Friday, July 04, 2008

ERP, Socialism,Capitalism, Crisis, Obama, Change

In my blogger page, I have about 15 half written articles on various topics which I didn't finish because I couldn't get to a sensible conclusion.
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Somehow the recent ERP hikes set off a chain of thought that strung together a set of diverse ideas to form a big picture. ..ERP ..... "Every Road Pay". ERP is one of those great innovations that changed our lives. Only Singaporeans get to enjoy ERP because no other govt in the world has been able to implement such a scheme because they are guaranteed to be thrown out of office if they do. So while other govts struggle with other schemes such as "park & ride" or "car pooling via car pool lanes", Singapore has this powerful solution - the ERP. Whenever, the speed of vehicles on the road slows, the govt simply has to up the ERP rate and magically congestion disappears. You can be sure any other govt visiting will be in awe of this wonderful solution. The govt has cleverly used the basic idea in economics that demand falls when you raise prices to solve our traffic problems. The statistical results are just great, after a few weeks of whining, Singaporeans actually change their driving behavior in response to the rate change and wahlah! magic the roads become smoother. The govt tells us that the ERP is family and business friendly because business save time and money when the roads are less congested....so far so good....


"Our wants are unlimited but our resources are limited...." - Economics 101.

Our little island is now so crowded, our roads have become scarce resources and the way to allocate it is via a pricing mechanism. Same with taxis - the solution to long waiting times for taxis was to raise taxi fares until some people like myself give up taking them. There is a very capitalistic nature to the way things are done in Singapore - if you have money and can afford it, you get to use the road during peak hours even if you're on your way to relaxing game of golf. The people priced out by the recent hike could be the struggling lower middle class father rushing to work after sending his children to school. With the recent hike in electricity tariffs, children in poorer families may have turn off their reading lamps earlier while someone else uses the electricity to power the multicolored lights in his fish tank 24 hours a day, 7 days a week. I'll come back to capitalism a little later....


"To each according to his needs...." - leftwing mambo jambo.
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"Even if the chap is lazy?" - Lucky Tan
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In 1957, the industrial output of the Soviet Union exceeded that of America, they sent the 1st man into space and their sporting achievements were the envy of the world. Many Western journalists visiting the country reported that poverty had been eradicated, the people's basic needs were all met and that the Moscow subway station had chandeliers, murals and marble flooring - for the masses to enjoy. The Russsians managed to get socialism working under its communist system. Suddenly capitalism had competition....
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"In 1976 the PAP resigned from the Socialist International, after the Dutch Labour Party had proposed to expel the party " - Wikipedia.
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Capitalism performed best under competition from socialism. While preserving the key features of capitalism, western societies begin to adopt important ideas such as worker's rights, welfare and empowerment. Workers were allowed to have unions, they were given pension, decent wages and plenty of power to negotiate. Paul Krugman looked at the 1950-70s closely in his book The Great Unrevelling how the middleclass swelled and the quality of life improved for working class Americans.

Communism and together with it socialism began to fall apart in the 1980s. The problem is you can't keep the economy going without private ownership, the productivity of a society under socialism will decline, resources are misallocated and unless you have alternate sources of wealth like oil money (example Libya or Venezuela), your standard of living will decline. That is what happened to the Soviet Union and it went into a long decline and eventual collapse. With communism out of the way, Capitalism triumphed and all the "modifications" removed - unions were dismantled by both Regean and Thatcher, deregulation and privatization started to take place in many industries. Capitalism gradually became unbridled...wage gaps started to rise.

Here's a good explanation about how income gap increased and the middle class shrunk by economist Krugman:



Economist Ravi Batra explained that wages form the demand in an economy and when wages don't catch up with productivity, the demand will fall and there is excess capacity. This problem was delayed by the expansion of consumer credit which allowed Americans to spend "beyond their means". In the past 20 years, corporate profits as a % of GDP in many countries kept increasing along with the household debt levels. Right now we are seeing the crisis of capitalism as the subprime mess and consumer slowdown threaten to plunge America into a deep recession.
Singapore leaders to make sure we are not left out of the money making machine adopted all the "good" practices - workers benefits such as retrenchment benefits, pensions, medical etc were removed. 20 years ago if you worked in a govt department, you would be entitled to pension and full medical benefits today all these are removed for the lower ranking civil servants but the PAP govt retained it for the elites. The PAP did even better than the Americans by importing foreign labor which puts further pressure on wages especially for the poorest Singaporeans. With all this, we were able to achieve the highest GINI coefficient (which measures income inequality) among developed Asian economies.

Ordinary Americans under the great economic strain find Obama's message of "shared prosperity" and "fair wages" highly appealing:



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It remains to be seen whether Obama will win and bring about change. But the hope of change alone is enough to drive Americans to support him because they feel they cannot continue with the system as it is.

The imbalances in the global economy are now coming to a head. The Marshall Islands declared a state of emergency because the impoverished nation can no longer afford to electricity due to high oil prices. Food riots are occurring everywhere as the price of food soars. Inflation is exacerbating the effects of income gap. Precious resources allocated to those who have money rather than those who need it. Here in Singapore we embrace capitalism to created an affluent society - or rather a city so expensive only the affluent can live comfortably. When Minister Mah Bow Tan was recently asked if the petrol tax can be reduced given the pain due to rising petrol cost, his reply was very simple - if you can't afford to drive, drive less or take the public transport....driving is for those who can afford it. He didn't ask the person why he needed to drive. It didn't matter what his needs were ....maybe he needed the car to drive his sick mother for medical treatment everyday. So much for the socialist heart......


"The island state has become a rich oasis with pockets of rising poverty, where the homeless sleep at void decks or beaches. Workers in their 60s or 70s clean toilets and sweep floors, instead of enjoying their retirement with grandchildren as is befitting the world’s seventh richest nation (in per capita GDP)."

- Seah Chiang Nee in his latest article Poverty Looms in the Isle of Riches

20% of Singapore workers earn less than $1200 per month and among this 20% half of them earn less than $900 per month. One in 5 Singaporeans hopelessly poor on our affluent island. When you're poor in Singapore, there is no escape. If you're poor in Kuala Lumpur , you take a bus to Penang or Selengor where they still sell bananas at RM$0.30 per bunch. If you're poor in Tokyo and cannot stand it, you can leave and go to one of the many perfectures where the price of a home is the cost of building a home. Here in Singapore when youi're poor, you cannot run from price hikes, ....there is no escape from this PAP paradise ( a paradise for PAP leaders?) ....


"Unbridled capitalism, winner takes all like in America, does not work unless you can cope with an underclass." - MM Lee, BBC Interview May 08.



If America, which has high taxes for the rich, gives out unemployment benefits, low income schemes for basic necessities such as water & electricity, food stamps, minimum wages, independent unions and the right to protest any injustice, is practicing unbridled capitalism....what kind of capitalism is Singapore practicing with 70 year old cleaners, jobs that pay wages so low a families cannot even afford basic necessities, controlled unions and leaders who after elections enhance their own salaries which was already the highest in the world to match those of top corporate climbers? The PAP has sunk itself into an ideology based on elitism and authoritarian capitalism that allows it to tolerate this great divide. There is nothing meritocratic about President Nathan making more money in a day than a low wage worker in year - we have allowed capitalistic tendencies to infect our public service. The belief that people are being paid what they deserve within a system distorted by the influx of cheap labor from China & India, monopolistic GLCs, and redirection of opportunities and resources to a small group of elites is a myth. No 70 year deserves to be digging dustbins for aluminum cans for a living when a minister still gets his bonus after losing Singapore's most dangerous terrorist.

"The human being is an unequal creature. This is a fact. We started with a great propositions all the great political movements, all the great religions, all the great political ideologies say let us make the human being as equal as possible, in fact he isn't - never will be...."
- MM Lee (1969?).


"..to .build a democratic society based on justice and equality..." - Singapore Pledge


I too believe that not all humans are born equal. But consider what Buffett once said - if he was born on an island with tall coconut trees and wealth depends on how quickly one can get to top to pick coconuts, given he wasn't born with the genes to climb trees he would have ended up poor. While we are not born equal, we can create socio economic systems that don't amplify the inequality. Societies that rely on unbridled capitalism to allocate resources very often fall apart when the strain becomes too hard to bear.

“We are in a strong fiscal position and if any country in the world can afford to find a better solution to deal with this growing income divide, it is Singapore”
- Economist Yeoh Lam Keong.



If we're so rich now that can lose billions investing in troubled western banks and then dismiss those losses as long term investments, we should be able to provide a safety net for the poor and help the aged worker retire gracefully. If we don't do it now when we have one of the highest reserves per capita in the world and an income gap comparable to 3rd world nations, we will never do it ...and it becomes apparent that it is more important to stick to broken ideologies than to help suffering citizens...

15 comments:

Onlooker said...

In pseudo:
ERP = Bad for business & people & development.
Socialism = Animal farm or at best a balanced union system.
fyi: Police is a concept of socialism(the puppies in the farm)
Capitalism = Decided by market force supply demand phase fluctuation. Planning of resource.
Socialism for RICH and POWERFUL people who use/hide in Capitalism = Crisis.
Obama::Change
If Change( Get out of Iraq&cut Oil compy Subsidy[ cause of global inflation]& Managed to win Election)== Crisis solved and allow to return thing to norm.
Provided Bush king did not try anything funny for haliburton/ carlyle again.

Anonymous said...

The trouble is they have started to think that the peasants have no longer any rights to the reserves and that it belongs solely to them to do as they please. If they can hold back more and more of our very own CPF money as though we have no rights to it, what rights have we to think that the reserves belong to the people.

Anonymous said...

The problem is that NO BODY IN GOVERNMENT IS LISTENING! If they are, they would not have the cheek to say ERP leads to losses for the government, GST was not the cause of inflation, GST increase is necessary, WKS must not resign. There is press freedom etc after the CSJ / LKY fiasco and the broadcast on SDP website.
There is an affective divide and it gets wider. Still I am not sure how many percent of the populace is ready for a post PAP change.

Anonymous said...

Well written. Nuff said.

Anonymous said...

"...The problem is that NO BODY IN GOVERNMENT IS LISTENING!.."

I disagreed.

SOME BODY IN GOVERNMENT is listening and they are laughing all the way to the bank.

While EVERY BODY will be busy shopping, NO BODY will be left behind.

Anonymous said...

I am also very worried about the future of Singaporeans if this trend continues. It is very sad to see that 'money' becomes the measurement yardstick for all performances. And we are gliding into the pitfall of mercantile system that leads to some not-so-smart policies in Great Britain in the 18th centuries.

We could only hope for compassion, integrity, and truth.

Anonymous said...

otherwise one of the better article if not for the conclusion.

you weighted on private enterprisation. but you also acknowledged the other extreme of inequity where the rich gets richer and those( vast majority) who slaved couldn't secure their livelihood and may have to suffer the indignity of government's aids - which isn't a good thing really.

do you think by siphoning some blood from the blood bank of blood suckers will help the bleeding when, in the first place, they were bled by blood suckers?

unbridled private wealth is more a curse than blessing!

by your diagnosis, or rather what the capitalist would have us believe, soviet failed because it was not self serving enough. you think pseudo communist china which build on greed now will not suffer the same fate except, in the other extreme end?

if the socialist cause failed, it failed because of structural abuses( top down rule) and organizational chaos. with today's technological advances and the benefit of hindsight, who knows, an equitable society may actually be more achievable.

i seriously doubt any autocratic rule can succeed in the LONG TERM!

Anonymous said...

There is no such thing as a perfect system. the soviets failed because no single committee, never mind individual, has perfect information or the knowledge/ability to react perfectly all the time. Change is the only constant.

3 tanners can beat zhuge liang?

the Bible tells us that man was given free will and must take responsibility for their own lives.

the american democracy is flawed but for now it is still number one. because the people (large middle-class) WAS empowered.

America is in decline today because like empires before them, the people gave up their rights (which is relative in nature) and traded their ideals for $$$.

Their last hope is their last safe guard (max 2 terms for presidents). Lets see if Obama can make a difference.

I am suddenly reminded of the Dragonlance books that I used to read many years ago. In this imperfect world, balance of power is the best. It was no accident that China's culture bloomed (and possibly peaked) during the spring-autummn period.

I am very sad. Maybe its the weather. Once upon a time, we had great leaders and I had a wonderful country that I called home.

*damned* I am becoming old and useless.

NoName

Anonymous said...

There is an article in Today titled: A Modern Authoritarianism by John Kampfner

Some of the worthy quotes:

Why is it that a growing number of highly educated and well traveled people are wiling to hand over several of their freedoms in return for prosperity or security?

The answer is in 'the pact'.

"The model for this is Singapore where repression is highly selective. It is confined to those who make a conscious decision to openly challenge the authorities. If you do not, you enjoy freedom to travel, to live more or less as you wish and...perhaps most importantly...to make money."

" In any battle between politics and economics, it is the latter that will win out"

"It was Oswald Spengler, who at the last turn of the last century, predicted that 'the masses will accept with resignation the victory of the Caesars, the strong men, and will obey them'"

"A modern form of authoritarianism, quite distinct from Soviet Communism, Maoism, or Fascism, is being born. It is providing a modicum of a good life, and a quiet life, the ultimate anesthetic for the brain."

Unquote.

Hmm, short of saying...who cares about social justice and conscience?

Anonymous said...

interesting to read your true thoughts as opposed to your usual sarcastic style. There is no perfect system. Here in NZ , many complain that there is no disincentive for "loafers" to go on the dole. But somehow , I'd rather see old folk playing lawn bowl , doing volunteer work and just enjoying their twilight years and not have to pick cans and cardboard....and I'm happy to pay the tax I need to cos there is such a thing as minimum wage , superannuation etc. So while there is no perfect system, I don't like a system where there are no checks and balances on the powers that be ...

Anonymous said...

Singaporean are not selfish individual, they give generously to those in need, bearing that the act of altruism is prevalent in society, why not apply it to politics and put it as in a manifesto, make voters understand what's for the greater good.

I read on BBC that 5th July was the 60th anniversary of the Nation Heath Service in the UK, from the onset, it is to provide free health-care for the entire nation, this was 1948, with nations bankrupted by the war. I had used it, and I am still amaze that it could be done.

There is such a moment in history, where a society felt it could do better, convinced the burden on its shoulder was worth the undertaking.

The welfare of its citizen is a shared responsibility, the leaders of Singapore seem to have chosen to ignore and forget, hoping it will right itself, but who has the greater means to steer a nation but those in charge.

Following Krugman's argument, Singapore is consistently top the freest economy in the world, perhaps that add support to the fact unbridled capitalism is the creation of income disparity.

Anonymous said...

no one lives by bread alone; but without bread, no one lives at all - the late Rajaratnam.

changing its context and meaning, i think what he meant to say was...no one lives by money alone; but without money, no one lives at all.

our right to life and liberty is found in and on money - Euro Rupiah Peso

celyra said...

Well, in the first place our economy booms today coz our people work hard together. But here the govt creates a system that punishes those who help create the success of the nation. Isn't that ironical? That MBT reply really sucks. Pui!!!!

Anonymous said...

Singapore could face another round of inflation if firms raise wages

http://www.channelnewsasia.com/stories/singaporelocalnews/view/359295/1/.html

Winner loh PAP...

Earn million can increase salaries, earning thousands then cannot.

Anonymous said...

If you cry 'wolf' too many times, people just ignore you!