September 2008
Pressure Builds on Singapore’s System
by Hugo Restall
Posted on Sept. 5, 2008
During the National Day festivities last month, Singapore Prime Minister Lee Hsien Loong’s gloomy prognosis for the economy—a “bumpy year” ahead—was overshadowed by even more dire warnings that the city state is about to start running low on its main resource, people. With an aging society and one of the lowest fertility rates in the world at 1.29, the government is pulling out all the stops, doubling the budget of baby-making incentives to $1.13 billion. Meanwhile, in order to make Singapore a more tolerant and pluralistic place, political videos will be allowed, as well as protests in a downtown park.
It’s all straight from the ruling People’s Action Party’s standard playbook. Play up the anxiety of a small nation beset on all sides, in need of a strong government to take positive action to avert disaster. Individual citizens who are failing to live up to the expectations of society need to be brought back into line. At the same time, leaders are willing to give those citizens a few of their rights back, as long as they are not used to undermine harmony.
Since Mr. Lee took over the premiership in 2004, Singaporeans have been watching for any sign he plans to reform substantially the authoritarian state created by his father, Singapore’s founding Prime Minister Lee Kuan Yew. So far there has been little indication that in his heart the prime minister is a liberal democrat. But the system of control is coming under increasing stress due to the changing structure of society. A process of subtle change will continue to be driven by pressure from below, rather than a change of heart at the top.
Last month’s gestures far fall short of lifting what the opposition calls the climate of fear—past experience, such as the detention of former Solicitor General Francis Seow in 1988, suggests that retribution for challenging the PAP can come in many forms, from bureaucratic harassment to detention without trial under the Internal Security Act. The government is making a virtue out of necessity by lifting the 10-year-old ban on making or showing political films, and allowing political podcasts during election campaigns. Oppositionists were successfully skirting the restrictions, so that they only served to hamstring the PAP's own efforts to utilize online media. The opening of a protest area is a token gesture, which no doubt will be raised to deflect international criticism the next time police arrest dissident politician Chee Soon Juan for illegal assembly. In that sense, the move suggested that Mr. Chee’s campaign of civil disobedience is causing some heartburn within the regime.
But the real problem is not Mr. Chee—the stressors on Singapore’s political machine lie elsewhere. The PAP’s legitimacy has always rested on its performance, backed by trust in the party. Given its chaotic past and neighbors, Lee Kuan Yew argued, the tiny country could not afford the risks associated with liberal democracy. In the past that argument was largely taken at face value by the Chinese working class, despite the experiences of other Asian nations that contradicted it. Today, however, there is more apathy than agreement. No one seriously questions the PAP’s track record of governance or probity of its top leaders, yet trust is giving way to resentment at the party’s arrogance.
The main proof is in the erosion of the party’s share of the popular vote in elections. In 2006, it hit 66.6%, down from 75% in 2001, and 75.6% in 1980. In the past, opposition parties deliberately refrained from contesting more than half of the seats, since they found that while some Singaporeans wanted to cast a protest vote, they would not vote for the opposition if there was any chance the PAP would be thrown out of office. But in 2006, the opposition contest 47 of 84 seats, suggesting that the PAP’s hold on voters’ loyalty is not as fearsome as before.
Why is this? For one thing, Singaporeans are better versed in critical thinking. During the 1980s and '90s, people may have grown wealthy, but they remained politically unsophisticated. Development happened so quickly that it took decades for education levels to catch up. According to the government statistics, between 1990 and 2005 the percentage of the population with a university degree grew to 17% from 4.5%. That is matched by an even more dramatic shift in individual age cohorts—in 2005, 32.1% of 30-34 year olds had a university degree, as compared to just 6.6% of 50-54 year olds. The language spoken at home is now predominantly English, meaning that Singaporeans are increasingly able to learn about and interact with the outside world.
Moreover, the PAP has pushed the economic structure of the country in a direction that is no longer win-win for all classes. A certain amount of economic inequality is tolerable as long as there is a sense that everyone’s lives are improving. But inequality and real hardship are on the rise, as inflation running at 6.5% erases the 3.3% wage gains that the poorest tenth of the population enjoyed last year, even as the top tenth picked up an 11.1% increase in income. PAP loyalists control a lucrative web of government-linked companies, while ministers have also picked up big pay rises, since their salaries are indexed to the private sector, making them some of the world’s highest paid politicians. As for social mobility, the top scholarships, which are a ticket into the elite, increasingly go to students from wealthy families that live in private apartments, rather than public housing.
Despite this trend, the PAP is unwilling to dismantle its policies of holding wages low in order to attract multinational companies to invest. This was a strategy born of necessity in the 1960s, when Singapore was short of capital and struggling to catch up with Hong Kong’s model of creating an export-oriented growth. Today it is economically obsolete, yet it suits the government politically because the combination of state-owned companies and politically quiescent multinationals prevents the emergence of an independent commercial class that might push for political change.
The result is a top-down economy which is running up against the limits of its capacity to drive growth. Without an entrepreneurial class and successful home-grown companies, Singapore’s productivity growth has historically lagged behind that of its laissez-faire twin, Hong Kong. As University of Chicago economist Alwyn Young showed in a 1992 paper, Singapore had one of the lowest returns on physical capital in the world. Its growth has been fueled by forced savings programs shoveling ever increasing amounts of capital into the furnace, rather than by innovation or managerial efficiency.
Mr. Lee’s administration has found that the only way to defuse public dissatisfaction is to do something the PAP consistently condemned as the hallmark of Western democracies: Give away money. The government used to damn welfare as a dirty word, yet transfer spending is on the rise. This year, $2.1 billion in giveaways were planned. Then last month Mr. Lee announced a 50% increase, totaling $179.8 million, in utility rebates and “growth dividends”—cash payments to households that started in 2006. The new prime minister has brought in other social spending programs for the poor. For instance in the 2008 budget, the Ministry of Manpower’s expenditure rose by 184%, almost entirely due to a new scheme of workfare, the $306 million Income Security Policy Programme.
The pressure for more entitlements will only grow as retirees find that their savings do not provide enough of a cushion. The compulsory government-run Central Provident Fund sucked up a huge percentage of income to finance the state’s development goals, but offered dismally low returns. As a result, many of the generation that built the Singapore miracle now finds itself eking out a retirement in public housing while the government surpluses remain under the management of the PAP.
Pressure Builds on Singapore’s System
by Hugo Restall
Posted on Sept. 5, 2008
During the National Day festivities last month, Singapore Prime Minister Lee Hsien Loong’s gloomy prognosis for the economy—a “bumpy year” ahead—was overshadowed by even more dire warnings that the city state is about to start running low on its main resource, people. With an aging society and one of the lowest fertility rates in the world at 1.29, the government is pulling out all the stops, doubling the budget of baby-making incentives to $1.13 billion. Meanwhile, in order to make Singapore a more tolerant and pluralistic place, political videos will be allowed, as well as protests in a downtown park.
It’s all straight from the ruling People’s Action Party’s standard playbook. Play up the anxiety of a small nation beset on all sides, in need of a strong government to take positive action to avert disaster. Individual citizens who are failing to live up to the expectations of society need to be brought back into line. At the same time, leaders are willing to give those citizens a few of their rights back, as long as they are not used to undermine harmony.
Since Mr. Lee took over the premiership in 2004, Singaporeans have been watching for any sign he plans to reform substantially the authoritarian state created by his father, Singapore’s founding Prime Minister Lee Kuan Yew. So far there has been little indication that in his heart the prime minister is a liberal democrat. But the system of control is coming under increasing stress due to the changing structure of society. A process of subtle change will continue to be driven by pressure from below, rather than a change of heart at the top.
Last month’s gestures far fall short of lifting what the opposition calls the climate of fear—past experience, such as the detention of former Solicitor General Francis Seow in 1988, suggests that retribution for challenging the PAP can come in many forms, from bureaucratic harassment to detention without trial under the Internal Security Act. The government is making a virtue out of necessity by lifting the 10-year-old ban on making or showing political films, and allowing political podcasts during election campaigns. Oppositionists were successfully skirting the restrictions, so that they only served to hamstring the PAP's own efforts to utilize online media. The opening of a protest area is a token gesture, which no doubt will be raised to deflect international criticism the next time police arrest dissident politician Chee Soon Juan for illegal assembly. In that sense, the move suggested that Mr. Chee’s campaign of civil disobedience is causing some heartburn within the regime.
But the real problem is not Mr. Chee—the stressors on Singapore’s political machine lie elsewhere. The PAP’s legitimacy has always rested on its performance, backed by trust in the party. Given its chaotic past and neighbors, Lee Kuan Yew argued, the tiny country could not afford the risks associated with liberal democracy. In the past that argument was largely taken at face value by the Chinese working class, despite the experiences of other Asian nations that contradicted it. Today, however, there is more apathy than agreement. No one seriously questions the PAP’s track record of governance or probity of its top leaders, yet trust is giving way to resentment at the party’s arrogance.
The main proof is in the erosion of the party’s share of the popular vote in elections. In 2006, it hit 66.6%, down from 75% in 2001, and 75.6% in 1980. In the past, opposition parties deliberately refrained from contesting more than half of the seats, since they found that while some Singaporeans wanted to cast a protest vote, they would not vote for the opposition if there was any chance the PAP would be thrown out of office. But in 2006, the opposition contest 47 of 84 seats, suggesting that the PAP’s hold on voters’ loyalty is not as fearsome as before.
Why is this? For one thing, Singaporeans are better versed in critical thinking. During the 1980s and '90s, people may have grown wealthy, but they remained politically unsophisticated. Development happened so quickly that it took decades for education levels to catch up. According to the government statistics, between 1990 and 2005 the percentage of the population with a university degree grew to 17% from 4.5%. That is matched by an even more dramatic shift in individual age cohorts—in 2005, 32.1% of 30-34 year olds had a university degree, as compared to just 6.6% of 50-54 year olds. The language spoken at home is now predominantly English, meaning that Singaporeans are increasingly able to learn about and interact with the outside world.
Moreover, the PAP has pushed the economic structure of the country in a direction that is no longer win-win for all classes. A certain amount of economic inequality is tolerable as long as there is a sense that everyone’s lives are improving. But inequality and real hardship are on the rise, as inflation running at 6.5% erases the 3.3% wage gains that the poorest tenth of the population enjoyed last year, even as the top tenth picked up an 11.1% increase in income. PAP loyalists control a lucrative web of government-linked companies, while ministers have also picked up big pay rises, since their salaries are indexed to the private sector, making them some of the world’s highest paid politicians. As for social mobility, the top scholarships, which are a ticket into the elite, increasingly go to students from wealthy families that live in private apartments, rather than public housing.
Despite this trend, the PAP is unwilling to dismantle its policies of holding wages low in order to attract multinational companies to invest. This was a strategy born of necessity in the 1960s, when Singapore was short of capital and struggling to catch up with Hong Kong’s model of creating an export-oriented growth. Today it is economically obsolete, yet it suits the government politically because the combination of state-owned companies and politically quiescent multinationals prevents the emergence of an independent commercial class that might push for political change.
The result is a top-down economy which is running up against the limits of its capacity to drive growth. Without an entrepreneurial class and successful home-grown companies, Singapore’s productivity growth has historically lagged behind that of its laissez-faire twin, Hong Kong. As University of Chicago economist Alwyn Young showed in a 1992 paper, Singapore had one of the lowest returns on physical capital in the world. Its growth has been fueled by forced savings programs shoveling ever increasing amounts of capital into the furnace, rather than by innovation or managerial efficiency.
Mr. Lee’s administration has found that the only way to defuse public dissatisfaction is to do something the PAP consistently condemned as the hallmark of Western democracies: Give away money. The government used to damn welfare as a dirty word, yet transfer spending is on the rise. This year, $2.1 billion in giveaways were planned. Then last month Mr. Lee announced a 50% increase, totaling $179.8 million, in utility rebates and “growth dividends”—cash payments to households that started in 2006. The new prime minister has brought in other social spending programs for the poor. For instance in the 2008 budget, the Ministry of Manpower’s expenditure rose by 184%, almost entirely due to a new scheme of workfare, the $306 million Income Security Policy Programme.
The pressure for more entitlements will only grow as retirees find that their savings do not provide enough of a cushion. The compulsory government-run Central Provident Fund sucked up a huge percentage of income to finance the state’s development goals, but offered dismally low returns. As a result, many of the generation that built the Singapore miracle now finds itself eking out a retirement in public housing while the government surpluses remain under the management of the PAP.
