There is a lot of anger now with SMRT CEO Saw Paik Hwa and there are calls for her to resign. The Chinese tabloids fed the fury of the readers by publishing a photo of her dressed as Cleopetra carried by a few half naked men. She did that to raise money for charity but it doesn't matter - people are just angry and they will find reasons to be angry. Our MRT trains are 25 years old. Things breakdown due to wear and tear....and in an unpredictable fashion and perhaps maintenance cost have to escalate as the trains age but privatisation means a great pressure to increase profits and answer to shareholders.
SMRT's profits rose every year even as the quality of service fell due to overcrowding. Its CEO Saw received the highest pay package of any CEO in SMRT's history. Profits vs quality of service. High salaries does not mean the system delivers quality of service to the people and system reliability. But you think hard about what is happening at a larger entity better known as Singapore Inc. For years the leaders are paid record salaries pegged to GDP growth while the quality of life of the people declined. The system put in place in Singapore Inc to maximize GDP growth is headed for a breakdown like the MRT. Just like the unhappiness caused by deteriorating quality of service and overcrowding of trains, the unhappiness with Singapore Inc system has been rising...and an increasing number feel that change is badly needed and things are heading for a breakdown.
Here is the highly respected professor Robert Shiller explaining the dangers of the income gap and some ideas on how to maintain stability in an socio-economic system.
A few things to note about Professor Shiller. A few years ago, he became famous for coming up with the phrase "irrational exuberance" to describe the Nasdaq bubble and warned about its collapse. He also warned us about the US housing bubble and his index the Case-Shiller Index is now the most widely tracked index for housing prices in US. Professor Shiller research field is in behaviorial finance and when his conclusions are based on scientific evidence and his understanding of human behavior devoid of politics and ideological bias. He tells us simply that unless the income inequality is addressed, there will be instability in the economc system and our society. This video was made in Aug 2009....1.5 years later we see social instability around the world - the Arab Spring, protests in Israel, Occupy Wall Street movement etc. While there may be other issues like democracy and human rights involved, the common denominator in these protests is social inequality.
I explained in numerous postings that income inequality is one of the root causes of economic problems we see in the past few years. When wealth is unequally distributed, there is fall in aggregate demand which is usually compensated by increase of debt which then become the cause of crisis be it subprime debt in the financial crisis or the ongoing european sovereign debt crisis. Even if we stabilise these crisis in the short term, the current economic model is still not sustainable until the income gap narrows.
Income inequality we are seeing today has only been seen in the last 100 years on the eve of the Great Depression. It took a depression followed by a World War in the 1940s, to compress the income gap.
In Singapore, we have the biggest income gap among developed countries. There has not been a single protest in Singapore because we have very harsh laws - there has been no large scale protests in Singapore and Singaporeans over time have been conditioned not to participate in one. The lack of protest does mean there is no unhappiness or instability in our system. In fact, without a escape valve it the whole situation can be very dangerous. Leaders underestimate the problems and pressures build up. If you look at authoritarian states e.g Egypt, Syria and semi-authoritarian state e.g Russia you see complete calm 3 months before that there have been no major protests for decades and when trouble erupts regime change takes place. In places where people protest regularly like Israel, the system stayed intact because the govt there is forced to always adjust to avoid complete collapse. The strongest signal that something is not right is during the General Elections when Singaporeans feel some safety in numbers and turn up for rallies. After that things look calm again and you can't tell whether people are now happy with the policy tweaks, some downward ajustment of minister salaries and various measures to cool the property market, provide more beds in hospital, increase ComCare + Workfare etc. The superficial calm probably leads the PAP govt to think sufficient is done, they have "bent over backwards" .....people can see the PAP system generally works and the few glitches fixed, the PR improved...and then they fall back into the thinking that the PAP is after all the fantastic govt that took this iny country from t 3rd world to 1st world, people can be wildly successful because of social mobility and understand Singapore is a resource-less state so citizens have to right-size their ezpectations. The PAP looks like they are thinking along these lines based on the pace of change they are implementing. This is a gross underestimation of the inequality problem and will lead not just to election disaster for the PAP in 2016 but deep social problems for Singapore in the coming years. Our system is not generally okay - like those MRT trains that have been breaking down, our healthcare, retirement systen, education, housing ....all need major revamp due to the income inequality....they are all falling apart under the strain of income inequality.
The PAP govt has allowed the income gap to rise for too long and to grow too big to still maintain schemes that is consistent with its self-reliance philosophy. Take CPF as an example. If income gap is small, it makes a lot of sense to ask everyone to take care of their own retirment through CPF saving - you spend your own money. With the large income gap it means that that a large segment of the workforce will not be able to save enough for a proper retirement and many who can retire will not have a good quality of life. Even without all the modification to use CPF for children's education, housing and as loans to GIC for reserve building that drain off CPF funds, the basic schemes becomes inadequate because of the income gap, many in the lower income brackets cannot accumulate the minimum sum. The PAP solution is to keep pushing back withdrawal age in effect forcing aged people to take up menial work because most of the time that is the only work available to old folks. For a country with a reputation of being an affluent, tourists are sometimes shock when they see very old folks cleaning tables for a living. Our income gap means that in the coming years more people will have to retire later and the situation will worsen. The lack of shared responsibility for retirement at a time when income gap is so high makes it a hard buy-in for ordinary Singaporeans who work under intense competition from foreigners, depressed wages and cannot make it to a proper retirement. This is a mismatch with the level of commitment the state demands from its citizens in the form of conscription plus reservist duties and unequal sharing of responsibility. The implementation of CPF Life, increasing withdrawal age and restricting access to CPF through minimum sum rules is pushing and stretching the system that is already on its way to a breakdown in terms of its goal as a provident fund to deliver a decent quality of life to retirees....
What about our healthcare system? Stretched capacities, insufficient beds at public hospitals as the govt tries to turn healthcare into a profit generation center by turning Singapore into a medical hub for the rich in the region. Rising profits in healthcare sector, overcrowded public hospitals, rising fees....doesn't that start to look like the MRT system? You pay more, quality drops due to overcrowding, record profit is made ...and Singaporeans are worse off every year.
Our economic growth model which now depends on increasing the foreign influx to increase the GDP....how is this going to be sustained? We rapidly reached the highest population density in the world. Housing cost and the cost of living has shot up at the same time our income gap rose to the highest among developed countries. We are starting to see a rise in poverty, a growing underclass and the stresses in the system is building up....but we are caught in a vicious cycle because we are now depended on this model having neglected productivity for too long. Are we not heading for a breakdown here?
When the system is old, you sometimes have to revamp it...do an overhaul or you have to spend large amounts on maintenance to ensure it does not break down. You cannot keep pressing on and pushing the system along to keep it going so that your profits and GDP keep going up. Things can deteriorate rapidly and when the unhappy people who have been waiting for improvements see that trust is completely lost and nothing you do after that matters because they will never trust you anymore.
CEO Saw has all the profits generated over the years made from the pockets of ordinary Singaporeans. She had the choice to spend it to overhaul the system to reduce the risk of breakdown and failure but she is also the CEO of a listed company and shareholders demand profits to be paid out as dividends. Singapore as Singapore Inc faces a similar conflict - its success is measured primarily in terms of GDP growth leading to policies that benefit only big businesses. Our society is one now strained by rising income gap, falling quality of life and breakdown of trust between the govt and the people. If we don't bury the notion of Singapore Inc and bring back Singapore the nation and revamp the systems to deliver benefit to the people and long term sustainability ....this whole Singapore Inc system will breakdown like the MRT system...and people will be demanding leadership change at the top.