vicious loop. One who is daring to play the hand and not kowtow to businesses' greed for profits but steer them with the right incentives towards a more sustainable model that will result in shared prosperity and ultimately a long lasting prosperity. We cannot expect the workers to always shoulder the burdens of economic growth and companies always to reap the benefits disproportionately. This cannot continue for too long.

The reason WHY WE CAN'T is LACK OF LEADERSHIP and the COURAGE TO CHANGE.

[brraverishhh]

Excellent discourse! We need a leader who builds a nation, not just an economy.

[Lt_Apple]

Well said..err.. posted. Great points.. (i oledi highlighted businesses won't gif a damn about nationality or citizens.. only profits.. and only for themselves)

I too feel that this model is out-dated and simply sucks the life out of us citizens. The rich and wealthy now don't seem to want to change anything cos they are reaping huge profits. Change might half their profits or more even.

which is why I call the pappies "balls-less", cos they let the businesses dictate them.. businesses only care about profits.. not about nations, citizens or even the lifes of ppl. They just look at the bottomline and if there is money to be made, they will keep quiet and things remain status quo.

Change must happen, so that our lives can be less on a model that seems to reward greed, selfishness and cut-throat behaviour.

The pappies haf lost touch with what a govt needs to do for a country and it's ppl.. and instead, has been hammering away on how a citizen should carry the country. The voters and citizens elected them to help us and the country.. not to drive us to despair and misery??

Wake up Sporeans.. those 60% of u who are not employers.. are u getting the right treatment from the ppl u voted for???!!!

[doctorzlo]

for a moment me was wondering why we're having a Gettysburg Address here...

[Lillie_Steins]

Excellent discourse! We need a leader who builds a nation, not just an economy.

hmm... so we do not need a second Winsemius?

[softy54534]

We had the Singapore 21, the Remaking Singapore and now this. Same story, new round.

[Raj_Copi_Jin]

The reason why we can't is because they don't understand the purpose of government.

[Lillie_Steins]

This is a very good thread. Let's call it the SBF National Convention and I wish to be a participant in it. But first of all, we need to understand why "we can't" and then we have to determine whether we need an Albert Winsemius II.

IMHO, the key reason why "we can't" is that we cannot think out of the box and the reason why we cannot do that is that the box is too big. It is like the Great Pyramids. People wonder how the ancient Eygptian could have built something so huge. There are even speculations that aliens were involved. We are in the same situation except that the ancient Eygptians are all dead now but the one who built our box is still very much alive. That is why we are still only applying band-aids.

Now to the second issue. Do we need an Albert Winsemius II? The problem is: even if we do, where can we find one? Is there actually anyone who can fit this role? Probably not.

In these challenging times when things change so fast and old paradigms are constantly being broken, we really cannot find an expert who has gone through these and knows exactly what to do. A certain Dr Chee and an ambitious Mr Tan might think they are the real Messiahs but really nobody knows.

New times need new solutions. In these times, nobody talks about a solo hero who can save the world or an inventor who can invent a game changing, no a life-style changing, device that sets the world alight for the next 60 years, a great economic cycle. Those solutions were from another era. These are times when we talk about group effort and we also talk about networking.

We need group effort because the problem is so complex that we need to find out exactly what it is first. One man's effort can't do that, not even one woman's effort. That is why we need team work and we need networking because we have the Internet and we have cloud. We do not even need to be physically close to one another. Don't think we need a second Winsemius. No we cannot find one. But we need a leader to lead a team of experts, more than just scholars.

I shall leave what the possible solution and the expected outcome is to a later post.

[doctorzlo]

I shall leave what the possible solution and the expected outcome is to a later post.

wouldn't that leave us with this notion that: Yes, we CAN!

[Peptobismol]

wouldn't that leave us with this notion that: Yes, we CAN!

Bob the Builder...

[9mm_fan]

wouldn't that leave us with this notion that: Yes, we CAN!

Not so soon please.

[S.T.D.]

SIA used to have a slogan for their frontline staff – DARE TO CARE. I believe this was to encourage them to use their discretion to use non SOP methods to help pax in distress etc even if it meant costing the company a bit more. It wanted to empower the staff to OWN the situation and make a bad situation good.

If only our MPs and Ministers ‘dare to care’ instead of just wanting to be ‘politically correct’, it would be a great start to figure out what are our problems and finding the correct balance in our policies to bring the country forward.

The problem is one needs balls to dare to care. Do they have the balls?

[Ifroham4]

TS

I read your article and I noticed that you are writing using economics to make your point. Though I agree that there is general malaise and a deteriorating and unsustainable model is apparent I am sure that you do not understand economics. Economics is a little understood discipline and not easy to grasp.

Singapore does not have primary resources or space to do much. We therefore need foreign capital and the right industries to maximise space use. In fact without constant flow of foreign capital we would be doomed. We also struggle with home grown industries not because we are not smart but because of our size, there is little scale to throw out thousand ideas based on thousand experiments and trials for at least one meaningful one to float to the top. We therefore rely on foreign capital to do all these things. Thus the manufacturing in the early years and Pharma in later years both via foreign capital.

Productivity is certainly a major issue and as long as cheap labour is available, productivity will suffer. Agree on this.

You seem to have identified all the issues - such as growing divide between rich and poor, social cost etc but you seem to have used to used your version of alchemy economics to put all this together. For instance the slave labour of the confederate states cited makes no sense at all and there are many others.

The issue is not cheap labour, It is the overcrowding and the accompanying social costs that is the issue. Even Singapore entrepreneurs chase the region for cheap labour. The appropriate model is sustainable employment for citizens, the economic climate to allow citizens to develop in their career and skills and see a growth in real income as they become better (productivity increase) over the years. This then directly impacts the social climate in a positive way. This government appears to run out of ideas, applying bandaids such as search for cheaper labour and hold on to sunset industries.

[Raj_Copi_Jin]

TS
Blah

I see you fail to understand modern economics just slave economics. There is no overcrowding in Singapore if you look at the available land. There is enough land to accommodate even 8 million if the people can be spread evenly. Tokyo 23 wards is smaller than Singapore and you do not feel the crowd like SGP that bad and even the trains, ours are more crowded - they have 20 million. Cheap labor does not mean more output. My 500W impact drill from Bosch costs much less in its useful lifespan than 3 blangah workers and they cannot even hammer a nail as consistent and good as it. Automation and identification of our problems in a wholistic and technocratic manner is dirt cheap. I tell you we can build cost effective first world healthcare, eldercare, childcare facilities. Our corrupt goons are dumb so they cannot see it. Sometimes there have been working models that would solve the problem. Choose not to use manufacture products of high specs and reliability and let contractors go for cheap bang a rusted dented nail approach to pocket corrupt money to visit meimeis. It is easy to do it. You count from military logistics and technical logistics which you can run simulations amortize cost with consideration of modularity adjustments, you can easily buy 10-15 years. But someone wants to play inflationary financial games with zero understanding. What we have here is 286s trying to perform duo-core processor functions and pretending they are duo-cores. Overclocking a 286 only gets a burnout.

[Lillie_Steins]

Overclocking a 286 only gets a burnout.

so we need a second Winsemius after all...

[Lt_Apple]

I see you fail to understand modern economics just slave economics.

ours are more crowded - they have 20 million. Cheap labor does not mean more output.

Overclocking a 286 only gets a burnout.

[Ifroham4]

so we need a second Winsemius after all...

Doesn't matter if it's Winsemius or Keynes, as long as it's a non-Singaporean, I'll be happy. Singaporeans have no talent

[Beerinkol]

Thank you Mr. Scoobal for your response. I would like very much to address the points you brought up.

I read your article and I noticed that you are writing using economics to make your point. Though I agree that there is general malaise and a deteriorating and unsustainable model is apparent I am sure that you do not understand economics. Economics is a little understood discipline and not easy to grasp. hmm...if it is little understood, you seem to believe your understanding is better than mine?

Singapore does not have primary resources or space to do much. We therefore need foreign capital and the right industries to maximise space use. There were 2 approaches adopted by resource-scarce Asian countries. One was to develop in-country capabilities and industries, the other was to grow quickly by attracting foreign capital. S. Korea, Taiwan, Japan took the in-country approach while Singapore, Malaysia and Indonesia took the other. S. Korea today has many home grown success stories disproportionate to the countries' size and Singapore has very few.


In fact without constant flow of foreign capital we would be doomed. That is also what I wrote. But it is because of the choices we made earlier.

We also struggle with home grown industries not because we are not smart but because of our size, there is little scale to throw out thousand ideas based on thousand experiments and trials for at least one meaningful one to float to the top. You don't have to be good at everything. You're right but our homegrown names are disproportionately small relative to our GDP which means our dependency is high on foreign capital.

We therefore rely on foreign capital to do all these things. Thus the manufacturing in the early years and Pharma in later years both via foreign capital. Yes. All the way we depend on foreign capital. That was also what I said.

Productivity is certainly a major issue and as long as cheap labour is available, productivity will suffer. Agree on this. You agree on this? Of course it is common sense but common sense is not so common in the PAP these days.


You seem to have identified all the issues - such as growing divide between rich and poor, social cost etc but you seem to have used to used your version of alchemy economics to put all this together. For instance the slave labour of the confederate states cited makes no sense at all and there are many others. Hello, I used as an example of an unsustainable system. Just like them we are unsustainable. Not that we are identical but both are unsustainable. When slaves were available, they did not implement approaches to increase the yield and modernization hence using more land. An economy such as Singapore's where the income divide is so big that some simply fall into poverty when wages cannot catch up with rising cost, is also unsustainable.

The issue is not cheap labour, It is the overcrowding and the accompanying social costs that is the issue. Even Singapore entrepreneurs chase the region for cheap labour. Friend, it is cheap labor that has caused much of the world's economic problems not just Singapore. Cheaply available labor especially skilled labor meant that much of the developed world faced downward pressure on wages in last 2 decades as corporations move freely to regions with cheap labor. The only way to counter that was to raise productivity and technology innovation to compete. This was the strategy neglected by the PAP.

Of course overcrowding is a problem. That is ANOTHER problem. Even if there is no overcrowding, but wages are too low relative to cost of living, it would be a problem. There are places where this has happened e.g USA where wages for middle income has remained stagnant as cost of living rose.

The appropriate model is sustainable employment for citizens, the economic climate to allow citizens to develop in their career and skills and see a growth in real income as they become better (productivity increase) over the years. This then directly impacts the social climate in a positive way. This government appears to run out of ideas, applying bandaids such as search for cheaper labour and hold on to sunset industries. Skills upgrades and productivity is not mutually exclusive. Strangely, after you start off by saying I don't understand economics, you failed to present a case showing which part of economics I don't understand.