Geopolitics and GLCs

The literature on the Singapore economy has discussed the issue of GLCs and their role in the economy rather extensively.  Most of the works are somewhat polite in their criticisms of the the system.  Outside of academia, the critics have been more vocal, with certain opposition parties calling for the dismantling of the Temasek Holdings system.

Being something of an Austrian School adherent in my economic philosophy, I can see the merits of the arguments.  However, I have also felt that there was some merit in the government's arguments for the need to get involved directly in the economy, and I have also recently argued that dismantling Temasek Holdings will eventually lead Singapore down the path to de facto rule by an unelected oligarchy of business and corporate interests.  As such, I've had a somewhat uncomfortable ambivalence on the issue for a long time.

A different angle presented itself to me recently when I was reading a Stratfor article on American geopolitics.  The author postulated a positive correlation between geopolitical risks and the state involvement in the economic model.  When I read that, the proverbial light bulb in my head was turned on.

Here, I will quote the relevant passages from the article:

As discussed previously, the United States is the most capital-rich location in the world, courtesy of its large concentration of useful waterways. However, it also boasts one of the lowest demands for capital. Its waterways lessen the need for artificial infrastructure, and North America’s benign security environment frees it of the need to maintain large standing militaries on its frontiers. A high supply of capital plus a low demand for capital has allowed the government to take a relatively hands-off approach to economic planning, or, in the parlance of economists, the United States has a laissez-faire economic system. The United States is the only one of the world’s major economies to have such a “natural” system regarding the use of capital — all others must take a far more hands-on approach.

• Germany sits on the middle of the North European Plain and has no meaningful barriers separating it from the major powers to its east and west. It also has a split coastline that exposes it to different naval powers. So Germany developed a corporatist economic model that directly injects government planning into the boardroom, particularly where infrastructure is concerned.
• France has three coasts to defend in addition to its exposure to Germany. So France has a mixed economic system in which the state has primacy over private enterprise, ensuring that the central government has sufficient resources to deal with the multitude of threats. An additional outcome of what has traditionally been a threat-heavy environment is that France has been forced to develop a diversely talented intelligence apparatus. As such, France’s intelligence network regularly steals technology — even from allies — to bolster its state-affiliated companies.
• China’s heartland on the Yellow River is exposed to both the Eurasian steppe and the rugged subtropical zones of southern China, making the economic unification of the region dubious and exposing it to any power that can exercise naval domination of its shores. China captures all of its citizens’ savings to grant all its firms access to subsidized capital, in essence bribing its southern regions to be part of China.

Based on this, I feel that a reasonable argument can be made that given our vulnerable geopolitical situation, the need for state intervention is high, and possibly even evident.

And given the rising risks in our external environment, I would argue that there will be more reasons for state intervention in the coming decade.

But that's for another day.

Tan Jee Say - Agitating for Change

Some thoughts on Tan Jee Say's campaign strategy so far, obvious as it is that he is out to get votes from the anti-PAP Singaporeans.

Checks and Balances

While I am fully in favour of the concept of checks and balances against government powers (from my libertarian streak), I feel that using the Presidential Elections as a platform is highly misleading, and I am dismayed (but hardly surprised) that there are Singaporeans who have been taken in by his tricks.

The fact of the matter is that nothing in our constitutional tradition suggests that the Presidency is a source of independent power in itself capable of challenging the government.  It is as ludicrous as saying that Her Majesty Queen Elizabeth II can act as a check on the UK government.

It would appear to me that Tan Jee Say is tapping on the unhappiness of the people who voted for the opposition parties during the last GE and who felt that they had 'lost' that contest to dumber Singaporeans (I have seen opposition supporters say this of Singaporeans who voted for the PAP) who supported the PAP.

Constitutional Powers

He also challenged the Law Minister, saying that the latter's interpretation of the constitutional provisions in respect of the powers of the President may not be the only valid one.  This is an argument clearly designed to hoodwink his supporters and to give them false hopes.

From Section 9A of the Interpretation Act (enacted following the landmark UK House of Lords decision in Pepper v Hart), we know that where there are ambiguities in statute, courts can have recourse to extrinsic materials such as records of Parliamentary debates in order to help with the purposive interpretation of written provisions.  If the interpretation of the powers of the President were unclear and open to competing views, the courts would have recourse to Parliamentary debate records, which clearly show that Parliament did not intend for the President to have the powers that Tan Jee Say and his supporters think that the office possesses.  So unless the Law Minister doesn't know his stuff, which appears to be unlikely since he had been a top-notch lawyer previously, it is not likely that any legal challenge to settle the issue would resolve in favour of the view proffered by Tan Jee Say.

Disregard for the Law

It has been reported that Tan Jee Say had said that, if elected, he would not be prevented by the circumscribed role of the Presidency from raising sensitive issues with the government.  He had also said that the Presidency is what the office-holder makes of it.  For example, he suggested that the President should be involved in Singapore's economic strategies (surprise, surprise!), which even an idiot like me know is beyond the prerogatives of the Presidency.

To me, this shows that he has no respect for the Constitution.  While it is perfectly permissible for a Singapore citizen to feel that the Constitution has flaws and ought to be reformed, integrity demands that one should seek change through the right channels, and not use a position created pursuant to the Constitution to subvert it.

Moral Power

The third argument used by Tan Jee Say to justify his position is to claim that the Presidency has moral power.   I find this claim untenable given the largely ceremonial role of the office, which does not provide much opportunities for it to develop moral authority in the hearts and minds of Singaporeans.  Furthermore, there is also nothing in our constitutional tradition (e.g. through unwritten conventions) that suggests the existence of such powers, unlike other Westminster-based jurisdictions like the UK.

In summary, I find that Tan Jee Say has campaigned using a strategy designed to exploit the unhappiness of a segment of Singaporean against the government, and have acted like a politician (in the derogatory sense) in his contest for what should be an apolitical office through the liberties he had taken with truth and the deliberate creation of false impressions.

As previously suggested on this blog, I feel that he has an agenda which, although unclear to me, does not appear to be one of benign intent.

Dismantling Temasek Holdings

Tan Jee Say, in one of his many anti-PAP moves, has recently suggested that Temasek Holdings be dismantled.  This was also the SDP's position during the recent General Elections.  While standard economic arguments were offered for the idea, I wonder if the motive were not purely political.

Now, the standard economic arguments that GLCs crowd out the private sector has been repeated ad nauseum (e.g. my professors made such arguments when I took a course on the Singapore economy in graduate school) and do not require further exposition here.  Because of such crowding out, it has long been argued that the Singapore economy would be better off if GLCs were privatised so that the government does not compete with the private sector.

In theory, the arguments sound good.  In terms of improving the overall efficiency of the economy, the arguments certainly have some merits. Unfortunately, in reality, it may not work out so well and will have negative political consequences.  The reason for this is that once the government sells off the GLCs, they will most likely end up in the hands of local tycoons and MNCs (most Singapoeans are too enslaved by their mortgages to afford to bid for such assets).  What this means is that in terms of reducing the concentration of economic power, privatisation has little or no net impact, and merely results in the transfer of such power from the government into the hands of a small group of private sector players.

While the ideological purists and the die-hard anti-PAP people will say that such an arrangement is better than the current one, I think that it will mean the undermining of our democracy, as the tycoons and other big economic players will then be in a position of strength to dictate terms to the government, much like what is happening now in Hong Kong.

As much as Hongkongers like to believe that they have more freedom than Singaporeans, the reality is that policies there are mainly set for the benefit of the elite few.  Granted that in HK, people are free to demonstrate, the fact that they cannot vote their government out means that they have no effective means of forcing a change in policy directions. Contrast this to what has happened here after the recent GE.   As for the so-called freer press in HK, any adult with a working brain can figure out that the media is tightly-controlled over there by a few tycoons and that success requires the backing of the CCP back in Beijing.

In short, dismantling Temasek Holdings will not result in more economic freedom, but will lead us down the road to oligarchic rule by the unelected rich whom we cannot kick out via elections.

Having tried my hand at running a business, I can understand the frustrations of having to compete with GLCs (how do you compete against entities whose cost of capital is zero?), and so I am not suggesting that the current system is a good one.  What I am saying is that the alternative proposed is worse.

If one assumes that Tan Jee Say is an intelligent guy, then one can only wonder about his agenda for suggesting that we hand power over to oligarchs.  I am sure he is not naive enough to believe the economics he learnt in school.

Presidential Elections: Make Your Own Decision

This is in response to an article at the temasekreview.com website, telling Singaporeans to vote for Tan Jee Say, their candidate of choice, so as to deny Dr. Tony Tan a victory.

As much as the site and its fans claims to support freedom and democracy, especially through their constant criticisms of the government, they have found it fit to tell others how to vote in order to achieve their objective.

To my mind, this is just another example of the Gramscian/Alinskyite Marxist tactics that I have often detected from that site and its supporters, the classic bait-and-switch of telling the people one thing and then doing another thing.  The other more prominent example is of course spreading falsehoods, and not bothering to apologise for errors, while claiming to be more 'truthful' than the state-controlled mainstream media.  All these are part of the dialectical methods deployed in order to unsettle the people into various conflicts.

For me, respect for individual rights and freedom means not trying to tell others how to vote, but to allow them to make up their own minds.  If those who do not wish to vote for Dr. Tony Tan should split their votes amongst the other three candidates, who is temasekreview.com to disapprove of such actions and urge Singaporeans to unite behind their candidate of choice?  They may think that they are locked into some kind of warfare against the PAP, but the rest of us who are equally capable of making up our own minds may not share such sentiments.

And yes, labour unions and other civic groups should also stop endorsing Dr. Tony Tan, as they too have no right to try to influence how their members vote.

To my fellow Singaporeans - Make up your own minds.  Vote for the candidate you think can best represent your interests.

Storm in a Curry Pot

Some thoughts on the unhappiness of Singaporeans regarding the stupid decision of the Community Mediation Centre (CMC)  regarding the freedom of an Indian Singaporean family to cook curry.

• One of the mandates of the CMC is to resolve disputes between neighbours.
• While there was a dispute between the PRC family and the Indian Singaporean family in the sense of a disagreement regarding the cooking of curry, in a legal sense, there is no dispute at all.
• Cooking curry and emitting fumes with strong smell, as far as I can tell from our Common Law, does not constitute private nuisance, and so there is no tort committed here.
• Since in a legal sense there is no dispute, the CMC should have thrown out the application and not waste taxpayers' money hearing it.
• It's an affront to Singaporeans taxpayers that we are made to pay for the hearing of a case where no legal rights of the claimants have been infringed and then to arrive at a decision that is ridiculous.

I hope the CMC will apply commonsense when deciding whether to hear cases or not.

And to the PRC family, I have this to say: 入乡随俗

National Day 2011

It's been an interesting year both personally and for the country.  From where I am now, I can see even more interesting times ahead for our small, vulnerable country.  My hope is that we will be prepared for whatever comes.

In the past week, we have Dr. Tony Tan warning about a 'perfect storm' hitting the global economy, and so far he appears to be right.  We also have DPM Tharman warning about slow growth for Singapore for the next 4 years.

On the other hand, based on my observations on the ground, I see that

• Shopping malls and restaurants are still doing very brisk business.
• Property owners are still demanding very high prices despite a slowdown in the volume of transactions.
• Commercial property flipping is all the range now.
• People are paying as much for a piece of COE as gold.
• Retail investors are still seeing the latest market sell-offs as buying opportunities.

So, who has a better sense of reality?  I think I'd place my bets with the government officials this time round.  I hope my readers will be prepared for a more sombre year ahead.  Opportunities will avail themselves to those who are prepared.

In any case, here are my wishes for the country this year:

• That we will recognise and prepare for the reality of peak oil.
• That we will massively increase our gold reserves to protect against the collapse of the current global financial system, which is, in my view, a certainty.
• That we will realign our economy to prepare for zero growth, and find a niche for ourselves in the new world of resource scarcity and nationalism, and a roll-back of globalisation.

Majulah Singapura!

Gold Breaks Above US$1650

Gold has finally achieved the price target of US$1650 set by the legendary Jim Sinclair many years ago.  Based on the movements in the US stock market overnight, it appears that market players are fleeing risk and that gold has finally become a safe haven play along with silver.  Unlike the last time round, the USD has not really been a safe haven play.

While many people were relieved by the debt-ceiling agreement in the US, the fact remains that nothing has been fundamentally fixed with regard to the untenable fiscal position of the US federal government.  I expect a full blown crisis soon, probably within the next 2-3 years.  I hope to be able to write more about this issue when I have time from my work.

Over in Europe, we have more rumblings as markets now attack Italian sovereign debt.

I think we are in for a rough ride in the markets over the short-term.