Free-market or socialism: A response to TOC

Chee Soon Juan

In his analysis of
my interview with The Online Citizen, Part 4, Mr Leo Khaw attributes to me the view that the Western market is without any form of regulation. This misrepresents what I said.

A careful reading of the interview will show that I was referring to criminal activity and that players in the financial sector are not immune from this. An example is Bernie Madoff who ran a Ponzi scheme and cheated investors; ergo the need for regulation.

In my book
Democratically Speaking, which Mr Khaw refers to, I traced the regulatory framework of the banking system in the US to the 1930s. Following the bank-run and financial panic that brought on the Great Depression, the Glass-Steagall Act, a law designed to separate funds of commercial banks from investment banks, was introduced.

This regulation remained in place until the 1999 when the US Congress repealed Glass-Steagall and allowed bankers a free hand in moving funds around. Unscrupulous bankers securitised dubious housing loans and sold them to unsuspecting investors, a scam which eventually ended in the collapse of the derivatives market and caused the financial mayhem in 2008.

I also talked about the enactment of the Dodd-Frank Act by Congress in 2010. The legislation attempts to put in controls over the operation of banks.

How Mr Khaw sees all this as me saying that the West is “without any form of regulation” is hard to understand.

The writer accuses me of saying that as far as our economic system is concerned, “we are just cloning the West”. This is another misrepresentation of what I said and wrote.

A proper reading of the interview and my book will show that I am referring to the financial system in the West. Just as a credit and housing bubble was forming in the US due to the deregulation of the financial system, Mr Lee Hsien Loong also deregulated our banking system in 2003. The derivatives that were sold by American banks were also sold by Singaporean banks. They called it Abacus, we named them Pinnacle Notes and Minibonds. A toxic financial instrument by another name wreaks just as much havoc. We were ignorantly following what the American bankers did.

How, from this, does Mr Khaw come to the conclusion that “Chee’s portrayal of our economic system seems to pivot on the point that we are just cloning the West”? The financial sector is but just one part of an economy.

Mr Khaw also writes that I said that the Singapore market is not regulated. I make no such claim. In fact, I am on record over many years and in various publications pointing out that our over-regulated environment puts our business community in a commercial straitjacket, rendering Singapore unable to compete on ideas on the world stage.

Mr Khaw says that it is “silly” to give up our comparative advantage in the financial sector. Developing ourselves as a tax haven is not comparative advantage. It is a predatory, extractive economic strategy that ultimately hurts, rather than helps, the Singaporean people. I have described in detail how this happens in
Democratically Speaking
and will not repeat it here. Even as I write this piece, the PAP Government has had to sign agreements with its foreign counterparts to curtail our secrecy banking laws.

I fail to see how calling for our financial system to be reformed to prevent money-laundering and tax evasion/avoidance makes us “unwitting puppets of the intellectual forces of pure and unadulterated socialism.” Even the IMF, no socialist enterprise, has pointed out the deleterious effects that tax havens have on society.

The writer also points out that “Chee speaks about the dismantling of GLCs and also speaks gloriously about free enterprise economy. Yet, at times, he uses a leftist narrative about rich getting richer and poor getting poorer.” On this, Mr Khaw is spot on. But then, he concludes: “Seriously, I can’t put my finger on the pulse on this one.”

Let me explain: A free-market economy does not preclude state intervention to invest in the needy and support the infirm. Many countries in northern Europe have combined free-market elements with socialist principles to good effect, producing robust and sustainable economies, and, most important, happier communities. My colleagues and I in the SDP want to do away with a centrally-planned economy and allow an entrepreneurial class to develop and flourish in Singapore. We also see the need to reduce the income disparity by introducing capital gains tax for the very rich and minimum wage for the very poor. It really is not that confusing.

What we envision for Singapore does not stem from political expedience, as Mr Khaw puts it. It is not motivated by an eye for an eye. It is an ideal born out of the virtues of diligence, justice and compassion, an ideal that even though we may never achieve, but one to which we must never fail to endeavour.

Dr Chee Soon Juan is Secretary-General of the SDP. Dr Chee’s latest book, Democratically Speaking, is available for online purchases here.

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