Editorial
On the social contract

By Toh Hsien Min

QLRS is late for only its second time, and again there's a good reason. During the period of time where I would normally be getting things together for the new issue, I was compelled instead to reacquaint myself with the hot dirt tracks of Ama Keng, from which you can hardly see a sign of Singapore's supposedly built-up status. It was not only that the burden of reservist duties meant that I had about a quarter of the time I would normally have to turn the issue around, but it also occupied time needed to co-ordinate things with external parties, e.g. for responses on editorial issues. And now that national service is back on the front page of the Straits Times, and our Defence Minister is coming out to say the case is a failure in the safety procedures and an "unauthorised and unsafe training practice", my own experience tells me: bollocks. During my recent stint, officers were smirking about how safety videos had to be shown and re-shown just for everyone to cover their own backsides, and had no relation to training whatsoever; and all those with various back/leg/arm problems were still made to go to field camp, dig trenches, lift heavy loads, etc. I'm currently C9L2 and between me and five others we dug out and built a 100 sq ft command post in 20 hours, and one week after I'm still taking painkillers for my knees. In fact, during this recent stint, one serviceman collapsed twice in asthmatic attacks and had to be evacuated to hospital both times - suffice to say, after the first incident, it was business as usual.

I've written on all this before, of course, but perhaps what's arising about national service now is symptomatic of a wider movement in governments that care less about their people than about their corporates and elites. One of my friends recently forwarded an article by John Cassidy of the New Yorker, in which he outlines how Paul Krugman, Princeton economist and author of The Great Unraveling: Losing Our Way in the New Century, has indicted the Bush Administration:

In the past two and a half years, the White House has reduced the top income-tax rates, lowered the taxes on corporate dividends, and prepared to abolish the estate tax. But Krugman is equally enraged by what he regards as the Administration's deceptive presentation of its decisions. "Bush has pulled the largest bait-and-switch operation in history," Krugman writes. "First he described a budget-busting tax cut, which delivered the bulk of its benefits to the very affluent, as a modest plan to return unneeded revenue to ordinary families. Then, when the red ink began flowing in torrents, he wrapped himself and his policies in the flag, blaming deficits on evil terrorists and forces beyond his control.

[...]

The Bush administration is an extremely elitist clique trying to maintain a populist façade," he wrote in a typical column last fall. "Its domestic policies are designed to benefit a very small number of people-basically those who earn at least $300,000 a year, and really don't care about either the environment or their less fortunate compatriots."

The responses that many of us who received that forward were instantaneous, and surprisingly co-ordinated. A prominent business journalist replied, "why is it that krugman's criticism of US govt sounds so much like singapore?"

Consider the latest round of CPF cuts announced in August and implemented this month. The stated purpose of the cuts is to keep Singapore competitive as a business location vis-à-vis countries such as China and India. However, if we apply the Krugman mode of inquiry, the stated purpose should be treated with skepticism until one parses the facts and figures. So let us look at what the people who make their money parsing facts and figures think about it. Here's a research report on the economic outlook for Singapore in the fourth quarter of 2003, by Swiss banking group UBS:

Another factor that needs to be considered are the recent changes to the CPF scheme to ensure competitive labour costs. Assuming that loss in long-term savings in household incomes is met entirely by a commensurate reduction in household consumption, the impact is likely to be significant [...] At the same time, we are uncertain whether these moves will create jobs or even stabilise the labour market. Our understanding is that these changes have been introduced mainly to retain competitiveness vis-à-vis China and India. However, we estimate that wage differentials with these countries are too significant to be altered by the proposed changes. As regards other countries, relative unit labour costs suggest that Singapore is already quite competitive and therefore, incremental gains are likely to be limited.

To these developments, we can add the government's steadfastness to go ahead with the pending 1% increase in GST in 2004. Assuming that the household sector alone bears this increase, we estimate it would imply a transfer of around S$350m from the household to the government sector. While this amounts to only 0.5% of overall consumption expenditure in Singapore, the point to note is that it further suppresses an already low consumption to GDP ratio of around 40%.

UBS's opinion is clearly that both policies may do Singapore more harm than good; in fact, they subtitled the CPF cut as a "problem". Local stockbroking house GK Goh, who issued a report the day after the announcement of the CPF changes, on 29th August, was more pointed on the directions that these implied:

...wages account for 20-30% of total business costs. Thus far, the burden of keeping Singapore competitive has fallen on workers. So the question is whether future changes will extend to the other 70-80% of business costs, which include numerous government fees and levies. At this juncture, it seems that the government has yet to demonstrate its willingness to make the same sacrifices that it is now asking of its citizens.

On the same day, Jake van der Kamp of the South China Morning Post practically laughed in Singaporeans' faces:

There will be a transfer of wealth from the people who worked for it to the multinational corporations (MNCs). This could be excusable if these MNCs then invested the money back in Singapore but the difficulty is capital investment in Singapore is dropping faster than a rock in freefall and has never been lower than it is now, relative to the size of the economy. The MNCs are mostly in exit mode now. They will not put the money back into Singapore.

The foreign angle could be an especially touchy one at this point. Another correspondent of mine asked if the general reaction was xenophobic in any way. I said no, there was plenty enough to be unhappy about in what is really a domestic issue, that of the contract between the government and the people. From a personal perspective, I'm pissed that I've put in a lot of effort into developing and running a company that has turned profitable and created jobs for Singaporeans and the government gives me a pay cut "in the interests of saving jobs". That these cuts are meant to save money for foreign MNCs who are generally perceived to be in take-the-money-and-run mode, which would represent a transfer of wealth from Singapore nationals to foreign interests. That the recommendation for these cuts for the local labour force comes from a foreign consultancy that has polled expats who are unaffected by the cuts but stand to gain from higher bonuses that come with a healthier bottomline, in other words another transfer of wealth from Singapore nationals to foreign nationals. That the civil servants who have gone along with this scheme are relatively unaffected as the Admin Service accrues pensions outside of the CPF, and it was shortly after announced that the civil service will get another half-month bonus this year on top of what they had got last year. And to ice the cake, that I've got to do all this silly national service stuff because I'm a Singapore national. If the foreign angle comes in at all, it's only because that's the sweet spot I'd like to be in: to be foreign talent living and working in Singapore.

The best analogy for Singapore's foreign talent situation, to my mind, is the English Premier League. Before Johnny Bosman challenged the UEFA transfer system in European Union courts, English football clubs could only field a maximum of three foreign players a team. After Bosman, there was no limitation to the number of foreigners who could be fielded so long as they held an EU passport. English teams began recruiting more and more foreign players. Today, it's not uncommon to find English football clubs taking to the field with no English players in the starting XI. The standard of play in Stamford Bridge, Highbury and the Riverside has improved, but lots of young English players coming up through the academies only get to play in reserve teams, because it's so much easier to buy an accomplished player from overseas than to blood your own youth team. There's nothing morally wrong with this, of course, but then England now has to deal with its national team having only one really good striker, one striker with promise, one passably good midfielder, only one left-footed player, and lots of dross.

The current issue of QLRS faces similar questions. We have had some very good work submitted this issue, in poetry particularly... from overseas. A countback of the current issue submissions show that 40% of contributors come from overseas. And as we always read based on quality of work rather than who the contributor is, 75% of the chosen work in poetry came from overseas writers. Will it be the Singapore national team that loses out? If our analogy is sport, perhaps the answer can be found in Miguel Jaime Ongpin's essay on sport: we must really try.

But isn't government for the people just a late 20th-century thing? Discuss in the Forum.

QLRS Vol. 3 No. 1 Oct 2003

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