Just food for thought:
Nov 23, 2006
Mixing
welfare and elitism in Singapore
By Alex
Au
SINGAPORE - Is Prime Minister Lee Hsien Loong moving to soften the
island state's time-tested capitalist credentials with state
welfare policies for the poor?
Growing economic inequality has put Lee to the political test, one
that is challenging his economic lieutenants to devise ways to
redistribute national wealth consistent with Singapore's strong
laissez-faire capitalist tradition. The formula they've arrived at,
however, seems likely to widen rather than bridge the divide.
In mid-November, Lee announced government plans to raise the goods
and service tax (GST) from 5% to 7%. The tax hike is designed to
generate about S$1.5 billion (US$960 million) annually, funds that
will be earmarked to develop a more generous social safety net.
"It's essential for us to tilt the balance [of spending] in favor
of lower-income Singaporeans because globalization is going to
strain our social compact," Lee said upon announcing the
policy.
It was an unusually candid admission for the leader of the ruling
People's Action Party (PAP), the political machine that Lee's
father, former premier and current Mentor Minister Lee Kuan Yew,
founded and that has ruled Singapore uninterrupted since the
country's founding in 1959. Strict adherence to neo-liberal
economic prescriptions and policy promotion of an export-oriented
economy contributed to Singapore's emergence as one of Asia's
richest countries in the 1980s and 1990s.
Now, it appears those same policies are disproportionately lifting
the top tier of society while leaving a growing number of
lower-wage earners in the economic lurch. That trend arguably began
with the 1997-98 Asian financial crisis when, government statistics
show, the wages of lower-skilled workers fell by about
one-third.
Despite economic recovery, the income gap has continued to widen as
Singapore's past advantage in manufacturing industries has been
eroded by China and other lower-cost countries in the region. Over
the past five years, about 20% of Singapore's households have
suffered from declining incomes. And that's arguably starting to
take a toll on the PAP's popularity.
Political reaction
Prime Minister Lee's pronouncements and policies are clearly a
reaction to those shifting perceptions. Details of the various
proposed new welfare schemes - known provisionally as "offset
packages" - will be announced in February along with the state
budget. Indications are that existing modest schemes to subsidize
elderly health care, housing and education will be topped up and
many new welfare schemes introduced.
Lee has said that the so-called "workfare bonus" - an unprecedented
cash payout to low-wage earners introduced as a one-off measure
just weeks before last May's general election - would be employed
to redistribute government budget surpluses back to
taxpayers.
The PAP in the run-up to the polls doled out S$150 million of
bonuses to about 330,000 low-wage earners, representing about 9% of
Singapore's population of citizens and permanent residents. That
payout anticipated but didn't blunt opposition parties'
class-oriented attacks against the PAP-dominated government,
claiming it systematically neglected the island state's many
low-wage earners.
The PAP won those polls handily, capturing 82 of 84 parliamentary
seats - though the weak opposition has since the 1980s claimed that
the election system is structured and regulated in ways that
inhibit small parties from fielding candidates, including the
requirement that parties must assemble an ethnically balanced
six-member committee to contest some electoral
constituencies.
Yet the prickly income-inequality issue was quickly resurrected one
month after the elections when a blogger writing under the
pseudonym Mr Brown pointedly asked why official data that showed
that 20% of national households were suffering from declining
incomes were released after rather than before the general
polls.
For his pains, Mr Brown's regular column in the government-owned
Today newspaper was brusquely terminated - fueling outrage in
Internet chat rooms about the government's heavy-handedness and
apparent lack of transparency. Meanwhile, the PAP-led government
proposed this month to tighten laws that govern the Internet as
part of an overhaul of the national penal code.
The proposed amendments would hold Internet users liable for
statements the government deemed to "cause public mischief" or
"wound racial feelings". If passed, the legislation would appear to
institutionalize the ban on posting inflammatory political content
the government enforced temporarily in the run-up to this year's
polls and would give it broad new powers to curtail freedom of
expression.
It's unclear whether public debates over the Internet about the GST
rise would be considered "mischievous" under the proposed new
rules. Some commentators have already dared to note that raising
the consumption tax is by definition regressive and will hit poor
households harder than rich ones as they are forced to spend a
greater proportion of their income on tax-inflated
necessities.
The Singapore Chinese Chamber of Commerce, a grouping of about
4,000 mostly small businesses, likewise took the chance to express
its "great concern and disappointment" about the tax hike. That's
because the policy has the dual purpose of also covering the
expected shortfall in tax revenues that will occur when the
government cuts corporate-tax rates from their current level of
20%. It has not yet been announced when the new lower tax rate will
take effect, but Singapore is under growing competitive pressure to
reduce its tax rates to remain attractive to foreign
investors.
To justify his government's corporate-tax cut, Lee recently said in
parliament that developing Baltic nations such as Latvia and
Lithuania levy a flat 15% tax on corporations. More to the
competitive point, Hong Kong's top personal income-tax rate is
currently 16%, a full 4 percentage points lower than Singapore's
rate.
"Such a reduction would only benefit profitable companies and not
the significant majority of small and medium-sized enterprises
which have to contend with high business overheads and a dwindling
bottom line," the Singapore Chinese Chamber of Commerce said in a
statement.
The unspoken subtext is that raising the GST while cutting
corporate taxes will in effect shift the tax burden from big
companies to ordinary citizens, particularly lower-income
Singaporeans, some commentators say.
While the details of the promised new welfare schemes are still
pending, the PAP-led government is headed into an uncharted and
difficult interventionist direction.
On the surface, Lee's government appears to have shaken its
historical aversion to welfare schemes and taken on board providing
long-term state assistance to a large cross section of the
population. Singapore currently does not impose minimum wages, nor
are there state-backed pension plans as in many Western countries.
In nanny-state fashion, each Singaporean is currently compelled by
law to set aside a certain proportion of his or her income for
retirement purposes.
The government insists it will fashion the new assistance schemes
in a way that avoids institutionalizing the economic lethargy and
dependence inherent in Western welfare systems. Lee recently told
parliament: "I would like to caution members that we should proceed
with care ... it is a real slippery slope. And many, many
social-welfare schemes which have ended up in serious trouble have
started off with good intentions."
Notwithstanding those words, the scale of the proposed changes
suggests a fundamental philosophical shift for the PAP. That's
largely because the growing chorus of complaints about the widening
income gap has grown politically too loud to ignore.
Entrenched elitism
The issue is also significantly tied to growing public perceptions
about elitism among PAP members of parliament (MPs) and their
family members - a perceived social arrogance and economic
selfishness that increasingly sticks in the craw of many
Singaporeans, particularly among low-wage earners.
Sin Boon Ann, a PAP MP, recently highlighted the danger of class
conflict in a speech to parliament. "The perception exists that
Singapore is a society bifurcated between the elites and the
commoners, the scholars and the normal streams, the gifted and the
ordinary, the [public housing] dwellers and the private property
owner, the rich and the poor," the parliamentarian said. It is
necessary to "break down the institution of snobbery within our
society", he said.
He spoke amid a surge in cyber-criticism aimed at PAP MP Wee Siew
Kim. In a now-famous exchange in Singapore's vibrant blogosphere,
Derek Wee (no relation to the parliamentarian) wrote in his blog on
October 12 about his economic insecurities as he approached middle
age. He opined that Singapore's liberal immigration policies were
putting his job at risk, and he urged the government to be more
understanding of ordinary citizens' plight.
An 18-year-old girl in her own blog replied and disparaged Derek
Wee's concerns, saying, "If you're not good enough, life will kick
you in the balls ... There's no point in lambasting the government
for making our society one that is, I quote, 'far too
survival-of-fittest'.
"If uncertainty of success offends you so much, you will certainly
be poor and miserable," the young blogger added. She went on to
refer to Derek Wee as "one of many wretched, under-motivated,
over-assuming leeches in our country", and rounded off her attack
by telling him to "get out of my elite uncaring face".
It was quickly discovered that the girl, Wee Shu Min, was the
daughter of a less-known PAP MP, demonstrating to many Internet
users that Singapore's highly touted meritocracy was being
undermined by an intolerant elitism at the top. Her name, "Wee Shu
Min", rocketed to the top of keyword searches in Singapore as
measured by Technorati.com.
Her father, Wee Siew Kim, later unapologetically waded into the
controversy. "I think if you cut through the insensitivity of the
language, her basic point is reasonable," he told the
government-controlled Straits Times newspaper, adding: "Some people
cannot take the brutal truth and that sort of language, so she
ought to learn from it."
It is against this ferment that Lee's government is now emphasizing
the need for long-term social support for the poor, and at the same
time moving to curtail political debate over the Internet. Yet
Lee's tax reforms and welfare promises are unlikely to bridge
quickly the divide between his government and its low-income
constituents. It's an issue that promises to dominate Singapore's
popular discourse and give Lee political headaches for years to
come.
Alex Au is an independent social and political
commentator and freelance writer based in Singapore. He often
speaks at public forums on politics, culture and gay
issues.
(Copyright 2006 Asia Times Online Ltd. All rights reserved.)
PS: Bang gang liao. Wait I research some more tomorrow
continue.