Singapore Democratic Party

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Manifesto: The Distribution of Wealth

Calls for a fairer distribution of wealth and income in Singapore are frequently met with derision from the PAP, followed by a barrage of warnings that tinkering with the system that the government has constructed will ruin the entire economy and put everyone out of work. If the PAP is not given a free hand to do as it chooses, then ‘companies may close down and more Singaporeans will be thrown out of their jobs.’ Such scare-mongering may buy the PAP more time. But if nothing is done to change the way wealth is made and distributed in Singapore, the economy will run itself into the ground, and the society will face some very unpleasant years ahead.

While Singaporeans are afraid to make their frustrations about the way wealth is distributed known to the government, the level of their resentment can be gauged in other ways. Top executives of public-listed companies are routinely grilled by minority shareholders about the skewed distribution of profits to directors. The bonus payments made by the Development Bank of Singapore (DBS), a government-run company, to its directors in 2000 caused an uproar among its minority shareholders, the reason being that the DBS executives were paid one third more than the directors of the Hong Kong and Shanghai Banking Corporation (HSBC) even though HSBC made 10 times more money than DBS that year. At the annual general meeting of another company, shareholders pummelled the directors for a record 13 hours about the $1.63 million payout the directors gave themselves while the company posted a net loss of $13.5 million in the year 2000. In 2001, Fraser & Neave’s shareholders rejected loudly the executive’s proposal to reward the company’s retiring non-executive directors with huge ex-gratis payments.

Policy development must evolve towards sustainable economic growth. This can only be attained if intelligent effort is made to spread wealth in a more equitable manner. A new economic paradigm must be constructed in which wealth is not concentrated in the government and the elite, one in which middle-income earners can make money to live rather than the other way around, and one in which lower-income workers are not subjected to constant poverty and want.

Replace the GDP as an index of national well-being

How well a government performs is almost wholly judged by how high it can push up GDP figures. The obsession with the index blinds us to the fact that the GDP is purely an indicator of the level of market activity. It tells us nothing about how growth (or the lack thereof) benefits the different strata of society, and the GDP does not distinguish between economic transactions that enhance society’s well being and those that harm it. A rich teenager making a couple of thousand dollars from a stock market bull run and a single mother holding down two jobs to make the same amount of money both contribute toward the GDP. Quality of life matters little to the final tally. A company that pays handsome bonuses to its directors and another that doles out painful retrenchment benefits to its workers both do their part in boosting the GDP. Fathers out entertaining their clients are looked on favourably as far as GDP growth is concerned, whereas those who stay home and read to their children are not.

Clearly, the GDP is a very limited, even deceptive, indicator of how well an economy is doing. Is there any pride to be taken in a high-GDP-generating, socio-economically polarised, politically alienated, and compassionless society? While Singapore is ranked highly in terms of GDP growth, it ranks only 28th on the United Nations’ Human Development Index—behind countries like Barbados and Malta. It is important that an alternative quality of life index that factors in the costs as well as the benefits of economic activity be devised and used in place of the GDP. This allows us to monitor how society benefits from the government’s policies, not just in terms of how many semiconductor chips we can make, but also how many divorces we prevent. It will give society an idea of the social and political costs that go into making ourselves richer, and to ensure that we retain our ability to care for the weak and poor.

Empower the people

In the age of big business and free trade, there is a clear and present danger that the very people whom corporations and governments depend on to deliver the goods will increasingly resemble the goods they produce—objects to be used and discarded. Workers must be able to defend themselves against exploitation. Upgrading their minds is just as important, if not more so, than just upgrading their skills. A workforce that is empowered is a workforce that is secure in outlook is a work force that is productive. It is not a coincidence that productivity levels of workers in democratic countries that protect workers’ rights are also the highest. Workers in the United States are consistently rated as the most productive in the world, and yet their democratically run unions are among the most powerful.

If Singapore is going to make a qualitative advancement in the nature of its workforce, it must likewise make a genuine qualitative change in how it treats its workers. Workers must be free to form their own unions and to make decisions about their own welfare. No right-minded employee will call for a strike without reason. Industrial disputes benefit no one—not the management, which must keep profits high, and certainly not the workers, who have mouths at home to feed. Human rights must be taught in the workplace, in universities, and even in schools, so that every citizen is imbued with a sense of responsibility for his or her actions and society. Universities across the United States, Europe, Canada, and Australia, including the University of Chicago, Columbia University, the University of California at Berkeley, Harvard, Johns Hopkins, Oxford, and Yale have human rights departments and programs that research, teach, and advocate human rights issues. If the PAP wants Singapore to compete with the big boys, then it must learn to behave like a big boy—not a big bully.

Introduce minimum wage

Lee Kuan Yew remonstrates that countries like the United States should not ‘pressure companies to pay higher wages in low cost countries,’ an action he attributes to protectionists in the United States who are trying to prevent competition from the Third World. What he refuses to acknowledge is the problems caused by companies that pay low wages in high-cost countries like Singapore. No one denies that a wage structure that is out of kilter with productivity is inimical to long-term growth. On the other hand, how does artificially suppressing wages help? Paying workers $2 and ministers $500 for an hour’s work is not ‘market forces’—it’s just bad policy-making. Ensuring a minimum wage for the lowest of the low-skilled employee guarantees that prosperity is shared by all.

But won’t paying workers higher wages blunt Singapore’s competitiveness? It depends on what and who we are competing against. If we continue to compare our salary scales with those of the lower-income countries around us, we are going to run a race to the bottom—a race that we cannot afford to win. Society is going to be so drained of spirit if we keep paying our workers lower and lower wages that our competitiveness will be critically undermined. Economist and management expert Peter Drucker wrote:

…I have often advised managers that a 20:1 ratio is the limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies. I worried back in the 30’s that the great inequality generated by the industrial revolution would result in so much despair that something like fascism would take hold. Unfortunately, I was right. Today I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates among the middle managers and workers.

If we are going to compete with countries that are innovative and resourceful, then we have to ensure that wealth distribution in society is equitable. What does entrepreneurship have to do with income inequality? Everything. No runner can hope to compete if he only takes care of his brains and not his legs. If we fail to take a holistic view of progress, we will not be able to sustain it. Unfortunately, the PAP revels in the exact opposite. Lee Kuan Yew tells Singaporeans that they should not ‘get upset or concerned’ when the government pays its GLC managers ‘two, three, four or five million US dollars in bonuses’ but simultaneously orders lower wage increases for workers.

Put our reserves to work

The government warns against depleting the country’s reserves even as it continues to pile up billions in the Treasury. Efforts to have just a fraction more spent on the desperate poor go nowhere. It is ludicrous to suggest that spending such minuscule amounts on social welfare would dent, let alone deplete, the reserves. In the meantime, billions of dollars are lost in failed government-linked company projects all over the world.

When it comes to subsidising the opulent, however, the PAP is in the front row. When the government liberalised the telecommunications industry in 2000, it paid the two existing telecommunications operators a total of $2 billion as compensation for the introduction of competition to their local market. SingTel, which is run by Lee Hsien Yang, Lee Kuan Yew’s second son, was paid $859 million, even though it was already sitting on $6.3 billion in net cash. The company immediately announced that it would redistribute the payout to already affluent shareholders in the form of a special dividend. Starhub, run by Ho Ching, wife of Lee Hsien Loong, was given $1.08 billion. The conglomerate had just started its operations and was not yet drawing in any revenue. The $1 billion payout allowed it to cover the losses it would have incurred in the first years of business.

Conclusion

If Singapore is going to survive, it is imperative that a system be devised in which the negative effects of the free market are ameliorated and people, young and old, rich and poor, boss and worker, can sit at the same table and partake of the successes of their labour through a system that ensures a more equitable distribution of wealth. An economy that boasts of large financial reserves but has little compassion for the poor, that rationalises, indeed celebrates, grotesque wealth inequality cannot be sustained—morally or practically.