The implications of globalisation are only just now hitting home. The phenomenal growth it has generated has also dramatically widened the gap between the haves and the have-nots, on a worldwide scale. Social provisions and national policies formulated a generation ago are struggling to cope with the demands of today’s interconnected marketplaces and accelerated flows of capital and labour.
The fortunes of open economies, such as Singapore’s, are particularly shaped by globalisation’s opportunities and volatilities. A recent Merrill-Lynch report credits Singapore with having one of the fastest growing populations of high net-worth individuals in the world.1 Yet we have also seen, in recent years, a stagnation in real incomes at the lower wage levels for the first time.
The problem is not one of income inequality per se, nor of the counter-productive politics of envy. Instead, there is a need to recognise that in a world of global outsourcing and cheap international labour, it may be possible to be gainfully employed and yet not earn enough to provide adequately for one’s family—even during periods of rapid economic growth. NTU’s Dr Ho Kong Weng has charted the relationship between wage equality and educational mobility, and warns that both are at risk of declining in the near future. What then is a society’s responsibility to its diligent but less able members—and also to their children, who might lag in the early investments necessary to do better for themselves later in life?
These are some of the difficult questions that confront policy-makers, not least because the market is unlikely to correct them on its own, or not without profound human and social cost. Economic strategist Yeoh Lam Keong argues that Singapore’s basic social compact is premised on equality of opportunity for all, and the unspoken promise of fair reward and social mobility with due effort: it is the Singapore Dream that is under threat from globalisation.
Recent policy changes, such as the Workfare Income Supplement (WIS), are bold attempts to address some of these new realities in ways that preserve our economic competitiveness and social cohesion. Ethos takes a closer look at the thinking behind the innovative Workfare scheme, and considers its limitations. We speak with Professor Lawrence M. Mead on the US experience with work-based benefits over the past decade. We revisit the principles of self-reliance that underpin Singapore’s social policies. We also examine a radically different model of social welfare: that of the Nordic states, which appear to be able to sustain both extensive welfare provision and economic growth.
But income is only part of the picture in dealing with poverty and wealth, as noted intellectual Martha C. Nussbaum reminds us. More can be done to mitigate the impact of wage stagnation and inequality through the provision of public assets and social infrastructure—quality childcare, good schools, libraries, public transport, affordable housing and healthcare—that disarm the sting of being less wealthy. There is cause for optimism, because these are areas that Singapore has traditionally been strong in, as the Federal Reserve Bank of New York’s President Timothy Geithner suggests. The challenge then is to maintain fair and open access to these and other forms of social spending in the years to come, and to approach these as canny investments rather than as expenditure. It is after all a strong and cohesive Singapore that is better able to ride the rising tide of global growth.
2007 also marks the 10th anniversary of the Asian Financial Crisis, perhaps the first true economic storm of the global era. It is not likely to be the last: the recent US sub-prime loan crisis is a timely reminder that much more needs to be done to fortify financial practices and regulatory systems around the world—nor are such structural vulnerabilities limited to developing countries only. In this issue’s special sub-feature, CSC’s Donald Low outlines the key factors behind the Crisis —many of them once again chillingly familiar: poor oversight, bad risk management, spill-over effects. In interviews with Adam Schwarz and Geithner, we assess the health of Asian economies in the aftermath of the Crisis, and its implications for governments seeking to inoculate their economies against future hazards. The lessons are stark: in a globalised world, the effects of policies—be they domestic or international in intent, sound or erroneous in judgement—are greatly accelerated and multiplied. The successful policymaker in this era may be one who is most keenly aware of just how narrow his margin for error is, and how far-reaching his decisions may be.
Once again I wish you a constructive read, and welcome you to take advantage of additional web-exclusive resources and articles at http://www.csc.gov.sg/ethos.
- World Wealth Report 2007 (USA: Merrill Lynch and Capgemini, 2007).