Total Defence Day 2014

I was reminded that today is Total Defence Day by the Prime Minister's Facebook post:

With the choice of MacDonald House as the focus of the photo, I guess the PM wanted to use the recent diplomatic spat with Indonesia to remind Singaporeans of the importance of national defence.

What the PM appears to have ignored is the fact that due to the government's bad economic policies of the last 2 decades, Singaporeans' economic position have been weakened considerably.  The reckless importation of middle-class foreigners have pushed up asset prices while the unmitigated reliance on low-end foreign workers have suppressed the wages of lower-income Singaporeans.  As such, due to these policies, the economic resilience of Singaporeans have been very much weakened.

Related to the above is the negative psychological impact on Singaporeans of feeling that we are 2nd class in our own country.  As a foreign friend of mine who had recently left Singapore told me - "I came to Singapore because your government treated me better than citizens".  So here, the psychological defence of Singaporeans has been seriously undermined by the government's single-minded pursuit of GDP growth.

With so many foreigners in our midst, and many of them carrying the 'I am here because I am a talent and better than you locals" attitude, our social fabric has been damaged by the increasing conflict between natives and aliens.  As such, on the social defence front, we have also regressed.

In conclusion, if the government wants to move beyond rhetoric in the area of total defence, the first thing to do is to change its economic policies and take measures to heal the damage done to the aforementioned 3 pillars of total defence.

Hopefully, Total Defence Day 2015 can be a happier one for Singaporeans.  希望新加坡人不用再面對外人喧賓奪主的情況。

Naming a Ship After Criminals

As we learnt today, the Singapore government has protested against Indonesia's decision to name a navy ship in honour of 2 soldiers who carried out the bombing of MacDonald House in 1965.  While that's the right thing for the government to do, and many Singaporeans are understandably unhappy about the incident, the fact of the matter is that we can do nothing about it.  We are a tiny red dot and Indonesia is a very big country.

Immediately after reading this piece of news, I was reminded of how some liberal-minded Singaporeans were calling for the removal of compulsory national service many years ago when I was still in university.  The premise of that call was that we have excellent relations with our neighbouring countries, and thus we don't need a large standing army to defend ourselves against them.  Unfortunately, over the years, more Singaporeans have come to subscribe to this flawed understanding of reality, including some opposition politicians hoping to score points against the PAP.

To me, this episode is just another reminder of a fundamental geopolitical fact: When you are a small country, you WILL be bullied.  This means not only that we have to have a strong military as a means of deterrence, but also that we just have to be street-smart enough to deal with this reality, and at times, even to turn this weakness into an advantage.  Protesting verbally is only 'for show', to maintain our 'face' and a modicum of respectability.  If we want to get back at Indonesia, we have to think of something else.  All is fair in foreign policy.

All I hope for now is that there are enough cunning and savvy people running our national strategy and foreign policy.  At present, I'm not too hopeful.

My Thoughts Regarding The Recent Riot

I think that the recent riot in the Little India area is yet another piece of evidence that the government is losing its ability to manage the basics of the country effectively.  Happening not long after the spate of vandalism acts against various government websites, I feel that the effects of years of neglecting the basics has now become more visible, and are likely to get worse.

Looking at the government's reaction to the riot, I think that it is still not able to fully appreciate the severity of the crisis that we are in.  By stressing that it was an isolated incident, I feel that the Cabinet is still unwilling to take a fundamental reappraisal of its economic strategy, and will continue to pursue a fairly aggressive immigration policy in the pursuit of further economic growth.

To me, the riot ought to be a very loud and clear wake-up call that we need to re-look at how the country is being run.  Unfortunately, I think the lesson will be lost and that there may have to be more serious issues erupting to the surface before both the people and the government become fully aware of the depths of the crisis that we are in.

Private Property Market Up 20% in Next 3 Years?

Just came across a new piece reporting that real estate industry analysts publicly suggesting that despite the government's cooling measures, land prices in the private property market could go up by 20% in the next 3 years, with finished products going up between 10-15% in prices.  The crux of the argument is that Singapore's population will continue to increase.  In recent weeks, I have heard this bullish argument repeatedly from various quarters.  How strange, I thought, that people have such short memory about the public outcry against the Population White Paper published earlier this year.  I am not sure if the government can 'pull a fast one' on Singaporeans in this matter, although I would certainly be disappointed in our democracy if we can be so easily hoodwinked.

In any case, when it comes to the state of the real estate market, I don't trust the analysis of those within the industry.  They often appear to me to be no more than advertorial writers 'preaching the party line' with constantly bullish views.

Economically, I see a lot of issues in the next 2-3 years globally. I doubt Singapore can escape unscathed.  In fact, the initial salvos of the next crisis may already be upon us, with the weakening of the ASEAN economies in recent months.

On the Growth Imperative of the Population White Paper

Having completed the reading of the White Paper, I will now look at the underlying logic of the argument that Singapore needs a much larger population to sustain ourselves economically.  This logic I will term as the 'growth imperative'.

Why we need economic growth

A major theme in the White Paper is the need for continued economic growth.  The most obvious reason for this is that we need to fund the retirement of the current generation of working Singaporeans, so as to lessen the fiscal burden of the next generation of Singaporeans.

Economic growth is needed in order to generate the investment returns needed to grow our retirement savings.  This is required both at the individual and the national level.  At the individual level, growth will allow our investment portfolio to increase in value over time.  At the national level, growth is needed so that the government can afford to pay us the above-market interest rates for our CPF savings.

There is one other less savoury reason for the need for economic growth: debt.  Singaporeans are very heavily indebted, as many of us have decided to overpay for housing and private transportation.  Now before we blame the government's policies regarding this, I just want to say that even within the constraints of such policies, we have a measure of freedom of choice, and I would argue that many of us have chosen poorly.  This has resulted in many of us being enslaved to our housing and car loans.  If there is no economic growth, we would have a financial collapse.

Why the need for population growth

Now, in order to achieve economic growth, the White Paper assumes the need to grow our workforce, as can be seen in paragraph 1.7.  So the next obvious question to ask would be this: Why do we need more people to achieve economic growth?

We can answer this question by taking a looked at a simplified version of the standard growth accounting equation that is used in economics:

Economic growth = Growth in capital + Growth in labour + Productivity Growth

In the first decades after independence, the Singapore economy had undertaken massive investments in capital to allow us to move from a labour-intensive economy to a capital-intensive one.  As argued by several US academics in the mid 90s, we have passed the point of diminishing returns in this area, and so while we will undoubtedly continue to engage in capital formation, this can no longer be the main source of our growth.  

We have also tried to improve productivity for several decades with mixed results.  In fact, if we could validly apply to Singapore the analysis done by Northwestern University's Prof. Robert J. Gordon on the diminished growth prospects of the U.S. economy, then it would be arguable that growth via this channel would not be easily attainable.

So this leaves us with only growth in labour as the remaining channel for growth.  This factor has 2 parts: growth in the number of people in the workforce as well as growth in the number of hours worked.  Since there is a natural limit in the latter, the emphasis in recent years towards increasing the former.

Problems with the logic

While I can understand the economic logic of the White Paper, there appears to me to be several problems with the ideas in the plan.

Firstly, while Chapter 2 of the White Paper talks about the need for strong families, our current economic model and its growth imperative are totally incompatible with improving family life.  Making pronouncements regarding the need to 'put families first', as in paragraph 2.6, will just be empty talk unless our economic model is changed in a fundamental way.  No new ideas on how family life can be enhanced have been introduced in the White Paper.  So there is a major contradiction between the pillar about having a strong Singaporean core and the pillar about a dynamic economy.

Secondly, paragraph 3.18 talks about helping older people find work , but this will be futile if you also have a policy of allowing easy access to foreign labour, which we do now.  There will be no economic compulsion to hire older workers.  As we can tell from the incentives given by the government to employers in this area, they have not been successful in materially improving the employment chances of older people.

The 2 points aforementioned form part of the reason why I think the plan will fail to achieve its desired outcomes.

When I next have time, I will look at how increasing our population will further worsen our national vulnerability to systemic shocks and risks.

Initial Thoughts on the 2013 Population White Paper

The National Population and Talent Division of the Prime Minister's Office has published the much-anticipated White Paper on our population woes. Entitled "A Sustainable Population for a Dynamic Singapore", it has sketched out an upper bound population of 6.9 million inhabitants by 2030.  As expected, the negative reactions came fast and furious online, with the stronger reactions calling for the PAP to be replaced in the next general elections.

The plan has three central 'pillars', namely 'Maintaining a strong Singaporean core', 'Creating good opportunities for Singaporeans', and a 'High quality living environment'.

Having read the Executive Summary so far, I would like to take a 'deconstructionist' approach and point out some of the issues I see with the plan.

With regard to the first pillar, we see this:

First, Singaporeans form the core of our society and the heart of our nation. To be a strong and cohesive society, we must have a strong Singaporean core. Strong families are the bedrock of our society, ..

The problem with this is that I have been hearing rhetoric about 'strong families' since I was a child, and what I see before my eyes is the progressive decay of our families which, given wider cultural trends, shows no signs of abatement.  Apart from talking about enhancements that have already been made to the marriage and parenthood packages, I see nothing new in terms of dealing with the non-economic (cultural, religious, ethical) aspects of the decline in family life.  As a student of economics, I would say that if the government cannot move beyond looking at this issue from only an economics perspective, the Singaporean core that we will have by 2030 will be a very rotten one.

As for the second pillar, I find the following passage loaded with irony:

Second, our population and workforce must support a dynamic economy that can steadily create good jobs and opportunities to meet Singaporeans’ hopes and aspirations.

The word 'hopes' was highlighted in the original document.  The irony in the aforementioned is that it is precisely because Singaporeans have, as a people, lost hope in the future that we have stopped reproducing ourselves. A plan that aims to persuade us of the need for more people to be allowed to live on our very over-crowded island will do everything else but give us more hope in the future.

Besides this, given the government's economic track record for the past 10 years, where we have had to bring in more and more cheap labour to support our economy, where productivity has been in decline, where there had been a series of asset bubbles (which still persist), and where we've been asked to set aside our moral values to allow for casinos, I believe it is not unreasonable to ask about the extent to which we can be confident that the same set of ideas and paradigms will enable us to create a dynamic economy when the record has been so poor (especially with regard to income inequality).

The third pillar isn't too promising either.  We see the following aspirations:

We must meet the infrastructure needs of a changing population and economy in a timely and efficient way, while preserving and enhancing a green environment, so that Singapore can be a unique, bustling ‘City in a Garden’.

Given the infrastructure troubles that we've had in recent years, it has been clear to some of us for some time now that we have a systemic issue with regard to the management of our infrastructure.  To me, the problems we have experienced and will continue to experience stems from a government/GLC culture of rewarding 'thinking work' disproportionately more than 'operational work', resulting in 'keep the lights on' type of jobs being shunned and lowly regarded, often outsourced to cheaper foreigners.

Until we see a change in the work culture, not only will the aforementioned aspiration be a pipe dream, we won't even be able to keep things running properly with our current population size.

Based on the foregoing, my initial impression of the White Paper is that the plans contained therein will not be achieved unless we see radically different ideas put forth in the governance of our country.

More on this topic later after I have read more of the document.

PRC Immigrants Complain About Noise from BE Electioneering

Some PRC immigrants living in Punggol East appear to be unhappy about the noise generated from the campaigning activities of the various political parties.

We have here an example of what economists call 'free rider' behaviour, where one wants to enjoy the benefits of the system without paying a price for those benefits.

Electioneering activities are part of the democratic process in this country. Non-citizens need to accord basic respect for the process.