Sunday, September 25, 2011
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.
Based on the latest data from the CIA factbook here's where counttries stand:
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.
Posting Time 8:25 AM
Posted by Lucky Tan