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Tuesday, December 9, 2008

ICONOCLASSING Pt 3 or RH Zero Sum Game Theory

ICONOCLASSING Pt 3 or RH Zero Sum Game Theory


1. Today's essay is Iconoclassing Pt 3, which continues from "Iconoclassing Singapore GDP Myths" and "Iconoclassing Pt 2", whose urls are just below :

19 June 2008


19 June 2008


2. Today's essay takes off from a speech "The Puzzle That Never Was" given by Dr CHEE Soon Juan in 2001 to Stanford University, Institute of International Studies, url and complete text just below :



January 29, 2001
Dr Chee Soon Juan
Secretary general, Singapore Democratic Party

Speech given at Stanford University, Institute for International Studies

Singapore society confounds the theory that wealth leads to an opening up of society. The Lion City is an affluent society unable, some say unwilling, to break out of its authoritarian mode. Therein lies the puzzle that the Singapore is.

A. THERE is a myth that goes something like this: Singapore's post-independence story has been one of a money-making miracle and the miracle-maker is, of course, the People's Action Party. We all know a myth, when repeated enough and left unexploded, gradually becomes fact. When you add to this another myth which is that Singaporeans, having become rich, seem not to mind living in an authoritarian state, a veritable puzzle develops.

B. Sieve out the hubris and scoop away the public relations puff, however, you have a reality that is very different and a politico-economic puzzle that is very explainable.

C. Singapore's economy has been designed to maximize GDP gains in the shortest time possible. The best way to go about doing this is to yell like crazy to foreign investors about the generous tax incentives that are on offer with cheap wages to boot. To make sure that the locals go along with the plan, the opposition, labour movement, and civil society in general is dismantled through laws such as the Internal Security Act which enables the ruling party to arrest anyone at pleasure and detain them at leisure. Workers must also be maintained on a strict diet of intellect-numbing presentation of government pronouncements sans critical analysis through a controlled mass media. Once these conditions are in place, one will be surprised how quickly multinational companies come in.

D. 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.

The addiction to foreign capital

E. As foreign capital poured in and employment grew, the PAP started to get too comfortable in government and rationalized that continued discipline brought about by its austere measures was the way forward.

F. Of course with growth, cost has also risen. With its neighbours competing for foreign investments, the government has had to rethink its strategy. One solution would be to get Singapore out of direct competition with its neighbouring economies for low-end, labour intensive industries. Thus in 1979, the government embarked on a series of measures to encourage the influx of high-tech industries to replace low-tech ones. With typical authoritarian efficiency, the PAP raised the level of real estate prices and wages of the workers. Political economist Garry Rodan wrote: "Without any apology, the PAP tried to force lower-value-added, labor-intensive industries to upgrade operations or close operations in Singapore altogether."

G. The result was that unit labour costs rose by 40 per cent in six years.

H. But instead of responding to the PAP's call to upgrade their operations in Singapore, many of the low-tech companies simply moved to cheaper countries. Magaziner and Patinkin wrote: "The EDB [Economic Development Board] people explained that they'd misunderstood why companies had come to Singapore. Good infrastructure was important, but it wasn't the main driver. Cheap wages were."

I. In 1985, this policy resulted in a full-blown crisis. A combination of a 40 percent decline in investments and slothful international trade saw Singapore's economy plunge into a recession with the GDP registering a negative 2 percent down from its usual 8-10 percent.

J. Then, as it is now, it is the people who end up picking up the tab. With the same autocratic style that announced the switch to a high-wage, high-skilled economy, the government now decreed that wages of the workers be cut by 15 percent. Lee Hsien Loong, who was then the Minister for Trade and Industry, exhorted workers to increase their working hours to "44 hours a week...and to do third shifts and keep plants open 24 hours per day." In the meantime, the government declared that it no longer mattered whether the techs were high or low, "all forms of investment which can make profits were welcome."

K. And so with wages cut and dissent muffled, the government went about serenading foreign investments again and growth was subsequently restored. The question was for how long and how much do the people have to sacrifice again when difficulties revisit the economy?

L. By the early 1990s the economy was wheezing and puffing again. In 1994, nearly 8000 workers were laid off by more than 200 companies. This was an increase of 19 per cent of retrenched workers over 1993. In 1995, the number of retrenched rose to more than 14,000. By 1996 there were unmistakable signs of an imminent recession. Again the government pointed to the "restructuring" and "upgrading" of the economy. Then Minister for Trade and Industry, Yeo Cheow Tong - without a hint of knowledge of the problems that the triggered the 1985 recession - said: "In actual fact, such restructuring and upgrading are signs of a healthy manufacturing sector." Someone forgot to tell him that the companies that were moving out were high-tech electronic ones which the economy was supposed to be upgrading to.

M. As it turned out, the PAP was saved from an embarrassing situation by the Thai government which buckled under the weight of the baht and devalued it on July 2, 1997, sending Asia into its worst economic nightmare. Perhaps, we will never know the severity of that economic downturn because of the Asian crisis. It does, however, make the PAP's claim that Singapore's economy tumbled during the crisis only because of it was dragged down by its neighbours' financial misfortunes seem, at best, disingenuous.

N. As before, the workers end up having to make yet more sacrifices. In 1999, the Singapore government announced that it was cutting wages by 10 per cent. The retrenchments continue into the present and is set to get worse. The government's latest explanation for the loss of jobs is not very different from that in given in 1994, or for that matter, way back in 1979. Prime Minister Goh Chok Tong told Singaporeans that "economic restructuring also meant retrenchments will rise" and this was because "low-skilled jobs are being lost and high-skilled ones created." Here we go again.

O. The fact of the matter is that Singapore cannot, or doesn't know how to, get out of its dependence on foreign investment. Walden Bello and Stephanie Rosenfeld noted: Despite its seeming prosperity, Singapore in 1990 is trapped in the treadmill of the export-oriented economics that it once so enthusiastically embraced. Having so completely opened itself up to the world market and the multinationals with the illusion that it could influence the former and manipulate the latter, the PAP technocrats now see that their policies have reduced Singapore's economy to a mere service economy, the fate of which is totally dependent on the calculations and whims of the multinationals.

Economic growth for whom?

P. The reliance of Singapore's economy to foreign investment exacts a significant toll on the welfare of the people. The government's willingness to sacrifice workers' wages whenever economic conditions become unfavourable means that Singaporeans are consigned to having to work harder and harder just to maintain a standard of living that, contrary to government pronouncements, is not all that its made out to be. Let me give you a few indicators.

Q. In the Global Competitiveness Report 1999 which surveyed a total of 59 countries, Singaporean workers, especially those in manual jobs, were found to be relatively one of the worst paid in the world. The median wage of an office cleaner or driver, adjusted for productivity, "is among the lowest in 59 countries worldwide." Only Russia, Ukraine and Ecuador are paid less. Secretaries don't do much better, their wages rank 50 among the 59 countries.

R. 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. But when the crisis was over, salary increases among 14 Asian economies was the lowest in Singapore. While Hong Kong, South Korea, and Taiwan had rewarded their workers between five to eight percent in wage increments (after accounting for inflation), Singapore averaged only 3.6 percent with the number predicted to decrease to 2.9 percent this year. It was reported that between 1998 and 2000, the average monthly income of the lowest 10 percent of households fell further by half to $133. The subsistence level in Singapore is estimated to be $1000 for a household of four persons.

S. All this in a city that is consistently ranked as one of the most expensive in the world. In the mid 1990s the Union Bank of Switzerland ranked Singapore as the 7th most expensive city - even costlier that Paris, New York and London. Just last week, the London-based Economic Intelligence Unit rated Singapore as the ninth most expensive city in the world.

T. And yet Lee Kuan Yew, without batting an eye, recently boasted: "Foreigners have noted how the people of Singapore have responded, putting national interest first by taking CPF cuts that helped this rebound (from the Asian crisis)." With trade unionism rendered comatose by the government - the umbrella National Trades Union Congress' chief is a government minister - a significant question arises: How do the workers tell the Senior Minister that they are hurting? How do they tell him that they don't want to be the ones having to put 'national interest first by taking CPF cuts' when the ministers increase that own salaries, which is already the highest in the world? Under the new pay scheme Goh Chok Tong's annual salary will jump by 14 percent to S$1.94 million, five times that of the US President's. How do they let him know that they don't want their employers to cut their wages by 10 percent when in the same period, the average household income for the top 10 percent rose by more that 3 percent while the number of millionaires in the country increased by 40 percent to a record high 742?

U. Gerald O'Driscoll, Kim Holmes, and Melanie Kirkpatrick wrote in the Index of Economic Freedom report 2000 that in Singapore "the authorities strive to be first but at the cost of efficiency and the ultimate well-being of the people."

V. For all the hype about Singapore being a near-paradise, 20 percent of its citizens indicated that they want to leave the country predominantly because of the stressful lifestyle and high cost of living. In 1999, a consumer health survey found that among the various Asian societies, Singaporeans are more likely to have suffered depression, stress and fatigue.

W. But in spite of all this, the PAP apologia will point to the political stability in the country and the notable lack of strife, and tell you that this is due to the ruling party's sound economic record and the people's contentedness. If the lack of civil strife is taken as an index of a government's popular support, then the North Korean regime must be one of the most loved ones in the world; Saddam Hussein, still in power after the rest of his counterparts in the US and Europe have left office, must go down in history as one of the most endearing political figures; and Burma's military outfit must be doing everything right since the crackdown in 1989.

X. Just because the surface of the water is calm, don't always assume that there is nothing lurking beneath. In an authoritarian state, the seeming tranquility is more a reflection of fear and of the effectiveness of the tactics of repression, than it is an indication of the masses affection for the ruling elite.

Y. There is no question that economic growth can occur in authoritarian states under the guise of free market regimes. There is no puzzle here. However, for there to be economic development, one that genuinely benefits the masses and one that is sustainable, the people must be active participants rather than mere digits of the assembly line. For this to happen, democracy is vital. History has shown that how right wing, free-market authoritarian regimes were not able to hang on to power forever. Singapore is no exception. The reason why the regime is still firmly in place is that the founder of the authoritarian system is still alive and very much in the political equation. The second reason is that Singapore is a much smaller country both physically and in terms of its population and because of this control is that much more effectual. Put Lee Kuan Yew in charge of a bigger country like say Malaysia (let alone even bigger ones like Thailand and large ones like Indonesia) and the results could be very different.

Living with fear

Z. I have related how much of a myth the PAP's economic achievements have been and shown you how the picture of the rich, fat, and politically contented Singaporean is just as fictitious. Let me now tell you about the climate of fear that Singaporeans live under and how this fear is induced.

AA. On the eve of nomination in the last general elections in 1997, I received a phone call from a woman who was the wife of one of our candidates. She pleaded with me to persuade her husband not to stand for elections. She was in tears. When I tried to explain to her the situation, she grew increasing desperate and threatened to jump off from the flat and take their children with her. We quickly sent some of our women folk to see her to make sure that nothing tragic happened. In between sobs she said that they had a family to look after and joining the opposition would ruin everything. She didn't want to see her husband again unless he agreed not to stand as an SDP candidate. Our candidate later managed to return home and pacify his wife. He continued on with the elections but hardly campaigned as he stayed home most of the time to make sure nothing happened.

BB. On an earlier occasion, I met up with an academic to discuss the possibility of him standing as a candidate. He picked me up and we quickly drove to a field that was unlit. We sat in the dark and started talking. He was visibly nervous and suggested another spot. And so we found another darkened place, this time in a carpark to talk about the business of his candidacy. We were behaving as if we were planning something illegal when we were just making plans for the elections.

CC. Another instance involved a well-known Asian author who had come to Singapore to work as well as do some research for her book. She told her Singaporean housemate that she was going to have lunch with me, whereupon the housemate became so terrified that she immediately asked the author to move out.

DD. In 1998 I was in Perth, Australia, to give a talk. A professor there told me that some students confided in him that they were interested in attending my talk but were afraid they would be blacklisted. In a similar occasion in Sydney, I was walking to the toilet after giving my presentation when a few students came up to me and said they were very supportive of what I was doing, but didn't want to be seen in public talking with me.

EE. We presently have a few younger Singaporeans who started the youth wing of the SDP. It is called the Young Democrats. Each and every one of them has come under intense pressure from their families not to get involved with the opposition. I am very glad they were able to persuade their families otherwise and stand firm in their convictions. Needless to say, I'm very proud of them.

FF. In case you think that these are just anecdotes that may not be reflective of the political situation in Singapore, a recent survey found that 93 percent of Singaporeans are afraid to speak out against governmental issues.

Is such fear unfounded?

GG. Singapore still retains the Internal Security Act (ISA) that allows the government to detain citizens indefinitely. Scores of opposition leaders, trade unionists, and social activists were arrested under the ISA and detained for years. Chia Thye Poh was one of them. He was imprisoned for 23 years without given a trial.

HH. Then there are the lawsuits. J. B. Jeyaretnam has recently been bankrupted because he could not pay the costs and damages outstanding to his opponents some of whom are PAP MPs. He has been sued repeatedly by Lee Kuan Yew and other PAP leaders and has paid more than a million dollars to these people, selling all his possessions in the process.

II. Tang Liang Hong, a successful lawyer who stood as an opposition candidate in the last elections has also been sued. He was declared a bankrupt and charged with tax evasion. He now lives in Australia.

JJ. Francis Seow, the former solicitor-general, was also detained under the ISA. He later ran for elections with the Workers' Party. He now lives in exile in the US after he was charged and convicted in absentia while he was in this country receiving treatment for his heart condition.

KK. These are just some of the higher profile cases. There are many more which time does not permit me to relate. I tell you about them because you will not read them in political science books or journals. Nevertheless, they are very real cases involving real people. The next time you read or hear anyone telling you that Singaporeans live in the comfort zone under cheerful climes with relatively little to fear, you can at least carry on a discourse with some intelligence.

More obstacles

LL. Which brings me to my next point. Why is there such a mistaken impression of Singapore in the first place? The mass media has much to do with this. Singapore's local media has been comprehensively subjugated in the 1970s when editors and journalists who crossed the government with their reports were put in prison. Many of the newspapers were closed down. Today all of the country's newspapers are published by state-run companies, the biggest being the Singapore Press Holding which is run by a former cabinet minister and a former ISD director.

MM. What about the foreign media? Time, Newsweek, the International Herald Tribune, Asiaweek, Far Eastern Economic Review, and the Economist have all been either sued or have had their circulation restricted, or both. The foreign broadcast media also recently came under attack. These actions by the PAP has had a lasting impact on the way the foreign media tends to report about Singapore.

NN. In such a situation who are the losers? The PAP? Hardly. It was a resounding victory for the government over the international media. The owners of these foreign publications? Not when you consider that their bottom line is to keep up their sales. The real losers are the people who have been deprived of yet more independent and uncensored sources of information. The PAP may have won the battle this round. But it has not solved the problem of the people being denied the right to freedom of information. All it has done is to set Singapore up for a much bigger fall in the future.

OO. This is not the only way people are deprived of dissenting opinion. Books critical of the PAP system, cannot find their way onto shelves in bookstores. None of them would carry my books. When I sell them on the street, I am prosecuted for illegal hawking. When I call up the Ministry of Environment to apply for one, they say that no such licenses are given. None of the newsvendors dare sell newspapers published by opposition parties.

PP. I have not even begun to relate all the appalling tactics employed by the ruling party during elections. Because of time restrictions, I will instead refer you to a report entitled 'Elections in Singapore: How free and how fair?' published by the Open Singapore Centre, copies which are available for sale here.

QQ. Having heard all that I've just said, can you truthfully say that this sounds like a government that has the kind of support it claims? Does this sound like a people who are unafraid and willingly allow the PAP this continued control over them? Or is there some truth to the fact that the PAP knows that the people want democracy and the only way to deny them of this is to institute more controls and device more ways of intimidating them?


RR. It is important to disabuse ourselves of the notion that the PAP is this visionary architect of Singapore's economy and, worse, that Singaporeans are so comfortable that they will just roll over and play dead every time the PAP cracks its whip. Why should Singaporeans be any different from the rest of the world which has unreservedly embraced democracy. From Mexico to Mongolia, Soviet Union to South Africa, people want to live in freedom and dignity, and to be able to hold their governments accountable. The last time I checked Singaporeans are humans too. And because we are humans we have this one thing in common that cannot be crushed. It's called the human spirit.

3. Dr CHEE is the only person in Singapore who has spent his entire recent life, >a decade, fighting/understanding/critiquing/writing/exposing the crooked, corrupt, nepotic, murderous, torturous, election-rigging, greedy, venal, LIE KY LHL WKS Cronies PAP LIEgime. He is also the only one who has done this well, with courage, skill, talent that no one else has displayed in Singapore. That makes him uniquely qualified to not only know and identify what is wrong -- and the entire system is hopelessly wrong -- but also how to fix it, given the chance. His books are not mere rants but contain insights into the problems and solutions to the problems.

4. As a sometime essayist/blogger, I would today like to take off from his above Puzzle speech, that portion relating to cheap labour that I have paragraphed-named as F to J and L, N and O.

5. It is my contention that Singapore has all along been a cheap labour economy, despite the few showcase high-tech and service sectors that are always trotted out and boasted to foreigners, like when they are bussed to some spanking HDB township touted as evidence of success. Dr CHEE has done me the service of stating the facts and figures in the paras mentioned. However, as in my 2 previous Iconoclassing articles, my theme is how LIE KY's GDP is a Myth. In today's article, I would like to postulate that "Singapore has always been a cheap labour economy." Evidence of this is in Para O : "O. The fact of the matter is that Singapore cannot, or doesn't know how to, get out of its dependence on foreign investment. Walden Bello and Stephanie Rosenfeld noted: Despite its seeming prosperity, Singapore in 1990 is trapped in the treadmill of the export-oriented economics that it once so enthusiastically embraced. Having so completely opened itself up to the world market and the multinationals with the illusion that it could influence the former and manipulate the latter, the PAP technocrats now see that their policies have reduced Singapore's economy to a mere service economy, the fate of which is totally dependent on the calculations and whims of the multinationals."

6. If you allow my arguments in my first 2 Iconoclassing articles and allow Para O, then it is clear that LIE KY is far, far, from being the genius and miracle worker that he and his lapdog media have endlessly portrayed him to be, but a total failure whose overhyped image is due to faked statistics, the Green Lever Effect, and an economy driven to ruin through 'managing FOR numbers'. The collapse of the Singapore economy and country will be when the Housing Bubble and Foreign Cheap Labour Bubble burst, as burst they must, as is inevitable with all bubbles. If you allow that "Singapore has always been a cheap labour economy", then you understand why so many citizens are unemployed, their woeful statistics disguised by renaming citizens + PRs as "Residents" and why an astounding 35% of the people on this tiny 700 sq km islet are FOREIGNERS.

7. Singapore has always been a cheap labour economy, only that, in the early days, we Singaporeans were the cheap labour, nowadays, the foreign workers are. This is inevitable. Through the years, due to the moronic policies of OverTax & UnderSpend in order to amass huge surpluses and reserves, which are regarded as evidence of success, as all money wealth seems to indicate success, the LIEgime raised the prices of everything, especially HDB flats where a typical tiny 4-room flat that costs S$30,000 to build, as proven by successful contractors' published tender prices, are now selling for >S$640,000. This Bubble can only burst and it will make the US subprime crisis seem modest. So, with frequent price hikes in GST, HDB flat prices, transport, utilities, every single possible cost, Singaporeans cannot pay their mortgage and eat 3 meals without a salary of at least S$1,000, which would be subsistence level. So, in order to keep the cheap labour economy going, Singaporeans are deliberately undercut by importing cheap foreign workers, until now they comprise 35% of people on this islet. UnderSpend means that the housing, transport, whole infrastructure do not keep pace, hence overcrowded metros, buses, malls, even parks. So, high GDP growth is at the expense of or balanced by ruinous social policies and conditions of life for the vast majority.

8. The common thread running through my Iconoclass series is that the supposedly high GDP growth that LIE KY got is false and distorted. Today, I would like to postulate that "True GDP growth is almost impossible and growth in one sector is always offset by decline in another or in a future foregone." We can call this the Zero Sum Game Theory.

9. Let us look at this puzzle or paradox by briefly checking the GDP growths of the advanced economies, especially that of Europe. After all, they have many of the best economists, planners, experts, think tanks, economic data gathering and studies, in the world. So how is it that they can manage no better than the ~2.5% in the best of times, even less in the inevitable troughs and downturns? If you minus the bad times GDPs from the good times, you get No Growth. Even the ~2.5% in good times becomes 0 when inflation and other factors are factored in. So, it is entirely possible that my Theory is right, that GDP Growth is impossible.

10. What of China and Singapore and other seemingly high GDP growth countries? Remember my Theory about 'future foregone'? In the case of China, its laudable record of >10% GDP growth over 3 decades is probably due to its one-child policy in which 2 adult parents pay taxes and contribute to economic activities while producing only 1 child to use back some of those taxes, mostly in minor expenditures such as schooling and a little healthcare, etc. This gives the China govt a big surplus for every family of 2 adults taxes/economics - 1 child's spending. Further, when that child leaves school to work, all 3 contribute for many years thus giving the China govt all 3 surpluses in economics. Any wonder China developed so quickly in just 3 decades? This may seem to contradict my Zero Sum Game Theory that no true GDP growth is possible and any growth is just a rebalancing of different sectors in which some sectors' growth are balanced by others' declines OR balanced by a future foregone or decline. In China's case, when the demographics turns bad, when there are many more old non-working people than young working people, the Zero Sum Game will happen and all the years of positive growth will then be nett off by years of decline. 7 years fat followed by 7 years lean.

11. The US also has had better GDP growth than the advanced European countries but this is offset or balanced by poorer societal conditions and many poor sectors. There is also future foregone in the huge deficits that future generations will have to pay back for the current generation's enjoyment. Zero Sum Game again. Nothing is for free. There is no free lunch.

12. If my Theory is right, then govts and economists must be very, very, careful what they wish for. If they want Big Growth in some sectors, then they must be very careful to ameliorate the declines in other sectors, or society, which will be inevitable. Or costs to future generations. The one salutary effect of my gloomy Theory is that govts and economists may stop chasing the mirage of high GDP growth and ask themselves what it is they really want to do, what they want for their societies. They may then become more like the advanced but slow-growing European countries and try to better the lives of their people, not just feed the economy. Better childcare, better healthcare, better schools, better public transport, better and more rewarding careers and jobs, more fulfilling lives. In the end, isn't this what govt should be all about?

RH Zero Sum Game Theory : "True economic growth is impossible. Growth as measured by GDP and other accountings are possible in some sectors, but are always negated by declines in others, usually measured over-optimistically for the growth sectors and over-pessimistically for the decliners. True growth over a defined period is possible, but only at the expense of future declines, like booms are always followed by busts and bubbles eventually burst. All this is due to the finite natures of Man and his systems. An emphasis in one area/s of endeavour is negated by neglect in another/s. A gain now leads to a loss later. In the end, it all adds up to zero."

Related somewhat to :



http://answers.yahoo.com/question/index?qid=20081021061251AASf7sU .