SMRT Strike - Populist Politics

Long before the SMRT strike, I started noticing Singapore-based PRC citizens on Sina Weibo commenting and mocking our political scene as moving increasingly towards populism (民粹主义), especially when the government introduced measures that they believed harmed their ability to exploit Singapore's liberal immigration policies.

Now that all the major opposition parties have stated their positions on the strike, we can see that the PRC immigrants and migrant workers have correctly read our political situation and that the strike instigators have managed to manipulate Singaporean public opinion to side with them to a large extent.

The fact that the WP, NSP and SDP leaderships have all failed to distinguish between the need to uphold the rule of law and the perceived unequal treatment of the PRC drivers but have conflated the two to undermine regard for our laws shows this trend towards greater populism.

Can we trust any of the major political parties to support unpopular policies if they prove necessary, especially in the next decade of disturbances and crisis?

Why We Need Manufacturing and Economic Diversity

This is a follow-up to my earlier critique of Tan Jee Say's economic blueprint, specifically dealing with the issue of having a manufacturing sector in the economy. Here I offer up some points for consideration as to why a service-only economy is not the way to go.

Resilience

Without a manufacturing sector, we will lose the knowledge of how to make things, and this will make us more dependent on trade. In times of peace and prosperity, this may not be a bad thing, as we seek to maximise the Ricardian benefits of trade. However, I don't believe we are in such times. In fact, quite the opposite: I believe that we are moving into a time of great uncertainty, conflict and war.

That having manufacturing improves a country's resilience was amply brought home to me when I saw factories in Japan cranking out essential items to support the victims of the earthquake and tsunami in Sendai.

Imagine what would happen if Singapore is hit with a large-scale disaster and we have to wait for outsiders to send us materiel needed for life support because we have neither knowledge nor industrial capacity to make them.

Peak Oil

When the effects of peak oil (and relative energy scarcity) becomes widely felt, there will likely be a widespread collapse of trade, tourism and other services, since the growth and sustenance of these are highly-dependent on the availability of cheap fossil fuels.

What do you think will happen to demand for healthcare and education (2 sectors favoured by Tan Jee Say) when the world struggles to cope with energy scarcity? When energy and food consumes more and more of people's incomes around the world, what do you think will happen to the amount of money left over for discretionary items such as vacations and financial services?

If we have only a service economy, this means that the impact of such a collapse will hit us disproportionately. A more diversified economy will allow us to work through the transition period while switching over the more sustainable forms of energy.

Income Inequality

My reading of Tan Jee Say's economic vision is that he desires to see a reduction in income inequality in Singapore. While this is definitely laudable, trying to achieve this outcome via a service economy is the wrong way to go. To take the closest comparable example, we see that income inequality in Hong Kong is higher than in Singapore, and it is largely a service economy.

Besides this, the evidence from the last century of economic development suggests that under the current global economic regime, a service economy almost always evolve into a FIRE (finance, insurance and real estate) economy. We can see this in places like the US, UK and Hong Kong. Such an economy invariably rewards speculation and punishes activities with long gestation periods, such an entrepreneurship. When speculation is rewarded over hard work, inequality always worsen because most people do not have the means or wherewithal to engage in those speculative activities such as trading futures or flipping condos. It also makes the economy more prone to boom-and-bust cycles.

On the other hand, economies where there is a healthy respect for manufacturing, such as Germany and the Scandinavian countries, appear to be less prone to speculative bubbles in recent years.

With regard to the argument that Singapore's manufacturing depends on cheap foreign labour in order to survive, and thus have a negative impact on income distribution, I would argue that the same can be said of our service economy, as evidenced by the legions of PRCs and Filipinos in many service outlets. In my view, this has to do with immigration policy rather than industrial policy.

As the government runs out of ideas on how to grow the economy, it has tried the brute force method of increasing factor inputs, which means ever greater manpower and capital are needed. And given that we don't have enough people, the obvious thing to do is to import them from abroad. If we reverse this policy and take the longer, tougher road of growth via productivity improvement, then this wage suppression factor would disappear, irrespective of whether we have a manufacturing sector or not.

Thoughts on the Budget

Having listened to the Budget Speech in its entirety over the radio yesterday, I came away with the feeling that there was very little new thinking in it, apart from what I believe is a structural shift towards greater welfare spending, the latter being an acknowledgement of the inevitable reality of our aging population, the magnitude of which most Singaporeans seem to have yet to grasp.  The government appears to be giving what the people wants - more welfare.

While there were targeted measures to help the poorer segments of the population cope with inflation, nothing was done to address the fundamental causes such as the rapid growth in M3, reliance on real estate speculation to create the illusion of wealth and the impact of such speculation on rentals and other overhead costs for businesses.  Furthermore, I could not find anything in the Budget that was aimed at preparing the country for the energy transition that will be coming our way within the coming decade.  But on this point, I am less disappointed since the awareness of an energy crisis is not mainstream.

SDP's so-called Shadow Budget

Notwithstanding the above, I also found the SDP's attempt at gaining credibility rather amusing.  Based on what I saw on my Facebook news feed, SDP supporters were busy hailing its budget proposal as a breakthrough in thinking.  There were even claims that it must have caused considerable distress to and panic in the PAP government.  So I went to the SDP website to have a look, and came away thinking that SDP supporters must have been drinking too much of their own Kool-Aid, just as they have accused government supporters of the same.

The idea that “[o]ur re-prioritized spending is to benefit the people rather than the PAP” is nothing more than the stale idea of welfarism that has been practised in the West for the past 60 years.  There was absolutely nothing original in the SDP's shadow budget.

As much as the SDP harps on about the tyranny of the PAP government and how it will offer freedom, the fact that it has proposed a budget similar in size to the government's last budget show that the party has no understanding of the concept of freedom, since it feels that the need to maintain the power to allocate the people's wealth as it feels fit.

The idea of bio-fuels as an alternative industry shows that the SDP's energy literacy is very low.  If it had done a simple search on websites like theoildrum.com, it would have discovered that bio-fuels is a total waste of time.

Furthermore, its proposal to cut defence spending shows that its geopolitical sense is very poor, unable to see beyond the pleasant rhetoric of the diplomatic pronouncements of countries in our neighbourhood to discover all the undercurrents in foreign relations.

Paying you with your own money

The other irony in all these is that while the critics of the PAP government accuse it of using an 'election budget' to buy votes, opposition parties such as the SDP are basically doing the same thing with their emphasis on greater social welfare spending.  They should perhaps read 'The Law' by Frederic Bastiat to see the beam in their own eyes, rather than harping on the speck in the PAP's.

If you are interested in learning how politicians of all stripes strive to bribe you with your own money, I'd suggest reading this article: The Sad Road to Socialism.

Beware of politicians bearing gifts, especially dumb ones.  Otherwise, regardless of how much reserves we have, we will be voting ourselves into national bankruptcy in our love for welfare handouts.