Are we being pragmatic or recklessly foolish?

Chee Soon Juan

I bought a car, the first that I have ever owned, from the junkyard when I was a student at the University of Georgia in Athens and paid all of $50 for it – with the COE thrown in.

Okay, it was nothing to look at. In fact, it was arguably the ugliest looking car in the world, the Americans didn’t call it the ‘Gremlin’ for nothing. But I’ll have you know that it could go from zero to fifty in ten – minutes.

All the talk about the genteel hospitality in the American South was true. Folks would cheerfully wave whenever they saw my car pass and I would return the pleasantry.

All except for this one bloke. He drove a bright yellow, flashy sports car. I think it was a Lamborghini. Athens is a small town, and we would often bump into each other and whenever he pulled up alongside me at the traffic lights, he would give me one of those what-on-earth-are-you-driving smiles and would rev his engine just to tell me that he was going to leave me in the dust in the very near future.

When the lights turned green, he did exactly that – splashing mud and debris all over my windshield. Under normal circumstances, I would catch up and give him a piece of my mind but I figured that since he wasn’t from the PAP, I’d let it pass. Besides, the windshield wiper wasn’t working.

As I was chugging along one morning, I saw a plume of smoke rising in the distance. When I got closer, I saw a bent lamppost and underneath it was a yellow pile of wreck. When I drove up, I saw that it was my Lamborghini friend looking kind of sheepish.

Fortunately, he was all right. But his car – togerther with his ego and presumably his wallet – was a total wreck.

The Golden Period

After I was done with my studies and returned to Singapore, I had this sense of deja-vu. I realised I was seeing the Lamborghini all over again, only this time in its place was Singapore and the stakes were much higher.

It was another vehicle that was flashy and glamorous, oozing with wealth and power and it streaked ahead so fast and so far ahead that it left our neighours in the dust. We were the gleaming financial centre, fabulously rich.

We have been able to achieve the feat and in such a short span of time, we are told, because the Government was unencumbered by a system of checks-and-balance and the messiness of democratic practices.

The corollary, of course, is that the people did not have a say in the way the country was run and the government does as it pleases. The vehicle came without the brakes – the brakes of democracy.

What keeps me awake at night is when we come to a tight corner or, worse, are approaching the edge of a cliff, what do we do? More importantly, does the driver know what he’s doing? These questions are made scarier, and ominously more compelling, when you consider what I’m about to tell you. In July 2007, Lee Kuan Yew made his now famous “golden period” speech. he said:

We are into a period of good economic growth and social development…If there are no wars or oil crises, this golden period can stretch out over many years. Investors from developed economies are pouring money into East and South-east Asia…

Not only was Singapore doing swimmingly, Lee said that it was he and his ministers who made this possible:

It is because a competent and experienced team of ministers took painful and unpopular measures in the last few years since the Asian financial crisis to get our domestic policies to encourage growth.

Now, I want you to remember this second line because I want to remind you of a statement that Princeton economist and Nobel Laureate for Economics Paul Krugman wrote some years back:

When Asian economies delivered nothing but good news…it is easy to assume that so-called planners knew what they were doing. It is easy for government policy makers to look competent in a prosperous economy. But they may not have a clue!

So who’s right? Lee who says that it was his ministers that ushered the age of unprecedented growth or was it Krugamn who was says that ministers didn’t have clue. Let’s take a closer look.

Barely one year later, let alone many, that Lee said that the golden period would last, our economy came to a carshing halt. In the fourth quarter of 2008, our GDP plunged precipitously, triggering the worst recession in our modern history.

Remember, there were no oil crisis and no war. It was the financial meltdown in the US in 2008. As it turned out, US government gave out close to one trillion dollars in TARP (Troubled Asset Relief Program) money to the ailing banks and auto industry in America that saved our economy from falling into the abyss.

It seemed that Lee was oblivious to the storm that was breaking. But there were unmistakable signs that all was not well withing the financial world. In August 2006, Yale economics professor Robert Shiller had warned that “there is significant risk of a very bad period…serious trouble in financial markets, and a possible recession sooner than most of us expected.”

In early February 2007, world renowned economist Professor Nouriel Roubini had warned that “the party will soon be over”. He raised the alarm at the World Economic Forum in 2007 that a credit and housing bubble had developed in the US and that would end in “painful consequences for the U.S. and the global economy.”

In May 2007, Warren Buffet again sounded the alarm: “There is an electronic herd of people around the world managing an amazing amount of money…I think it’s a fool’s game.”

Note that these warnings came just months before Lee told us that we were entering an economic golden period. He obviously didn’t know or, worse, didn’t understand what was happening in the financial world. In fact, despite the rumblings, he advised Singaporeans to “maximise our opportunities in this golden period”!

Zombie investments

This is exactly what the GIC did. In December 2007, Dr Tony Tan, then a humble executive director of the GIC, injected US$10 billion into the UBS even as the Swiss bank had written off US$33 billion due to bad debts and exposure to the US subprime crisis in the second half of that year. Dr Tan said that the bank has “a worldwide global wealth management business which is something not replicable by any bank.”

In 2008, UBS posted a total loss of US$17 billion. Two years later, the bank admitted to helping defraud the US government and was fined US$780 million. Its top executive, Raoul Weil, was declared a fugitive by the US and stepped down from his position at the bank.

It gets worse. In January 2008, GIC had poured into Citigroup nearly US$7 billion. Dr Tan had assessed that Citi was a “sound bank...temporarily facing significant problems. But their franchises are strong”. (emphasis added)

But listen to what Dr Nouriel Roubini said of Citibank:

Over the course of the last 80 years, this bank has repeatedly overextended itself and teetered on the brink of insolvency, only to bounce back thanks to government forbearance, rescues, and bailouts. Any bank that needs that much help does not deserve to exist.

Nine months later, the bank announced that it was on the verge of bankruptcy and needed bail-out money from the US government. The bank was staring into the abyss with a potential loss of US$306 billion in toxic assets it had created and bought. If the US government had not stepped in with the TARP money, Citi would have collapsed and our US$7 billion would have been no more.

Not to be outdone by her counterparts at the GIC, Mdm Ho Ching was also throwing good money after bad at American banks.

She paid US$4.4 billion for a 9.4 percent stake in Merrill Lynch in December 2007, even though the bank was already losing money then. Six months later in July 2008, Merrill reported another two quarters of losses and announced that it needed more capital.

By then, the truobles with the banking system in the US had become a full-blown crisis. In March 2008, Bear Stearns, the fifth largest bank in the US collapsed because it couldn’t sustain losses from its exposure to the subprime loans.

A few months later, Lehman Brothers also folded. The crisis threatened to go up the chain and eat up off the big banks.

Incredibly, instead of pulling back, Ho Ching upped Temasek’s stake to 14 percent. She said that she believed that Merrill had a “great franchise” and that she had “great confidence” in its chief executive John Thain.

Sure enough, just months later, this “great franchise” went belly-up and had to be taken over by Bank of America. John Thain was forced to step down as CEO because he had not fully disclosed all of Merrill Lynch’s losses.

And just before the bank was bought over, John Thain, in whom Mdm Ho had “great confidence”, authorised payments of salaries, bonuses and dividends to its top executives a total of US$3.6 billion. Before he left, Mr Thain had spent US$1.2 million redecorating his office including the purchase of

  • US$87,000 for a rug,
  • US$25,000 for a table,
  • US$87,000 for guest chairs,
  • US$35,000 for a commode
  • US$1,400 for a wastebasket

In case you’re wondering where all our money went to, there’s your answer. It was like the what’s what in the land of zombie investments.

One would think that after all this, wiser heads would prevail and that it would be prudent to take a more cautious approach to problems that plagued the global financial system. But no, we are ramping it up. As recently as 2011, Lee Hsien Loong waded further in:

Competition from emerging financial centres in the region is intensifying…MAS needs to continue leveraging on Singapore’s system-wide capabilities to strengthen our position as an international financial centre.

In 2012, the world woke up to the news that JP Morgan Chase had lost and estimated US$4 billion in reckless trading. It was as if 2008 never happened. Worse, the Barclays together with the whole cabal including Citi were embroiled in rigging the London Interbank Offered Rate (LIBOR) which effectively sets lending rates for all commercial transactions. Eurozone crisis is threatening to pull the entire global financial system down.

This is the heap – corrupt and murky – that Lee Hsien Loong wants Singapore to be on the top of.

What do we do?

My friends, this is an insane position to be in. Our national wealth – all our CPF savings, our tax surpluses – are controlled by two entities, one headed by the prime minister and the other by his wife . And we have absolutely no say it them.

We have no idea how much they control in the first place, we don’t know how and where the funds are invested, and we haven’t a clue what returns we are making on these investments.

No other people in the democratic world, the sane world, in the pragmatic world would leave themselves open to such an exposed and vulnerable position.

Professor Chris Balding of the Peking University have been trying to match the numbers with the claims that the two national wealth funds put out. But it is like trying to square a circle. The numbers just don’t add up.

Professor Balding is not the first one to draw attention to this situation. I’ve been trying to do this for the last 20 years. In 1984, former deputy prime minister (the late) Toh Chin Chye said of the reserves that “we don’t know if we are on thin ice or solid rock.”

One way to resolve this dangerous problem is to change the government at the ballot box. But, hand on heart, is this a viable solution or are we indulging in wishful thinking because the alternative is too inconvenient, requiring too much pain and sacrifice?

With our election system the way that it is, with the PAP pulling all the levers of control – amending the constitution to introduce new laws like the GRC at will, changing boundaries of the constituencies like changing underwear, controlling the mass media – is relying solely on elections to bring about political reform a serious proposition?

The problem is that financial and economic crises don’t wait for elections. How many more five-year terms are we going to wait before catastrophe hits and we are unable to extricate ourselves from a political quicksand?

I have said this before and I will say it again: We cannot just depend on elections and elections alone for political change. We need something else. And that something else is freedom of assembly. Listen to what Nobel Laureate for Economics Amartya Sen, hardly a rabble-rouser, said:

Political and civil rights give people the opportunity to draw attention forcefully to the general needs and to demand appropriate public action. The governmental response to acute suffering often depends on the pressure that is put on it and this is where the political rights (voting, criticizing, protesting, and so on) can make a real difference. (emphasis added)

We must do more than just relying on elections, more than just writing letters to the forum, posting articles on our blogs, voting during elections. These are all important activities but we must do more. We must organise ourselves – the political opposition together with civil society – and push for our freedoms of speech and assembly, our right to peaceful mass protests.

Get out there and organise the people. Use the Speakers’ Corner for now. It wasn’t a gift from the PAP, it was a hard-won concession. In time to come, let us expand our protests beyond the confines of Hong Lim Park in numbers large enough that will compel the Government to bend to the will of the people.

It is only when we gather in large enough numbers that the Government will open the books of GIC, Temasek, and HDB for inspection; that it will stop the madeness of bringing in more foreigners that this island can take; and that it will hold genuinely free and fair elections.

Power never concedes with a demand

Our Malaysian friends understand this very well. In recent years, they have doggedly challenged their government’s ban on public assembly, forcing the BN to take unprecedented steps to open up political space and democratise their country. Recently, Malaysia promised to abolish the ISA, free up the media, and the Malaysian courts have even ruled against the government, declaring Bersih a legal organisation.

They understood what 18th century American slavery abolitionist Frederic Douglass said: “Power concedes nothing without a demand. It never did and it never will.”

My friends, we cannot stand up for justice on bended knees.

Some say that we are a pragmatic people, uninterested in human rights and democracy. Whenever I hear this I think to myself: Are we really being pragmatic or are we being foolish and reckless like my Lamborghini friend in Athens?

Even if it is true that Singaporeans don’t understand and don’t care about democracy, it doesn’t matter. What matters is that Singaporeans who do – Singaporeans like you and I – must press ahead with the arduous, but noble, effort to make into reality that idea, that dream, that hope of democracy that has eluded our nation for too long.

Let us not yield and let us not kneel. Instead let us stand up like men and women with all my our transgressions, with all my fears, with all my imperfections, let us stand up and rattle the cage of oppression. Let us defy those who would make put our minds into cages, our eyes into blinkers and our souls into mortuaries.

Let us take this journey to the place where we will know truth and then truly know what it means to be free, to be honest, to be human.

Thank you.

: Book Launch of Democratically Speaking
Democratically Speaking is available for online purchases here.

Chee Soon Juan is the secretary-general of the SDP. This speech was made at the launch of Democratically Speaking on 5 August 2012.