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Singapore's Gilded Age

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31 October 2018

"This is the best of times. This is the worst of times."

Charles Dickens wrote this opening line for his book "A Tale of Two Cities" to portray a time of controversies and contradictions during the tumultuous environment of the French Revolution. But the line is just as befitting for today’s Singapore.

Increasingly, Singapore is divided into two worlds. For some, it is the best of times because they are now enjoying the fruit, be it from their hard labour or their astute investments afforded by the remarkable economic growth of the past decades. For others, Singapore has become a place where life is becoming painfully hard because of stagnating income amid rising living costs and widening social gap and of the uncertain, if not bleak, future going forward.

Economic development always produces “winners” and “losers”. But a country’s economy does not evolve in a vacuum. For societal developments to be sustainable, the political economic system not only must be meritocratic but must also ensure that the “winners” do not take all so that enough is left for those who are left behind. The role of any government is therefore not only to develop the economy but also to put in place a political system to ensure the equitable distribution of the economic gains, inequality notwithstanding. More importantly, the system must also be equitable for the future generations so that the odds are not stacked against them even before the race has begun for them.

On both counts, for both the current and the future generations of Singaporeans, the politics of economics appear to be failing. All these while, political expediency dictates that policymakers focus on controlling relative inequality, hence the use of the relative index, Gini coefficient which, by its measurement, already puts Singapore among the most unequal in the world.

But even as a narrow measure of wage inequality, Gini coefficient comes with a serious shortcoming. As a relative measure, it does not reflect the rapidly widening absolute inequality which is where the real harm is done because when wages are so low for those at the bottom that even just getting by with bare necessities becomes hard. Today, absolute wage inequality, not measured by Gini coefficient and hence not consistently tracked, is rising at a rate of 20 times between the top and bottom deciles of wage earners.

Notably, social disparity today is no more driven by just environmental (e.g. globalization) and circumstantial factors (e.g. illnesses). as it was during the 1980s and 1990s. Since the turn of the century, inequality in Singapore is increasingly driven by systemic forces (i.e. deliberate policies) employed by the Government to extract wealth from the rising land dividend amid declining demographic dividend. These systemic rent-seeking policies resulted not only in rising housing, living and business costs but also stagnating wages and declining job security as well as very significant wealth transfer from the households to the State.

As the Nobel laureate economist Joseph Stiglitz puts it, "Inequality didn't just happened. It is created by the government."

Inequality Hitting Young Singaporeans

It is not that the Government is doing nothing to address the widening inequality. But efforts are mainly targeting at containing damages to alleviate pains created by the rent-seeking policies rather than fundamentally addressing the root issues to future-proof Singapore.

Meanwhile, job opportunities for even young Singaporeans are dwindling with a matured economy. The high costs of doing business have also resulted in the exodus of MNCs over the past decade leading to a further contraction of the manufacturing sector which is the key to support the growth of middle-class households. For young Singaporeans who are late to the race, they face not only uncertain job prospects and lower wage-growth potential but also high living costs. The high housing costs, pushed up by government-regulated “market” forces, enslave them to a life of hard work just to pay off an “investment asset” that they lease from the government and do not own in reality.

In contrast, those who are lucky to be born into the ‘right’ family are destined to live a gilded life. Increasingly, life is becoming a race not with the same starting line but with multiple entry points along the way. The privileged ones can be given a lift by their well-endowed parents to join the race at an entry point far ahead of others in their cohort. In the coming decades, the skewed playing field will increasingly favour those with the right lineage. For those born less privileged and receive no help from their parents, who may themselves be struggling with saving for their retirement, they are made to bear the full costs of past growth even though they have not benefited as much from Singapore’s past success. This is not only inequitable but also unsustainable socially and politically. More will become disgruntled and choose to challenge the system. Eventually, the rising inequalities will breed cynicism and cause young Singaporeans, especially those born poor, to lose faith with meritocracy.

The problem is also not just the magnitude of the inequality. An even more worrisome issue is that widening social gap is driven today not by just environmental (e.g. globalization and technological changes) and circumstantial (e.g. inability to work due illness or who your parents are) factors but maybe increasingly also by deliberate systemic factors caused by government policies (e.g. high housing costs, regressive tax regime, and liberal foreign labour policies). Going forward, social disparities risk becoming structural and persistent with inequality breeding more inequality like a cancerous growth. The already high inequality will henceforth only worsen rather than improve unless strong deliberate actions are taken by the 4G leadership to rein in the runaway dynamics driving socioeconomic disparities.

Already, in a 2016 survey conducted by Institute of Policy Studies (IPS), nearly one in five Singaporeans between the ages of 19 and 30 wish to emigrate. Among them, almost a third will consider the possibility of doing so within the next five years. They believe that doing so will improve their social status and socio-economic security. Almost half – 42.6% – agreed that emigration can provide a backup plan in case Singapore fails.[1] In another IPS study on social capital released in December 2017, it was revealed that the sharpest division in Singapore is now based on class, instead of race or religion.[2]

It is not only the despondent young Singaporeans who are feeling left behind. Many seniors, after having contributed their prime years to the construction of Singapore to make it what it is today, are also feeling destitute and forsaken. In 2017, a record high of 129 elderlies aged 60 and above chose to end their own life instead of enjoying their golden years in retirement.[3]

Policy Paralysis due to Narrowly-Focused Vested Interests

This malaise of a society divided into two blocs – the haves and the have-nots – is hardly new. Socialist models and ideas censuring inequality while espousing an inclusive egalitarian vision had sprouted since antiquity in the classical works of Greek philosophers Plato and Aristotle. Plato’s work Republic, for example, depicts an austere society in which men and women of the “guardian” class share with each other their few material goods.

For many Singaporeans who are ahead in the race, they choose to believe that all is well and nothing should be done to rock the boat while remaining oblivious to the potential troubles ahead. Some also questioned why take the government to task since election results have given the ruling party a convincing political mandate.

To begin with, election results always favour the incumbents, especially so in the case of Singapore’s ruling party, because of its well-honed ability to root out opposing voices and to hold on to power. Issues that are debated during the elections are mostly about current pains rather than about our long term vision for Singapore and what needs to be done now to bring that vision to fruition.

It is foolhardy to expect inequality to go away on its own. Recent events such as the Brexit and the election of Donald Trump as the 45th US President have amply demonstrated the tumultuous consequences inequality results. In the US, for example, rising sentiment of disaffection on the ground towards the establishment not only prompted calls for protectionism and de-globalization but also led to the election of highly controversial Trump. The American society has never been more divided.

Notably, both Britain and the US were the two flag-bearers of the neoliberal economic regime, first extensively propagated by Prime Minister Margaret Thatcher and President Ronald Reagan in the late 1970s. Today, neoliberalism, which Singapore also faithfully subscribes to, is in disrepute for not only leading to frequent financial crisis but also high social inequality.  Britain, for example, has the highest Gini coefficient among the European countries. The US, on the other hand, has the highest index among the OECD countries. Brexit and the election of Trump did not happen by accident or by fake news.

Singapore need not wait until when 60% of its wealth is concentrated in the hands of 10% of the population, as in the case of the US, before we conclude that actions are needed. By then, the drivers of inequality in wage, income and wealth would have become structurally entrenched and any efforts to narrow disparities will only become increasingly more socially tumultuous as we are witnessing now in the US.

More importantly, it is time to ask what kind of society Singaporeans want for the next lap. Do we want a society that is divided into two worlds or we prefer a socially cohesive and vibrant nation-state where class-divide at birth will not be an overriding inhibiting constraint and where all Singaporeans have an equitable stake underpinned by meritocracy, inequality notwithstanding.

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[1] See Amir Hussain. (2018). “Nearly 1 in 5 young Singaporeans want to emigrate: Survey.” Yahoo News. 28 September, 2018.

[2] See Charissa Yong. (2017). “New Study finds clear divide among social classes in Singapore.” Straits Times. 28 December, 2017.

[3] See Yahoo News. (2018). “129 elderly suicides in 2017, record high for Singapore: SOS”. 30 July, 2018

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