Singaporeans live in a tiny bubble that is our island. We don’t usually give a damn about the rest of the world. We don’t understand why people riot, what austerity is, how poverty feels like. I like to think we are lucky. Even in the deepest recessions we have had, we have not felt desperation in the street like Europe does right now. Economic data like jobs numbers, PMI, export orders are inconsequential to anyone not in the finance sectors. But you know, you should be keeping a casual eye on these. The economy is the country. It’s an understatement to describe it simply as vital. There is no country if there is no economy, and it better be a viable one too. The American Presidential elections in November is widely regarded as the election of the economy. If you have been following the stories, I hope you like me feel like there’s a lot of deja vu while you watched the convention speeches last month and the debate this week. There are so many lessons to take home, and the best thing is that we get to learn it through someone else so we don’t have to make those mistakes. You should be watching.
I’ll start and say I am pro-democrat. President Obama if anything, will stabilize the domestic situation and guarantee a continuity of the policies in place and general direction of the country and economy. The debt in the US is growing at a staggering rate, but Japan and Europe are likewise troubled. To be honest, if the economy and politics could be kept apart, we would not be so indebted. This is the most polarized election America has seen in every aspect. In terms of economy, a Romney win is pro-business and especially so for the traditional sectors such as banking and coal. An Obama win will see diversification of the US economy into new sectors such as clean energy and also growth of the healthcare industry due to Medicare. What the American people should vote for, is the path to sustainable growth in the long term. What nobody can put a finger on is why is growth so difficult to achieve? There is no quick fix for stalled growth. I don’t know if Obama’s plans are better than Romney’s, but I think Obama needs more time and he deserves as much. A Republican win as I see it will be wasting at least the first couple of years in office undoing what Obama has enacted such as Medicare and tax systems and even foreign policy, before the Romney team can even start to do anything.
In that sense, we’re incredibly lucky in Singapore to not have to deal with polarized politics. We like to complain that a one-party system is not democratic and allows the government to have their way in everything. But on the other extreme, would you like a government back-paddling on everything every other term and going nowhere? It’s what we have seen in Greece in their debt debacle. People have voted out the government carrying out austerity measures to secure the ECB loan again and again, only to end up with a coalition government who is doing the same thing in the end. How much time has democracy wasted in this debt crisis? Our current political situation is at a sweet spot I think. There is enough opposition in parliament and the President who will keep the PAP in check. When the next election rolls in however, a swing government might be on the cards and that does not bode well at all. I think the opposition is too untested and if emboldened by the support of the people, will become too eager to change things and perhaps take unnecessary risks. Like Dad likes to tell me, there are some mistakes that there’s just no going back from. I don’t like how Singaporeans are staking the country for variety or to feel a little more accomplished by rebelling.
The US is one of the biggest economies in the world and there is no doubt some inertia at work that is keeping growth from picking up again since it has last come to a halt. Listening to the speech Obama made at the DNC, a change of direction to socialism seems to be what is happening. There is talk of improving education, of providing healthcare, of closing the income gap, of upgrading infrastructure, and also of sustaining growth. Does any of that sound familiar to you as a Singaporean? For years and years PAP harps on and on about sustaining growth, of diversification, of upgrading workers.. And perhaps now we can see why it is so fundamental. As we become a first-world country, growth can no longer be expected to be in double digits anymore. Industries such as low-tech manufacturing become less and less viable as emerging markets swoops in at lower cost to force us out of the market. It is a never ending game of catch me if you can. We have to make sure there is another ready-to-go industry we can jump right in as the previous door closes. We dabble in biotech and aerospace and soon, green energy because we need to keep one step ahead. Otherwise, the consequences are as you see in Europe now. Complacency has cost them a whole lost generation in years to come as they struggle with debt and returning to growth. It is very likely these Europeans will have to lower expectations and living standards drastically as they come to terms with their harsh reality. It could easily have been us. And on a side note, this is one reason why we need to shut up about FTs.
The social-economic divide of our people is slowly growing to look like that in the US. Low interest rates domestically and a strong currency is an environment in which the rich can capitalise upon and grow richer. Obama wants to take care of the middle-class because they are the driving force and heartbeat of their economy. I find what he said at the DNC very moving. There is indeed no reason why anyone who is willing to work hard cannot afford to feed his family. Employment is what keeps people happy. We have done a great job in Singapore to keep people employed and motivated to stay employed despite the challenging conditions. In the US, the 99-ers are the expanding group of people who have been unemployed for so longer, they no longer want to find a job. This is a huge drag on the welfare scheme as well as a huddle to growth. Employ, employ, employ. Romney believes cutting corporate taxes will help firms up hiring. That is why Singapore is pro-business and low tax. Our people cannot afford to be unemployed when the people is the only engine fuelling GDP in an economy in which we have no agriculture and oil to fall back on. But we have to take care of the working class and make sure wages keep pace with inflation. The US would be elated to have any inflation at all now, but for us it is a problem that never goes away even in the recession years. We cannot give outright handouts and welfare, but we can give incentives like Workfare and tax rebates. Yet this is still not enough. A growing, struggling middle class like in the US is what we have to avoid.
Our solution now seems to be upgrading the skill of workers so they can find higher paying jobs. It makes for a competitive Singapore in which it seems like people can no longer make a living if they aren’t capable. This is really my problem with the situation locally. The rich-poor divide will only widen more and more with time if we go on like that and there is a choke point where we cannot tax the rich any further without justification. In that sense I marvel at the government’s innovative ways to raise tax revenue from casinos to COEs. Obama coined a new term ‘economic patriotism’ at the debate this week. The risk really is that the rich will simply move out of the country if they are to take on more and more of the burden of supporting the masses. Can we risk these people taking their money and getting out of Singapore? We are supposed to be a financial and wealth hub in this part of the world after all. The US with their vastness and sheer size of the workforce can afford sectors in manufacturing to support a middle class in the long term. I hate to say this, but as the lower educated Singaporeans get increasingly squeezed out, will they have to go overseas and be FTs themselves in foreign lands to make a living? The truth is that the labour market is very tight in Singapore and there should be more than enough jobs for everyone which is why so many FTs are here. Is it rather instead that capabilities aside, Singaporeans feel entitled to better jobs than those being fielded by FTs now? I mean look, if FTs are making enough to get by, why aren’t Singaporeans?
The issue of FTs in Singapore is a sticky one and I think one day further down the road we will be where the US is now with their immigrants becoming de facto citizens in their own right for their contributions to the economy. There is likewise backlash to the ‘Dream Act’ as it is known. Whether illegal in US or legal in Singapore, immigrants simply stir up resentment in a population safeguarding their own interests. For us, I’m not sure using FTs to carry growth will be sustainable in the long run. Sometimes the FT population seems to me to have exploded out of the government’s control. There is a delicate balance between what our infrastructure can support and the growth more FTs will bring. We need to find ways of making more money with less people. This is the ‘productivity’ the government is talking about. Inefficiencies really need to be cleaned up and businesses consolidated especially in the public sector. Yet again there, it is a trade off with employment. The public sector is perhaps the biggest employer in any country. Should we keep employing 3 people to do 1 person’s job just so we can keep all 3 happy? I think it makes no sense commercially, but politically it’s another story. In this way, I think the local workforce has been conditioned to be unproductive. Is this the way forward? Definitely no. Is this why wages won’t grow? Yes, because payroll is growing faster than profits. It’s really simple math.
There is a lot more to be said about the American election as it goes on and things heat up. The fundamentals of government remain unchanging no matter where in the world we are. It is a great opportunity to be a spectator in this election and I hope Singaporeans will make the most of it and watch and take something away from it like I will. The position of the POTUS is one that will affect the world in some way or another. So yes, it concerns you and it concerns our economy. So stay tuned!
