Saturday, May 10, 2008

And the pain deepens........



Life gets really interesting when the price of rice rises 50% in 2 months. Inflation has now spread to food and the rise is astronomical. If you're a rice farmer in Thailand life is sweet, but if you're a construction worker in Philippines with 5 kids to feed, you'll be on the streets demanding Arroyo's resignation. It is estimated that oil producing countries will make US$1 trillion due to higher oil prices this year, they make money just by pumping this black liquid out of the ground while the rest of us have to work in factories and offices to survive. I know many of you "tak buleh tahan" the price increases. Unfortunately it is here to stay.....many of you would like to give all the credit to our great govt for all this, but I think they are only partially responsible. If you want to understand inflation and why you're so unhappy today....read on!
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In the past, economists used to think that inflation is correlated with employment. Employers who were able to raise prices are more willing to hire workers. It was Friedman who warned that this correlation might not hold and something known as stagflation (inflation + recession) can take hold and one can have both inflation & recession at the same time. Friedman argued that workers are not dumb, they will figure out prices are on the rise and demand higher wages thus discouraging employers from hiring more workers. Friedman was vindicated in the 70s when stagflation occurred and a recession occurred at the same time of great inflation. What occurred at that time was the wage/price spiral as workers demand higher pay to protect real incomes, that in turn leads to more inflation and the economy enters a vicious cycle. The back of inflation was broken when the US Fed under Paul Volcker broke the back of inflation by hiking interest rates to astronomical levels - my late grand mother used to tell me stories about how she got more than 10% interest on her savings account those days vs 1% today. ...while Volcker managed to kill off inflation, he caused a deep recession that saw unemployment rising to levels not seen since the Great Depression. At the same time, Ronald Regean became US President and introduced "Regeanomics" which was a policy of lower taxation, supply-side economics and a laissez-faire philosophy. One aspect of Regeanomics was to help employers to stand up against unions which were seen as a socialist corruption of capitalism - over time the power of the unions were broken....the same thing happened in UK under Magaret Thatcher. At the time people could see the problems caused by unions and their demands. The elimination of labor unions also broke the wage/inflation spiral....prices can rise but don't spiral out of control. The 80s/90s saw the triumph of capitalism over socialism,.....governments delivered high growth rates, low unemployment and low rates of inflation. The formula worked .....
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Over time without strong unions, the rights of workers started to erode. By the time we got to 2008, a record number of workers are on contract terms, companies have a hire/fire policy, pension schemes were a thing of the past, working hours increased, minimal retrenchment benefits etc. Singapore to attract investments had to follow the global trends otherwise companies will just move to cheaper places. What we see today is corporate profits is now at a historic highas a % of GDP (the implications I'll explain later). Our govt can claim the credit for happily embracing global trends. Isn't low wages, high profits great for businesses? ....Great if it is sustainable - remember workers are also the end consumers. Bear with me for a few more paragraphs and the big picture will be formed.
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Today we see in the US Presidential elections is a strong demand for change by Americans. Americans see themselves "short-changed" by "new" economy. Ordinary Americans now live from paycheck to paycheck. ...my point is this, the trouble we are seeing today is not just happening in Singapore but in all over the world. However, the income inequality in America is nowhere near what we are seeing in Singapore.
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The thing about unfettered capitalism is pressures tend to build up over time. Suppose you play poker with players slightly better than yourself every weekend. Sometimes you win and sometimes you lose but in the long term your losses start to mount because the others are better than you. You stop playing when you run out of money. To keep you in the game, the other players give you some of their money out of pity and because it wouldn't be fun to play without you or they offer to change the rules so that you won't be so disadvantaged.. ...however if they refuse to do that, the players will start dropping out of the system until there is no one left to play. Successful societies learn over time that it is destabilizing to run the system without some kind of social safety net or they empower the weakest members so that they have a voice because the longer you run the system the fewer winners you get. The whole idea behind the one man one vote system is to put in place a govt that runs the place to benefit as many people as possible.
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Here in Singapore, since welfare is a dirty word...what do you think people get when they go and see the MP? Maybe the MPs can provide some words of comfort. But seriously speaking, if you're qualified, the MP will refer you to the CDC to get some help or give you a few utilities vouchers so that you can keep your lights on for a few months and have water to bathe. The idea is to give you just enough to ease your pain so that you will not to join some guy who set up shop in Toa Payoh to criticise the govt. With inflation an increasing number of people are pushed towards poverty and they find themselves getting poorer working as if not harder than they did last year.

But what would the MP tell the person if he believes his plight is due to the govt policy of allow hundreds of thousands of imported workers? If he believes the system is unjust because he works full time and cannot afford to feed his family? Or if he believes the PAP govt formulates unbalanced economic policies that favors its numerous GLCs which are run by the power elites?
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For you to remain happy, you have to believe these answers:

1. Foreign workers create jobs for you. Without them, you won't even have a job so the FT policy is a good one. Why no other countries import as many foreign workers as Singapore per capita? That is because their govts are no good, they are not as interested as the PAP in creating jobs for the people.

2. The reason why many Singaporeans cannot afford to feed their families even when they work full time is because they have not upgraded their skills sufficiently to meet the needs of the economy. After a decade of skills upgrading, the number of workers who can't feed their families has increased significantly, so what is going on? Well, the needs of this economy appear to be changing faster than the workers can upgrade their skills.

3. The GLCs (like SMRT, SingPower) need to increase their fees although they are making record profits and Singaporeans are feeling the pinch from inflation because they need higher profits to maintain their service quality. Incidentally the profits is so high for some of the GLCs which are monopolies like SingPower, they are able to takeover the Australian company Alinta for $7.4B....so some Singaporeans cannot afford to pay for their electricity but SingPower is able to make billion$ acquisitions overseas. This is something we can all be proud of because we have all struggled to contribute to the wealth of GLCs
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We have the highest income inequality among developed East Asian economies and the highest rate of inflation in 25 years. This combination means our MPs have longer queues than before during their "meet the MP" sessions. They can write letters for you and say a few words of comfort.

19 comments:

Onlooker said...

Lucky I want to be happy too but I need to point out some spoiler too so forgive my points >>
1. Foreign Workers does create jobs but with influx of people here comes with a price.
Notice how when you are told not to stockpile rice. Well, let's just say that FT workers stocking up on rice in auNTy lUCy shop(no prize if you guess they are PRC stocking bags of 25kg rice my how strong they are but wasted not doing NS).
While we are most grateful for them to so graciously create jobs ((crimes for)police ,(VD for )doctors, software( bugs/security breach in some bank for) consultants) for us.They also need to consume rice that were imported from Rice producing countries.
Thus making he availability of such items that much lesser in the stockpile.
2. Yes we upgrade our skills all the time.But you see the Employers thought that the FT are more productive at a lesser pay scale. And though I agree that some are so, Most are not.The Better ones will (NOT?) take credits for work that you have done and the (highest levied) other ones Always seem to get involved in accident while the supervisor is not there(like severing the top part of a finger)
So Upgrade all we want but when it come to prices we just cannot compare and have to accept that our (NS) contributions count as nothing.
3. Finally GLC what can I say,But that it is a good place to put our retired Civil servants to good use for the good of the semi private sector. And not to mention CPF money well spent. It is absolutely necessary for them to consume high quality seafood air flown from Hokkaido in minutes so that they do not feel stress and mismanage those Funds that they have so wisely invested in what Warren Buffet avoided.

Anonymous said...

Good article. Thanks.

Anonymous said...

Good to read, inspiring and thanks for helping to keep our ears to the ground.

Anonymous said...

The idea is to give you just enough to ease your pain so that you will not to join some guy who set up shop in Toa Payoh to criticise the govt. - Lucky

Lucky, you hit the nail on the head! PAP plans it this way - keep the people just "boleh tahan", not too poor, not too rich using taxes, levies and price fixing via its many monopolistic and near-monopolistic businesses.

This is why I think SDP's "Tak Boleh Tahan" fails to capture this insidious political strategy of PAP. Tak boleh tahan might apply to SDP being harassed and sued repeatedly by PAP but that is not what is happening in society.

PAP is too cunning to prevent tak boleh tahan to take hold on society. This why PAP has kept 20% of the populace poor and the next 20% on the borderline of povery over the years. The related statistics on this from 1988 to 2003 are available in this document, page 8 & 9, from Singapore Department of Statistics. Look at the income vs expenditure of these income groups.

Just boleh tahan makes people ever looking for a deliverer and PAP tells them only it is that one and only deliverer, Singapore being such a impossible nation to manage and succeed.

Just boleh tahan keeps people from thinking about political freedom let alone entertain any concept that they are actually the boss or master of the nation, a concept which the Chinese word "Min Zhu" for democracy actually implies.

Just boleh tahan means people look to the govt for financial help and hence feel obligated to PAP. Their obligation to PAP is further compounded by a loss of human dignity given that PAP had been drumming the message into the people that state welfare is neither a citizen's right nor a privilege.

Just boleh tahan means people are not about to rebel given that many people are quite contented with life - a good approach to life but one that PAP nevertheless exploits to its advantage.

Just boleh tahan in Singapore also means the people are kept busy trying always to make ends meet and have no time nor energy to understand the deeper and broader issues of living in Singapore - politics that is.

How then do we fight this "Boleh Tahan" strategy of PAP? The way is to create a contagious intellectual ferment among those who can see or are beginning to see through PAP's web of deception. The Internet is delivering us this historic opportunity.

PAP will of course send its minions to ridicule this happening.

You will know them by the way they talk. They will come and tell us that we are just whiners and nothing can be effected thereby.

These minions are third-rated minds and hence are not able to achieve their objectives to discredit the dissent over the Internet.

In any case, it is not "Tak Bolen Tahan" that is the political problem in Singapore at large. The problem is "Boleh Tahan Lagi" or "Still can do" that is the trick of the trade of PAP.

Anonymous said...

Thanks for a very good article Lucky.

Anonymous said...

Singaporeans deserve what they vote for.

gary teoh said...

MP can't help us much.You have to look after yourself.you die is your business, as long as every month I have $13+k in my pocket.

Anonymous said...

So now more people are going for handouts from the govt.

PAP will insist that such handouts are not state welfare and so make them as difficult to get and red-taped as possible, as humiliating as possible and as low as possible.

Lee Kuan Yew used to say "No free lunch in Singapore". But when an old and sick citizen is in need, still no free lunch? Let him starve and die, make him continue to struggle in a hawker centre collecting dishes and clean toilet?

PAP says that state welfare bankrupts the nations practising it.

I have posted a message in this blog before explaining that countries practising high level of social welfare are still doing alright if not better as a society than Singapore.

In fact they are actually are more productive in terms of GDP and HDI (Human Development Index) than those practising less state welfare. This is based on a article at Wikipedia that has not been refuted.

In reality what Lee Kuan Yew and his men want is to have their cake and eat it. They want the highest salaries in the world, yet to be free from looking after their people which is nothing but their responsibility as the govt of the day.

For this reason PAP says that looking after the needy is the responsibility of the family.

Even charities are all relegated to private institutions.

This is why despite the scandalous stories coming out of the old NKF for many years, PAP pretended nothing was amiss until the cover was blown.

Then again Ren Ci. Only recently the story about the CEO monk doing business using the organisaiton's funds was officially admitted. But the populace has heard stories like that for years.

PAP prefers to cover up such questionable practices in the charities as much as possible because otherwise it would threaten its policy of relegating to the people all responsibility of providing welfare to the needy.

I think at the end of the day no matter how hard PAP tries to shirk its govt responsibilities to the people, the buck will eventually stop there when needy people have no where to go.

Because PAP is only interested in taking in money, it gives free reins to foreign workers to come and work here. This is taking its toll on Singaporeans through depressing their wages and robbing them of jobs.

This will eventually turn full circle and end up as an application for financial help on the MP's desk. Never mind how humiliating, how red-taped, how stingily, the funds will eventually have to be given out by PAP.

If it needs be Singapore will become more and more a nation of people robbed of their disgnity and rights as citizens and going for handouts in the midst of apparent economic vibrancy and prosperity reaped off by foreign talent and PAP elites.

Please do not blame the people for their stupidity in re-electing PAP time and again. Love them if you want to serve them. Do not follow the PAP's unacceptable example.

Anonymous said...

Good article. Thanks.

Anonymous said...

A great article and a must read by all Singaporeans. Thank you.

Anonymous said...

Thanks Lucky tan.

But it still only makes us mad with the current situation. Unfortunately, what is the alternative. Which party can step up to say, hey - I have an alternative plan. Or is the PAP still the best of the worse.

Yes, given the chance to vote, I am willing to vote the opposition a vote just to shake up PAP.

I worry about this.

Anonymous said...

Then again Ren Ci. Only recently the story about the CEO monk doing business using the organisaiton's funds was officially admitted. But the populace has heard stories like that for years.


how many other religious organisations are similarly quilty of channeling public funds to businesses such as buying up properties?

looks like highest paid ceo/minister is not only the domain of the rich and powerful?

yamizi said...

Lucky,

Do you happen to be a social science lecturer or somewhere along that line in your profession in real life?

Anonymous said...

Dear Lucky;

I must admit that I know little about Economics. And being a normal human, I do possess a little reasoning power.

So, I assert that Foreign Businesses and not Foreign Workers create jobs. The Latter robs the Locals of their jobs.


Anyone who 'upgraded and or retrained him/herself' up to a certain proficiency, will find that there are many more more qualified foreigners willing to take on the same jobs at lower pays because of exchange(currencies) rates. And do not forget, Singapore is one of the smallest country in the World.


The World is facing a huge and widening income gap because businessmen are never satisfied with their profits and leaders are never satistied with their powers and remunerations. And both prey on the people.

The poorer and weaker the people, the more the businessmen and political leaders will want to make use of them to fulfill their ambitions, and to control over them(the people).

This is my superficial understandings, but pardon me, I will say, they are truths that everyone can see.

patriot.

Anonymous said...

Anon 10:32

Your point is taken. Which opposition party is capable of taking over the govt? Not a single one has dared to say this.

But this situation is the result of PAP destroying the opposition parties during 60's using the ISA.

The opposition was never the same after that.

I suggest not depending too much on the current slate of opposition to fight for the people, let alone to form a govt.

Neither should we depend on elections alone to set things right.

We should go for participative democracy.

PAP had all along denied participative democracy to us even though Goh Chok Tong kept mouthing participative democracy many years back.

Now it is not up to PAP to decide on this on the Internet. PAP can try to block political websites such as being practised by the Chinese govt.

But in the end, dissidents can just set up other websites in a matter of minutes. So it is going to be an endless wild goose chase which no govt can effectively manage.

PAP therefore pretends to be liberal by saying that it is not controlling what goes on the Internet on political issues. The truth is that PAP has no choice.

Netizens has already started the new form of participative democracy on the Internet.

PAP politicians may not directly participate in the discussions but they nevertheless have to know what's going on and be careful of the people's sentiments therein.

The control-freakish PAP chiefs are probably wringing their hands and banging their heads wondering how to control this rising tide.

If they are really wise they should forget about such an objective altogether and go instead for true democracy. There is no turning back from this as I see it.

If anything such a reformed course will in fact ensure the greater legitimacy and survivability of PAP into the future.

Anonymous said...

the way i see it, there is only one courageous and vocal group in this country. they're the ones paying a great price in an attempt to hold the electives accountable. the rests are basically cowards. cowards because they have no guts to put their money where their mouth is.

if this country wants to see changes in the house, they better change their mindset towards getting into the house.

clue: just because you don't get to vote doesn't mean you can't impact the ones that do.

start building a creditable group. establish your distinctive beliefs now and not wait and gabra later.

get at least one group in then watch whether they have more backbones than the current opposition. if not...out they go the next time.

point to note: they may segregate but the people can still congregate and influence at grassroots level....for a start at least.

otherwise, the way things are going, don't expect much changes.

Anonymous said...

PAP MPs want the people to know that they deserve their 250k pay!

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