Vincent Wijeysingha: High prices, low wages will lead to crisis

Singapore Democrats (link)

Dr Vincent Wijeysingha recently spoke at the Online/Offline forum held last weekend where he talked about the current economic arrangements in Singapore and its implications for our future. Below is the text of his speech.

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

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

Let us first of all acknowledge that all nations are vulnerable to national security challenges. Sadly, we don’t live in a world where it is possible to exempt ourselves from danger. In this region, Singapore is, perhaps, particularly vulnerable because of the many antipathies the first PM made through his arrogant commentary against our neighbours, their cultures, their economies.

China’s geostrategic ambitions and contracting economy, terrorist elements in Indonesia, and the proximity to a North Korea governed by a very inexperienced leader also give rise to potential dangers.

But at the same time, we are oddly safe because of our Strategic Framework Agreement and Free Trade Agreement with the United States, our place in the regional economy, and the significant share of the Asean trade that we carry. So this is the framework we are operating in.

The issue we are discussing today can easily be hijacked by a xenophobic causal discourse because it implicates the lowest-waged sectors of our workforce which are also massively populated by foreigners. But to interrogate the issue from a security perspective may be precipitate and premature. My take is that national security implications raised by the volume of foreign workers in Singapore are limited and they are not imminent.

Having said that, I readily accept that the frustrations of our people are very real. They are deeply influenced by the social and economic hardships which the immigration policy has raised and which we have not had the opportunity to debate widely.

But in my view, the central issue is the stability of the economy. Our industrial structure continues to be based on a goods and lower services model propelled by cheap labour. More than half the economy is based in these sectors, employing half of the workforce. This economic model, although tinkered with at different times and in limited ways to varying success, has really not departed a great deal from the low-waged predominance.

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

In the late 1980s, the principles of the Washington Consensus were developed. They advocated, among other factors, reductions in public spending and privatisation of public goods as the policy options for the coming period. Singapore adopted the principles unhesitatingly.

The government coupled this with eliminating the means by which workers can bargain for better wages and limiting the space for debate.

Salaries across the lowest centiles of our workforce declined in the last ten years and have not risen much more noticeably for those in the middle centiles while they have rapidly increased at the upper levels.

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

In the last 4 years, the government has blamed inflation entirely on external factors, even though the most significant inflationary pressures have been in transport and accommodation. Both of these inflationary pressures the government has significant control over through COE levels and HDB prices.

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

A demoralised, struggling population working among the longest hours in the world at incredibly poor productivity levels in what the Economist Intelligence Unit has recently described as the ninth most expensive city in the world, and constantly at the mercy of being replaced by more cost effective foreign workers.

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

History has taught us the suffering and desperation that gave rise to the revolutions in America, France, China, Russia did not come from the outside. They came from the policies of capricious kings living exorbitant, expensive lifestyles and apparently deaf to the suffering of their subjects. There is nothing so calculated to provoke social unrest as a hungry stomach and the inability to fill it.

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

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

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

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

Studies have shown that poor labour conditions lead to high turnover, poor productivity, a sense of aimlessness and lack of commitment. The morale of our people, their commitment to the nation, the sense that they are being listened to, these engender a sense of ownership and responsibility. However, two key principles which have animated PAP policymaking have led to a significant divide between the people and the government. They are that the people are mere economic digits and the nation nothing but an economic laboratory.

Fear is not an enduring phenomenon. It has a breaking point beyond which people are no longer fearful because their fear safeguards nothing. When we enter into an interim period where the cheap labour advantage moves elsewhere – and it is already beginning to – if we haven’t done the hard thinking and planning beforehand, we will struggle to remedy the situation at crisis point.

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

An economy based on a cheap labour foundation eventually faces a race to the bottom, that is, to compete to be able to offer the cheapest wages. Such a situation is only politically manageable when there are means by which workers can bargain as equal partners in the economic enterprise. In the absence of this, you generate the pressures I describe.

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

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

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

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

The Minister of Manpower’s handling of the SMRT industrial action; the Transport Minister’s statement on fare increases; the general refusal to even countenance alternative approaches, together with the resolute silence of the mainstream media, will do nothing for our ability to weather future storms.

We need to be freeing up our social structures so that the project of nation building can expand rather than contract. The intellectual bunker to which the government appears to have retreated is a dangerous reaction.

  1. Vincent speaks a lot of sense, but it only makes sense if you Read his speech. Then one can go over bits to feel their real impact. Otherwise his message passes one by too easily.

    He needs to Speak in much shorter sentences. He needs to repeat his main points – in different words of course – at least twice.

    Most of all, he needs to make his points in Much simpler, friendlier English. People’s standard of English here these days is poor. And those are the ones who have been to university!

    Otherwise, no matter good his points are, they will not get across. This would be a waste.

  2. Agree very much with Zen’s point of view.

    And some stats will go a long way in making the point.

    High Prices – lets expound on this; ntg was mentioned on our inflation rate. Also, the numbers given by the authorities, and whats actually on teh ground.

    Low Wages – where are the numbers? Whats our avg wages level? How Sporean/resident wages have actually reduces? and by How much?

    Numbers, tables and some charts will go a long way in making the wgole argument easier to grasp.

    Otherwise, keep up the good work, and remember simpler numbers and words will help reach out to more people.

    John John