2econdsight

"to rescue truth from beauty and meaning from belief"

The lie behind “Not the W word, pls…We’re Singaporeans!”

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Mention welfare spending, one will be accused being a “champagne socialist” or a communist dangerous to the nation. But the PAP elites do not mouth the plainly idiotic platitude of their die-hard supporters. Theirs came straight out of the best political minds money can buy: “You want welfare….look at the debt crisis in Europe!”

That redistribution policies cause social welfare systems to fall into a debt-ridden death spiral is another of the PAP’s insidious doubletalk.  But that is not what ails Europe or rather just a part of it since only the 4 weakest out of 18 Euro members got into difficulties. The primary cause of the debt crisis is the Euro single currency’s deeply flawed fiscal and monetary framework and the equally flawed response to the crisis. Do not just take the writer’s word for it; read up on Nobel Price Laureates Paul Krugman, Joseph Stiglitz and others. (A brief outline of the Euro debt crisis in the appendix).The PAP’s doubletalk is really meant to scare off Singaporeans on social spending.

Don’t mention equitable and welfare

Singapore is pervasive of measures the PAP imposed to control the political narrative, mislead the voters and to exclude differing perspectives and solutions to economic, political and social issues. The fear is of course, that large segments of the electorate begin to vote for alternatives much more supportive of them than of the wealthy and the government elites. Indeed their interests have been steadily diverging and many wonder if familiarity with the same government is too much a price to be paid especially when their own stake in the economy is shrinking. That interest may even go as far as preferring higher taxes on the top 1-5% if it dawned upon them that the financially regressive regime of capped CPF contributions, surcharges and high GLC-induced costs favoured the wealthy.

And what are the alternatives much more supportive for the wider electorate than those that provide a more equitable outcome for them.  These would be redistributive welfare policies that lessen inequality and equitable economic policies that do not require huge influx of foreigner workers, the suppression of savings and the relentless extraction of non-tax revenues for the government. Of course in polite conversation in Michelin-starred restaurants or over a bottle of Romanee Conti, these politics cannot be mentioned by name, they are just that “kind” or that “sort” of politics.

Why the elites don’t like Welfare

But not for the PAP and their fellow-travellers in the civil service, the executive elites and the wealthy. Why not, especially “that kind of politics” did not erode the enduring strength of the Nordic countries and most members of the European Union but imagine

–          Proper wages that are not suppressed by cheap foreign labour and which raises wage share of GDP from the current abysmal 42% to the OECD average of 59%. The wealthy want that to reduce their investment returns, business owners their profits and the GLCs their returns given to the government via Temasek?

–          Higher tax for the top 1% – the wealthy and the elites will scream bloody murder. The government will chip in to say low taxes for the rich / cronies / job creators (multiple choice here) will bring prosperity for all … oops for themselves and the foreigner workers.

–          GDP growth more in line with the long term growth potential of 3.5% make do with less foreign workers and better returns on CPF and savings – the elites can see their gravy train from growth maximisation coming to an end.

“That kind of politics” also meant the government have to cope with that terrible deed – compromise. How many F-15s for how many hospital beds? Better still how much money go into defence, vanity projects and minister,s’ pay instead of social spending before the huddled masses get really pissed off? Essentially, “that kind of politics” requires the ministers for a change to actually work hard for their salaries rather than perpetually taking the easy and expedient option such as passing financial burdens to citizens and attempting to buy off the pioneer generation.

Democracy is all about voters making informed decisions from unfettered access to political choice and alternatives, uncluttered by relentless one-sided propaganda and free from repressive measures. The suppression of “that kind of politics” directly results in poor social spending and unequal economic outcomes for voters. The wealthy to whom the highly remunerated ministers and civil servants belong, only want a fig leaf democracy that keeps the rest in their place. The battle for welfare and equitable society is the battle for real democracy.

 

Chris K

* Chris K holds a senior position in a global financial centre bigger than Singapore. He writes mostly on economic and financial matters to highlight misconceptions of economic policy in Singapore.

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Addendum:
Accumulation of wealth at the top up to a point and we are well past that point, is not conducive. Afterall how much can a few wealthy spend since they have everything they wanted. Money in the hands of the poor and the middle class increases consumption which drives GDP and there are are more poor and middle class than the top 1-5%. Why has there been such a tepid global demand in the past few years? Look no further than accumulation of wealth at the top tier.  It is again a PAP induced fallacy to say that social welfare is just sucking up money – no, that money has to be spent and as such go back into the economy.

Appendix:

The Euro single currency project was driven far more by political imperatives than economic ones. The economists have warned that there cannot be monetary union without fiscal union which provides for pooling of national budgets. However, fiscal union cannot proceed without political union, a step too far for every Euro member. In the absence of fiscal union, the members signed up to a set of fixed fiscal targets such as limiting deficit to GDP ratio to no more than 3%, a particularly idiotic requirement from a purely economics perspective. The target is too high when the economic growth is strong, too low when growth is weak. In a continent size economic region, uneven growth and economic development persists. The absence of fiscal union meant financial assistance cannot flow seamlessly from surplus countries to deficit ones. Germans in Bavaria do not mind if Bavaria’s financial resources went to assist Hamburg in the north, it is still the same country but they certainly do not want the monies going to Spain for example. All it takes is a large external shock, the Global Finance Crisis, to expose the flaws. The contraction of liquidity combined with a sharp fall in tax revenues caused significant problems for the weaker members in servicing their debt.  But the response is equally flawed. The surplus countries led by Germany imposed fiscal consolidation as the only means to resolve the problem. Locked into a system of fixed fiscal targets and fixed monetary values, this meant savage cost cutting by the deficit countries in everything from salaries to social welfare. The result is a debt deflation spiral that causes a collapse in economic growth. Ultimately the Euro crisis is about national politics not pulling together to achieve a common European good.

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