Realigning The Population Debate Part 2: Shifting economic fundamentals

Vincent Wijeysingha

In Part 1 of this Perspectives article, I suggested that the present population policy is rooted in the exigencies of a former political era from which the current government struggles to free itself. The Lee Kuan Yew administration assembled a formidable political apparatus which entrenched its worldview and rendered feeble any move to depart from it.

In this concluding section of my article, I examine some of the economic underpinning of population policy which are, in my view, equally susceptible to the former ideology but which must be altered if we are to deal with the challenges the government’s White Paper has not adequately addressed.

Singapore, as one of those nations straddling the economic superiority of the developed world while still possessing existing capabilities for economic transformation, is at pole position to exploit the characteristics of the age if we are daring enough to begin the process of economic transformation.

To be sure, our resource limitations remain. There are only so many people we can accommodate on the island and only so much reclamation we can achieve. Indeed, in his paper Creating Jobs and Enterprise in a New Singapore Economy, Mr Tan Jee Say places his analysis squarely on these limitations.

An economic policy based largely on supply side factors has only so far to go before it begins to approach waste and over-production. A case in point is China’s Ghost Cities where relentless construction of super-cities has resulted in excess capacity so profound that some analysts say will simply atrophy without ever achieving their potential. Chengdong, Zhengzhou and Dongguan all boast hundreds of thousands of shops, offices and apartments which are entirely empty and not likely to be filled within their natural lifetimes.

The debate following the publication of the White Paper in and outside of Parliament has taken place largely from the supply side. Members of Parliament rose to defend the four assumptions of the White Paper which I highlighted in the previous part of this article.

Probably unconsciously, since post-War geo-economic history has limited reach, they also depended on the post-War assumptions of the Lee Kuan Yew generation. The media, which could have played a signal role in deepening the debate, sadly fell into line, subtly warning of the untold dangers of controlling population growth. Many of the Chambers of Commerce sounded the threaten investment flight. The Singapore Business Federation warned of the impact on business of controlling the labour supply.

The challenge to business

Business leaders are fully aware of the pressures that increased wage costs will have on their outfits. For several years, they have called for the Government to better appreciate the demands on their competitiveness. They note the pressure of rental and transportation costs on their bottom line which the Government has failed to mitigate. But they struggle to place these pressures cogently before the Government since there is little they can do to campaign for more competitive accommodation and transport terms which appear to be non-negotiables as far as the Government is concerned.

I once shared a speaking panel with a small business owner who admitted that while he could confidently campaign for cheaper and cheaper labour, since this appeared to coincide with policy fundamentals, he was unable to tell the Government that their rentier approach to business was hurting his enterprise. He admitted to being afraid of reprisals.

During our party walkabouts, we frequently hear stallholders and shopkeepers complain that state landlords repeatedly raise their rents and even vary their rents according to their profitability. Unfortunately, they also admit to being afraid to voice their concerns. This stalemate is exerting a strong backward pull on the debate.

And what of the economic arguments surrounding the debate? Writing in the IPS Commons, an online opinion platform hosted by the Institute of Policy Studies, economists Donald Low, Yeoh Lam Keong, Tan Kim Song and Manu Bhaskaran added their carefully considered perspectives. Indeed, they confirm that the general trend of basing decision-making on outdated modalities strays into the economic sphere too.

An economic time-warp

They argue that subsidising industrial costs such as labour are a form of protectionism and in fact do not conduce to productivity but detract from it because it highlights lack of competitiveness in the economy. Subsidised labour in the long-term weakens the economic structure because it provides poor feedback on our competitiveness.

There is no reason to assume that our only advantage is cheap labour. Indeed, the potentials identified in this essay could enable an economic transformation if the current leadership were daring enough to grab hold of the proverbial horns.

Furthermore, subsidised labour is in effect a tax relief from the people: in other words, we are subsidising companies to produce at below par. Again, during the LKY era, this may have been a hard but necessary pill to swallow.

Today, however, the argument that Singaporeans must, through their hard earned money subsidise multinational corporations, can no longer stand. Subsidised labour also dampens wages for local workers so that, in effect, Singaporean workers are actually facilitating the very process that leads to stagnant wages.

Low et al also hint at other economic shibboleths the present Government clings too. Production is not a zero-sum game as it might have been in the Cold War era. Companies moving to other countries do not necessarily affect domestic economic performance because consumption is not a finite resource. Countries such as Singapore can take advantage of higher consumption elsewhere by way of responding to increased demand from those countries.

Singapore had a large number of highly competitive locally-grown banks and finance houses and our service sector and (relatively) high technology sector were growing. With the advent of the Export Orientation Industrialisation (EOI) strategy, we systematically replaced these sectors by a growing dependence on Multinational Corporations investing here. The priority of that moment was jobs at all costs. I concede that this was necessary. Today, the priority is to take our industrial potential in a new direction, one that, as it were, ‘re-nationalises’ our economy and takes advantage of the ecological and systemic capital we have built up.

Southeast Asian expert, Garry Rodan, went so far as to speculate that a secondary political advantage was to be gained from marginalising the local business sector. It enabled the PAP government to weaken the political strength of local businessmen in favour of foreign capital whose only intent is its bottom line. The positions on population policy taken by the international chambers of commerce seem to give some strength to this argument: Singapore’s destiny remains a priority to multinational corporations so long, and only so long, as our short-term investment climate remains conducive to their bottom line.

Now, let us make no mistake about it. A strong and healthy relationship with international investors is entirely desirable to an economy such as ours. International investment brings with it finance, technology, expertise and, to some extent, productivity capabilities. However, an investment climate that proceeds at odds with the well-being of our people and the long-term viability of our society must be avoided. It is the job of the government to balance the priorities of investors with that of the nation as a whole.

Re-imagining a new compact

The SDP’s population paper, Building a People: Sound Policies for a Secure Future, seeks to re-orientate the various strands of the debate in a sustainable direction based on a careful reading of current trends. Taken in tandem with our housing and healthcare policy papers, alongside our Shadow Budget 2013: Transforming Our Capabilities, we acknowledge that the proper object of policy should be the well-being of the people and a communitarian approach to meeting the cost of public goods.

For too long we have viewed public goods such as healthcare as a drain on the economy. In fact, both at the bottom line and in moral terms, public goods are, pardon the pun, good. Increased spending on social well-being does not depress the economy since it creates jobs and expands the expertise in these fields as well as allocating resources for increased productivity.

Increased spending in such public goods as transportation encourages more usage of such goods thus limiting the social (eg environmental) cost of city living (eg pollution, overcrowding). Increased spending in the education industry contributes to technological innovation and a higher skilled workforce.

Interestingly, the population White Paper sets down a series of objectives:

  1. Mitigate population ageing;

  2. Grow the GDP and per capita GDP;

  3. Cover shortages in labour supply and skills and act as a cyclical buffer; and

  4. Contain wage costs to ensure international competitiveness.

These objectives are rooted in a national framework that has fast outpaced itself. A new compact which prioritises both our indigenous capabilities and a new sense of Growth with Equity rather than Growth at all Costs is called for. That the government timed the White Paper in the face of such loud and widespread criticism and a devastating by-election loss suggests that the pathways set in train by the Lee Kuan Yew leadership are still very much entrenched and which the current administration has neither mind nor stomach to consign to history.

Dr Vincent Wijeysingha is the SDP Treasurer and Head of Communications Unit.

%d bloggers like this: