VW: High prices, low wages will lead to crisis

December 19, 2012
Singapore Democrats

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Singapore Democrats

Dr Vincent Wijeysingha recently spokeat the Online/Offline forum held last weekend where he talked aboutthe current economic arrangements in Singapore and its implicationsfor our future. Below is the text of his speech.$CUT$

The issue we are addressing today –and the incident that gave rise to it – is a serious one and haswide ramifications for societal stability.

I think we should,therefore, be very clear about what we are talking about, because awrong approach can so easily ignite the wrong gunpowder: History hasmany examples of problems that have derailed societies because of amisapprehension of the core problem.

Let us first of all acknowledge thatall nations are vulnerable to national security challenges. Sadly, wedon’t live in a world where it is possible to exempt ourselves fromdanger. In this region, Singapore is, perhaps, particularlyvulnerable because of the many antipathies the first PM made throughhis arrogant commentary against our neighbours, their cultures, theireconomies.

China’s geostrategic ambitions andcontracting economy, terrorist elements in Indonesia, and theproximity to a North Korea governed by a very inexperienced leaderalso give rise to potential dangers.

But at the same time, we are oddly safebecause of our Strategic Framework Agreement and Free Trade Agreementwith the United States, our place in the regional economy, and thesignificant share of the Asean trade that we carry. So this is theframework we are operating in.

The issue we are discussing today caneasily be hijacked by a xenophobic causal discourse because itimplicates the lowest-waged sectors of our workforce which are alsomassively populated by foreigners. But to interrogate the issue froma security perspective may be precipitate and premature. My take isthat national security implications raised by the volume of foreignworkers in Singapore are limited and they are not imminent.

Having said that, I readily accept thatthe frustrations of our people are very real. They are deeplyinfluenced by the social and economic hardships which the immigrationpolicy has raised and which we have not had the opportunity to debatewidely.

But in my view, the central issue isthe stability of the economy. Our industrial structure continues tobe based on a goods and lower services model propelled by cheaplabour. More than half the economy is based in these sectors,employing half of the workforce. This economic model, althoughtinkered with at different times and in limited ways to varyingsuccess, has really not departed a great deal from the low-wagedpredominance.

Now, there are only two ways to enhanceoutput: either you reduce your costs or you increase yourproductivity. There are no magical alternatives.

In the late 1980s, the principles ofthe Washington Consensus were developed. They advocated, among otherfactors, reductions in public spending and privatisation of publicgoods as the policy options for the coming period. Singapore adoptedthe principles unhesitatingly.

The government coupled this witheliminating the means by which workers can bargain for better wagesand limiting the space for debate.

Salaries across the lowestcentiles of our workforce declined in the last ten years and have notrisen much more noticeably for those in the middle centiles whilethey have rapidly increased at the upper levels.

Coupled with low or depressed wages,there has been a lack of political will to tackle inflation.

In thelast 4 years, the government has blamed inflation entirely onexternal factors, even though the most significant inflationarypressures have been in transport and accommodation. Both of theseinflationary pressures the government has significant control overthrough COE levels and HDB prices.

Now add to that mix the privatisationof public goods. The outcome?

A demoralised, struggling populationworking among the longest hours in the world at incredibly poorproductivity levels in what the Economist Intelligence Unit hasrecently described as the ninth most expensive city in the world, andconstantly at the mercy of being replaced by more cost effectiveforeign workers.

We are a population that feels little strength orability to improve our conditions, either through fear of change,fear of the PAP, or distrust of the alternative policies.

History has taught us the suffering anddesperation that gave rise to the revolutions in America, France,China, Russia did not come from the outside. They came from thepolicies of capricious kings living exorbitant, expensive lifestylesand apparently deaf to the suffering of their subjects. There isnothing so calculated to provoke social unrest as a hungry stomachand the inability to fill it.

In Singapore, we are a far cry fromsuch scenarios, you say. But not so much because we are a happy,satisfied lot. We have in place a formidable police apparatus, aidedand abetted by laws such as the Internal Security Act and CriminalLaw (Temporary Provisions) Act to silence any form of dissent. Youwill notice across its history that the PAP government reacts mostharshly and swiftly when a social movement is calculated to attractwidespread support. They dealt with the SMRT industrial actionharshly and swiftly. The PAP’s longevity has depended on this.

It has also depended on asocio-economic compact it established with the citizens in its earlyyears. But what are we to make of the eventual outcome – and itwill come – when Singapore’s comparative advantages on which thecompact is based begins to fade? The real threat to our security willcome when the PAP’s performance legitimation begins to decline.

So far, it is sad to say – but wemust face it if we are to engage with the challenges of the moment –it is our silence and fear of acting in the way the Chinese busdrivers did that keeps the lid on social unrest.

High prices and poor wages willeventually reach a point where our citizens have more to lose than tofear. Then, the government will be faced with precisely the kind ofcrisis that leads to regime change. And if inertia or poor qualityleadership, as we are already seeing examples of, make the governmentincapable of responding decisively and creatively, it may be too latefor us to suddenly realise that the emperor has no clothes.

Studies have shown that poor labourconditions lead to high turnover, poor productivity, a sense ofaimlessness and lack of commitment. The morale of our people, theircommitment to the nation, the sense that they are being listened to,these engender a sense of ownership and responsibility. However, twokey principles which have animated PAP policymaking have led to asignificant divide between the people and the government. They arethat the people are mere economic digits and the nation nothing butan economic laboratory.

Fear is not an enduring phenomenon. Ithas a breaking point beyond which people are no longer fearfulbecause their fear safeguards nothing. When we enter into an interimperiod where the cheap labour advantage moves elsewhere – and it isalready beginning to – if we haven’t done the hard thinking andplanning beforehand, we will struggle to remedy the situation atcrisis point.

The UK faced that problem in the 1980sduring Mrs Thatcher’s time in office. Thankfully for them, theysuddenly found oil in the North Sea which allowed them to stabilisethe transformation. Singapore is not likely to be so lucky.

An economy based on a cheap labourfoundation eventually faces a race to the bottom, that is, to competeto be able to offer the cheapest wages. Such a situation is onlypolitically manageable when there are means by which workers canbargain as equal partners in the economic enterprise. In the absenceof this, you generate the pressures I describe.

What can we do? Sufficient time needsto be given to deliberating on a Singaporeans First frameworkencompassing alternatives such as a Minimum Wage; the refocusing ofour industrial structure towards the SME sector; a far more creativeeducation, not just for children in elite schools but all schools;sovereign wealth funds delinked from absolute government control; andpublic services run on a service rather than profit ethos.

Where do we start? The only means ofopening up the discourse is to return to citizens their role – infact, their responsibility – in policymaking. Those fundamentalrights that have been limited or even removed in exchange for thesocial compact, the freedoms of assembly, association and speech,need to be returned to the people. Even in ancient societies like theRoman empire, the nation started to crumble at the very point whereexploitation, inequality and royal deafness began to couple together.

Contrary to what the PAP – andespecially the first Prime Minister – clung to over the years, thefundamental freedoms are not fanciful notions without a bearing onour economic system. They are fundamental elements of it for thesimple reason that no one individual or group can be expected toanticipate the answer to every question for all time.

The effects of the Washington Consensusare considerable. But in the absence of different views heard anddifferent methods tried, we will learn too late. We cannot respond toexistential crises by pretending they don’t exist.

The Minister of Manpower’s handlingof the SMRT industrial action; the Transport Minister’s statementon fare increases; the general refusal to even countenancealternative approaches, together with the resolute silence of themainstream media, will do nothing for our ability to weather futurestorms.

We need to be freeing up our social structures so that theproject of nation building can expand rather than contract. Theintellectual bunker to which the government appears to have retreatedis a dangerous reaction.