With reference to my legal action to block our government’s loan commitment to the IMF you may have heard me say that I am not necessarily opposed to giving the IMF more resources. I must now admit that in light of continuing events in Europe I may have to revise my original statements.
I said that I was not necessarily opposed to the IMF goal per se, for two reasons. Firstly, it may be beneficial if it prevents another financial crisis like 2008 that led to a catastrophic slump in demand for our exports. Secondly, my opposition to the loan pledge is founded on considerations of rule of law and democracy. In my view, and that of a majority of other Singaporeans, who find the AG’s arguments extremely evasive and nonsensical, our loan commitment to the IMF is caught by a law that requires it to get Presidential and Parliamentary approval first.
So, I stressed that I had no objections to the IMF’s firewall fund, per se, in order not to co-mingle an issue affecting our rights to representative democracy at home in Singapore, with general opposition to the IMF, already out there.
In fact my action was just a mirror of that taken by the Auditor General who caught a soft loan to the World Bank’s International Development Association, in breach of the same Act. That loan was scrapped, raised again and put through the correct procedures, namely that Presidential approval was sought (see here).
Before you read any further let’s have a quick quiz. Rank the citizens of these States and Cities in order of standard of living from prosperous to conditions of austerity. In Europe consider the citizens of Italy, Germany, Greece and Portugal. In south East Asia consider the citizens of Taipei, Singapore and Kuala Lumpur. OK, now read on.
I have repeatedly said that (see here) everyone knows that the hidden objective of Christine Lagarde’s request for an extra $430 billion firewall, to which our Finance Minister on behalf of the PAP government readily agreed to make a generous contribution, is to prop up the Euro and to support the struggling peripheral members and their insolvent financial systems. Don’t be fooled by the fiction that Minister Tharman was careful to propagate in his answer to a carefully stage-managed Parliamentary question from one of his backbenchers. Then he said
“There are firm commitments to increase resources made available to the IMF by over $430 billion… These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.”
Anyone who doubts that the bulk of IMF lending is going to the Euro Zone has only to look at the latest IMF quarterly report which shows that 88% of lending is to Europe and the top three borrowers are Greece, Portugal and Ireland.
New evidence has emerged that these countries may not be so meriting of our charity after all. A new study by the European Central Bank (ECB) (see New York Times report here) has suggested somewhat controversially that the Germans may be being misused. Germans considered the prosperous people of Europe, have been asked to dig deep into their own pockets to bail out the rest of the Euro Zone. But are they actually poorer than the citizens of many of the countries they are being asked to support?
More than that , when I read the New York Times article I got the eerie feeling that that author was talking about Singapore. See this extract:
“The study was based on an exhaustive survey of 62,000 households in 15 of the 17 euro zone countries, which showed that the median net wealth of German households was only half that of Greek households, less than a third of Spanish households and less than one-fifth of Cypriot households. Much of the gap stemmed from the low rate of homeownership in Germany. In the other countries, real estate was the main source of household wealth.”
While German households were well ahead on measures of income and comparative unemployment rates the survey did have some surprising conclusions such as that Italians are land-rich even if average incomes are low. However, in language that seems uncannily reminiscent of how Singaporeans live, the article goes on to say that
“The fact is that many Germans struggle economically…Although extreme poverty is relatively rare, millions of Germans live in drab concrete apartment blocks, ride the subway and do their shopping at Aldi, the ubiquitous discount grocery chain.”
Now read this and tell me whether this describes Germany or Singapore? :
“Germans are intentionally misled to believe there is less poverty at home than there actually is…People think we’re the richest country in the world, that we have an especially strong social safety net, but these are just half-truths.”
Substitute HDB for “concrete apartment blocks” and NTUC Fairprice for Aldi and the article could be describing Singaporeans. The big difference is that we are not intentionally misled to believe that we have strong safety nets. Rather we are told that safety nets will ruin us and that we need a “spur in our hides.”
Of course part of the difference in wealth stems from the lower rate of home ownership in Germany due to greater difficulty in obtaining mortgages and a large stock of rental accommodation. This may be why there is so much grassroots opposition in Germany to lending to the European countries that have been hit particularly hard by the collapse of their housing bubbles. However when they do buy the majority of homeowners own the freehold of their properties. They are not forced to buy their apartments of average to low quality but steadily decreasing size from a monopoly supplier who retains the freehold. Neither are they forced to buy from government monopolies or cosy Public-Private oligopolies when it comes to the bulk of purchasing decisions. Of course our State managed media and the PAP government relentlessly drums home the message of how fortunate Singaporeans are and how well off they are compared to the citizens of other nations. I recently saw some propaganda on a PAP support group Facebook page that said, “Just because other people are rich doesn’t mean that you are poor.”
In fact as I have pointed out here, when measured by GDP per hour worked, Singaporeans ranks near the bottom of the leading industrialized nations and well below Ireland, Italy and Spain, three of the Euro Zone economies with the most severe financial problems. (Sadly these international comparisons by the US Bureau of Labor Statistics are ceasing because of the budget cuts forced by the recent US sequestration. This means one of the most important independent comparisons of Singapore’s economic performance will be lost)
Ireland is already one of the major recipients of IMF loans under its recent debt restructuring and bank bailout. Spain has received a Euro 100 billion facility from the ECB to restructure its banks. Both Italy and Spain are likely in the not too distant future to require a similar debt restructuring to the smaller Euro Zone economies such as Portugal, Ireland and Greece. At this point both countries will probably receive support from the IMF under the new firewall arrangements. If the Euro Zone crisis worsens, and every indication is that it is far from over, Singapore’s loan commitment is likely to be called upon sooner rather than later. So just like the Germans we are lending to countries whose citizens are much better off than ours.
I cited here the 2009 survey by UBS which showed Singaporeans’ living standards roughly on a par with those of the inhabitants of KL and lagging behind Hong Kong, Tokyo, Seoul and Taipei. The 2011 report (Singapore was mysteriously dropped from the 2012 survey) showed Singaporeans’ real hourly net pay at 40.7 with New York at 100. Dublin was on 101.7, Madrid on 75.6, Milan on 75.3, Lisbon on 65.1, Barcelona on 71.6, Rome on 53.6, Athens on 59.9 and Nicosia (the capital of Cyprus to which the IMF recently lent Euros 1 billion as part of the banks’ rescue package) 93.7.
It is not even clear if net comparisons are appropriate. Though Singapore performs better on comparisons of net pay because of our lower taxes the inhabitants of these European countries receive an incomparably more generous package of welfare benefits from their governments in return for the higher taxes. Medical treatment is largely free in most of these countries and they also have old age pensions and income supports that Singaporeans can only dream of.
Of course the PAP government wants to play the role of generous benefactor internationally with our money. All authoritarian regimes crave recognition and respectability. It helps to mute criticism from foreign governments. Libya, or Gadhafi’s son, was a generous benefactor to UK universities. Our scholars are an important source of income for Cambridge University and other elite institutions. It additionally allows them to maintain the fiction of good economic governance. The IMF is all too happy to oblige.
The PAP could be likened to Robin Hood but in reverse since the rule seems to be give to the rich and keep Singaporeans in austerity. In fact when will Singaporeans wake up and realise that they live in conditions of austerity, self-imposed and completely unnecessary?
Grace Fu recently strengthened the reverse Robin Hood philosophy by condescendingly saying that the government will shoulder a greater proportion of healthcare bills but that the need for co-payment would remain in case Singaporeans were tempted into “overconsumption” of healthcare (see here).
While there should probably be some need for co-payment I believe this should be capped and reduced for those on low incomes. It is hypocritical of our government to be telling our citizens they won’t be allowed to ‘over consume’ on healthcare while contributing to supporting countries with generous welfare states where health care is not limited.
In my next post I will be showing how our government plays Robin Hood in reverse domestically. In my rebuttal of Stiglitz, I already touched on the inequity of our tax system. I will add to this with details of our government’s policies on foreign labour and the effects of its monopoly over much of the domestic economy that keeps prices needlessly high. Until then please try not to give too much money away to the already wealthy.
Kenneth Jeyaretnam
* As a blogger, KJ hopes to help imagine a model for a New Asian Nation to bring about a free and fair future for Singapore. KJ is a Cambridge trained economist who could be broadly described as from the Keynesian school. He is also a successful ex-hedge fund manager and a liberal opposition politician who contested in the 2011 General Election with his party. He is currently the Secretary-General of The Reform Party. He blogs at http://sonofadud.com.