A protester holds up a placard during the Population White Paper protest last year. (Yahoo file photo)
Sudhir Thomas Vadaketh is a writer. Together with Donald Low, associate dean for executive education and research at the Lee Kuan Yew School of Public Policy, Sudhir is the co-author of an upcoming book, Hard Choices: Challenging the Singapore Consensus, to be published by NUS Press in April 2014.
Singapore needs to address its drastic wealth inequality in order to, among other things, reduce social tensions, improve social mobility and maintain its commitment to building a fair and just society.
While there has been much discussion about income inequality in Singapore’s recent past, wealth inequality has garnered little attention. This is partly because of a paucity of official data. But a report on global wealth last year by Credit Suisse, an investment bank, suggests that Singapore has one of the biggest wealth disparities in the world.
Why worry?
In any capitalistic society, some inequality is desirable as the just rewards for differing effort, which incentivises people to work hard. But extreme inequality can be pernicious, justifying redistribution.
First, it disrupts an individual’s innate sense of fairness, and can cause people to lose faith in meritocracy’s fair workings.
Second, extreme wealth inequalities can lead to several economic inefficiencies, for example when people overspend on positional goods such as luxury cars at the expense of productive investments.
Third, a country’s democratic traditions are arguably under threat by wealth concentration. This is because a small group of rich people can wield undue influence on public policy. Fourth, there is a moral argument against obscene wealth accumulation.
Wealth inequality also threatens social stability—it has been at the heart of political upheavals from the French Revolution to the Arab Spring.
Do Singaporeans care about wealth inequality?
Singaporeans have traditionally been averse to wealth redistribution, partly because of the idea that focussing on equalising life opportunities is enough. When estate taxes were abolished in 2008, Singapore became one of the few countries that does not have capital gains (including property) or estate taxes.
And yet over the past few years, Singaporeans have become increasingly concerned about wealth disparities and less convinced by pro-wealth arguments.
Consider the idea that Singapore needs many wealthy billionaires in order to seed and grow businesses. This misunderstands the nature of entrepreneurship. Henry Ford and Bill Gates came from humble origins to build giant companies. Their descendants, billionaires, have not created anything similar. Much better for Singapore to foster a friendly investment climate and an open, innovative environment.
Finally, there is much evidence today about the lack of intergenerational mobility in this country. Many Singaporeans today subscribe to the school of thought encapsulated by Michael Harrington, an American political scientist, who in 1962 said that most poor people are poor because “they made the mistake of being born to the wrong parents”.
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