Singapore - Hotel / Village - its development conundrum

This is originally posted on Thursday, 7 June 2012 at 00:54

Singapore used to operate under market socialism: a paternalistic state allowing private enterprise to flourish whilst maintaining tight control and seeding key sectors.

The market socialism leading to the initial rise of Singapore has an unintended effect of robbing its citizens of entrepreneurial initiative and civic awareness. This creates a sclerotic economy that is not able to respond as quickly to the shifting conditions of the global economy. The problem is not an engineering flaw of the economy: rather the main issue lies in the fact that the economy was thoroughly engineered (relatively too much) from the outset.

The mechanical nature of growing industries by government initiatives cannot cope with accelerating changes around the world; private initiatives at the citizenry level will fare much better because they are akin to the "smart components" of the economy. Each "smart component" reacts swiftly and flexibly- the architecture of the economy is able to adapt to the changing needs in the global markets. 

However the emergence of entrepreneurship is an organic process that requires a change in the general way of life (culture, education system, community engagement, personal finance etc) of the average Singaporean - something that cannot be augmented easily in the short term.

In addition, we may have actually shifted from a progressive paternalistic state to a corporatist neo-feudal mode of governance. This implies that the government, in its bid for private FDIs, had ceded more power into private hands.

We often hear the adage that privatization (as it is understood in laissez faire economics)  is good because it encourages and amplifies competitiveness. "Singapore scores high on competitiveness - it will progress powerfully." Sorry to burst the bubble(s), but it  is not entirely true.  This is apparent when we observe that our economy is embedded within a socio-political context.

What do I mean? Basically, I'm saying that competitiveness do no shit if the economy is structured awkwardly. Confused?

Let's use the analogy of a hotel versus a farm. What is common between a hotel with 40 individual guests and a village with 40 individual farmers? Well for starters, both contain 40 individuals. Secondly, both compete in certain manner. The hotel guests compete with their wallets, VIP privileges and timing which they book the hotel, hoping to get their choice rooms. The farmers in the village seek to outdo one another in the village.

Now that we established that there are 40 competitors in each scenario, we can ask ourselves: what's the difference between these two scenarios? At first glance it may not seem obvious. The hotel makes money from the competition among the guests, but the village also makes money when its farmers sell their crops to other neighboring villages. In both scenarios, the hotel/village makes money.

This is akin to Singapore's situation: we make money when foreign "guests" set up their operations in our country. We make money when they "pay" with their FDIs. Even the detractors of Singapore's development path have no choice but to agree that at present, Singapore's economy is indeed still growing. We still make money.

The problem perhaps is that we didn't realize that farms do not stay small- some may shut down, but others grow. When farms grow and expand, they can sell even more to other villages (and also provide for its own village without lack), bringing even more revenue into the village. The hotel guest, in contrast, leaves once their booking period is over, and the hotel either tries to persuade the guest to extend its stay or intensify its attempt to attract new guests. At this point, it is pretty evident that the farm is a metaphor for our homegrown enterprise, while the guest represents foreign enterprises.

When our economy operates like a hotel, there is a structural weakness built into its system: we are at the mercy of our hotel guests. We need to provide the best "customer service" (dangle carrots to attract MNCs), and we will close down when we fail to attract our hotel guests sufficiently. This seriously erodes our economy's security as we are beholden to foreign private interests for our survival. That is also probably the reason why many policies aiming to improve the Singapore worker's welfare (eg. minimum wage, less foreign influx, etc) failed to be carried through. Push the wrong button and our hotel shuts down- we are caught in an economic deadlock. 

At this point, please note that I'm not suggesting that we close our doors to foreign MNCs. In the real world, our economy runs simultaneously as a village-hotel.It's insane to even think that we can survive without any form of FDI. The issue is that our farms are not operationally ready in the present moment. It takes a village to raise a child (who will become the next generation farmer).

The economy needs to start operating like a village. In a village, there is a way of life that is cultivated, and it is passed on to the children who will inherit the farms (or even try something different, like designing clothes for a change). I mean our children in the literal sense. If we prepare them from childhood to be work for the hotel, that is what most of them will end up as: hotel workers who serve and enrich the guests. With so many hotels around the world and the guests being free to choose, we will end up consigning our children to a minimum wage existence as hotel workers. Perhaps the village will eventually consist of only guest rooms - the worst case scenario possible.

In addition, the village head needs to ensure that there is a balance of interests. It may seem difficult to decline the quick cash of some external merchants who wants a piece of the village, or demand their adherence to certain rules and regulations, but it has a long term benefit of securing the interests of the villagers in the future. Local enterprise can take root if it is playing on the same level (or uneven to the local's favor) as the foreign enterprise.

Singapore needs to wean itself of its diet of FDIs and start to independently create new things. Of course foreign interests won't be happy about it- the only entity standing between them and our infant local seedlings will be the government. The government needs to be vigilant for any foreign acquisition of local corporate assets, and prevent predatory pricing by MNCs. Singapore had been a paternalistic state turned corporate machine, but it is reforming in recent years. Let's hope that the momentum of reform continue to advance in the years to come.