theonlinecitizen

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Myths and misconceptions about pursuing high growth indefinitely

Posted by theonlinecitizen on June 15, 2007

By Ney Reed

After my earlier article (“Paradigm shift in focus required – from economic growth to economic development“) , I am asked to discuss more about what development policies Singapore need to pursue.

However it is premature to do that because the earlier article only looked at growth vs development and did not discuss pursuing high growth and pursuing it indefinitely which this article will attempt to do.

A subsequent article to this can perhaps look at development policies that Singapore need to follow.

Race horses always amused me even though I do not gamble. One thing that I always found humorous about them is that during a race if the jockey falls off, the horse will not stop running.

Instead it will continue to run as fast, chase after the other horses that are ahead of it and never look back even once to see if the jockey is around. In some instances the horses may divert from the racing track into the inner track outside the boundary of the race.

In the worst catastrophes horses have even diverted into the crowd. What always makes me laugh is to see how the horses, after looking for their jockey, will run without stopping with full determination and at full speed till the race ends.

Watching these horses only remind me of Singaporeans: once they set their course, they will dash with full speed, never pausing to reflect or look back. Even when they look at a jockey or divert out of the circuit track, they won’t stop to rectify their path.

We can see this phenomenon everyday on our roads, in our schools, amongst our policy makers, our organizations etc.

One silly race that we are still dashing to the never ending finish is the pursuit of high economic growth indefinitely.

Every month the news is never without discussions of projected estimate, actual estimate and forecast of growth rate. Every economic undertaking is almost always explained linking it to its impact on growth rate.

In the earlier article I only very generally compared pursuit of economic growth and economic development. This article will look at the two main principles behind Singapore‘s pursuit of economic growth which are that the country must not only achieve growth but that growth needs to be high growth and that it has to be achieved indefinitely.

What leads to Singapore policy makers to develop these philosophies are the following myths and misconceptions that they subscribe to.

 

“A country like Singapore can always be pursuing high growth”

No country has ever achieved high growth indefinitely.

In the history of mankind no country ever achieved that. After a period of time, high growth rate will stabilize to steady growth rate. Countries normally will plan for a period of high growth and thereafter plan to maintain a steady growth rate instead of pursuing high growth indefinitely.

To achieve high GDP growth indefinitely, a country will need to achieve high growth rates in productivity and capital indefinitely. For achieving high growth rate of productivity indefinitely, a country needs high growth rate of population indefinitely. Singapore is too small to sustain this. For high growth rate of productivity indefinitely, a country needs high growth rate in literacy, skills development, retraining, R&D, growth and development in post-secondary education etc.

This is practically and realistically impossible in terms of Singapore‘s resources, mindsets and attitudes, atmosphere and environment that are required to allow this. What is practical instead is to aim for stable growth.

 

“High growth is critical for Singapore‘s survival”

High growth is critical to accelerate a country from the stage of “underdevelopment” to the stage of “industrialized”. Thereafter the country has to move on to the stage of “developed”.

Here what is essentially required is development and stable growth, not high growth. Every developed country after having achieving high growth and moved on to the level of the industrialized stage, only achieved high growth at prosperous peaks of business cycles.

Instead the focus and experience was in achieving stable growth.

 

“High growth is good, very good… die die must go for it…”

High growth strategy does not come without a big cost. Generally those who are not able to contribute to the high growth economy will tend to be left behind and marginalized.

For instance those within the labour force whose productivity cannot grow at the rate which is required to sustain the high economic growth will then lag behind. This group is not a static group either. One whose productivity is high today and is relevant to the economy today but faces a decline in his/her productivity due to age, insufficient skills, inability to retrain etc will then become much less relevant or irrelevant to the economy tomorrow.

The labor force that supplies labor in turn is also the consumer force that supports consumption in the economy. When their incomes are no longer stable, their consumption patterns will no longer be stable and since consumption is one of the most important engine for economic growth, it will eventually affect growth rates.

It also contributes to widening the income gap.

Other groups who are incapable of supporting high economic growth either today and/or tomorrow also grow less relevant or irrelevant.

These include laborers who need to find satisfaction in supplying their labor at prevailing wages offered by the industries, traditional Singaporean businesses that need to transform at the speed bureaucrats transform their policies and economy, owners of capital and land and properties in the economy who need to be able to hang on to their resources and be able to rent them and so on.

If one looks closer, this is purely a game of survival of the fittest or the affluent.

Some Singaporeans are foolish to think this is fine and natural but this game of survival of the fittest leads to an indefinite widening income gap that threatens the very long term survival of the economy through the destabilization of the social order of the country.

In the economy that is pursuing high growth indefinitely, constant change becomes a necessity and reality. But these changes come through change in laws, regulations, rules, conditions etc.

Also in a normal-sized country, the government can move around the country to implement changes whereby what they recently implemented somewhere is not really affected.

In the case of Singapore which is so limited by size and population, there are not that many new changes that can be effected. Hence change then often becomes changing what has been just changed.

Constant change can make prevailing environment, expectations and forecasts unpredictable, thereby introducing a great deal of uncertainty in economic activities.

A constantly changing economic environment is as confusing and worrying as a constantly changing political environment, especially for a small country. Governments may try to concede to multinationals and corporations to create a superficial sense of stability within the chaos of constant change or new change but consumers and smaller businesses remain outside this superficial sense of stability and tend to be subjected to constant changes.

In all it is clear that high growth and pursuing it indefinitely comes at a big cost which really is not necessary and worth the benefits that it brings along.

Instead, for Singapore just like any other newly industrialized countries, what is required is stable growth policies and more development policies.

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28 Responses to “Myths and misconceptions about pursuing high growth indefinitely”

  1. thunder said

    So what specific things should Singapore do or not do so that its people can have a better life than today, and can thus spend more time to write fluffy articles?

  2. Iahur said

    <i>A country like Singapore can always be pursuing high growth. No country has ever achieved high growth indefinitely.</i>
    The Govt is well aware that as we become a richer country, our growth rate will be slower compared to the past. Nowadays, the Govt’s estimate of Singapore’s growth rate (e.g. in the annual Budget Speech) is always about 4-6%, a much lower rate than those achieved even in the 90s. In fact, our growth rate in recent years has proved to be consistently higher than Govt’s estimate, so if anything, they have underestimated rather than overestimated Singapore’s economic potential.
    <i>What is practical instead is to aim for stable growth.</i>
    Another platitude. Can assure you that the Govt wants that to happen too. More importantly, there is no logical inconsistency between high growth and stable growth. Stability itself is not a virtue. Would Singaporeans be better off with a consistent 1% growth year after year, or growth fluctuating between 3-7%?
    <i>“High growth is good, very good… die die must go for it…”</i>
    Where and when have you heard any policy makers espouse the above? If the Govt wants to max out our growth rate with no regards for any other factors, they will be doing things like removing the foreign worker quota and levy and giving businesses all the foreign workers they need. Instead, the Govt has to play a fine balancing game in giving enough foreign workers for businesses to be viable, and yet not giving them so much that jobs are not created for locals. Similarly, the corporate tax rate must be low enough to attract investments but still high enough to provide enough revenue for defence, education, workfare etc. If going for growth is the only objective, then the Govt would have cut corporate tax to zero. I am not saying the Govt always find the optimal solution, but give them more credit lah…
    <i>It also contributes to widening the income gap.</i>
    So what is the solution? Would lower growth help those at the bottom of the pyramid. If growth drops to, say, 2%, does it mean that the richer Singaporeans will now donate more money to help the needy, or will they then be willing to pay higher taxes to fund things like Workfare and hospital subsidies? If growth drops to 2% would there be more and better paying jobs for poorer and less educated Singaporeas?
    <i>A constantly changing economic environment is as confusing and worrying as a constantly changing political environment, especially for a small country. </i>
    Believe me, the Govt will really love not having to change anything. If Singapore can continue to do the same things and enjoy our prosperity, they can sit around do nothing and collect their pay. Unfortunately, we are a little red dot and the World changes without caring whether we like it or not. If we can tell countries like China and India: please stay STABLE, closed, poor, and undeveloped and don’t take away our manufacturing jobs, then we are fine 🙂

    **Remarks deemed to have nothing to do with the issues raised in the article is deleted by the editor.

  3. twoheadeddemocracy said

    Bring in the ‘tithes and camels’ so they may be food for all. And by tithes, I do not mean the kind of garbage being served by hill billies concerts organized by ‘mediums’ for a handsome fee which,to their credit, is far too brilliant than serving kidney fondue.

    According to local sources, the watchdogs hope to sniff the coffers of the high priestess of prosperity. That may just brings us one step closer to a living hope only if they manage to turn the table on the money changers!

  4. davidhuang said

    Iahur,
    if a gov will pay themselves millions because they think they deserve it, then why insist they have no solutions to our problems ?
    These arrogant cronies tell us they deserved millions, so why are you speaking for them. They don’t need your pity, and by pitying the gahmen, you are obviously insulting the gahmen’s intelligence !

    **Remarks deemed to have nothing to do with the issues raised in the article is deleted by the editor.

  5. High economic growth can be achieved if our per persona income is below US$10,000 or S$15,000. We are now having a per persona income of S$35,000. So how can we achieve high growth without enough workers ?

    America can achieve high growth because they have many illigal immigrants and their population is getting bigger with immigrants. We cannot do that because we have limited land.

  6. city coke said

    ‘If we can tell countries like China and India: please stay STABLE, closed, poor, and undeveloped and don’t take away our manufacturing jobs, then we are fine”

    correction.our extraordinary talents(one in particular) were partly responsible for telling countries to stay UNSTABLE, liberally open,excessively rich, progressively destructive if necessary,take away jobs from first world countries or lower their wages and that’s why we became ‘unre-fine’!

    these copycats should not have followed us. they could have evolved a better and KINDER model but didnt or rather…incapable of. well, it’s inevitable.

  7. kelvin said

    If high growth turns into better jobs and better pay for the workers,I am for it.What is the point of having high growth when it benefits the corporate,the rich, instituitions and the gahment and the people at the bottom of the pyramid do not get better pay and still having to pay for the ever increasing prices of food and daily expenses.We are importing almost every item and we have no control over the cost of the raw mateial.We are getting more FTs who are hungry, eager to work and compete for jobs.

  8. Iahur said

    <i>if a gov will pay themselves millions because they think they deserve it, then why insist they have no solutions to our problems? </i>
    Where did I insist they have no solutions? In fact, in the face of global competition, terrorism, unhelpful neighbours etc. I think they have done rather well.
    <i>What is the point of having high growth when it benefits the corporate,the rich, instituitions and the gahment and the people at the bottom of the pyramid do not get better pay… </i>
    For argument sake, I will accept your premise that high growth does not benefit people at the ‘bottom of the pyramid’ which I assume refers to the poorest 10-20% of the population.
    Firstly, Govt is responsible for the welfare of all Singaporeans, so even if growth benefits only the top 80% of the population, there is no reason why it should not be pursued. Moreover, as these people, particularly those in the middle, also vote and like to complain in ST Forum, the Govt has to take care of their interests right?
    Secondly, high growth gives us the revenue to fund defence, education, workfare etc. even when most Singaporeans are not paying income tax (which is amazing for a country with as high per income capita as S’pore). At the end of the day, what I cant see is why people think the poor can benefit from lower growth.
    Actually, if Singaporeans really want to help those at the bottom, they can at the next GE vote for whichever party that promises higher income tax to fund unemployment benefits or other subsidies for the poor. But seeing the reaction to means-testing for subsidised hospital beds, this is unlikely to happen.
    Since people are not going to voluntarily transfer their income to the poor, we need growth to create the wealth than can help the poor. Just think, without growth, how does the Govt pay $6b (and increasing every yr) annually on education, which still provides the greatest opportunity for people at the bottom to break out from poverty?
    I am still asking the same question: For those who think that we are on the wrong path, what SPECIFIC things should Singapore do or not do?

  9. lesile said


    People like to open their gap without reading carefully or thinking. Where did I insist they have no solutions? In fact, in the face of global competition, terrorism, unhelpful neighbours etc. I think they have done rather well.”
    So what are the solution to our problems ? PayAndPay because of globalizaion, competition ? If you keep buying that, let me tell you, forget about voting, choice, and voice. Forget these all, because the same reason will be used again and again. Is’t these the same reason been used and you said that they have solutions for us ? Yeah, rising cost and PAP indeed is the solution for us !

    Iahur,
    Did they really have solution to our problem even though you never say that ? For a gov that is never opened and never stand scrutiny, and insist that they are right, then stop blaming Singaporean when rising cost increase. We see gahmen increase their own salary increase, GST increase, and sure everything is done in a intransparent way.

    Iahur, the way you speak seem to be very elite kind of thinking and kind of rich people yourself.

    Iahur, oh yah, please stop talking rubbish about voting. Voting is never fair. LKY say it and everyone know it. Why not fair ? Because many areas are walkaway. Mine at Bukit Timah is walkover and so is many areas.

    Iahur, stop listening to gov’s crap to say that you can vote them out. The gov say a lot of things now to say if you not happy, you can vote. But when election come, you know there is no way to vote them out and GRC is great vehicle for walkover.

    You can say whatever crap you want but when the time come, you just do it differently. That’s art of right timing.

    The question to ask : Did Singaporean deserve to have better society other than money, money and money ?

    Economic growth is good but not at the cost and expense of Singaporean. Isn’t the gahmen Singaporean too, and why they never did set an example ? Money example ?

  10. kelvin said

    If you are one of the 18-20% at the bottom and with prices going up and an unsecured future ahead of you because of competition from FT.Even the alunimium cans collection is seen now collected by some FTs. Pause and think where your next meal is coming from.Wait for the next election? Or start thinking which MRT stations to pick to jump track.I am talking about the real singapore now people living from hand to mouth.So what you are saying to those folks is that you dont like it here you can go. The gate is opened and there are many waiting outside wanting to come in.

  11. Lahur,
    Thanks for exercising your good judgement and speaking up.
    Agree with you that this post has absolutely no value whatsoever. Arguments are weak, if they are arguments at all. 🙂 Too bad the KTM is too busy to write a post to clarify what high growth rate is all about or to reply to the fellas who have posted comments thus far. You have actually done quite well. 😛

    **Remarks deemed to have nothing to do with the issues raised in the article is deleted by the editor.

  12. Gerald said

    Thunder, Iahur and KTM,

    You all are so quick to criticize a post for being “fluffy” and having no value when you obviously haven’t understood the context of this article. The writer made reference to an earlier article where he argued for the importance of pursuing economic development as opposed to just economic growth. If you read para 3, you’ll see that there’s going to be a “subsequent article to this (that) can perhaps look at development policies that Singapore need to follow.”

    If you disagree with his points, at least have the decency to rebut it with just counter-arguments, rather than resorting to personal attacks and slamming him as an “anti-estab”.

    I personally think that this “economic development rather than just economic growth” argument is something worth considering, even though it is hard for me to completely accept after 29 years of PAP indoctrination to the contrary.

    I think we would all do well to keep an open mind to new ideas. (Well, at least ideas that are new to Singapore.)

  13. Lifeslikethat said

    **Comments deleted by the editor

  14. Ned Stark said

    Lifeslike that,

    Its Ney, I am Ned 😛

    But i tend to agree with Gerald and Lifeslike that. Going on ad hominem’s attack make you no different from those who attack PAP bindly.

  15. Lifeslikethat said

    Sorry, Ned. Was just reading your article on the work holiday programme and got mixed up. 😦

  16. Hi guys,

    Come on, lets not get personal. I think Ney has tried to clarify and explain his stance in his replies so far and also in his follow-up article. There really is no need to start calling names.

    Lets stick to the issue, k, guys?

    Thanks.

    Regards,
    Andrew

  17. Gerald,
    Perhaps some quick clarifications.
    <i>You all are so quick to criticize a post for being “fluffy” and having no value when you obviously haven’t understood the context of this article. The writer made reference to an earlier article where he argued for the importance of pursuing economic development as opposed to just economic growth. If you read para 3, you’ll see that there’s going to be a “subsequent article to this (that) can perhaps look at development policies that Singapore need to follow.”</i>
    Believe it or not, the KTM writes also. 🙂 It is just his professional(?) opinion that these posts are too wordy and do not present arguments well. That’s the KTM’s opinion having been around for a while. If you don’t agree with the KTM, that’s fine. 😛

    Lahur has already raised many good points of contention, none of which have been addressed. All Lahur has been getting are ad hominem attacks from folks whom the KTM interprets to be the anti-estabs (not Ney Reed). The KTM is simply giving Lahur some moral support and encouragement in view of the sliming he’s been getting from various quarters. Fair enough?
    As for the KTM’s point to Lahur about asking for suggestions, it was quite amusing to the KTM because HE ASKED exactly the same question before when he was new to the blogosphere and NAIVE (maybe stupid?). Hehe. 😛
    <i>I personally think that this “economic development rather than just economic growth” argument is something worth considering, even though it is hard for me to completely accept after 29 years of PAP indoctrination to the contrary</i>.
    Interesting that you learnt Economics from the PAP. It turns out that the KTM learnt his Economics in school. 😛
    <i>I think we would all do well to keep an open mind to new ideas. (Well, at least ideas that are new to Singapore.)</i>
    What ARE the new ideas?? There’s nothing here or in the previous post that the KTM hasn’t read or thought about before. 😛 Seriously, the KTM might just write something on economic growth, but that’s a serious topic that requires a significant amount of research and effort for proper treatment. It’s not something that the KTM has time to deal with right now given that he’s just finished his treatise and responses on the university admissions system.
    Fundamentally, the crux of the issue is the following: people shouldn’t conflate the issue of <a href=”http://www.singaporeangle.com/2006/07/on-sustainable-development.html” rel=”nofollow”>the poor being squeezed by globalization</a> with economic growth. The two issues are clearly related, but to blame our problems on economic growth are unfounded. The KTM would submit that without robust economic growth, we (bottom 20% poor inclusive) are going to be even worse off than we are now.
    Perhaps Lahur might wish to pursue such an endeavour?

    ****Remarks deemed to have nothing to do with the issues raised in the article is deleted by the editor.

  18. Ned Stark said

    Then KTM perhaps it would be prudent to wait for Ney to respond to your argument rather than naming people anti estab?

  19. ** Comments deleted by the editor

  20. Clarence said

    I’m also not feeling very combative today. Well done Lahur. 🙂

  21. Iahur said

    Gerald,

    I personally think that this “economic development rather than just economic growth” argument is something worth considering…

    I assume “economic development” means an increased sophistication, general level of skills, diversity etc. in the economy; while “economic growth” refers to just the numbers, i.e. the % growth in GDP? Given that we have not struck oil or gas since Independence, I fail to see how the latter can happen without the former.

    I think we would all do well to keep an open mind to new ideas. (Well, at least ideas that are new to Singapore.)

    The problem is, there are no ideas (new or old) in the article, unless you count platitudes like: “what is required is stable growth policies and more development policies.” as ideas.

    I take your point that there could be another article coming up on “development policies’ that Singapore should adopt. But I don’t see why there is a need for this long fluffy preamble. In any case, I hope all the points I have raised will help make the next article less fluffy.

    Lesile,

    Iahur, the way you speak seem to be very elite kind of thinking and kind of rich people yourself.

    If I am really a rich elite, I won’t care what nonsense people are sprouting on the economy. If the Singapore’s economy tanks, I can just relocate. Or I can park my money overseas and live like a king here. Unfortunately, I am neither rich nor elite, so will sink with the economy. My only consolation now is that the people who sprouts all these nonsense are not running the economy.

    The question to ask : Did Singaporean deserve to have better society other than money, money and money ?

    If any Singaporean really thinks that he has too much money, and it really bugs him that others have too little and have to pick cans for a living, he can always pass some to his poorer fellow citizens. The ironic thing is that the people who TALK the most about the poor are not actually poor; it just provides a cheap alternative to actually DOING something for the poor.

    KTM,

    Thanks.

  22. Lifeslikethat said

    **Comments deleted by the editor

  23. Ned Stark said

    Iahur,

    I fail to see why a person has to be poor just to talk about the poor. Furthermore your statement has the implicit assumption that there are people who just NATO. While it is undeniable that there are those who NATO, it will be grossly unfair to tar everyone with the same brush.

    Perhaps with regards to the issue of development v growth, we could look at the debate between lee wei ling and philip yeo regardin R& D in Singapore. One advocates focussing on niche areas while another advocates the influx of foreign researchers, which is a tried and tested means by which Singapore achieved its current success. Of course another way could be a greater tolerance for those with differing views so as to allow the flourishing of arts and culture in Singapore.

  24. Ned Stark said

    Anyway with regards to this issue, there are myriad kinds of econmic theories out there; keynesian classical monetarists etc such that there is no one true answer to the problems faced by the economies. Furthermore economic policies have social implications and therefore there is no real answer to be had. Of course that does not mean we stop debating or we start to deride the opposing side, be they government non government etc.

    Anyway Iahur i think the point leslie was trying to make is that Singapore has become a rather materialistic society as a result of the policies which brought about its success (an example of the societal implications of economic policy perhaps?)

    and as to why there is so much fluff…well its an economics essay:P

  25. Iahur said

    Ned Stark,

    I fail to see why a person has to be poor just to talk about the poor.

    I didn’t say that. Neither do I say ALL of them are NATO. But I do believe most just like to TALK about it.

    Perhaps with regards to the issue of development v growth, we could look at the debate between lee wei ling and philip yeo regardin R& D in Singapore.

    Dun quite see the link. In any case, I don’t think their positions are all that different at the end of the day. More a clash of egos than positions.

  26. Ned Stark said

    Maybe, maybe not. I felt that Philip’s approach was the approach more typical of Singapore (ie get the foreignors in, hopefully they train the locals to be guppies, and make R& D a pillar of growth) and Lee Wei Ling favoured a specialised approach. But then again my memory could be abit faulty:P

  27. Iahur said

    Ned Stark,

    I felt that Philip’s approach was the approach more typical of Singapore (ie get the foreignors in, hopefully they train the locals to be guppies, and make R& D a pillar of growth) and Lee Wei Ling favoured a specialised approach.

    Let me try to explain why I think there is no fundamental difference between their positions.

    I don’t think Dr Lee rejects foreign talents. She cites our Asian Games performance as an example of how S’pore can specialise and succeed in niche areas — and our sporting successes rely heavily on FTs (not only the actual athletes but coaches as well). I am sure NNI has its fair share of FTs (and govt funding) as well.

    I also dun think PY believes that we should specialise and not try to do everything under the sun. By virtue of the fact that we cannot attract world-class talents in every area we will have to specialise anyway.

    Also, is it surprising that Dr Lee, who heads NNI, sees head injuries as an area that more resources should be devoted to? I’m sure other researchers will see their own areas as deserving of greater attention too. In any case, hard to see head/spinal injuries as a niche area — I presume people all over the world, including those in rich countries that do a lot of medical research, suffer from such injuries.

  28. Iahur said

    Sorry, typed too fast. Re-post with typos corrected:

    Ned Stark,

    I felt that Philip’s approach was the approach more typical of Singapore (ie get the foreignors in, hopefully they train the locals to be guppies, and make R& D a pillar of growth) and Lee Wei Ling favoured a specialised approach.

    Let me try to explain why I think there is no fundamental difference between their positions.

    I don’t think Dr Lee rejects foreign talents. She cited our Asian Games performance as an example of how S’pore can specialise and succeed in niche areas — and our sporting successes rely heavily on FTs (not only the actual athletes but coaches as well). I am sure NNI has its fair share of FTs (and govt funding) as well.

    I also dun think PY believes that we should not specialise and try to do everything under the sun. By virtue of the fact that we cannot attract world-class talents in every area we will have to specialise anyway.

    Also, is it surprising that Dr Lee, who heads NNI, sees head injuries as an area that more resources should be devoted to? I’m sure other researchers will see their own areas as deserving of greater attention too. In any case, hard to see head/spinal injuries as a niche area — I presume people all over the world, including those in rich countries that do a lot of medical research, suffer from such injuries.

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