Singapore Democrats

We tell them, look, they have got to work harder or they’ll become stupid. It’s just that they don’t see the point of it. Why race when you can canter and save your energy and do other things? Art, ballet, sports whereas these new migrants, they spend all their time slogging away in the library or at home.

Art? Ballet? Sports? Already Singaporeans work the most hours compared to many other countries with real incomes falling. How is anyone supposed to have time for leisure? Even the elderly can't retire, the number of older Singaporean men working is at a record high. Is it any wonder then that in a survey conducted by Taylor Nelson Sofres (TNS) Singaporeans were found to more likely have suffered from depression, stress and fatigue than most of their Asian counterparts?

And to remove any doubt that he is completely tone-deaf when it comes to inspiring workers, Mr Lim Swee Say, minister in charge of the National Trades Union Congress, exhorts workers to work "faster, cheaper and better.”

All said, it is clear that the PAP's economic strategy, if you can call it a strategy, is to compel people to work longer and harder, and for less.

An old problem

The question of productivity did not just arise recently. The SDP raised this issue as early as 2005. We cited the questionable productive nature of our economy. In his book A Nation Cheated, Dr Chee Soon Juan wrote: "Singapore’s labour productivity...is notoriously mediocre." He went on to cite the influx of foreign workers which "expeditiously and artificially inflate[d] GDP figures." This, he added, was problematic especially in the absence of "a concomitant increase in labour productivity."

Stanford University economist Lawrence Lau explained that a more accurate picture of an economy’s performance can be obtained by studying the differential between all the resources that go into increasing economic output (including capital investment and education) and the GDP. He worked out a mathematical model to test his assumptions. When he applied his calculations to Asian economies, he found that some Asian countries produced high economic growth without showing corresponding increases in qualitative output in productivity. Singapore, in particular, stood out.[1]

An economist from the Massachusetts Institute of Technology, Alwyn Young, went a step further and compared capital investment against worker efficiency in Singapore’s economic growth patterns. He found that increased levels of capital investment could account for all of Singapore’s growth. In fact, through the most part of the 1960s, 70s and 80s, the output share of capital investment in Singapore increased from 11 percent of GDP in 1960 to more than 40 percent. But what is alarming is that very little, if any, growth is due to increased worker efficiency—that is, to the quality output of workers.[2]

This compares rather unfavourably to countries like the United States. Economists have estimated that approximately 80 percent of the rise in per capita income in America stems mainly from the productivity and efficiency of the workers themselves. Capital investment accounts for only the remaining 20 percent. Even the Japanese show a much higher rate of labour-efficiency growth. Singapore’s labour productivity, as pointed out, is notoriously mediocre. For example, in the retail industry, it is estimated that Singapore’s productivity is only 50 percent of its economy, compared to 70 percent in Japan and 80 percent in the United States.[3]

Another study pointed out that compared with workers from India, Taiwan, and the Philippines, Singaporean workers are rated as lacking imagination and adaptability.[4]

Young says compared to Hong Kong our overall economic performance has not grown any faster. Yet Singapore has spent much more of its resources in propping up that growth, a clear indication that the PAP Government has not invested the island-republic’s capital very efficiently through the decades. Young noted:

While the Hong Kong government has emphasised a policy of laissez faire, the Singaporean government has, since the early 1960s, pursued the accumulation of physical capital via forced national savings and the solicitation of a veritable deluge of foreign investment…Singapore has one of the lowest returns to physical capital in the world. The days in which Singapore can continue to sustain accumulation driven growth are clearly numbered.[5]

Another telling statistic is our public debt as a percentage of GDP. According to the latest estimates for 2009 from the CIA World Factbook, the figure for Singapore is 117.6 percent, making us one of the highest in the world – ranking sixth out of 126 countries surveyed. Hong Kong, on the other hand, ranks near the bottom at 110 with only a public debt of only 18.1 percent of GDP. This is a clue as to how Singapore derives its wealth which is primarily through the myriad of tax and savings schemes. Hong Kong, on the other hand, thrives on the energy and enterprise of its people.

Furthermore, a PriceWaterHouseCoopers report in 2006 found that the "average Singapore household is one of the most indebted in the world." At 174 percent of the personal disposable income, the household debt in Singapore surpasses that of even Britain (116 percent), Japan (100 percent) and the United States (90 percent).[6] As a percentage of GDP, Singapore's total household-sector financial liabilities stands at, according to the Monetary Authority of Singapore, 85 percent in 2004. This compares with 60 percent in Hong Kong. Much of this debt can be attributed to the ballooning of HDB loans. With the skyrocketing of HDB prices in recent months, the household debt of Singaporeans would no doubt escalate as well.

Analyst Dan Fineman also questions the wisdom of Singapore’s economic strategy. He points out that Singaporeans are deprived of disposable income by numerous (hidden) taxes, fees and expenses as can be observed by the fact that they consistently consume a share of GDP 10-20 percentage points below that of their counterparts in Hong Kong.[7]

Economist and Nobel Laureate Paul Krugman said of Singapore's economic system: “One can immediately conclude that Singapore is unlikely to achieve future growth rates comparable to the past.” This is because when quantitative accounting is performed, an “astonishing result emerges: all of Singapore’s growth can be explained by increases in measure inputs. There is no sign at all of increased efficiency.”[8]

Further confirmation of Singapore's economic predicament comes from a comparison of the rates at which emerging markets approximate the productivity of the industrialised countries. Among Asia's Tiger economies, Singapore ranks the lowest.[9]

Hong Kong   2.0
Taiwan         0.8
Thailand       0.1
Korea          -0.2
Indonesia    -1.2
Malaysia     -1.8
Singapore    -3.5

In a nutshell, the way that Singapore has gotten rich is not through efficient use of our resources and innovative production. Rather it has been through squeezing more and more out from a limited resource, that is, the people. But like the sugarcane-juice seller, as the cane is passed through the crusher less and less juice comes out with each squeeze. There comes a time when all that is left is pulp.

References
1. Paul Krugman, The myth of Asia's miracle, Foreign Affairs, 1994, Vol. 73, No. 6, p. 71.
2. Ibid.
3. Service sectors lagging behind in productivity: Cheow Tong, Straits Times, 2 November 1994.
4. S'pore last in Perc labour survey, but this may attract investors, Business Times Online, 8 September 1998.
5. The 2001 Index of Economic Freedom, The Heritage Foundation.
6. From Beijing to Budapest 2005/2006, PriceWaterHouseCoopers.
7. Dan Fineman, Fiscal Predator, Far Eastern Economic Review, 6 May 2004.
8. Paul Krugman, The myth of Asia's miracle, Foreign Affairs, 1994, Vol. 73, No. 6, p. 71.
9. Paul Krugman, The Return of Depression Economics, 1999, Penguin Books, New York.

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