RH: Demographics-based Economics

From: Robert Ho (ho3@pacific.net.sg)
Subject: RH: Demographics-based Economics
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Newsgroups: soc.culture.singapore
Date: 2004-10-10 21:37:18 PST

From: Robert Ho (ho3@pacific.net.sg)
Subject: RH: Robert's Complete Case Against Leeconomics (Main)
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Newsgroups: soc.culture.singapore
Date: 2003-06-18 07:02:04 PST

RH:

ROBERT's COMPLETE CASE AGAINST LEECONOMICS

No discussion of LEECONOMICS can begin without a definition of GDP, so I will offer one here, a fairly standard definition of GDP: "Gross
Domestic Product is the total market value of all the final goods and
services produced by labour and property in a country, regardless of
the nationality of the entities producing the output."

The last is key to understanding Leeconomics: "…regardless of the
nationality of the entities producing the output." Thus, in this one
definition can be understood why Leeconomics has failed the people of
Singapore and ultimately, Singapore itself. To quote from Dr Chee Soon Juan's January 2001 speech to Stanford University, entitled The Puzzle That Never Was, "More than 7000 of these multinationals, involved in every type of business conceivable, have setup shop in Singapore. They account for more than 90 percent of investments in the manufacturing sector, 70 percent of the gross output in the manufacturing sector, over 50 percent of those employed, and 82 percent of direct exports."

Meaning that, as in the arguments that follow, since most of the
entities producing the output in Singapore are foreign Multi National
Companies [MNCs], the people and economy of Singapore derive little
benefit from such unusually heavy reliance on Foreign Direct
Investment [FDI] except initially, in the profusion of jobs created,
but which are now, also very unusually, largely taken by foreign
workers deliberately mis-named "Foreign Talent" [FT]. But more of
these later. [As an aside, China today stands in danger of becoming
another ‘economic slave' with as little chance of upgrading out of
it].

When did GDP come about? After all, it wasn't even understood by
Governments a few decades ago, although now, every single Singaporean
seems to know the latest figures, thanks to a Government and a
Government-controlled media that has come to regard this Magic Number
as a kind of national scorecard and a kind of indicator of how well
Singapore is run as compared to other countries. It has been subtly
portrayed in Singapore by Lee's Regime as almost a kind of athletic
event race to the finish line, with Singapore, of course, usually
among the leaders, if not well in the lead.

This was not always so. In Singapore a few decades back, there might
have been some statistical measures of economic performance but it was probably the GNP, and hardly made the news, since it was just a number only the very few statisticians around understood, or knew how to calculate, and even the collection of statistics was in its infancy and wholly inadequate. In those days, probably even the Government of Lee Kuan Yew and LKY himself did not fully understand the import of GDP. Certainly, LKY then did not even think of measuring himself using this, by now Magic, Number of GDP.

‘ADVANCED' AND ‘BACKWARD' COUNTRIES

In those days, countries did not compare with one another. And when
they did, they merely thought of themselves as 'advanced countries' or 'backward countries'.

An advanced country was one where the people had enough to eat, had
decent homes, a good public transport system, decent work with decent
working hours and adequate healthcare, etc. In other words, the basics of good social and physical infrastructure. A backward country was the opposite.

How much simpler things were then, and how much more relevant
comparisons were than today's over-emphasis on the GDP Number. Today
in Singapore (at least, until recently, when the Number began turning
ridiculously low and even negative), the GDP is used to justify the
$1-2 million salaries the Ministers pay themselves. It is also used in other nefarious ways, for example, to change the entire workforce into a GDP-enhancing system, without regard for whether this all-consuming drive for high GDP actually translates into an 'advanced' country's quality of life for the citizens.

As one example, the overriding desire to produce high GDP Numbers has
led to the influx of 1 million foreigners, deceptively labelled by the PAP as 'Foreign Talent' so that locals would not baulk at the numbers, the highest in the world for a small domestic population of 3.2 million. Also, it was a non-too-subtle putdown for the locals for, if you are not a talent, would you dare oppose so many foreign 'Talents' pouring in, and being treated even better than the locals, to boot? Also, we are told by the Great Man himself, and repeated by his faithful Heir and Court Eunuchs, 'that foreigners create jobs that would otherwise not be created' and which has been disproved by me in:

RH: Why Foreign Talent policy cannot work:

http://groups.google.com/groups?dq=&hl=en&lr=&ie=UTF-8&oe=UTF8&group=soc.culture.singapore&selm=c443dfe.0306170359.51a0d094%40posting.google.com

Why is this incessant chasing after high GDP Numbers bad? Isn't this
how all countries are ranked and measured now, if not way back then
but very true now?

CHICKEN ENTRAIL READERS

True to some extent. Nowadays, with the Economist having become the
modern day Oracle and Soothsayer, [but reading the innards of
computers instead of chicken entrails], from whom even world leaders
have to seek advice and prognostications, the GDP Number is indeed
important. But it was not always so. I would put the Rise of the
Economist about 20 years back. (Different countries would have
different times for their Rise of the Economist until today, we are
all living in the Golden Age of Economics).

Around 20 years ago, the world and LKY began to adopt statistical
measures for everything. For everything, there was a number. Without a number, you could be accused of generalities, of not being 'accurate'. With numbers, everything seemed so scientific, so precise, so unbiased. No longer did countries call themselves advanced' or 'backward'. Now the world had numbers and you stand either on a very precise 6.3% GDP growth or a less impressive 5.9%. Instantly, countries could be very precisely ranked, which is what numbers allow, since numbers are created for that very purpose and by definition, are ordered progressions.

Except that, numbers can lie and do lie, and lie very insidiously.

Why?

Let's take GDP Numbers. First, let me repeat my definition of GDP:
"Gross Domestic Product is the total market value of all the final
goods and services produced by labour and property in a country,
regardless of the nationality of the entities producing the output."

That is a short definition. No proper understanding of GDP can be had
in less than a thousand words embedding several technical
sub-definitions. Ah, we begin to sense that the GDP is actually woolly and indistinct and not a sharp featured animal -- it is a Jabberwocky. Worse, the compilations of the numbers that go into this final so-accurate-looking Number, are actually even more woolly. Different countries have vastly differently-sized or even wholly different economy sectors and so we are not even comparing apples with apples.

Since different countries have differently-sized or different economy
sectors, this means that Country A's GDP growth of 4.1% [I have always wondered how they can manage to get it so accurate to one decimal place!] may actually be 'better' than Country B's 6.1%. By 'better', I would have to use the old, English, non-Economics meaning of 'better managed and better-performing'.

THE RUNNING TRACK ANALOGY

Now, I normally dislike using analogies because no analogy is 100%
accurate to the meaning it is supposed to illustrate and often
introduce inaccuracies and irrelevant sub-meanings that distort the
original meaning intended. But I will break my rule here to offer one. Just one. Imagine countries to be runners all running around a 400 metre running track. Also imagine that all the runners started at
different times from different start points around the track. Further
imagine that some runners are running full marathons of 10 km, some
half marathons of 3 km, some 1,000 metres, some sprinting 400 metres
and others doing the dash of 100 metres. Now, comparing these
different countries (runners) at a moment in time by putting yourself
at the Finish Line or some other point, could you meaningfully say
that Country A is better than Country B or Country C or D, etc? It
just doesn't make sense to even compare.

So, when LKY found that advanced countries measured themselves using
the GDP growth rates, and that Singapore happened to score high GDP
growth rates because of its unique size and economic features, GDP
Numbers became the prime justification for everything from his own
salary to deliberately lowering the salaries of workers, and for
policies benefiting the rich to become richer while the poor were
kept poor and even made poorer by deliberate Government policies --
justified on the premise that high GDP growth rates were the be-all
and end-all of Government!

Thus, his entire economics policy (singular, because he has had only
one) became one long drive to attract Foreign Direct Investment and
lately, to bring in vast hordes of Foreign Talents to work in the jobs this FDI brought. Where, you might ask, do Singaporeans figure in all this? We don't. Foreigners invest here, employ foreigners to work here to produce the goods and services –- most for export, and both these foreign parties make the money and probably repatriate much of it back home. We look on as unemployed locals. And meanwhile, this 'foreignisation' of the economy seems to produce decent Numbers that LKY and his Court Eunuchs can boast about and on the basis of which they reward themselves with yet more pay rises!

THE 3 WAVES OF LABOUR

This last policy of bringing in vast hordes of FTs is what may be
termed the Third Wave of workers. In the early days of LKY's reign, he faced the postwar baby boom, which produced big numbers of workers
seeking work and a life – the First Wave. So he went into overdrive to create jobs, hence the drive to attract FDI. Due to the boom in the region, and the rise of the Japanese Yen, which drove many Japanese companies out of Japan and many to Singapore, he succeeded. So well, in fact, that he also encouraged women to leave their womenly chores at home to work in offices and factories – the Second Wave. Finally, when yet more cheap labour was needed, FTs were brought in. Thus, Leeconomics's seemingly impressive early GDP growth was largely due to massively increasing labour participation, in 3 big Waves. However, this Third Wave was also designed to lower overall wages, since the local Singaporeans were becoming used to decent wages. This resulted in the current deliberate lowering of all wages to restore the economy back into a low-wage, cheap labour economy, from which we never really upgraded. "If we did not have some foreign workers to average down the wage cost for the employers, are you sure the employers can survive in Singapore?" admitted DPM Lee Hsien Loong, Straits Times, Oct 29, 2001.

Thus, while the elite have their taxes cut so they can get richer, the working classes are actually heading back to become the cheap labour attraction of a generation ago. To quote again from Dr Chee's 'Puzzle' Speech: "During the Asia crisis, monthly wages for low-skilled workers fell up to 34 percent from $746 in 1998 to $492 in 1999. During that period, 16 percent of the work force earned below $1000 a month. Nearly 30 percent of households were not earning enough to afford the minimum standard of life," [while] "the average household income for the top 10 percent rose by more than 3 percent while the number of millionaires in the country increased by 40 percent to a record high 742."

Economists will recognise from these 3 Waves of labour that
Singapore's seemingly impressive GDP growth in the early years are all due to increasing inputs of labour and not from increasing
productivity and as such, cannot be sustained. FTs now number 1.1
million, that is, work permit holders including maids, out of a native population of 3.2 million. What this does to the social fabric is not just a matter for sociologists, but a concern for economists as well because on an island of 650 square kilometres without any resources, this is clearly unsustainable. Unless, of course, a non-economics solution is sought, such as the invasion of Johor State, for its land, water and Chinese population, probably on some Hitler-Poland pretext.

Thus, Leeconomics is: ‘attract foreign capital into Singapore,
bringing in their foreign technology, employing foreign workers,
producing foreign goods for foreign exports'. The peoples' crisis at
the moment [the leaders never suffer any, for obvious reasons], is
that all this foreignisation of the economy nowadays doesn't even give them the jobs or the salaries it used to some years back.

For a fuller discussion of why FTs are bad for Singapore's economy and people, read my post in this newsgroup

[RH: Hiring Foreign Talent -- How Many Jobs Do We Lose?]:

http://groups.google.com/groups?dq=&hl=en&lr=&ie=UTF-8&oe=UTF8&group=soc.culture.singapore&selm=c443dfe.0306180209.225024b9%40posting.google.com

ROBERT's THEORY OF JOB CREATION

[This Robert's Theory of Job Creation explains how, across the whole
economy, 100,000 FTS –- and there are now 1.1 million work permit
holders -- may cause a loss of up to a million jobs. It also explains
why hiring one FT results in generating only ONE family's worth of
economic activities whereas hiring a local instead generates MANY
families worth of economic activities. Thus, from a sheer economics
standpoint, hiring locals for top-level jobs is far, far better for
the economy].

This Numbers Game Syndrome is a peculiarly Singaporean phenomenon for
several reasons. Firstly, the Singapore Technocrat or Bureaucrat or
Minister is not a real politician. He has no political skills in
communicating with or moving the people. At best, he is a manager and
indeed, most of them were former managers in Government Companies or
the Civil Service. Thus, these managers are predisposed to Numbers and totally lack the instinctive empathy with the people that all true politicians possess. Secondly, they are totally unaccountable to the people because Singapore is not a democracy. This leads to a totally top-down administration that can get very, very distant from the people below.

Today, if you have lived long enough in Singapore, especially over the last 15 years or so, and have been reading the local media, you would know instinctively that what I have written above is all true. Except that I am the first one to point out this truth in this way.

So, if comparisons of GDP growth rates between countries are
meaningless, are high Numbers also meaningless? The answer is Yes.
Coming back to my Running Track Analogy, it is useless and unhelpful
to compare a 100m dash runner to one doing the 10km marathon, even if
both are passing you by at the same time. They are running different
races! Thus even Absolute Numbers are meaningless. If LKY says that he managed 8% GDP growth last year, so what? Does that mean that all the people got better pay/profits by an average of 8% last year? Until that is so, even high absolute numbers mean nothing. The most LKY can say is that, under his rule, Singapore has become better in social and physical infrastructure and that people have a better quality of life. Which can also be said of Hongkong, China, South Korea, Taiwan, Japan, Malaysia, Thailand, etc, etc, -- more than half the world if we bother to count. Very few countries regress in such things.

Thus, GDP growth rates used to justify astronomical Ministers'
salaries and other unfair Government policies that benefit the rich
and disadvantage the poor is a Lie at best. At worst, it DISTORTS
Government policies away from a more equitable distribution of wealth
and important things like healthcare as well as 'Foreign Talents'
taking away jobs and meaningful lives from citizens. We can say that
the PAP Government, which prides itself on being the most intelligent
Ministers in the world, have made themselves the stupidest by not
having analysed the issue as I have done here. If they had, they would have come to the same conclusions as I have and the people would all have been better off. I am aware that I am doing the PAP a service by pointing out this aspect of their policies of which they are totally oblivious. And by so pointing out where they had gone wrong and thought wrong, I am helping them to change tack, to dephasise GDP and to emphasise people first, at a time when GDP growth is no longer impressive and will remain that way for years, perhaps decades, perhaps even forever, to come. So, this little treatise actually gives them an excuse to drop the emphasis on GDP Numbers just when the Numbers are no longer impressive.

‘AVERAGE', ‘GOOD', ‘EXCELLENT' GDP GROWTH

It would have been better for this stupid Government to express
economic growth annually by giving it a say, 'Good' score, or an
"Average' score or an 'Excellent', etc, and be done with it. By
getting seemingly impressive numbers in the earlier years, the PAP has gone chasing after high GDP Numbers in a kind of 'competition to get the highest Number' contest to the extent it has forgotten that the ultimate end result of all Government polices is to improve the
citizens' lives and not to achieve some high GDP Number. Other
countries are not obsessed with high GDP numbers because firstly, they don't have seemingly impressively high numbers, and secondly, they are all hitting about the same numbers range, so they take it in their stride and don't deliberately formulate Government policies for the sole effect of high GDP Numbers. This is because most other countries have a free press and a more democratic system that prevents this particular abuse and distortion of Government policies. When people are allowed to think and criticise, the Government cannot get away with stupid practices like this of LKY and his PAP Govt. Precisely because only Singaporeans are not allowed to think and criticise, this Abuse and Lie of GDP Numbers is practised only in Singapore.

If the PAP does not deliberately formulate policies for high Numbers,
what should it do? Ah, here I may have to do some National Service
again, to offer alternatives that are better than the current Number
Chase, which has gone on for too long and distorted economic and
social, even welfare (practically non-existent) policies.

SOCIAL COMPACTS THE ANSWER

For example, instead of formulating Government economic policies for
high Numbers, the Government should set itself a series of Social
Compacts.

By that, I mean that the Government should sit down and think out a
series of desired objectives for the people, such as:

*That no Singaporean should go hungry;
*That no Singaporean should live without a roof over his head;
*That no young Singaporean should be without at least 10 years of
absolutely free schooling;
*That no Singaporean, able or handicapped, be without a job that
pays no less than $600 a month, this to be reviewed yearly;
*That no Singaporean worker be without a non-politically-affiliated
union;
*That no Singaporean should be without medical care when sick, even
if he cannot pay for it;
*That no working Singaporean be without sufficient leisure to rest
from work and to improve himself whether such improvement be
educational, in hobbies or community matters;

These are all easily achievable and only require a different focus and a change in thinking from chasing High Numbers to Serving
Singaporeans. When that change in thinking is undertaken, the Government economic policies can be adjusted accordingly, such as
reducing 'Foreign Talents' -- practically an 'instant' cure for many
of Singapore's current economic ills! These are all very achievable
and much of it requires no more than small changes in policies. [However, change will be hard for a Regime that never admits that any of its policies can be wrong or ill thought out – saving face is more important to it than saving the people].

Certainly, my Social Compacts make much more sense than the current
bullshit about 'Community Above the Individual' rubbish which is
nothing more than an excuse for continued dictatorship.

Other Social Compacts can include (although I am not hopeful):

*That every Singaporean above 18 have the right to elect his MP in a Single-MP Constituency as conducted by an independent Elections
Commission; while every Singaporean below 18 have their vote exercised by the mother, first, and the second child, the father, and so on [thus achieving, for the first time in the world, truly universal suffrage for every citizen without any arbitrary distinction due to age];
*That every Singaporean household be given a free permanent
subscription to a newspaper of his choice, which can be changed;
*That every Singaporean household be given a 14" CTV if it does not
already have a better one;
*That every Singaporean household be given a radio if it does not
already have a better one;
*That every Singaporean household be allowed to use their CPF for
the purchase of computers and peripherals;
*That there be a free-to-air Politics Channel on TV and Radio [with
related Internet websites] that broadcasts politics 24/7, including
registered Opposition political activities;

*Other Social Compacts can relate to the rights of citizens or their legal rights, or human rights, or citizens' rights, etc.

If all these seem startling, it is only because of their novelty. I
have long thought out parts and pieces of these, so I can say that
with time, these are all very sensible, even obvious. They are not
pie-in-the-sky ideas at all. The first Social Compact is easily
achievable. The second requires a willingness to level the playing
field for the Opposition but still confers enormous advantages to the
PAP. It will actually be better for the PAP than the Opposition and
better overall for Singaporeans. All it requires is an acknowledgment
that Leeconomics has had its day and should be retired, which can also be said of Lee himself. And about time, too. Too much damage has
already been wrought.

Robert Ho
18 Jun 03
UK 1500 Singapore 2200

RH: I would like to acknowledge an intellectual debt to Dr Chee Soon
Juan for the above article because he had long sounded this theme in
various speeches, books and publications in the Open Singapore Centre
and the Singapore Democratic Party.

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

RH:

1. Since the above was written, I have recently come across some
statistics that may buttress my argument as described in the above "3
Waves of Labour". Which theorises that at least in Singapore, the GDP
is much more a function of labour than perhaps, anything else. Today,
I would like to expand this a little.

2. If I am right, not only Singapore but other countries, too, depend on demographics for GDP far more than is realised or orthodox
economists allow for.

3. For example, if we take a strictly demographic approach to
explaining GDP, as I have done in the above "3 Waves of Labour", then
old and ageing societies may be expected to produce lower numbers than new and growing populations. Is this so?

4. Let us take a look at the EU, comprising much of Europe and having big, greying populations. The average GDP growth in the EU in the past few years is an anaemic 1%. This seems to fit my theory, which is that demographics play a far bigger role in GDP than most economists will allow.

5. In the US, the average of the past few years is 2.5%, somewhat
better than the EU. Does this slightly better performance disprove my
theory? Not at all. In fact, it confirms it. Remember that my thesis
is that demographics is a major determinant of GDP? The US did better
than the EU largely because of its big continuing influx of
immigrants, almost all of economically productive age. To an extent
not seen in the low-immigration societies of Old Europe. Also, the UK
has done better than the rest of the EU and here again, the bigger
influx of immigrants probably explains why, although Gordon Brown will be loath to admit so.

6. Another example. Japan was/is the most ageing of all large, modern populations and sure enough, Japan has been mired in a dozen years of almost no-growth. If I am right, Japan will continue to stagnate in low GDP growth forever, since immigration is almost non-existent and the population will not become any younger anytime soon.

7. It is also no surprise that all the so-called Tiger economies were comprised of mostly young populations, namely, postwar Japan, South Korea, Taiwan, Hongkong, Singapore, and nowadays, Malaysia and
Thailand.

8. Even China seems to prove my theory. China for the last decade or
so, is a young society and it is booming along GDP-wise. This is both
good news and bad news. For if I am right, and economies depend more
on demographics than is allowed by orthodox economists, then all the
Tiger economies, including China, will soon falter and lapse into a
Japan-like malaise when their societies age, which is inevitable. My
theory may also explain India's rise. If I am right, and India's
population is young, India should experience the same booming economy
as China, which, I believe, is actually happening.

9. However, societies that need to continue high GDP may have to
artificially import huge numbers of immigrants, or at least, foreign
workers, and this is exactly what Singapore has done, with almost a
quarter of its population foreigners. But no other country can do this with impunity, due to political and social considerations. Only a true dictatorship like Singapore's can do it with impunity.

10. There are many more examples out there, I believe. I know nothing about the South Americas, or Africa or even the rest of Asia, Europe and Canada. But I can think of a simple test to determine if I am right. Suppose you look at a country first in terms of its
demographics, namely whether it is a growing or a greying population,
then see if it has significant immigration or foreign workers, then
you should be able to tell if that country has good GDP or not – then check the actuals to see if it all pans out as I predicted. Any
economist willing to do this? You could be on the brink of a new
paradigm.

Robert HO
11 Oct 04 1235
Singapore

http://groups.google.com/groups?hl=en&lr=&group=soc.culture.singapore&selm=c443dfe.0410102037.3c83acf9%40posting.google.com