Singapore’s limits: The curse of the GDP

By Eugene Yeo, Consultant Editor

[In this two part series, Eugene Yeo writes about the two chief limiting factors of Singapore's uccess: the growth-at-all cost economic policy and an unthinking, unquestioning, subservient citizenry]

In his National Day speech, Prime Minister Lee Hsien Loong said that Singapore is now in a stronger economic position after a turbulent start to the year. (read full article here)

‘As a result, growth in the first half of the year was minus 6.5 per cent – a very significant contraction, but less bad than we had feared,’ he said.

There’s no guessing that the ‘growth’ he is referring to is Singapore’s Gross Domestic Product or GDP, the perennial barometer of our nation’s success.

Singapore is a nation obsessed with numbers and none the more so than the GDP. It is on the lips of every minister and it is little wonder since a substantial portion of their astronomical pay is pegged to the GDP.

Every few days, the mainstream media will update the entire nation on the latest GDP forecast. When the GDP growth is good, the government takes credit for it and raises its own pay. If the growth is negative as is of now, it is an inevitable consequence of the global financial turmoil.
No leaders in the world is so beholdened to the GDP like ours. Malaysia’s Najib Razak waxes lyrical about “1Malaysia”, China’s Hu Jintao talks about building a “harmonious society” and Hong Kong’s Donald Tsang frequently promises to ensure the “civil liberties” of the people.
How many Singaporeans even understand the meaning of GDP?

By definition, the GDP a basic measure of a country’s economic performance, is the market value of all final goods and services made within the borders of a nation in a year.

It is a sum of the total output of a country, but tells us virtually nothing about the income gap, the cost of living, the per capital consumption and most importantly the welfare of the people, especially the poor, needy and destitute.

The Singapore government’s selective and myopic focus on the GDP has led to a gross neglect of other areas culminating in a widening income gap as shown by our Gini Coefficient, which is one of the highest amongst the 30 most developed economies in the world.

Though Singapore’s per capita GDP is roughly 11% higher than Hong Kong’s, our per capita consumption is about 21% lower. This means that the average Singaporean spends 21% less than the Hong Konger. We have to save much more and spend less to maintain the same standard of living.

Unlike other first world countries, Singapore lacked a social safety net. Recent studies have shown that the CPF is hardly adequate to meet the retirement needs of Singaporeans as it is mostly used to service mortage loans for inflated public housing.

The high cost of living, coupled with education and medical expenses mandates most young parents to work long hours and save for the future leading to a low domestic consumption which increases our reliance on foreign investments and exports.

Singapore has one of the highest saving and investment rates in the world, During the past 20 years it has averaged about 37%, and for several years during the 1980s it approached 50%! Thus, Singapore typically invests between two and three times as much of its income as the United States. (Source: FRBSF)

U.S. economist Kenneth Kasa wasn’t impressed by the Singapore model of development:
“We cannot rule out the possibility that Singapore invests too much and is dynamically inefficient.”, he wrote.

Where have all our budget surpluses gone to? Not surprisingly, a portion of it ends up with our two sovereign wealth funds - Temasek and GIC, flushed with billions of dollars.

Kenneth Jeyaretnam of the Reform Party argued that our budget surpluses can be better utilized by re-investing it in the people, our most precious asset:

“The budget surplus having been taken from the pockets of Singaporeans then represents money that not only could have, but should have, been returned to the citizens of Singapore in the form of lower taxes, fees and charges. It could have also been used to finance much higher domestic investment in education or in health and welfare.”, he said. (read full article here)
The GDP growth over the last three decades which is contributed by every Singaporean has gone to enrich mainly the state with the ordinary citizens “improverished” by standards of the developed world.

We may have a roof over our heads and three meals a day, but everyday life is a continuous struggle to keep ourselves and families afloat especially for the middle class which is becoming squeezed by the rising costs of living and stagnant wages.

To assess if our nation’s GDP growth from the years 2002 to 2008 has really benefitted us, we only need to ask ourselves these questions:
1. Are we happier?
2. Are we having an easier life?
3. Do we feel secure about our future and that of our children?

The key task of the government is to care for the people and not primarily to generate GDP growth which is only a means to the end. If the current growth-at-all cost policy cannot provide for the well-being of the people, then an urgent rethink of the economic blueprint is necessary.

Can Singapore afford to grow at a slightly slower rate and yet able to reap more intangible benefits from the “software” of the citizenry.

In a less stressed society, young Singaporeans may be more inclined to get married and start a family. Increasing our birth rates will reduce our dependence on foreign workers. Instead of spending their entire lives in pursuit of the 5Cs, Singaporeans may find more worthy and meaningful goals in their lives. An increased emphasis on citizens to show that they matter to the state will instill a far greater sense of belonging in them than just mere decoration of the the neighborhood with flags.

In the early years after independence, when we are still a developing country, GDP growth matters above everything else. We need foreign investments to generate years of growth in order to jump-start the economy.

Now, we are already a developed economy. We are losing our advantage as a low-cost manufacturing hub to neighboring countries like China, Vietnam and India. We have to progress to the next stage of an intelligent and creative economy that generates real value to keep us ahead of our competitors. A ‘top-down’ approach simply will not work because creativity can only thrive in adversity.

Singapore needs to produce a Bill Gates, a Larry Page, a Bernard Kouchner, a Barack Obama who dares to go against conventions and fight for their beliefs, ideas and vision.

We have one of the highest education standards in the world. Our college students excel in Mathematics and Science, often triumphing over the Americans and Europeans in international competitions, but why are we so far behind them in terms of creativity?

The real problem with Singapore is that we have produced too many technocrats, bureaucrats and yes-men. We need more thinkers, innovators and visionaries who dare to blaze a trail of their own against conventions.

The government needs to liberalize the political arena to allow the people to freely question its policies without any fear for there is a rebel in every genius, innovator and visionary. We are a nation of sheeps, obeying orders and following blindly what the government says without ever thinking or questioning and this is another limiting factor to our future success as I will elucidate on in my next article - An unthinking and unquestioning Confucianist society”.