Saturday, February 13, 2010

Dampening the volatility in our economy...

Here's an interesting set of slides by Prof. Choy Keen Meng on the volatility in our economy:





This talk at an event organised by the Economic Society of Singapore on 27 Oct 2009.

Here is an interest chart showing how much our domestic consumption has shrunk over the years and how exports became dominant in our pursuit of GDP growth.



It shows how much our domestic consumption fallen as we pursue growth based on the export-led model. We became dependent on external demand which is highly volatile. Export led growth will mean more of the same "cheaper, better, faster" type economy to compete with China which is a race to the bottom for our workers. Expanding domestic consumption can lead to higher wages for our workers, narrow the income gap and result in a less volatile economy.

10 comments:

Anonymous said...

Kong hee fatt choy, lucky! I predict the year of the Tiger will be a year of change. It will be a interesting coming election. I expect more goodie$$$ will be handling out by the government soon...we've already seen more flats being released just annouced last week...
More will come our way...

Singaporeans have to remember :
First comes the sweets... Then comes the whip.

Anonymous said...

Economy can be volative, rich poor gap can be widening, HDB prices can shoot to the sky but one thing stays very constant. That is PAP will get 98% seats again, doesn't matter Tiger or what not year.

No need to consider other things, just look at the opposition can tell already.

Anonymous said...

Mr Lucky

//
This talk at an event organised by the Economic Society of Singapore on 27 Oct 2010.
//

U have a typo.
Btw, maybe u want to just stick to fighting for min wage and maybe save the manufacturing sector (ala Germany). Oh, TH setup yet another hedge fund while u were away on your jihad on Christianity.

PS: SM Goh sends his thanks *wink wink*

Anonymous said...

Lucky,

"Expanding domestic consumption can lead to higher wages for our workers, narrow the income gap and result in a less volatile economy."

You need to expand on that. It's not clear. How so?

cy said...

what about the gross fixed investment to GDP ratio which is 28.5% in 2008? does it contribute to volatility too?

we are also dependent on FDI too. with more to choose from,esp.china, singapore FDI has not been increasing by much.

also,we are a developed country which needs less fixed asset investment.

LuckySingaporean said...

anon 09:50,

The purpose of this post is to point to the presentation by the ESS which talks about the causes of economic volatility in Singapore.

The idea that expanding domestic consumption will help to close the income gap and help to eliminate low wages goes like this. When you come against low wage emerging economies such as Vietnam or China the pressure on your wages are high so you end up with a large segment of the workforce stuck with this type of wages. What you do is give up these low tech industries because competing with vietnam & China head on is a race to the bottom. However, as you move up the technology ladder it is a pyramid meaning you will lose manufacturing jobs. To make up for this you need more domestic consumption and growth of the service sector. You can do this by increasing the disposal income, say by, keeping housing cost reasonable so that a family can spend more on enrichment programmes, enjoy better quality of life etc.

Nobody is saying all that this is a panacea or that it will surely succeed but following our old economic models will mean more of the same outcome - wider income gap, high stress, volatility etc. It is worth a try especially when our domestic consumption is so low compared with countries of similar size.

None of these are my own ideas because it has been discussed by Singapore economists for years. Only thing is there is no political will to try something that is potentially better...and we will stick to the old formulas until the income gap or working stress breaks us.

Anonymous said...

Thanks for the expansion.

Currently, we're running double the pace. I don't see us slowing down. We're not gonna build up our domestic economy. In the mid 90s, the government was pushing for local businesses to go regional. This move was stunted as we saw SM Goh ushering the biomedical industries. Then, PM Goh mentioned that he is putting his cards on this industry and that the real result of this outcome is only visible in 15-20 years, long after he left his PMship. Shortly after, the casinos (purported to be made a local industry in and of itself) as a viable source of income for the republic were proposed.

As it would take at least 3 years for anything sustainable and substantial to come off the casinos, to what extent would you agree with me, that the move to expand on domestic consumption is mere act of tweaking the GDP report card?

Anonymous said...

Something out of topic but worth bringing up. =) Was at Jurong East yesterday and I was really taken aback (and frightened) by the sheer amount of foreign workers hanging out there. *shakes head*, how can anyone say the numbers isn't a lot after seeing such a scene where the ratio is at least 15:1, foreign worker:S'porean

Anonymous said...

Mr Lucky

While expanding domestic consumption is surely a good thing ... how much more do you think Sinkees can consume after paying for HDB and other essentials?

Anonymous said...

more wild theories ...

http://www.ft.com/cms/s/0/8015712c-1775-11df-87f6-00144feab49a.html?nclick_check=1

President Obama says Goldman is ok so it must be true.

Pls be on the lookout against these lies from these untrustworthy media.