Is the economic strategies committee (esc) recommendations old dressed up as just-new – Part 2

February 12, 2017

Q: What do think is the single most important factor that desperately needs a solution for revivifying the Singapore economy? Do you see the Singapore first policy as a solution?

A: What you’re in fact asking me albeit in an oblique manner is where do all the good stuff that accounts for economic growth really come from?

Government likes to trump the idea they regularly invest in high quality education. But what’s the point when you have physicist driving taxi’s just because then can’t seem to land good jobs pay well? What’s the point when you have firms that considers workers an accounting liability once they hit their early forties? what’s the point these days when even the very idea of firms have transformed to such an extent where all you really see is the receptionist and there is no one in the office because everything is either outsourced or they are just getting things done by contract workers.

I think we have to be very clear here about a very simple question and that is simply this a where do all the good stuff that really drives the economy come from?

For me if you go back and read many of my materials even as far back as ten to fifteen years ago – I have always been a very aggressive backer of the middle class – the reasons are simple. As when we ask ourselves the question who actually starts enterprises that hires people – most people in Singapore will probably say, Temasek or maybe name some multinational where everyone has to wear uniforms and clock in – but for me the crèche that incubates entrepreneurship and risk taking for the last two thousand years of human history has always been the middle class.

So when you talk about how to craft an economic growth strategy for Singapore. You cannot preclude the middle class. Neither can you elide it – it’s like talking about making a cake without flour or eggs because to me – the middle class has always been the happy band of society that offers the highest intellect, motivation for upward mobility that is inextricably linked to innovation and creativity – these are the people who start enterprises that grow – big firms and oligarchs like GLC’s and the likes of Temasek Holdings some say do the same on a larger scale. But what you need to understand is they do it in such a way where they don’t necessarily compliment the upward mobility of the middle class in terms of opportunities – as since they are so big – paradoxically they work against the middle class by having their hand in everything to such an extent where the aperture for opportunities for the middle class can only diminish and at worst regress.

Q: Yes. It is certainly true. It is well known that you happen to be a very supporter of the middle class – but the question is what is the nexus between innovation and creativity and the middle class – how are they linked?

A: You know I am just a simple farmer. But let’s imagine it this way – let’s say Singapore is not a small country. Let’s say it’s got so much land that it’s like the mid west of America. But if all the land concessions are just given out to big agri Temasek type firms – then why should I even bother with the whole idea of trying to turn the wheel of life by farming?

It’s a bloody waste of time. I can’t compete for nuts with these juggernauts. They have millions of hectares. All I have is my humble veggie patch. So they have the benefit of economy of scale – they buy fertilizer per ton cheaper than I can ever hope to do – they’re probably so big they can even engineer price artificialities just to give them a price advantage that cuts my margins to nil – this is exactly what I face regularly.

That’s why if you read my blog regularly. You read about bizarre stories of how I am always playing cat and mouse with the big plantation owners and oil millers – you may think buying plastic flowers and using my charm to get information from fat secretaries or climbing up flimsy drainpipes like some third rate secret agent to break into filing cabinets in the middle of the night is just sandbox politics – but trust me – this is serious stuff – as all I really want is a level playing field where I can earn a decent living as a small timer farmer.

I see the plight of the middle income earner very much in the same metaphoric lens in Singapore – he wants to start an enterprise – but wherever he turns, it’s a road block. As there are simply too many big firms that have their hand in everything from setting high rentals to price manipulation.

Q: What countries can we learn from where big is bad and small is good?

A: Look at America. It’s middle class is nuked! Do you really want to know how Trump got elected? Many political pundits like to point to the dissatisfaction of the rust belt regions. But disagree – as the real reason has everything to do with the evisceration of the middle class in America.

Do you really want to know what’s the one saving grace of the middle class – they read. They’re prolific accumulators of knowledge. Kids from poor families just play candy crush and angry birds on their iPads – that’s their lot. It’s not an indictment on class per se but if I am just a guy scrapping by that’s provably what I would do myself – after all I can’t cut the margins to make those investments to start an enterprise not without minimum wage and only an extra day off every two working weeks – so their children struggle to achieve in school and pursue higher education. Children from rich families may seem to have every reason to succeed thanks to their privileged childhood opportunities. But comfort is a solvent – it robs them of rugged individualism, drive and the frontier spirit – hence they lack the desire to build wealth and climb the economic ladder further – but the middle ground is only place where you will find the perfect balance between yearning and fulfillment and that is why it will always be the crèche of entrepreneurial spirit.

The economy sags when middle class anthropises – it dies.

Q: I quote what you mentioned just now. ‘Comfort is a solvent – it robs them of rugged individualism, drive and the frontier spirit’ end of quote. Who is ‘them’? The reason why I ask you this is because I notice you seem to draw a very link between discomfort and success – can you elaborate further on your theory?

A: Who is ‘them’? Depends on which camp you belong too. If you’re in the standard PAP line then I guess the onus is on the average man on the street who is always told that he shouldn’t rely too much on the government. But what is often elided from the narrative is how so GLC’s and even certain state owned enterprises such as Temasek continue to enjoy monopolies and can even be considered five star comfort zones. So there is a lot of dissonance here when we ask who exactly is ‘them’ in the Singapore context.

Wages as you know are kept low in Singapore to presumably to create an environment where SME’s can compete without hurting their bottom line – isn’t that a sort of comfort zone?

Wonder no more why productivity is so low in Singapore. Because if let’s say I am an enterprise owner and I can get easy access to cheap labor – then tell me where exactly is the level of discomfort that would provide heat for me to get off my fat ass to find alternative ways to best the bottom line? Why even bother looking at automation when all I have to do is get ten more Bangladeshi to get the job done.

But if you compare this with how the average Singaporean is regularly told he needs to work harder and foreigners are needed to fuel competitive economy – there seems to be two narratives. So it’s really double standards here.

Bear in mind what I am saying is very serious. I am mindful of this. But that is my personal point of view of how Singapore really is – too often enterprises are given the sweet end while the average Singaporean is told swim or sink. So what you have is a business environment where enterprises continue to enjoy the comfort zone of cheap labor that is why most of them don’t seem to be able to discover the imagination or will power to migrate upstream.

This is awfully complicated. I don’t want to simplify the formula for success or failure to such a point where I may even come across as rhetorical – but my point is simply this. Discomfort is a precondition. A strategic precondition before innovation and creativity can take root. If you look at every single nation that has succeeded – at every single significant turning point in it’s history it experienced stress – not Thai massage stress, but do or die stress that compelled it migrate up stream.

Japan is good example. Many people like to say the Japanese camera industry grew exponentially during the seventies right up to the eighties because they copied rigorously – but to make good cameras. You also need great optics, where did the Japanese acquire the core competence to develop great lenses – it goes back all the way to the Russo Japanese inter war years in the early 1900 – when the imperial Japanese navy realized all their binoculars and optics came exclusively from Germany from a firm called Zeiss – without decent optics you can’t wage war – artillery shells will all miss their targets. Good optics are required from everything to range finders to bomb sights to periscopes – so the Japanese were stressed to hell. That specific constraint was what compelled them to develop their home grown optics technology that eventually became the bedrock of that allowed them to manufacture good camera’s.

My point is you can be lazy and settle for a presentist Harvard business school view – you always have to go back into the depths of history – if you really want to gain a comprehensive grasp of how nations and firms leverage on innovation and creativity to carve competitive advantage – I admit, it’s not always a clear line of sight. There are many factors that come into play such as serendipity and even pot luck.

But even if we take short cuts are drawing analogies and comparisons – I think it’s axiomatic, to succeed there has to be a certain level of discomfort.

Argentina is a very good example of what can happen things get too comfortable – in the early days circa 1900, it was a so happening place that if I was born in that period. I would probably buy a one way ticket to work there. But look where it is today – it’s a basket case, albeit with limited success stories speckled with failures and even so much of it can only be thru it own distorted lens of what is success and failure – in it’s hey day the Argentinian economy was exclusively powered by rugged individuals, risk takers, there was a strong middle class.

Eventually under Peronism – the state had became bellicose and so all pervasive and strong. The government owned and ran not just natural monopolies such as water and electricity but anything that looked big with a couple of Temasek sized oligrachies – everything was subsumed into the purview of these juggernaut firms – everything from aircraft production, steel, chemicals, construction, road building, car ­factories to even paperclips. The great paradox of Argentina that has baffled even the best economist till today is while the economy did indeed industrialize – but without realizing it, it had also engineered the constructed it’s own mechanism for self destruction. In 1950 Argentine income per head was twice that of Spain. By 1975 the average ­Spaniard had more money in his pocket and enjoyed a higher standard of living than the average Argentine. Argentines were almost three times richer than Japanese in the 1950s; by the early 1980s the ratio had been reversed. So what happened?

If you ask me – I know the story as I am planter and if you asked me who actually brought down the economy of Argentina it’s was the aristocracy of this big firms that had their hand in everything from plantations to steel mills – they’re are cultured lot. Argentinians. They dress well. They’re Eton educated. Like to play Polo and have a taste for Italian fast cars. But from a modern planters point of view – they’re good for nothing! As the aristocracy of the planters and great industrialist community today are just reenacting the curtain call of the Fin de siècle era – it’s very sad.

This is what happens when the comfortable are not forced out by the collar of their shirts and dragged out into the wilderness of the discomfort zone – they all become like Argentinian aristocrats who are full of affectations, unlike their predecessors who were all very rugged men like the conquistadors of lore.

And this is what happens when businesses and SME’s are always molly coddled by the state with plentiful cheap labor – they all become lackeys!

Q: So you say firms and especially SME’s should be stressed?

A: Yes. You want cheap labor no! They experience stress. But since the allure of profit motive is so powerful – they find alternative means thru automation, robotics or improving work systems – that’s the only way to compel firms to take innovation and creativity. By creating stressful conditions where if they don’t migrate. They perish!

Q: A summary of what you have said so far is this: if Singapore wants to leverage on innovation and creativity – then it needs to grow instead of destroy the middle class. Am I right?

A: Yes and no. But you do have to excuse me now Kompf. As I need to hit the field. We will talk more when I return.

Q: Can I follow you?

A: Nien fräulein. It’s rough terrain. This time. I need to go with my dog. Stay here. We will talk further later. I will cook you something delightful when I return. I promise we will continue the conversation – meanwhile do enjoy middle class plantation life.

Q: What is your take on the role of the custodians of power, when they are repressive and intolerant. Will that have a detrimental effect on innovation and creativity?

A: I think in the case of Singapore and everywhere else – whenever officialdom features too prominently and dominantly in the sphere of the individual it definitely has a negative effect on creativity – but how much is hard to gauge emperically. In the case of Argentina, that pattern is certainly true – where democracy was created in 1912, undermined in 1930, ressurected in kind again in 1946, died again in 1955, brought back from the dead in 1973, killed once again in 1976, and finally reestablished in 1983 – it certainly had a chelating effect on the middle class and is perhaps one of the leading causes of brain drain as nothing can be worse than a regime that is willing to do anything just to hold on to the reins of power – when that happens the people who are best qualified to comment or just talk shut up or worse still they get used to living with a police man in their head and so what they have to say is always tinged with a sense of reservation and caution. As since they need their job. Then the right to speak the truth becomes a liability.

Q: Is that why there are so few vocal intellectuals in Singapore?

A: No comment.

Q: Let me approach it another way – if there is a way to criticize without incurring penalties will it create a society that is more adept to risk taking?

A: I think you already know the answer to that question – I have no further comment on that.

Q: What is your view on the widening income gap? It is well known you are critical. But how does this disparity in wealth correlate with the idea of creating a society that is comfortable with innovation and creativity?

A: There is a very perculiar logic that has taken hold in the last twenty or so years. Especially amongst the neo liberal economist and thinkers that began during the Reagan era – the idea goes something like this. When the rich get richer. Then some how part of their wealth percolates downward to the rest of society presumably like rain or piss – but where the logic fails is how this is exactly accomplished is never really quite satisfactorily explained, discussed or even written at lenght or breadth about – so if you ask me, this is just a form of mysticism.

As wealth doesn’t percolate downwards as much as it gets relocated elsewhere to the Cayman Islands or some place where no one even bothers to ask you where did all this gold bars come from?

Besides the notion the rich create jobs is not entirely true – they may create jobs where labor cost are low or where they can dump used machine oil into a river without anyone knocking on their door at night. Truth is the select few rich businesses don’t necessary create jobs. Not in sufficient numbers for the natives at least.

Especially not in the era of the ghost companies – where they exist, but at the same time they hardly hire anyone in those countries that they claim to be located. Labor is so diffused these days worldwide.

Rather, the rich become rich as they simply happen to be the beneficiries of an ecosystemic loop that regularly cannabilize on the largess of the middle-class. By either wage imposing conditions of wage regression or just dumbing it all down to cost competitiveness.

The real wealth creators in any nation have always been the middle class. When the middle class thrives, businesses grow and hire people and since they aren’t so big that they will ever consider opening a Swiss account or relocating their businesses to lower cost regions in the world – most importantly they stay local and the earned money circulates in the monetary ecology of the local community.

It’s like this really. I can hire foreign workers in my plantation. But you know oil palm is a skilled trade – even simple task like cutting fruit requires years of apprenticeship before workers can be effective. Otherwise they will end up destroying the trees – so that sort of apprentice and master relationship needs to be nourished and sustained at a cost even if it happens to eats into profit in my opinion. As it’s a long term investment to infuse the whole industry with the requisite quality and quantity for sustainability farming. You know many planters these days are in a right fix – as since the ringgit has deprecciated against the Indonesian rupiah and Bangladeshi Taka – many foreign workers have decided not renew their contracts. So there is currently an acute shortage of skilled workers in the oil palm sector. But I don’t have that problem at all.

Besides I am a strong subscriber of the notion of dignity of labor – and that simply means I like to money to circulate within the local economy. But if I have foreign workers who repatriate eighty cents of every dollar they earn back home – then where does that leave the local economy? So to me I am always in a precarious position. As a landowner in comparison to a harvester earns so dramatically much more – to me it’s strategic. I can never afford a Brexit or Trump event – if that ever happens that’s it. I am finished. Game over!

My point is you can’t take the idea of meritocracy to it’s illogical end – if an IT engineer hails from Mumbai his expectations are going to be much lower that a native who has to live, work, plan and take cars of his elders in Singapore. This is not theoretical. That is my point. It’s real. So if jobs in the local scene are just based on cost competitiveness – then all you’re doing is forcing droves of people highly educated people to work in Starbucks or Mcdonalds and there is a long term cost to that when you factor in the conditions to create an entrepreneurial based society.

There has to be. So if you package that as meritocracy. I say, go and die lah!

Q: What do you think about the role of education in the innovation and creativity ecosystemtic loop?

A: It gives me little or no pleasure to say this – but when we speak about the evisceration of the middle class and continue our discussion on why Argentina failed when it had every reason to succeed – it is precisely because of the self-serving aristocracy of the land owning and shipping families that stifled political and social development in the 1900. The Bembergs and Osmena’s corn beef barons disappated so much of their time and wealth on transforming Buenos Aires in little corners of Saville Row and the fifth Arrodisment in Paris – the chattering classes even preferred to speak a French. As frankly even the high class Argetinians couldn’t understand a single word spoken by the average Argetinian – Argentinian Spanish is very different from standard Spanish. The natives or poor speak some kind of canto – where the rhythm, pitch, modulation and intonation is all jumbled up – so the high class Argentians couldn’t even really undestand what the hell their poorer compatriots were saying – communication was a big issue that contributed to the Argetinian economic decline. How much is hard to gauge precisely. But it certainly amplified the class divide in more ways than I can possibly elaborate.

But if you ask me what really amplified the class divide was the disdain the planter and landowning aristocracy harbored towards their poorer compatriots – While American rail and oil barons funded libraries and promoted scholarships for the working masses the likes of Carnegie, Vanderbilt, Rockerfeller et al. The Argentinian aristocracy much preferred a Belle Époque life of dissipation pursuing Polo and recreating little Paris in Beuno Aries where they could show off their wealth like sapeurs. Instead of integrating with the masses they lived In the equivalent of Sentosa Cove far removed from the everday realities of Argentinian life – very much within their glider gated communities where the oligarchs oriented Argentina’s economy towards exploitation of the fertile soil and its working people, using their immense largess to steer political policies to their sole benefit.

So my point is when we speak of education – it is this aspect that to me presents the highest danger – when rich kids from privileged families have absolutely no idea how the rest of the poorer kids live and get by.

Worst still when poor kids see all this brazen display of wealth – it only heightens their desire for the unattainable and that can only gene resentment, enmity and everything that is against the idea of brotherhood.

That is why when we speak about education these days – it’s so important to stress the importance of egalitarims – many people label me as a communist. They say in Harrow. He was very much influenced by Franco’s austered lifestyle and iron willed proletarian work ethic that only seemed to prioritize the khaki of functionality and very little else. But to me – this is the new compact that the rich needs to cultivate to reclaim the lost ground with the masses – this to me is the real education that we need to impart to our youths – the idea of a classless society where the rich may not be so different after all from those who are just getting by.

Q: What is your opinion about the mellinials being the strawberry generation who don’t have the right stuff to start enterprises today?

A: I happen to have a lot of sympathy for this particular generation only because life is has never ever been tougher for any generation. Everything militates against them – job life cycles are getting shorter. And they will shorten further. Cost of living is high even by the most forgiving standards. If they commit to proper we are talking about long repayment periods that exceed what earning ratio of previous generations by not double but maybe quadruple. To cap it all off they now have compete with the whole wide world – so life must be hard. Even if they happen to own the latest smart phone it’s no consolation when I compare how things really were in my generation where dumb people like me could even get by and providing I don’t do anything stupid like fall in love with a China gold digger. I will retire quite comfortably. But for the mellinials it’s tough, tough and tough.

Q: What would your advise be to this generation?

A: I have a very unusual way of motivating people. You know when I was back home in Singapore. There was this guy. His name was Homer. Homer Tan. Now with a name like that you would probably think he could think for the both of us – but this guy was just a whining wet blanket. He would just go to work everyday and at the end of the day we would always be lounging in the pool and it was the same ritual every single time – where he would recount to me – his epic, I am going nowhere story. So one day I got really sick and tired. I wasn’t in a very congenial conversational mood that evening. So I asked me him for his IC. Of course Homer gave it to me and I took off my shades looked at him and said in a really serious tone – Homer you need to get on a plane and go make something out of your life in the big wide world. I can be five chili intimidating like the Yakuza, Mafia or Ang Tau kiah gang in Bedok when I get dead serious. Anyway to cut a long story I told Homer that if he didn’t get his act together – I have secret designs on his mummy as I think she is the perfect MILF sort that I would really like to have a candle light dinner with soft music along with other unmentionable things that I planned to do. To cut a long story short Homer disappeared pronto – today Homer owns a spanking new Hondajet. Don’t believe me call me and I will call him and we can fly private. I am not kidding. Today Homer runs a recycling plant in Belarus extracting gold and other exotic materials from computers and ex soviet era hardware that go to die in junkyards – I get a case of the finest grade whisky every year from Homer along with a ten page A4 thank you note.

I am not kidding. Ten pages of the before, during and after story.

So as you can see I am not exactly your weekend get away motivational coach that you go to and at the end of the day you get a free T shirt or mug. You really don’t want to ask me that sort of question. You don’t. Not if you know my background.

But sometimes – perhaps it’s good when someone comes along and gives you a hard kick into the deep end of the discomfort zone.

I am not saying this method of persuasion should be incorporated into the curriculum of everyone who really wants to be an entrepreneur. But I do think for some people who only seem to spend all their time whining away like some petulant wet blanket – they should just go and improve their lot!

Q: You seem to have a very clear view of what governments shouldn’t and should do along with how much etc. So can we at least agree that what you are trying to say is this – they should grow the middle class and not destroy it? Is there any country that you would consider following?

A: Yes. Just take care of the middle class and if that’s done right then all the goodies will emerge – do I see any country doing all the right things. I think if you look at really successful countries and firms all have one thing in common – there is a clear valence between hard work and reward i.e there is great respect and veneration for the idea of dignity of labor – the idea that a man should be paid a fair wage for his labor. When that notion is disrupted thru central planning or policy formulation at a government level – that’s when everything goes wacky. That’s when people start to get disillusioned. That’s when they get scared. So scared that at times they don’t even have the faith to start a family because they can’t even handle the basics of life – and when that happens the cost can be exorbitantly high. As scady cats don’t ever stick their necks out. They don’t start businesses and they certainly don’t even dare to harbor dreams as all it seems to do is supply them the grief of shattered hopes and unfulfilled aspirations. Of course all this is very hard to measure in metric terms – but if you ask me one country where the government may have got it right. Paradoxically, it’s China. I am not saying everything is right and perfect there. Not at all. They do have problems. And some of them are big and intractable. But as far as growing the middle class is concerned – I think they have done a wonderful job. Today if you conduct a survey of the most optimistic generation – it will be the young educated middle class Chinese. Of course all this never gets mentioned in the Western press or even talked about in the Harvard Business Review because the Chinese leadership is really quite coy about self aggrandizing – but if I had to rate them, I think they have certainly done an incredible job of growing a healthy band of middle class Chinese while the rest of the Western Hemisphere and even rest of Asia has seen this segment of society of getting narrower till in some cases they have all been squeezed right out.

I say they, the Chinese leaders have done a great job because when we ask ourselves what is the litmus test of a good or crappy government – it’s never GDP to me, that metric has always been chimeric – it really boils down to the very simple and basic question – where do you see yourself in five years?

I think more western trained politicians, economist and especially sociologist should take a closer look at the success story of China and my hope is they learn from it….but always remember what do I really know. I am just a simple farmer.

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