Overreliance, continued

I found, on The Economist, two charts that were rather intriguing yet baffling. They both show how, in today’s world, corporate and international, we are becoming more and more dependent on single entities that have rose and braved through multiple storms. They both reinforce the thought on ‘Overreliance’ – https://theaveragedollar.wordpress.com/2012/08/02/overreliance/

Sinodependency

A chart depicting ‘Sinodependency’ – how dependent other players in globalised capitalism are on the Chinese economy. Source: http://www.economist.com/blogs/graphicdetail/2012/08/daily-chart-9

As seen on the left-hand-side, firms listed on the S&P 500 with Chinese operations have been really depending on the world economy’s next big thing to thrive and do far better. This isn’t really a good sign amid good growth – the rippling impact felt should the Paradox of Thrift seep into Chinese markets during a recession would be impeccable. The right-hand-side chart, more economically inclined, exemplifies how bad economic growth would be affected, should China crash all of a sudden.

The dependence for growth and survivability on China, its firms, and its consumers seems to me to be a rather worrying issue. Yes, China is enjoying great progresses in development and so are we benefitting from its cheap consumer goods. But should just one economy go into a downturn, we’ll all be sent into jitters.

One-Firm Economies

Relative dependency on the largest listed firm per country, as a percent of GDP. Source: http://www.economist.com/blogs/graphicdetail/2012/08/daily-chart-10

As the world may rely on China, so could one economy depend on its largest firm. In Luxembourg, ArcelorMittal apparently generates revenue equivalent to 161% of its GDP. Having such a large mass of national income able to be earned by just one company sounds like a good deal, but it is not until when these firms come to a crash (touch wood). They typically control industries, employ many, develop productivity, and lead innovation.

Without a firm which could possibly be the economy’s hallmark (e.g. the revenue earned by Sands China goes to prove how much Macao relies on the gaming sector) could cause serious repercussions, and even possibly and industry-based domino effect. In Macao, a collapse of the gaming industry could mean a total economic standstill.

There ought to be serious thought given to diversification and critique over not doing so. As far as it might seem easy to manage one-firm or one-industry economies, the impacts their fall could produce would not be the same.

Two years on (Part 1)

I was packing my older stuff around the house and found the following essay, written in my years in junior college (2010), in General Paper (GP) where one question is to be attempted out of 12, and have to be written under 90 minutes with no research or reference to be done (yes, they could be done before the exam but there is no prior knowledge of the question). It is marked exactly like an English language composition paper except that there’s more focus on the thought process.

Because it is written without any research work done, there are no references. I do not intend any intellectual property infringement (who would during an exam?) and some factual information might be inaccurate. But I would like to reexamine my thought processes then and revisit my ability to regurgitate facts and rearrange them in an artistic manner (apologies for the self praise, my teacher once stated those as a hallmark of a good essay). The essays were edited to remove grammatical and spelling mistakes made under stressful conditions in tests where there were no two ways about it.

There would likely be more to come as my ancient papers get excavated. And by the way, economics-related questions were rarely chosen by my peers for its content-heavy and tricky nature, so these are rather few and far between.

How important is the knowledge of economics in today’s world?
Written 09 April 2010, scored 33/50

The study of economics, which is a discipline which looks at how money flows and how resources should be allocated to attain efficiency in the real world, primarily helps facilitate the objective of earning money. Different models of economics co-exist in today’s world, and the knowledge of these theories, such as Classical Theory or Keynesian Economics, are a must should a nation’s people want to maximise their economic well-being. Nonetheless, knowing is not enough, the people must apply.

In the 1940s, after the Great Depression and World War II, the world was brought to a juncture where nations had to decide on nation-building or rebuilding policies. Needless to say, the economy was one important aspect of nation building. Most modern sovereign states, as we would have known, chose a to adopt a predominantly free market, where together with education, empowered people with knowledge on economics so as to facilitate production and consumption relatively independently, which also challenge the people on application of economic theory. It is important to allow people to assume roles of production and make economic decisions on their own. Without prior economic knowledge, how would countries such as the US or Britain, just to name a few, be among the world’s leaders today? The US has been a capitalist state, which was also strongly emphasised since the post-war era, and hence it goes to prove that such a system is workable. In short, the free market system works for many countries, but in order for it to be so, economic knowledge has to be first put into the brains of the people.

During the same era, some nations decided upon the exact opposite of such a system. These nations were known as the communist and socialist states, such as the former USSR and North Korea today. Such a system may work for some countries as the government ensures economic efficiency and welfare for the people, in particular the employed. In North Korea, well known as a command economy, knowledge of economics is of fare less importance, as the government decides ‘who produces how much of what in what way’, i.e. the government does all the resource allocation. Not even the producers need to know about economics – all they do is produce for the government. In such a system, economics is clearly of little use while technical skills would have been more practical to pick up. This system, on the other hand, breeds laziness and under-utilisation, as there is no incentive for firms to be productive; they just have to meet the status quo. (Since my teacher commented “elaborate” while marking this essay, I shall do so now: For a simple reason, there is no incentive to work harder. However hard one works or however efficiently one delivers, the government takes everything and redistributes it in a way they deem favourable, usually as equal as possible. This is the problem with socialist states.)

Besides, some countries’ peoples may not be ready to take on the challenges of the modern world and economy. It is hence, in essence, pointless to empower these people (the general public) with such knowledge as business leaders and the government would still take care of the masses – their interests and economic well-being. Many richer nations in Africa such as Egypt or South Africa are still developing their core industries that were naturally endowed or state-created, namely tourism and diamond production respectively. In time to come, the knowledge of economics would start to be of importance should the government decide to empower their people with economic decisions to make. Then, we will see a proliferation of baccalaureates in these nations with relevant certificates.

So when a country is determined and ready to raise their people’s standard of living, economics comes in very important should the nation adopt a free market system to economic development; most would probably do considering the testimonies the two main types of economies mentioned would eventually generate. In Singapore, the government adopted mainly the free market system, but played a very paternal approach from the 1960s up to the mid-1980s. After gaining independence in 1965, the Economic Development Board (EDB) was set up in Singapore, and thereafter it was regulated that economics would be a module in many polytechnic, pre-university and university courses. The tiny city-state saw a boom in economic growth all the way up to the 1990s when growth slowed down as it approached saturation. Today, the average Joe in Singapore could blabber at least something very basic about demand and supply; about 7 in 10 pre-university students choose to study economics and humanities faculties have been increasing economics intake sizes each year. Amongst many factors, one reason Singapore is going strong is the presence of economic education, although some critics argue that the government intervenes too much in hope of creating niche industries. This is, of course, outweighed and compensated by the growth the state enjoys.

The knowledge of a large range of economic theories is important as well. Firms want to produce efficiently, hence the costs theory; consumers want maximum utility (or satisfaction), thus the Law of diminishing marginal utility; whole economies want to gain from trade with others, thus the comparative advantage theory. The knowledge of both microeconomics and macroeconomics, in short, will be vital to maximising society’s welfare, ensuring the nation enjoys growth, allows industries to stay highly productive and the entire economy to be efficient in allocating resources for production and consumption.

However, there are times when economics may fail. The recent Late 2000s Global Recession was brought about by the subprime crisis earlier and aggravated by the fall of Lehman Brothers Inc., America’s fourth largest bank, due to the former crisis. Too many factors have been overlooked in such economic and financial decision making (I was asked to elaborate again: The subprime and financial crises were probably caused by a combination of not using economic knowledge appropriately by making wrong decisions and the complication of theory and real-world happenings; there were too many incidents happening with multiple frameworks coming into play and not all of them could be directly linked to economic theory). Capitalism, on another note, is well known for exploiting the poor, especially for their labour, in less developed countries. Either way, the failure to harness and apply the knowledge of economics properly and responsibly leads to economic destruction. This leads philosophers to a fundamental question: should people be empowered with economic knowledge, regardless of economic significance?

Capitalists clearly say yes to that. With economic knowledge and skill, economists developed the Gini coefficient to measure income disparity, which is increasingly becoming a problem for all kinds of economies. Most governments would probably not want to restrain economic knowledge for it would only worsen the Gini value. It also kills philanthropy as the rich would be made up of only a small group of elites who can’t be bothered with causes especially those championing the poor, compared to the current situation in many European nations like Germany or the Netherlands where the rich donate generously due to peer pressure.

Economics, the study of how to stay efficient to maximise benefits and welfare, either monetary or non-monetary, would be desirable to any member of the general public – humans are naturally greedy, which we all could concur, and want to harness this knowledge to maximise income and quality of lives for themselves. However, some governments, depending on the economic and social landscape, restrict this knowledge from the people. There have been success stories, there have been failures, but in any case, the nation able to make use of economic knowledge and apply it to real life, regardless at national or individual levels, would surely be able to enjoy and reap the benefits from this elegant discipline.

Afterthoughts Now
The use of economic knowledge must be well managed and monitored. How do we evaluate its importance then? Empowering people with economic knowledge would be beneficial if only they could apply it for the benefit of the nation and society.

Exits, revisited

The furore over European sovereign debt, bailouts, Euro exits and Greece (amongst a whole lot of other Eurozone economies) seemed to have died down a little following multiple bailout decisions and resolutions made. But with the polls looming and the rise of anti-EU political parties in Northern Europe countries such as Germany, Norway, and the Netherlands, the fundamentalism of the Eurozone and possible exits of a few member states come back into question.

Every nation for itself, once again, as expected
See also: https://theaveragedollar.wordpress.com/2012/06/10/a-union-for-self/

Many still ponder over the possibility and of one or a few exits from the Eurozone in the near future, a move that would shake the currency union and shared monetary union across 17 countries inhabitated by 500 million. The fundamentalism behind the urge to disbelieve the notion of an exit by any member state is rather straightforward – it is clearly an issue of self-interest.

It is already clear that, on all fronts, people and organisations are going all out from preventing Greece from leaving the union. The reasons are simple. A Grexit would inevitably cause shivers in the economies remaining in the union, and of course, Greece itself, when it changes back to the drachma. Although there are many economies sharing the euro, one exit is one too many to tip the balance.

It is, once again, the ‘every nation for itself’ problem setting in again. Well, Germany feels obliged to provide bailout cash for its own benefit too. Without some of the member states which are defaulting and it is saving, Germany might be unable to operate smoothly in the Eurozone, hence the endless flow of rescue packages albeit them starting to feel the space in their pockets.

If we see the Eurozone as a social group, Greece would have been out by now, for simple reasons of guilt and not being able to take care of itself. But things are starkly different due simply to the way international communities are made. The constitution is made in such a way that EU members would have to co-depend on each other. The EFSF/EFSM/ESM allows Greece is getting its bailout – exactly what it needs and wants, and because, in the first place, the EFSF was unanimously agreed, this bears no grounds for Greece to be evicted, nor Germany to stop saving it. [1]

Here’s a paragraph from Wikipedia. Pardon me for simply copying and pasting the whole chunk, which I thought would essentially highlight one key aspect of self-interest involved here.

The question then is whether Germany would accept the price of inflation for the benefit of keeping the eurozone together. On the upside, inflation, at least to start with, would make Germans happy as their wages rose in keeping with inflation.Regardless of these positives, as soon as the monetary policy of the ECB—which has been catering to German desires for low inflation—began to look like it might stoke inflation in Germany, Merkel moved to counteract, cementing the impossibility of a recovery for struggling countries. With eurozone adjustment locked out by Germany, economic hardship elsewhere in the currency block actually suited its export-oriented economy for an extended period, because it caused the euro to depreciate, making German exports cheaper and so more competitive. By July 2012, however, the European crisis was beginning to take its toll. Germany’s unemployment continued its downward trend to record lows in March 2012, and yields on its government bonds fell to repeat record lows in the first half of 2012 (though real interest rates are actually negative). (Wikipedia)

If we put it on an international, intra-EU scale, it is a simple choice between the following options,

• To allow exits which will prove the strong stand of the Union, or
• To prevent exits so as to stabilise their own economies in these tough times;

And within which the answer is clear: exits, they will prevent.

Are you playing your part?
See also: https://theaveragedollar.wordpress.com/2012/07/07/what-must-be-done-must-be-done/

For the obvious dilemma between austerity and Keynesian-propelled growth, Greece hasn’t been putting a lot of effort in fulfilling the terms of the bailout. While Greece has been granted the bailout, they have had struggles in meeting the terms and getting the economy back on track. And because of this, bailout providers (mainly Germany of course) are urging them to stick close to agreed terms and fiscal reforms. [3]

What they must however understand is that there is more to the debate about the priority of the government. Is the main aim of the government to kick start growth by spending, or is it to ensure the government itself stays afloat? If it sounds familiar, allow me to remind you about the chicken-or-egg paradigm.

Nonetheless, credit must be given for successful fund raising which meets part of the terms, [4] and these goes to show that the international community is behind the possibility of Greece recovering from the default. And yes, they need more time. The bailout providers probably need emphatise with Greece – on the account that the economy, not just the fiscal balance, is really lacklusture. As far as they have kept their heads above water and their growth at decent levels, so do Greece want to as well. But the fact remains that they are resource-strapped, and have to take one step at a time in recovery.

If they don’t want it, you can’t force it
Bottom-up political and communal sentiment across the EU seems to be in disapproval of a continued union. Amidst the probable impending financial problems should the euro area be financially traumatised with an exit of a certain number of users, societies and communities and political parties across Europe have risen to a voice of disdain over the current economic situation – and one message have been sent across: focus on the bread-and-butter issues.

The Economist article: “Europe’s far right: Culture matters more”, August 11, 2012 (http://www.economist.com/node/21560294)

Far-right groups typically advocate for sound domestic and social policy, and champion equality across the whole nation by fighting for those in need, more often than not for day-to-day issues. The rise of far-right groups recently goes to show the extent the attempt at the European Union (note: it is very much still an attempt) isn’t taking care of individual European communities well despite forging a European community collectively.

The European people are definitely unhappy, not just unfazed by the perceived successes in the EU through what has been lamented as soft propaganda. [ref, if not I lament] Sure, it feels pretty great to be living in a mega community where 16 other countries use the same money, and when one could travel or buy goods hassle free across supposedly non-existent economic borders. Yet, humans don’t change – we still live on bread and butter, water and shelter. It doesn’t amuse a citizen very much if his country is getting richer statistically or there have been globalisation going on; what would make him react to this international process is that he finds his pockets shrinking.

Conclusion
This applies not just to the Greek-German episode, but to other defaulting member states such as Cyprus, Spain, Italy, Portugal, Ireland and so on. Not just do member states have to learn to be independent in a landscape where every other nation looks out for themselves first, the EU must also refine their working processes to make bailout processes not as rough, which will aid others in recovery, instead of being supervisor-like and expecting them to meet terms and conditions from time to time.

References
[1] Council of the European Union, “Extraordinary Council Meeting” (document) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/114324.pdf
[2] Greek Government Debt Crisis (Wikipedia) (webpage) http://en.wikipedia.org/wiki/Greek_government-debt_crisis Retrieved August 22, 2012
[3] The Seattle Times, “Germany: Greece must follow through with reforms”, August 21, 2012 http://seattletimes.nwsource.com/text/2018955703.html Retrieved August 22, 2012
[4] The Telegraph, “Greece raises 4bn euro at debt auction to help government avoid cash crunch”, August 14, 2012 http://www.telegraph.co.uk/finance/financialcrisis/9474761/Debt-crisis-Greece-raises-4bn-at-debt-auction-to-help-government-avoid-cash-crunch.html

Other footnotes and examples for “Are you playing your part?”

• BBC News, “Greece needs more time for cuts, says PM Samaras”, August 22, 2012 http://www.bbc.co.uk/news/business-19329402 Retrieved August 22, 2012
• BBC News, “Greece bailout: Eurozone Ministers set tough conditions”, February 10, 2012 http://www.bbc.co.uk/news/world-europe-16976520 Retrieved August 22, 2012
• Business Standard, “Merkel mulls easing bailout terms”, August 19, 2012 http://www.business-standard.com/india/news/merkel-mulls-easing-greece-bailout-terms/483626/

Other articles of interest from The Economist
http://www.economist.com/node/21560269 (“Tempted, Angela?”)
The high possibility of a breakup but the immense efforts used to prevent it. As there are always two sides to a coin, so is the decision to tear up a union leaving some in tatters and while others bleed profusely. Furthermore, it must not lie on just one person, instead a compromise between all stakeholders must be reached.

http://www.economist.com/blogs/freeexchange/2012/08/euro-crisis-0 (“Euro crisis – just enough rope to hang themselves”)
The ECB being torn between increasing and decreasing bond yields and interest rates in the short and long term. Is it time to consider the probability of re-empowering individual central banks?

http://www.economist.com/node/21560312 (“Postcard from the edge”)
Differing fates in pension spending in Germany and Greece. While there is much industrial but little fiscal cooperation in the EU, there is fundamentally no inclusive growth and togetherness in forging ahead within EU, undermining the need for an international bloc.

That gap to plug

In the last of a four-part National Day tribute series, we shall examine the problems and challenges Singapore faces with an ever-burgeoning income and opportunity gap, and the underlying population issues that come along with it. There is no better gift for my country than to analyse for its citizens the impending socioeconomic issues we face.

The country recklessly exploded our GDP from mere $400 per capita type of statistics in the 1960s to, on average, over $40000 per capita today through a variety of policies from rapid industrialisation to trade reliance, infrastructure development to economic diversification, including tourism, finance, technology, and research. [1] [2]

Our city-state’s share of world GDP is about three to four times of its share of world population, i.e. we are about 3-4 times richer, on average, than the ordinary human being. Yet this wealth is not shared evenly, or there hasn’t been much effort, as I perceive, to allow it to be so. The nation’s Gini coefficient stands at 0.478 in 2009 and the richest tenth takes home about a fifth of all income and their mirror group having 2.5 times lesser than national average, which equates to the top 10% earning about 5 times more than the bottom 10%. [2]

~

Income inequality is indeed a ballooning problem in our era; yet, there can be no simple solution given the socioeconomic landscape the past generation have created – the propagation of an overly capitalist mindset from their predecessors. This is not totally an economic problem – the issue that needs to be resolved here is more of a social one. We could imagine it this way – implementing economic solutions is solving the problem on the surface; yet implementing social solutions is solving the problem from the base, or say, getting to the root of it.

A social problem lacking equality in education, opportunities, knowledge, exposure, social chances, and networking, amongst other factors, and also a lack of an altruistic culture in what I would call a ‘blind’ chase for riches in capitalism has caused economic problems in income/wealth inequality. In hope for higher levels of economic development so as to secure a better quality of life which are the government’s political and economic aims, it seems as if the government are not ensuring that people not given equal chances in an range of aspects in life. Allow me to call this the ‘opportunity gap’, and let us examine who and what is/are causing this gap to burgeon.

Pseudo-Equality and Meritocracy in Education.
Education was generally made frictionally unavailable to the lower quartile in the 1960s-1980s, as the less fortunate typically needed their children to urgently go into the workforce after compulsory education. Furthermore, they might not have had enough savings for university given the sky-high rates then with a relatively poor educational financial support network. The rich, on the other hand, afforded not only money, but also time, to allow their children to continue further studies.

After a generation or two, without a fully meritocratic system, the gap continued to widen – the so-called ‘upper class’ had comfortable white-collar jobs in the offices of MNCs moving into Singapore, while those who did not receive continued training had to find a living from the springing factories across the island. [3]

Today, however, things are slightly different. University education, which typically leads to a more affluent lifestyle, has been much more accessible with bursaries and financial assistance, and most importantly, meritocracy. But the gap still exists, albeit in a different manner. Now that education is virtually available to all despite income [4], what is not is the peripherals that have sprung up in a knowledge economy – such as tuition classes or enrichment courses, and even the prospect of landing an Ivy League spot.

Often coerced by their parents, who would tend to want their children to maintain their current lifestyle, today’s students from wealthy families often get sent to top schools by donation, endless tuition classes, and finally overseas studies when the time comes, in hope of better employment prospects; or simply given hereditary businesses. Those whose parents hail from the salary class might not have the resources to engage in such antics except for encouraging their children to work hard.

Attention and Nurturing
Those getting opportunities tend to be those who already have – it seems the Gini problem is omnipresent.

Like how my teacher would rather me enter a mediocre college and stand out there, instead of entering a top college and be mediocre – as I could get more attention and opportunities in such an arrangement. Indeed, in school, those who stand out tend to be those who get attention for nurturing – it occurs to me that those on the top scorer list tend to be those who have participated in one or more academic Olympiad. This is possibly human mentality – not just Singaporean – we tend to look out for those who have performed better, and make them better instead for bridging the gap, in hope that:

(1) They will do so in a school-based community, on the premise that helping friends is a virtue
(2) They will do the school proud – an example of slightly selfish mindsets by the teachers and departments

The innate selfishness in all humans also cancels the first point out. Coupled with often-criticised competitiveness in Singapore’s education system, an every-student-for-self mental model prevails. An outstanding pupil would likely bear fear that others might overtake him should they know his tricks to studying. I’m not generalising; this has been the general trend I have been observing.

And if a student were to come from an average salaryman’s family, is soft-spoken, has average intellect, and does not have any academic enrichment outside curriculum, he or she tends not to be noticed. They might just pass off as the most mediocre, common-faced student the teachers could ever get, and continue to go unrecognised for probably a hidden potential. This further incubates this opportunity gap, and they might never get a chance to shine. That is not what we want.

Exposure
And that is the reason those who have been through the education system administered by the Ministry of Education (MOE) would have experience extensive programmes to, supposedly, uncover their potential and give them a global outlook. But to take care of more than half a million [5] students at a go and ensuring each child is fully developing their potential proactively is something qualitative, and providing opportunities and “global exposure” would be structurally impossible for MOE. Schools could not possibly allow every individual the chance to dazzle or bring them places. This responsibility, then, lies on the parents.

By capitalism, the rich are able to enjoy material wealth, tangible benefits, or utility (in whichever way you’d love to put it). As such, many richer families could allow their kids some sort of real world exposure at their formative years, which some might not be able to get through outings, trips, interactives, etc. These play an implicit yet significant role in determining their ability to connect with people, typically giving them stand-outs for higher education, scholarships or job openings. It is also likely to enable them to relate better to all sorts of people and respond to all sorts of situation given the lessons learnt through the heightened exposure.

On the other hand, many other average families probably are:

(1) Engaged in making ends meet,
(2) Skeptical of children being fluent in worldly issues at a young age, and/or
(3) Not as able to provide them with courses or outings, be it a lack in time or money.

All these cause the exposure component of the opportunity gap, leading to some children having little exposure or reinforcement on what they have learnt in school, as at times their parents/families may not be able to relate to those experiences, or worse, brush them off impatiently. And needless to say, dysfunctional families carry it out even worse.

Networking
Top-bracket, families and their children tend to be affiliated to those in the similar socioeconomic group, and thus have much wider connections that offer much promising education, work and training opportunities. The uncles and aunts they are acquainted with from young tend to have large businesses, huge houses and lots of money like mommy and daddy. All these give them further opportunities to get richer, have more cars, larger swimming pools, exclusive club memberships, widening networks, school-ready children – all the good stuff they can expect in life.

Humans never fail to work in such a mechanism, and so do birds in conventional wisdom – as with “birds of the same feather flock together”. If we don’t allow those who need opportunities to break through to mix with those who have the opportunities to provide, we will continue to stay with this gap. Those who are already currently mixing at the perceived top tier can do away with some of the networks they have made and still lead a decent lifestyle based on their other links in the ‘general market/pool’. This is also gives rise two distinct groups of people in our society – one working really hard in attempt to live in a condominium, and another leading hedonistic lifestyles and letting their formidable network work for them.

~

We can see that the root of the problem is an over-emphasis on meritocracy, the hallmark of capitalism. Because of a society-wide focus on results speak the loudest, propagated and made popular by the government, another form of Gini-style inequality surfaces. The “knowledge-rich” gets richer and the “knowledge-poor” stay relatively poor. This is despite the policies making higher education generally affordable yet not totally inclusive to the extreme lower quartile.

This is not a criticism of governance or policies against the Singapore government. It is however pivotal to note that education is closely linked to income in today’s meritocratic and knowledge based society. And sometimes we may not be practicing meritocracy the right way (there is no right or wrong, yet there might be a fairer way). Meritocracy is about giving everybody an equal chance, but starting equal is another story altogether.

This is a cumulative ‘effort’. Their elders who braced meritocracy in somewhat a form of malpractice emerged to be better or worse off now, and provide them with the respective starting background in school/work, or a  ‘seed capital’ in life. Imagining individuals as companies, it would be unfair to compare performances companies having different seed capitals, especially when the amount reaches a critical mass allowing it to conduct a massive “fixed input investment”.

It is time we think about equality in opportunities, not just in income.

References
[1] The World Bank Database (for Singapore’s historic GDP) accessible online at http://databank.worldbank.org/data/home.aspx
[2] CIA World Factbook – Singapore available online at https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html
[3] “Singapore – A Country Study”, Federal Research Division, Library of Congress, 1989. Published online at http://www.country-data.com/frd/cs/sgtoc.html#sg0049, retrieved August 19, 2012
[4] Ministry of Education, Singapore (webpage) http://moe.edu.sg/initiatives/financial-assistance/
[5] Education in Singapore (wiki) (webpage) http://en.wikipedia.org/wiki/Education_in_Singapore

Articles of Interest
http://www.moe.gov.sg/education/post-secondary/files/post-secondary-brochure.pdf
http://www.spp.nus.edu.sg/ips/synopsis_p2012.aspx
http://sg.news.yahoo.com/blogs/singaporescene/singapore-scholar-system-outdated-033716654.html

The Richest in the World

We shall look at the underlying implications behind a recent survey result which concluded Singapore as the richest country on Earth – what the figures actually mean and the role mass media in (possibly) amplifying such a mediocre discovery.

Local broadsheet The Straits Times marvelled over, a few days ago, a rather bland-looking survey finding on its front page. It states that according to The Wealth Report 2012, jointly conducted and published by Knight Frank, the property group, and Citi Private Banking, Singapore ranks top in the world in terms of gross domestic product (GDP), putting it at the top of the world in that metric. The answer, however, lies deep within.

An excerpt from the report (PDF download) showing Singapore coming out tops in terms of GDP(PPP), and the 40-year comparison. Part of this screen capture is printed on The Straits Times as well.

Firstly, the figure published is the purchasing power parity (PPP) GDP, which in other words take into account exchange rates in comparison to other countries – how affordable a certain good (or basket of goods) is to Singaporeans as compared to other nations, when measured in US of GK dollars. Our consistently strong exchange rate to prevent capital or cost-pull inflation had actually gave rise to a strong GDP(PPP) as the scalar automatically adjusts itself, yet does not necessarily reflect our actual citizen wealth.

Besides, observers might have noticed the “2010 PPP US$” at the bottom of the table, which essentially (and obviously) means that these were 2010 figures, measured before the Euro crisis took its toll, and when Singapore had negated much of the shockwave from the American subprime crisis 3 years before that which culminated in the Lehman collapse. It is of no doubt that at that point in time, Singapore would still show very favourable numbers, and that leads to some, including me, pondering over the reason data two-years off-date has been used in the report. Is it just because it was a Citi project, and there lacked rigour to source for more up-to-date sources, despite this report being business rather than economic

That being said, we are not to see this report in an economic perspective. Do note that Knight Frank is a property agent and Citi Private Bank, as the name suggests, is a high-end consumer bank. They are not analytical firms or consultancies concerned about social welfare, and this report is targeted at businesses and investors looking for market sentiment. Probably we should not even treat this report seriously if we’re to look at economics.

The number of countries studied is also unclear. Typically, countries like Qatar and Luxembourg would top charts, with much higher than Singapore for their truly developed infrastructure and niche tertiary industries they could pride themselves on, coupled with truly high standards of living and a decent-enough exchange rate. If that’s the case, it would be clear common sense that it would be irrational to label Singapore as the ‘richest in the world’.

Take a look now at Table 2 after fixing your eyes on Table 3 and wondering how Singapore made it there. It is evident that in the next forty years, prolonged and sustainable yet stable growth would be experience by emerging economies, and some of the global growth generators (3G) – a term for countries to look to when the BRICS have exhausted themselves – coined by Citibank economists Willem Buiter and Ebrahim Rahbari in February 2011. Our year-on-year GDP growth would likely be somewhere between 2.0% to 6.4% per year on average, which seems a rather decent figure (most probably closer to the lower end though). But considering this year’s 1.5% to 2.5% target set by the Prime Minister a week back in such a crisis, saturation seems near. Aren’t we supposed to continue staying competitive and look to break saturation and not yield to consistency?

After all these, it seems as if our mindsets are playing a little trick on us. Or probably it is the mass media that is. It is a fact to some cynics that the government uses the media to control Singaporean’s perspectives towards worldly issues, and in this case to obviously ensure that we think that we are doing very well economically. This might or might not be the case, though. An average of a S$6,000 monthly salary (calculated from the report) would put an overwhelming majority of the working class below average, which is statistically incoherent; or it would mean a burgeoning Gini coefficient from the last measurement. Whatever the case, the facts are there for Singaporeans to find out themselves – be it issue-specific or the marathon-like cynicism towards state-controlled media.

In a world of rising competitiveness, the future lies ahead for us to fight for ourselves. As with typical capitalism, we only have ourselves.

Reclusive Cartoons

Source: Slate.com. I was surfing and found these two cartoons regarding two of North Korea’s major happenings this year rather succinct in portraying the underlying implications the reclusive government would, sadly, never get to see.

The Rocket Programme

Political cartoon depicting implications and self-devastating effects behind North Korea’s rocket programme of late. Source: Slate.com

The Reclusive State’s rocket programme would likely end up as a zero-sum game, with it being stubborn as usual and going ahead despite persuasions from neighbours and peers to withhold or downscale WMD research and development. Such behaviour would only result in a self-destruct, which eventually caused embarrassment as the launch failed.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Announcement of Kim Jong-un’s Marriage

Political cartoon depicting the underlying poverty problems while leader Kim Jong-un marries in relative luxury. Source: Slate.com

DPRK leader Kim Jong-un’s high-profile marriage announcement in July was against the backdrop of an increasingly interconnected and competitive world, while North Korea stays closed and continues to push for radical projects that would not bring its economy far at all (while without globalisation). The first lady’s turnout and bearing seems to bear some sign, though, that Western influence might be acceptable on the informal front.

References
http://edition.cnn.com/2012/04/12/world/asia/north-korea-launch/index.html
http://www.project-syndicate.org/commentary/love-and-marriage-in-north-korea-by-katharine-h–moon

Where the money comes from

US Presidential elections have been known to use large amounts of cash, thankfully attributed largely to rich donors and seldom taxpayer’s money (probably except for the incumbent seeking a second term). The stunning yet nerve-calming fact about the 2010 campaign spending is that about a quarter of it came from 0.01% of the US population, and this is probably the trend for many campaigns, be it presidential, mid-term, senate, or congressional, to come.

Check out this post from the Washington Post: http://www.washingtonpost.com/blogs/the-fix/post/meet-the-political-01percent–in-2-charts/2012/08/10/7698e39a-e257-11e1-a25e-15067bb31849_blog.html

Here is the original research document: http://sunlightfoundation.com/blog/2011/12/13/the-political-one-percent-of-the-one-percent/

There have always been criticism and cynicism linked with the top 1% of American earners (the upper bracket of 3 million people who typically earn in excess of $500,000 a year). Yet, 30,000 individuals are now responsible for this large contribution, as put forth in the article:

When it comes to those who give to political campaigns, however, it’s not the one percent that matters but rather the .01 percent — that hundredth of one percent of Americans who gave 25 percent of all the money donated to federal campaigns in the 2010 election…

While the US Presidential elections mean a whole lot to the rest of the world for the policies the new elect that would implement on November 6 might have deep reaching impacts for other countries. Then again, many thinkers including Ian Bremmer, Paul Krugman, Joseph Stiglitz and Thomas Friedman have already created movements within their homeland to convince the masses that the 21st century no longer belongs to the US. Whoever is elected, the direction the world has to follow is collaboration, and no longer cooperation with the US.

The relevance for us, then, is that there are lessons to be learnt not just from this election, albeit every country being in totally different political landscapes. We shall look at the source of campaign money income – imagine millions of budget coming from just 30,000 people, and should these people default on the candidates or parties, a quarter of their budget would simply vanish. Candidates, on the bottom-line, ought to keep campaign expenditure at minimum – it is quite unbecoming for a potential politician to splurge en route to the House while many others are out there suffering.

The purpose of political campaigns is to reach out to the masses and inform them of one’s direction and potential policies he/she would take if elected to office, and not a self-marketing, brand-creating process in which there are segregated target groups. Although, yes, various groups have various concerns. But if the sole purpose of rallying and campaigning is to appease certain groups of voters, then a candidate has to think on running again.

On a side note, one Twitter account was quick to note that Mitt Romney’s VP-hopeful Paul Ryan has conspicuously only followed one other account. I’ll leave it up to the reader to discover it. (See http://twitter.com/DemPaulRyan)

What a country must do

Not only individual, corporate and organisational entities, but countries too, must always be forward-looking and not resort to one of the following amidst revolution and crisis.

• Sink into nationwide pessimism with poor governmental willpower to forge ahead.
• Default on countrymen’s trust, spirit and bond and engage in an ‘every man for himself’ mentalmodel.
• Take to extremism by implementing unconventional policies such as protectionism and information restriction.
• Implement extensive state controls which undermine the ownership citizens have to take of their country.
• Be obsessed in the finger-pointing instead of the resolution process of current problems and issues.

An attempt was made to crystallise in my latest Facebook status:

While we celebrate our nation’s birthday, pledging our dedication and reaffirming our identity to this country, let us also remember the struggles we’ve been through, and, more importantly, constantly bear in mind the challenges we will face in time to come, for, like what Prime Minister said in the National Day Message, we (not just our children) live to prepare for the test of life, not a life of tests.

Although it might not fully and inclusively represent the thoughts of all stakeholders, or may have left some concerns out, it is a desirable direction we must consider going towards in this new era in which it will dawn upon us that things are no longer the same as our parents’ generation.

Renewal

In the second of a four-part tribute on our nation’s birthday: Singapore recently made a reshuffle to its Cabinet and conducted a ministry restructuring, and local bloggers and media were quick to weigh in to comment, analyse and opiniate. What we need to focus on is not the political implications or the usage of such moves as a political tool, but leadership management and its effects on the country, and sustainable, strategic development for Singapore.

Ministry Restructuring
With effect from 1 November, MCYS and MICA will be split into three ministries – the Ministry of Social and Family Development (MSF), Ministry of Culture, Community and Youth (MCCY) and Ministry of Communications and Information (MCI).

The restructuring of the ministries must signify the evolving role of government in media and community – increasingly challenging aspects of management these days with ultra-connectivity and the influence one geographical region in the world might have on another in terms of culture, practices, norms and trends.

Note that ‘development’ is on the agenda of the new ministries. Although appearing as just a nomenclature issue, these ministries might have been tasked by the government to take on new roles in a new world, within which I believe development, be it community or communications, is still pivotal amid new challenges in the next generation.

It is also interesting to note that the restructuring came before the nation’s 47th National Day, which also marks the 45th year since National Service was signed into law. Given today’s diplomatic landscape, the military, society and communications of an open, small and vulnerable Asian capitalist state such as Singapore would likely to be found highly intertwined.

Besides, in this new era and with this restructuring, the arts seems to be no longer able to be a stand-alone entity under a ministry dealing with information, probably one of the reasons for the split. The government probably views that the youth and the community, in today’s world of high-speed information flow, must be actively engaged with not just arts, but culture, in order to form a close-knit and less digital-based and device-obsessed society. That is where we ought to move towards, but its effectiveness lie very much in the hands of stakeholders among the common folk.

Appointment and Promotion
This reshuffle saw a number of promotions in parliamentary appointment holders and appointment grades across all levels of governance – be it parliamentary secretary or full minister. Most were handed to current appointment holders, with the probable notion that it is more beneficial for the legislative body and the country to deepen leadership depths and empower deserving personnel, rather than build pointless capacity in appointing more MPs to parliamentary roles.

Integral to every organisation, so do politicians need incentives in progress. While monetary rewards are already (over)befitting for the nation’s leaders with whom visionaries we all (supposedly in a democracy) trust, our highly meritocratic government has always had a penchant for promoting those who are viewed to have performed well and facilitating emplacement on the fast track.

To some, this exercise exemplifies the skewed (as viewed by them) direction the government has always been adopting – the preference of ‘scholars’ – those who had done well at school and consistently at work – over ‘farmers’, who typically did not excel that well academically and might not match  but have put in hard work and are committed to their work.

While we focus on getting the brightest to run the nation in hope of a desirable outcome, there ought to be some balance too. There tend to be issues people of certain endowments might not be able to comprehend, and hence we need in the government, just as in any organisation, personnel of a variety of backgrounds and portfolio to sit in the board and provide varying perspectives.

It is a relief that not all about proficiency in studies that takes a nation far enough- Yaccob Ibrahim and Grace Fu both received their undergraduate degrees locally and went through rather quick but stable routes of advancement in their careers.

Youth-phoria
Youth – the new word in fashion. We have seen a surge in younger ministers and MPs in position now – with (most iconically) Chan Chun Sing, and also former military colleague Tan Chuan-Jin, Lawrence Wong, Lee Yi Shyan, Sim Ann, Sam Tan, and Muhammad Faishal all involved in this reshuffling and promotion exercise. And Heng Swee Kiat was already a minister following GE 2011.

Some cheer the move on, justifying their excitement on the basis of diversifying management and perspectives, and adding colour to policy making processes; while others simply see it as a superficial move to appease younger crowds. Both arguments have respective validities, and Whatever the case is, the onus is on these young high-fliers to make the best out of their stint in power.

Just as the common folk, it is all up to the individual to make the best out of his life.

Bibliography
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1216875/1/.html
http://www.parliament.gov.sg

More than just a message

This is the first of a four-part series running through our nation’s 47th birthday.

Prime Minister Lee Hsien Loong delivered the National Day Message 2012 this evening, asking Singaporeans to look at the kind of future we expect and reminding Singaporeans of the challenges faced in this changing worldwide landscape. Seems like it is inevitable – we are all affected by the new world order no matter where we are or belong around the globe.

The message started off with:

We celebrate National Day amidst an unsettled world. Europe and the US face serious economic problems. Asia is doing better than other regions, but China and India are slowing down and tensions are simmering in the South China Sea.

Against this backdrop, Singapore is doing quite well. Our economy grew 1.7% in the first half of 2012 and we are on track for 1.5-2.5% growth for the year. Internationally, Singapore’s standing is high, whether with emerging countries like India and China or advanced nations like the US.

The facts are presented. While PM Lee will move on to discuss how Singaporeans would be engaged in community, so must the people play an active role in economic development as well. Do we think that the 1.5-2.5% growth target is good enough for Singapore? Amid inflation, market restrains and the faltering affordability of healthcare and transport services, can this sustain the common folk’s lifestyles? It may be a good figure for the country, but might not for the citizens.

Singapore’s GDP(PPP) per capita is one of the highest in the world – in excess of $60,000, and ranked 3rd in the world by IMF and the World Bank, yet its nominal GDP per capita (current prices) hovers around $48,000 (or even $34,000 at constant prices). That simply reflects a strong exchange to bolster the production economy, yet does not reflect actual wealth among citizens who pay sky-high fees and large proportions of their incomes for healthcare and transport.

Also not reflected is Singapore’s Gini coefficient of 0.47, which measures income inequality. While Singaporeans might be well-off in general, and the upper and middle class live comfortable (or even luxurious) lives, the bottom quartile often have financial issues with day-to-day issues. We talk about building an inclusive society, and this seems very much drifted from that goal.

—

The highlight of the message was when the Prime Minister asked a few fundamental questions:

We must ask ourselves some fundamental questions: What future do we see for Singapore? What kind of home do we want for our children? I believe all of us want to be proud to be Singaporeans, and to live in a successful country that meets our aspirations. What does this mean?

What this means is simple – if I were to answer the PM on the spot – we must all take ownership in building a society we aspire to possess and call home, call it something ours. It is not the government’s job in building the nation, but every single citizen’s responsibility and eventual obligation to build their own home, for the country belongs not to the government, but to its people. PM actually addressed this issue later in the message:

We will build on these initiatives in a sustainable way. The Government will do more but it cannot do everything. Every Singaporean must play his part in creating an inclusive Singapore. This is how we can nurture a united community, and do the best for ourselves and one another.

We have built a unique home on our little island, striking a balance between preserving the old and embracing the new. Let us make it even better. A beautiful home with green spaces, blue skies and clear waters, just like here in Bishan-Ang Mo Kio Park. A cherished home where we build treasured memories and lifelong friendships. A safe home which we will defend.

—

PM Lee also recapped current policies and their effectiveness, and to probably the appall of many Singaporeans, his analyses were very much in perspective rather than objective.

Domestically, we are clearing the backlog of applicants for HDB flats, building more MRT lines and upgrading our bus services. Our GST Vouchers and U-Save rebates will help lower-income households cope with inflation.

We have strived for such an inclusive Singapore for many years. Our home ownership programme gives every citizen, rich or poor, a stake in our nation. Our universal and almost free education system equips every child with the tools to succeed in life. Our healthcare system provides every Singaporean with good quality and affordable care.

This year’s Budget was a further major step. We introduced new programmes. The Silver Housing Bonus is benefiting our ageing population. Increased subsidies for home-based care are helping more families with elderly parents. These are not one-off gestures, but a carefully designed package which lays the basis for stronger safety nets for the future.

But as new needs have emerged over time, we have enhanced our social safety nets. We introduced ComCare to help the needy, and Workfare for low-income workers. Low- and middle-income couples now get Additional Housing Grants to buy HDB flats. In schools, Opportunity Funds enable less well-off students to participate fully in enrichment programmes and study trips.

…we need to review our policies more broadly, particularly social and education policies. To still be a shining red dot twenty years from now, we must rethink our approaches, and reinvent ourselves. We must anticipate changes and prepare for what lies ahead. Singaporeans will remain at the heart of all that we do, as we update our policies to best serve our people. Core values such as meritocracy, multi-racialism and financial prudence cannot change. But within these broad principles, we should review what needs to change and where we should act more boldly.

I have asked Minister Heng Swee Keat to chair a committee of younger ministers to take a fresh look at what we are doing. We will engage Singaporeans in this review, and build a broad consensus on the way forward. I ask for your support in this exercise.

There have surely been limitations and failure stories in relation with such measures, such as tight terms and conditions for monetary grants, or relatively withdrawal limits for healthcare pools. Meanwhile, it is great to see the PM urging immigrants to make the effort to integrate into the society and having a committee to involve Singaporeans in policy-making and keeping them, especially youths full of zeal, at the forefront of forging the nation ahead in the new age.

—

In either way, the three key thrusts Singaporeans must take away from this message are:

First, Singapore must always offer hope of a better future.

Second, Singapore must be an inclusive society with a heart.

Third, Singapore must be a home that all of us love.

Sounds simple, yet, we still have long strides to make in many of these realms.

The first key thrust is undermined by the opportunity gap and the over-emphasis on academic progression, frowned upon by many of those who, because of such criteria in the workplace, fail to have certain opportunities supplied to them. Individualism propagated in the capitalist world and Adam Smith’s ‘every man for himself’ notion completely and totally washes hopes, as for now, for PM’s second key thrust – enough said.  Lastly, while a “feeling of belonging and identity is especially important for an open society in a globalised world”, this society and its state has a long way in attempts to make disgruntled citizens feel a sense of belonging, ownership and loyalty, much less identity with the nation.

For the people and the country to be as one, just as with any organisation and staff member, their principles, thoughts, dreams and aspirations must be parallel. The people must feel the support from the community and government in order to obtain a sense of identity, to create an inclusive society, and to facilitate the making of a nation of opportunities.

These key thrusts are very much heart-ware based. Allow me to suggest the CARE structure used in the armed forces – commitment, aspiration, recognition and experience. Working towards providing and engaging citizens actively in these four heart-zones would essentially epitomise the direction we would need to go towards.

Such a move would require efforts from both the people and government. The people would have to dream high, grab opportunities, be more open, be more socially active – all in order to create the sense of identity PM mentioned. On the other hand, the state must proactively exercise its role in facilitating and providing the information, space and platforms for such things to happen. Not to forget taking the initiative to engage our people in national issues and impart a sense of ownership. Only then, could we say that we have built Singapore, and not Singapore has shaped us.

1. National Day Message at http://www.todayonline.com/Singapore/EDC120808-0000146/Prime-Ministers-National-Day-Message-2012
2. Data for current GDP figures from http://www.tradingeconomics.com/singapore/gdp-per-capita
3. Data for GDP(PPP) figures from http://www.tradingeconomics.com/singapore/gdp-per-capita-ppp
4. General data obtained via World Bank http://databank.worldbank.org/ddp/home.do
5. General date obtained via CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html