Sunday, September 25, 2011

Economy : Unsatisfactory until The Great Revamp....

The above chart shows the income inequality in the US from 1918 until today. If you plot the chart of income inequality of countries around the world, you find the pattern of rising inequality in the last 30 years. Among developing countries, Singapore and USA have the highest income inequality. The only time during the last 100 years when the income inequality is as high as it is today was in 1929. The global economic system fell apart after the stock market collapsed in Oct 1929.  There are numerous similarities between 1929 and 2007, the consumer debt was extremely high as individuals borrowed to spend because the income gap means that ordinary workers make too little to generate the aggregate demand for the total goods produced in the economy. Household borrowings help to close the gap i.e. the economy depended on rising debt levels to keep it going.

After the US economy fell apart in 1929, Democratic president Franklin Roosevelt implemented The New Deal empowered labor unions and ethnic minorities. The 3 decades after World War 2  are known as The Great Compression - the income gap became compressed as the US  govt allowed labor unions to wield more power, implemented high progressive tax on the rich and implement major social programs. As wealth became more evenly distributed, the middle class expanded, unemployment fell and the US experienced sustainable growth withour significant rise in the household debt. However, that began to change roughly when Reagan took office.
The policies to reverse what The New Deal policies - weakening of labor unions, tax cuts for the rich, together with the spread of free market capitalism, globalisation and deregulation combined to erode the middle class. While there were other economic benefits of the new directions, income gap grew and much of the gains concentrated in the top 10% of the income earners.
.If you look across countries, there is a general trend of rising inequality:

A few things to note from the above charts.  Among developing countries, the income gap is falling as they become more developed with the notable exception of communist China. With the exception of socialist Fracne all developed countries have seen a rise in inequality.

Based on the latest data from the CIA factbook here's where counttries stand:

For the US, you have to go back all the way to 1929 to find an income gap as high as what we see today.  There is only one developed country with worse or comparable to the US depending on when you measure inequality and that is our tiny island of Singapore. The other place with higher inequality is Hong Kong which is technically not a country - at their level of inequality despite the perceived economic success of Hong Kong, the incumbent govt is almost certain to lose if free and fair elections are conducted tomorrow - that is why they have postponed direct elections there until 2017 so that social programs can kick in and mitigate the effects of the inequality.

In recent months we have seen rising protests around the world, authoritarian govts falling and increasing number of incumbent govt voted out of office in democratic countries. The current economic model is not just unsustainable in purely economic terms, the masses are forcing govts out to bring about change. From Israel to Australia, we see rising frustration among ordinary citizens.demanding change. Today we are facing the 3 economic crisis in  and on the verge of the 4th recession in 14 years. The global economic system is clearly not stable and does not produce outcomes that ordinary citizens around the world want to preserve. In many countries the people will keep voting out govts until they get what they want. We are seeing similarities with 1930s and the whole system will be in a flux until we see the income gap compressing.

So how did Singapore achieve the highest inequality among developed countries at a time when income inequality is at the highest in the last 70 years?  You don't end up here when you implement fair and balnced policies that benefit as many of your citizens as possible. PAP's ideological extreme has led to this situation .Cutting corporate tax rate and taxes for the richest and increasing GST to tax the poor. Weakening the bargaining power of unions through something euphemistically called tripartism - over the years workers' benefits such as retrenchment benefits disappear along with job security. Importing cheap labor to depress wages of the lowest wage earners. Elitism that concentrate the state resources and allocate the best opportunities to a small number of people. Pro-business policies that pandered to the demand for workers to be cheaper, better and faster. The people of Singapore sent a very clear signal to the PAP govt that they want change. The PAP won most of the seats in parliament not because people feel that its policies are correct. The PAP was helped by a combination of other factors. The fragmented Opposition is generally perceived as not  ready to take over as govt and the PAP still enjoy the support of older folks who lived through the great transformation took Singapore from a poor developing country to developed one.  The PAP still enjoys favorable but bias coverage from the MSM. These advantages will diminish  by the time the next election comes.


Having a GINI index of 48 means an inequality much larger those that motivated massive protests in so many countries. Singaporeans are just as unhappy. However, we have a culture of fear and obedience, Singaporeans do not protest to show their unhappiness. The unhappiness festers and grow internally ...hidden in individuals and families. The govt will start to interpret this quiet response as an acceptance of the status quo just as it did before the 2011 elections. The image of huge opposition rallies and collective show of angry will fade and the PAP will go on a path of 'least resistance' guided by the interests of the power elite. We are beginning to see the PAP in 'explanation mode' again - they are explaining why we need more foreigners, explaining why we need the ISA to keep us safe[Link], explaining why they cannot adhere to UN human rights recommendations[Link], explaining why the govt cannot do more for the poor, disabled and elderly. The best we can hope for is some tweaking of PAP policies as we move on from here.

Economic  inequality will drive demand for all sorts of change because when people'\s  lives are not getting better they are less amenable to various aspects of authoritarian rule still preserved by the PAP. Even the govt of Malaysia knows that there is a need to get ahead of the curve with important changes. The PAP needs an ideological shift and revamp the current socio-economic system to compress the inequality. Telling the people that things are acceptable because there is 'social mobility' will not address their unhappines with their own economic situation. Trying to make as little change as possible to get by and leaving the income gap as it is and unhappiness to fester below the surface will simply compel the people to bring about change by voting for the opposition. Shortly after the 2011 election, our PM said 'nothing is sacrosanct'.  However, watching the PAP in the past few months what we see is an inability to change as denial begin to overcome the post-election realisation that the people are very angry and want change.

33 comments:

Anonymous said...

I tell you lah, majority of people are still happy with the PAP.

If not ah, Tan Jee Say would have won 50 or 60%, not 25%, of the votes in the PE(presidential elections)! And for PE, where got fragmented opposition factor?

In fact, in the PE, he did not even manage to win the 40% opposition votes of GE 2011!

This shows that no matter what, PAP still had majority support. And GE 2016 will be no different.

Anonymous said...

People can be happy and satisfied even though they are poor or have a hard life.

I think there may be a lot of such people in Singapore.

When I say people, it includes people who are born in other countries.

Anonymous said...

Widening income gap. This is not failed policies or were they the results of unintended consequences. It is all part of the grand design. Read the book the grand chess board by the fucking brewzinski guy.
And its international in agenda....just look into the flouride in your drinking water and the chemtrails zig zagging across our skies here & all over the world .
Too busy to ask why & too busy to care.... ? Great ! Thats exactly where thay want you to be !
Just google and youtube them for research for a start.
To understand the problems we have today and maybe to unravel the puzzle or connect the dots Lucky , you got to look beyond local issues.. You will then see the patterns & trends .
By the way this is just a place to rant and seek literal release. Most people around the world and most singies dont give two hoots.. Too daft , too dump down , too busy with making ends meet , too lazy , too selfish & too human perhaps . That is our flaws.....so in the end we deserve whatever we get !!!!!

Anonymous said...

Sin has emerged stronger economically after each and every global economic downturn. This is a fact that everybody can see and appreciate, don't You agree Mr Lucky? Maybe, it is also reason why Singaporeans do not need to protest(about anything).

Hock lock siew said...

The Confusious concept of "hock", "lock", "siew" is alive and well in all the Chinese people.

"Hock" ( hokkien )
As I prosper and have wealth ( however its measured ) I am happy
... let me gamble with ToTo/4D

"Lock" ( Hokkien )
As I have fertility, virility ( does not have to be kids )as my potency is errect.. I am happy..
let me have my fun, in Zhu Hai..

"Siew" ( hokien)
As I live a long life , I am happy
..

As long as these elements are satisfied, the Chinese will not bother about anything else.
Poison the river? who cares
Pollute the air? who cares!

All in Singapore are happy.. there is char kway teow and MBS
( hock )

There are bars and geylang..(lock)

there is long life..

There is comfort of 100 inch TV
There is a nearby Sheng Siong
There is Maria to help my mum & dad
There is a childcare centre nearby

We have a good system

What's to worry?

Anonymous said...

Under the pressure of SME (small medium enterprise) towkays who want the floodgate to be opened to let in more foreigners (include permanent residents) into Singapore regardless of the fact that the chance of Singapore going into recession next year is getting higher, many excuses are used to support more foreigners (include permanent residents) are needed.

In addition, SME towkays want Singapore to pay for the training and upgrading of cheap foreigners (include permanent residents) using taxpayers money to replace Singapore Citizens.

There are 3 issues to the training of foreigners (include permanent residents).

First, if these foreigners (include permanent residents) are labeled as foreign talents by main stream medias and towkays, then why these foreigners (include permanent residents) need to be trained and the skills of these foreigners (include permanent residents) need to be upgraded?

Since these imported foreigners (include permanent residents) need to be trained and upgraded, these foreigners (include permanent residents) are not foreign talents.
Isn't calling these foreigners (include permanent residents) as foreign talents is wrong and bluntly cheating by main stream medias and towkays?

Second, if the imported foreigners (include permanent residents) do not have the skills or the imported foreigners (include permanent residents) skills are obsoleted, then why are these foreigners (include permanent residents) mass imported to Singapore?

Third, why should Singapore taxpayers money be used to train and upgrade foreigners (include permanent residents) skills?

Lye Khuen Way said...

I am not so optimisstic as some commentors about " SIN emerged stronger each time after a crisis" and believe Lucky DID look beyond this little RED Dot in this post.

In fact, I agree fully with Lucky's observations. The current Govt, ( incidentally can I observed that the new Parliament will only assemble on 10th Oct !) is in denial mode and do not appear to be ready to do anything different from the last, except for some instances in the Ministries of National Deverlopement/ Health/ Education.

Yes, I do see some disclosures from the CNB that, to cynical me is the precusor to many more revelations. No ?

Anonymous said...

The political party responsible for rise in income inequality is republican party.

US is a democracy country and rise in income inequality won't be popular among the voters. So what did republican do to convince the voter on something that is in-advantages to them ?

First- supply side economy, which advocates less union, less tax, less regulations are good for the economy. when peoples fed up with the supply side economy, republican switched to religion right (remember Bush junior's years?) When the religion ideology lost their shine, here come the tea party.

On the surface, it was supply side economy, religion and tea party, but hiding underneath is policies aligned to the rich.

But fortunately, US is a democracy country, where you cannot cheat the majority of the voters, who have fallen into poverty forever.

From my observation,there is few important things happened in US recently. First, Warren buffet has come out and claimed that the government should tax him more. This put Republican, who advocates tax cut for the tax in a embarrassing position. They started to attack Buffett in emotional and hysteria ways. This shows their nervous

Secondly, finally, there is a left wing politician, who is able to convey left wing messages in an appealing way to the voter. watch this video of Elizabeth warren
http://www.youtube.com/watch?v=htX2usfqMEs

I can see that tide start to swing to the opposite direction.

PAP is just a copycat. They copied Republican idea for the last 20 years. Once the US starts to change, Changes in Singapore will be followed. try to be optimistic !

Ultraman

Anonymous said...

Singapore is small, only 5 million people on 700 sq km, so easier to control.

Now suppose you have only 2 children. Quite easy to take care or make them happy, right? Maybe with one more so 3 children also not a problem.

What happen if you have 8 children? Not so easy, right? Some of the children will make noise and protest, right?

Same thing for a country lah.

Anonymous said...

Agree with most bits by Ultraman.

From an ethical point of view, we lack the warrior and hero spirit in Singapore. But this is changing with more youths clearly unhappy with the government's policies, particularly, the hdb issue.

I agree that tweaking in taking place. The problem is that there is too much deception and pretendering going on in Sin, perpetuated by the MSM.

When you have a minister banning the sale of chewing gum and blaming the weather when flooding keeps recurring, something is wrong. There is no accountability in Sin. People feel they are being politically bullied and are these days showing in on the polls.

What we will observe in these coming 4 years will be some lame attempt at dumbing and thumbing down singaporeans with dissenting views, all to the disservice of the incumbent in the coming years. People are now more aware of the issues that are affecting their lives.

The truth is that we are told that change is taking place slowly and incrementally. When the government sold Senoko power station to a foreign company; our source of energy, we should get worried. When are men serving national service when our power supply is in the hands of foreigners?

Tan Cheng Bock could see that Singaporeans are disunified because of the government's policies during the last PE.

Things are stirring in Sin. But the people should be prepared for another 5 more stressful years to come. The main issue of the cost of living has not been addressed and the cpf scheme needs to be reformed as many young singaporeans are still clueless that they wont have enough to survive after their 60s.

PAP is in-charge because a lot of old people are in the dark. Things are changing in Singapore. These days, it's not the older folks who are talking in the kopitiam. Young Singaporeans are talking at Starbucks and Coffee Clubs.

Why?

Things have not been going right for Singapore since the last 10 years.

Lucky is spot on regarding the 4th recession in 14 years.

Hey Lucky, when do you think the recession would set in?

Cool post!

Anonymous said...

In the 60s and before, having a dozen or more children was NEVER an issue. And that was when Sg was a primitive fishing village.

Anonymous said...

the problems only began when the pappies started interfering one failed experiments after another. if not for authoritarianism they would have been long gone by now.

Anonymous said...

You are relying on the young to change things? LOL

Please.

My bet is on the ...old :)

Anonymous said...

despite my occasional shitting in here...haha... lucky has generally been rather educational though I may not agree with his implied solutions..haha

so yah, keep it up dude

Anonymous said...

Our PM is good at bull-shitting. Unfortunately, education does not make a person smart, this is the hard truth which keeps PAP in power.

Anonymous said...

Look at the rainbow, it may be beautiful but everything that goes up must come down. just like MP LKY. From MP to PM to MM to MP again. Unfortunately, only time not Lucky Tan can tell when.

Anonymous said...

Mr Lucky

The only regime changes recently are those arranged by your beloved Mr "Black Messiah" Obama!

The Reagan years were the start of the decline of Christianity (rise of anti-religion ... really ... see Mr Dawkins career) and end of >50% income tax.

Do you really want to reverse that?
Your rich LGBT friends would rather rot in hell (if there is one)...

Hey, I know!
Your beloved Mini-star Cow to the rescue!

Doubtful man said...

I cannot understand how the big shots cannot solve or even decide how to solve this problem.

With all the data collection, resources, machinery that each country have

With all the endless meetings, conventions, seminars, talks

With all the facts that they have in front of them

With all the hindsight... they
cannot:

A) decide on how much bail out is required for Greece.. they seem to be underestimating all the time!

B) decide on the next course of action.. assuming they had done step 1.. (?) but was there a "step 1"??

C) Forecast with certainty what will happen next.

Speech by Robert Zoellick
" we are nearing a crisis"

" we are in a dangerous situation"

" world growth will slow to 3%"
( but not a negative mind you!)

"these are uncertain times"

All the gloom and doom.. but where is the damage?.. Gold price? Oil price?.. SQ first class is still packed.. Business class travel still has obnoxious crap people..
Casinos are packed
F1 formula grandstands are packed
Changi airport traffic has increased
Banks loan growth is reported to have slowed to 5-6%.. ( mind you its not negative either!)

YOU STILL HAVE YOUR JOB RITE???

wait until you have lost it, then we talk.

Anonymous said...

"Business class travel still has obnoxious crap people.."

Because corperate ppl are mostly obnoxious ppl.

Anonymous said...

Hey Sin Roads are packed with continental cars, the ubiquitous Korean made are a rare sight now.
Don't forget we got GDP of 15% for 2010, highest in the World(?)
And there are more condos being built than HDB Flats.
Fantastic Leadership in Sin!!!

sama sama said...

Where is the recession?
Where?
Where?
Where?

Can I smell it?
Can I see it?
Can I touch it?
Do I feel it?

Answers to each is a clear no!

Full of bull shit... cos, i dont care what happens to the stock market, oil market, gold market. house market, forex market...

I wake up each morning and I still see my vegetable stall and the mee pok stall.. and the crowded bus, and the crowded MRT.
I walk across the pedestrian bdge and the CTE is jammed with cars!

What recession you talking about?
My neighbour drives 3 cars!
Another sends kids to tuition by taxi!
Upstairs still smoking every 30 mins! ( tax or not tax.. still can afford fags!)

Ah neh can drink beer and stout at void deck with friends till 12pm!

Everyone else have smart phones except for me!

Anonymous said...

And in Sin, we have the highest number of millionaires; remember it is Sin$1.20+ to USD1.00.
You know?

Anonymous said...

Sorry, it is USD$1.00 = Sin$1.20+.
My apologies.

Anonymous said...

Can Lucky Tan respond to the last few comments please.

Thank You !

Shields said...

Singapore is small, only 5 million people on 700 sq km, so easier to control. Now suppose you have only 2 children. Quite easy to take care or make them happy, right? Maybe with one more so 3 children also not a problem. What happen if you have 8 children? Not so easy, right? Some of the children will make noise and protest, right? Same thing for a country lah.

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