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http://blogs.wsj.com/searealtime/2012/01/16/singapore-inc-needs-a-rethink-economists-say/
Singapore’s vaunted style of pragmatic, efficient government – credited with fueling the city-state’s meteoric rise to prosperity over the last four decades – may have lost some verve, according to a new study by some of Singapore’s leading economists.
As decades of rapid and largely equitable growth in this Asian Tiger give way to a widening gap between rich and poor and slowing social mobility in a country often boastful of its meritocratic traditions, the government needs to adopt a more activist stance that better supports citizens, said the paper, penned by six economists for the city-state’s Institute of Policy Studies.
That means expanded welfare programs, more redistributive policies, and a bolder, experimental approach to policy making, among other steps.
It’s a fairly radical prescription for an island nation that has long been a darling of foreign bureaucrats, many of whom flock here to study its policy-making and economic management, led by a People’s Action Party government that emphasizes individual responsibility, lean social security and growth over distribution.
But the current social contract – optimal for places with young populations, rapid growth, full employment, and rising real wages – “would not be sufficient to ensure equitable and inclusive growth in the face of the changes unleashed by globalization, rapid technological change, and our own policies,” the economists said in the paper released Monday on the IPS website. The authors include academics and former senior civil servants who carry significant heft in policy-making circles, including Manu Bhaskaran, an academic at the Lee Kuan Yew School of Public Policy; Donald Low, a former senior bureaucrat at Singapore’s finance ministry; Tan Kim Song, an economics professor at the Singapore Management University; and Yeoh Lam Keong, former chief economist at the Government of Singapore Investment Corp.
Analysts widely believe that the days of double- and high single-digit growth rates year-in, year-out are things of the past; Prime Minister Lee Hsien Loong recently said the city-state would do well to average annual growth of over 3% in the coming decade. Rising socioeconomic tensions meanwhile are throwing up political challenges for the PAP, which came through May’s general election with its narrowest victory margin since Singapore’s independence in 1965, and saw its favored candidate barely win a presidential vote in August.
These electoral setbacks “reflected a discontent with the current model of economic and social development: the over-riding emphasis on growth over distribution; the inadequacy of our social safety nets and the uncertainty this creates; wage stagnation for significant elements of the workforce even as a small segment at the top enjoys large increases; and the increase in inequality,” the economists wrote in the paper.
Piecemeal tweaks won’t arrest these problems. “Singapore must find a social compact that achieves a better balance between growth and equity, and between individual responsibility and social insurance,” they said.
The solution, they said, involves creating sturdier social safety nets and rolling back a market-fundamentalist approach that has transferred risks from the state to citizens in areas like public housing, social security, and healthcare. While retaining the essence of Singapore’s admired social institutions, policy makers should also borrow successful ideas from Scandinavian and East Asian contemporaries, and reject existing dogma – like the insistence on the virtues of small government and low taxes, and a reflexive rejection of expanded welfare – the economists said.
Crucially, Singapore’s strong balance sheet allows it to pursue such reforms without sacrificing fiscal prudence and sustainability, the economists argued. Risks of moral hazard from increased social interventions can also be mitigated with creative policy formulation, they added.
It is unclear if the PAP government, which has enacted comparatively modest reforms so far, would be prepared to pursue these recommendations. A PAP spokesman wasn’t immediately available to comment*.
However, the authors of the paper acknowledge that the first step to change is often the hardest.
“The main obstacle [to creating a new social compact] lies in a mindset that often does not recognize the need to make important, and sometimes radical, systemic changes as [Singapore’s] operating context changes,” they wrote.
The paper:
http://www.spp.nus.edu.sg/ips/docs/events/p2012/SP2012_Bkgd Pa.pdf
*I am sure the scholars are hard at work preparing the official rebuttals.
Singapore’s vaunted style of pragmatic, efficient government – credited with fueling the city-state’s meteoric rise to prosperity over the last four decades – may have lost some verve, according to a new study by some of Singapore’s leading economists.
As decades of rapid and largely equitable growth in this Asian Tiger give way to a widening gap between rich and poor and slowing social mobility in a country often boastful of its meritocratic traditions, the government needs to adopt a more activist stance that better supports citizens, said the paper, penned by six economists for the city-state’s Institute of Policy Studies.
That means expanded welfare programs, more redistributive policies, and a bolder, experimental approach to policy making, among other steps.
It’s a fairly radical prescription for an island nation that has long been a darling of foreign bureaucrats, many of whom flock here to study its policy-making and economic management, led by a People’s Action Party government that emphasizes individual responsibility, lean social security and growth over distribution.
But the current social contract – optimal for places with young populations, rapid growth, full employment, and rising real wages – “would not be sufficient to ensure equitable and inclusive growth in the face of the changes unleashed by globalization, rapid technological change, and our own policies,” the economists said in the paper released Monday on the IPS website. The authors include academics and former senior civil servants who carry significant heft in policy-making circles, including Manu Bhaskaran, an academic at the Lee Kuan Yew School of Public Policy; Donald Low, a former senior bureaucrat at Singapore’s finance ministry; Tan Kim Song, an economics professor at the Singapore Management University; and Yeoh Lam Keong, former chief economist at the Government of Singapore Investment Corp.
Analysts widely believe that the days of double- and high single-digit growth rates year-in, year-out are things of the past; Prime Minister Lee Hsien Loong recently said the city-state would do well to average annual growth of over 3% in the coming decade. Rising socioeconomic tensions meanwhile are throwing up political challenges for the PAP, which came through May’s general election with its narrowest victory margin since Singapore’s independence in 1965, and saw its favored candidate barely win a presidential vote in August.
These electoral setbacks “reflected a discontent with the current model of economic and social development: the over-riding emphasis on growth over distribution; the inadequacy of our social safety nets and the uncertainty this creates; wage stagnation for significant elements of the workforce even as a small segment at the top enjoys large increases; and the increase in inequality,” the economists wrote in the paper.
Piecemeal tweaks won’t arrest these problems. “Singapore must find a social compact that achieves a better balance between growth and equity, and between individual responsibility and social insurance,” they said.
The solution, they said, involves creating sturdier social safety nets and rolling back a market-fundamentalist approach that has transferred risks from the state to citizens in areas like public housing, social security, and healthcare. While retaining the essence of Singapore’s admired social institutions, policy makers should also borrow successful ideas from Scandinavian and East Asian contemporaries, and reject existing dogma – like the insistence on the virtues of small government and low taxes, and a reflexive rejection of expanded welfare – the economists said.
Crucially, Singapore’s strong balance sheet allows it to pursue such reforms without sacrificing fiscal prudence and sustainability, the economists argued. Risks of moral hazard from increased social interventions can also be mitigated with creative policy formulation, they added.
It is unclear if the PAP government, which has enacted comparatively modest reforms so far, would be prepared to pursue these recommendations. A PAP spokesman wasn’t immediately available to comment*.
However, the authors of the paper acknowledge that the first step to change is often the hardest.
“The main obstacle [to creating a new social compact] lies in a mindset that often does not recognize the need to make important, and sometimes radical, systemic changes as [Singapore’s] operating context changes,” they wrote.
The paper:
http://www.spp.nus.edu.sg/ips/docs/events/p2012/SP2012_Bkgd Pa.pdf
*I am sure the scholars are hard at work preparing the official rebuttals.
