Myths and misconceptions about pursuing high growth indefinitely

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.