Friday, June 11, 2010

Away from home....

I'm been travelling the past few days to various cities in Europe for meetings. I'll be back in Singapore on the weekend.

I had half a day off the earlier in the week so I had time to walk around. I had a heavy breakfast at my hotel that day. When it was time for lunch I bought a small piece of pizza but couldn't build up an appetite to eat it. I took a seat at a bench to check my map and put the uneaten pizza on the bench. A few people came by to as me if I still wanted the pizza and I told each of them I still wanted it. When the 5th person, a woman with a toddler, came by to ask me for it, I got tired of saying no so I handed the pizza to her. She said thanks, took the pizza, walked away and was eating it about 20 meters from me. Another woman came by and joked, "she's eating it all for herself ...nothing for the toddler". I told her that the woman could have fed the kid earlier but can't afford food for herself. She told me that is unlikely. The welfare state there gives out more than enough for food and housing giving more to those who have children, She cautioned me against giving food or money to people who approached me because they were likely to be unemployed who receive enough from the state but have nothing to do all day so they attempt to supplement their welfare checks by approaching foreigners for money or food.

All over Europe you have unemployment in the double digits with Spain having 20% umemployment. The high unemployment is due in part to the structural problems with the global economy ( I was writing a posting about this before I had to go overseas and it will be up over the weekend). See the solution to the unemployment problem in Europe is very simple can call this solution (CBF)"Cheaper, Better, Faster". European workers where I'm at have a minimum wage of 1300 Euros a month (S$2.2K). All the govt needs to do to get the unemployment down is to to eliminate the minimum wage and create millions of jobs by asking workers to be CBF and accept pay of S$1000 a month. You might think that the cost of living in Europe is exorbitant so workers need much more to survive. I think this is a myth. This may be true 20 years ago but our cost of living has cost up. Cooked food at a restaurant is still expensive by Singapore standards but supermarket prices of uncooked food is about the same. Housing outside main cities which is a real viable option for many who commute to work costs less than public housing in Singapore. Singaporeans pay the 2nd highest electricity rates in the world. You will see advertisements for cars under $10K Euros ($17K). Yes, World Cup 2010 will be shown free in most places here.

While European countries appear to have saddled themselves with large sovereign debts which will require govts here to implement harst austerity measures. Even when they implement the harshest measures to get back to shape, their care for the poor, elderly and unemployed will still be miles ahead of Singapore. Singapore pushes for the CBF economy with armies of low wage workers struggling to survive...they will never do this here because fundamentally they believe that a person working at a full time job should be able to live a decent life and any system that takes that away is wrong and inhumane - they could have easily pushed down their unemployment by forcing down wages and pushing their less fortunate to take up low wage jobs. But they know in the long run, they will produce an unequal divided society and that they, unlike in Singapore, they simply cannot accept.


Anonymous said...

"Singaporeans pay the 2nd highest electricity rates in the world."

Wow if true, I didn't know until now but why is it so?

You can say this is due to we importing all the oil and gas to generate power but there are also many other countries who are in the same boat and are even developed countries.

How come they can price their electricity cheaper?

Anonymous said...

Singaporeans must pay top dollar for best talents to govt the city. Cost of living must be high, wages must be kept low by importing cheap labour for nearby 3rd world countries. High GDP is the aim so that ministers' salary, pegged to GDP can be kept high. If you want to be governed by the elite you must also accept to pay top dollar for that. You get what you pay/vote for.

Anonymous said...

Enjoy your trip. Tell us more after you're back.

Anonymous said...

About 2 years ago my friend went with her sister to visit her daughter studying in Germany. She told us a guy approached them for some food they had. They quickly gave it to him & they vamos fast. They were afraid that more would turn up. However, my friend is still thinking of backpacking in Germany should she be given the golden handshake this year.

Fox said...


The problem is that the wages of the Spanish workers is too high for their economy. This does not mean that the individual labourers are incompetent. It could be a mismatch of capital and labour.

Normally, what would happen is that the currency devalues or that Spanish labour moves to places which can support their higher wage demands. However, with the Euro, it would be difficult to do that because the Germans would resist devaluation because their labour is just more efficient. And it is difficult for the Spanish workers to move to Germany because of language issues.

It is difficult for wages to drop because the price of labour is sticky as with the price of everything else in the real world. Such wage adjustments take a long time. It doesn't help that they have minimum wages.

Fox said...

Consider Singapore. Let's say that we have a minimum wage level and don't mandated CPF cuts. What would happen? Well, because wages are sticky, Singapore's currency will devalue until the wage levels become competitive relative to our trading partners. Currency depreciation effectively gives us a wage cut AND a rental cut i.e. the cost of land would also go down.

However, because Singapore insists on a managed peg, we can't use currency devaluation (and also because the politically influential rich own more land and more Singapore currency). Instead, we have to import more foreign labour to push down the wages of Singaporeans.

If you are rich and own a lot of SGD denominated assets, then it is great for you. If you are an ordinary Joe like I am, then it is not so great.

Anonymous said...

Actually got one article in The Sunday Times got mentioned the cost of generating electricity per Kwh for natural gas and oil, and there is significant differences between them. The article is published when the idea of using nuclear power is suggested by someone.

The cost of generating electricity per Kwh is much lower using natural gas as compared to oil and 80% of our electricity comes from gas.

Yet we are charged the oil price version.

Anonymous said...

Top dollar does not always guarantee top talent. We are paying for the most expensive politicians in the world, but their track record shows how incompetent and greedy they are. They are just in this job for the money. They implement policies that are vastly out of touch with reality, have no feel of the ground, and many suspect they are just eager to jack up the GDP with any means so as to get a better year end bonus.

I would gladly trade 10 of our expensive politicians for just 1 Goh Keng Swee or Toh Chin Chye anyday.

Anonymous said...

Hi Fox,

Even without a minimum wage, we already are importing a lot of foreign workers.

We are importing foreign workers like a drug addict buying more drugs. We have foreign workers working as janitors, construction workers, cleaners, engineers, managers, clerks, accounts executive, programmers, technicians, etc etc.

Most of these foreign workers come from Third-World countries like Phillipines, Burma, China, India, Malaysia. Vast majority of them are not more capable than us Singaporeans.

Their only common denomination is that they are CHEAPER!

Fox said...

Even if there were no foreign workers coming in, wages in Singapore would have fallen or stayed stagnant anyway simply because the cost of production in China is much more competitive.

I would have preferred a currency devaluation over the policy of importing foreign workers simply because holders of Singapore-denominated assets would have suffered equally with the workers. Of course it is in the interest of the rich land owners in Singapore to maintain managed currency float than to let it float freely. The beneficiaries of the strong currency are you and me, the workers, but those own are rich enough to own a lot of real estate. Even those who bought flats in the 70s and 80s benefit from this strong currency but not the young people.

Anonymous said...

Mr Lucky

Studies have proven that min wage have minimal impact , if any, on unemployment. Its taxes (and not all taxes are equal), demographics and regulations. But dun let facts get in the way of your obamanomics :-)

Hey, could Europe's decline be due to the decline of their Christian work ethics? Then its surely a fair price to pay for learning the "truth"?

Or science making workers obsolete?

Hmm ....

But seriously, for the 1,000,000th time ... as the europeans and yanks are discovering for themselves ... an equal and fair society requires higher income taxes for millionaires like our mini$tar$ ... and you. Unlikely under PAP. So when is the mythical selfless atheist political party coming to save us poor sinkees?

Anonymous said...

To aonon 12/6/10 09:57, the "mythical selfless atheist political party coming to save poor sinkees" is already in front of you. And it is the most persecuted party in Singapore, but you may be too daft to realise so.

Fox said...

"Hey, could Europe's decline be due to the decline of their Christian work ethics? Then its surely a fair price to pay for learning the "truth"?"

Ireland, Italy and Spain have the highest church attendance amongst all the western Europeans. Fat lot of good that helped.

run road said...

Ireland, Italy and Spain have the highest church attendance amongst all the western Europeans. Fat lot of good that helped.

Ah true, but notice they're all staunch Catholic nations. There hasn't been a Catholic work ethic or indeed a Christian work ethic since oh, the work of one Max Weber circa 1900. It's the Protestant work ethic that brings home the bacon (allegedly). Thus you can expect Uncle Sam, John Bull and Herr Fritz to be the ones to extract the fat from the fire. Mind you, it was probably the Protestant work ethic that began the débâcle in the first place... As ye sow, so shall ye reap.

Anonymous said...

Hi Fox,

The word "competitive" is defined as "exploitative" in today's context.

True, we will never be able to match China's "competitiveness", as we in Singapore demand a better living standard and work conditions.

China's "competitiveness" is achived by paying workers S$240 a month, making them live 50 ppl in a small bunk, and demanding that they accept such working conditions and produce top quality work.

But not to worry, Singapore is on its way there. Salaries have been falling sharply in manufacturing for years, as we demand longer working hours from workers for smaller wages.

Basically, your academic arguments is built on getting lots of people to accept low pay and poor working conditions in return for disproportionate working hours, quality and quantity of work done.

How long do you think your working model will work before workers rise up in violence and demand for better treatment?

Will you subject yourself to the same working conditions?

Fox said...

"True, we will never be able to match China's "competitiveness", as we in Singapore demand a better living standard and work conditions.

China's "competitiveness" is achived by paying workers S$240 a month, making them live 50 ppl in a small bunk, and demanding that they accept such working conditions and produce top quality work."

If you want Singapore to compete with China in making circuit boards, then of course Singaporeans will have to put up with such exploitative conditions.

I have more faith in Singapore and less confidence in China. There are many things we can do better than China and China's current growth trajectory is unsustainable. They simply cannot double their economy through manufacturing and exports. They are taking tremendous environmental and social damage from their economic policies.

If you look at China's coastal provinces, many of them have attained fairly high standards of living. Ten years ago, a good number of the PRCs in Singapore were from the coastal provinces. Today, the majority of PRCs in Singapore are from the poor northeast and southwest of China. This implies that the standard of living in China has risen very rapidly.

It is not impossible for Singapore to enjoy a high standard of living and still rely on manufacturing. Germany and France have substantial manufacturing sectors.

Lucky Tan said...


You're right China is on an unsustainable path but the economic stresses are just one aspect. Its centralised authoritarian political system is the other.

The question is not that China has to change in a big way but how long and how messy. Within a week or 2 the labor unrest in China has gotten much worse but that is just a symptom of its unsustainable trajectory the end if they don't move fast enough and change, the whole thing can fall apart abruptly.

Anonymous said...

China, as far as I am concerned, is still a baby in terms of maturity as a civilization or a country.

Most of us by now understand the concept of freedom, liberty, workers' rights and democracy.

China, until very recently, has started to experiment with such ideals. For the past few thousand years, freedom and liberty are totally alien concepts in China.

Just like the workers who build the Great Wall or Forbidden City, China only understands how to exploit workers. China will either conscript them to work for free, or pay them very low wages, while paying the top cats millions of dollars.

I am glad to see Chinese workers fight for their rights. China's growth is unsustanable, unless their leaders can persuade millions of Chinese workers to accept their low pay and poor working conditions as a form of national duty or patriotism. That's how China has been operating for the past few millinieum anyway.

Anonymous said...

Technology has brought down barriers that in the past were able to isolate people from social progress and changes taking place in the world. As much as China tries to manage information flow through its great firewall, it is a losing battle. Most leaders realise this, the problem as always is the older generations are too slow or simply fail to comprehend.