Why Singapore can’t ease back on economic growth focus

In the past few years, Singapore’s seemingly single-mindedness in promoting economic growth has come under criticism from several quarters, but one former policymaker explains why the city-state has to continue making it a top priority.
 
If Singapore does not focus on growing the economy, it will not be able to continue its support for increasing social investments into education, housing and healthcare, said Devadas Krishnadas, a former police officer, public servant and current public commentator, in a recent interview with Yahoo Singapore.
 
Devadas, who spent more than 10 years in policymaking in various ministries, including the Ministry of Finance, weighed in on the economic growth-versus-social spending argument by pointing out that social investments are not just a function of political will but also of fiscal ability.
 
“Fiscal sustainability is a direct derivative of economic well-being, so we have to not take our eye off the fundamental fact that if the economy does well, we can do well socially. If the economy doesn’t do well, there will be significant limitations in what we can do on the social side. It’s not the other way round,” he explains.
 
Author of a book published earlier this year that compiles socio-political and economic commentaries he wrote in The Straits Times and Today, among other publications, Devadas argues that as a trade-weighted economy, Singapore is “either doing well or not” depending on its relevance to the world economy.
 
In other words, when things go down, they slide down quite quickly — and it is never a given that recoveries will be equally certain or swift, he says. “We cannot be complacent and assume that past experience is any guarantee of our performance in future crises,” he adds.
 
All that said, Devadas gives a nod to the government’s increasing expenditure on health, education, care for the elderly and childcare — these social investments, he notes have been growing "quite aggressively” over the past three years, and they are long-term commitments as opposed to “one-shot policies”.
 
“In fact, the longer-term concern must be whether we can continue to support these commitments unendingly into the future,” he said. “We can’t tell the future with ultimate precision. What we can do is try to make sure we have the best-possible chance of doing so, and that chance is predicated on a well-performing economy. That is the essential truth of our reality.”
 
Gini, and the need to keep things in perspective
 
Devadas also feels that the Gini coefficient, a measure of income inequality, which in Singapore is notoriously high, must be looked at carefully. He notes that it is a measure of the spread of income, not an absolute comment on poverty or wealth.
 
“While the spread is very wide in Singapore, the base is high,” he said. “Our lower-income when compared to the lower-income in other countries, even in advanced economies, are better off.”
 
He expands on this by noting that the lower-income don’t live in crime-ridden neighborhoods, are not locked out of public services or under the policing of gangs — things he notes are characteristic of the lower-income in other parts of the world, even in advanced economies like the United States.
 
“Those conditions are not present here at all, so we have to keep things in perspective and focus on what are the key issues at a social level,” he added.
 
Criticism has also been levelled against Singapore’s existing “welfare-averse” social system, which involves smaller portions of government spending than in other Asian countries like Taiwan and Hong Kong.
 
In contrast, Devadas feels that the country’s social support system is “quite comprehensive”.  
 
“When one looks at the tax and benefits model here, the lower-income benefit far more than they pay into the system, which for them is principally indirect taxation as the lower-income don’t pay direct taxes,” he said, stressing that people should not be coloured by superficial reports, headline-grabbing statements or difficult-to-sustain comparisons with other countries that he feels are very far away and have totally different systems.
 
“We sometimes have to take a step back and look at our system on its own terms and be fair about how much is already being done, how much more has been committed to in the next few years, and therefore how much really is going to be done for those in genuine need in future years — and those efforts are far from small and getting bigger,” he added.
 
True, he agrees that the system is fragmented, with numerous different interventions in healthcare, education and social work, for instance, giving the impression that the effort is small on the whole.

“But there is wisdom in the government’s targeted approach because it’s trying to ensure that the right help goes to the right people… as opposed to carrying considerable slack in a social support system, which would be expensive to support as has been the experience in the West.”