Wednesday, February 27, 2013

The worst idea in Budget 2013 analysed

Related post: Worst idea in Budget 2013

Just as well Chan Chun Sing provided me the threads I could grasp to quickly think through this worst idea of Budget 2013. Saves me time.

It is always a good idea to give those at the bottom of socioeconomic pile a leg up not with the providing welfare but enabling them to join the middle class or better. We keep doing this for the bottom 10 or 20% and so across the board we keep getting better with each iteration.

It is a truly terrible idea to offer welfare to the middle class. Something is terribly wrong with our economy management when the bulk of the population need help. The government has been taking away too much money.

This is also an example of their nefarious philosophy of governance. They hope to take so much from you, return some and then sell it to us as a good government helping us out. If I may this is the white vice but a vice nevertheless of the black vice of other democracies addicted to deficit spending. This government scheme is good for buying voters' support, bad for our economic competitiveness and certainly putting the PAP interest before the nation.

Worse, this will become an addiction. Once upon a time goodies were given once off, then some of them become recurrent. This wage subsidy is good for three years. Eventually more and more temporary goodies will become permanent and then morphed into entitlements. We will become weak like elsewhere albeit via a different virtuous looking route! I quote the minister

"But the most important thing is that we can only do this if the pie continues to grow, and we have a bountiful harvest to share among Singaporeans."

Indeed the PAP government would love to nurture in us a dependency complex for them. Few are sufficiently familiar with Economics* to understand the huge negative impact on our economic development. It will stunt our economy. At best we will have some pockets of excellence achieved at great cost directed by the government and the rest would be stuck with third world capabilities. They would wonder why restructuring and raising productivity is like scaling a cliff. Innovation will suffer and mostly exist in technological domains. Forget about business concept and process innovations. We will continue to attract the rich in order to rob Peter to pay Paul. They will come because the taxes against them in most territories will be rising. Is this the society we want? But it is one that secures the PAP in power at our expense.

Yes, it is a Robin Hood Budget, robbing the rich to pay the poor. The way this is done, inflation will exacerbate as this is wealth transfer and not wealth creation into hands which the money would be spent, i.e., even the lucky ones will not necessarily be better off given expected higher prices. Those who do not get a regular wage will suffer (a way to tell you not to retire) and the rich, no problem this time they can still afford this involuntary expense.

What the government really need to do is to slaughter many sacred cows and restructure the economy. The evidence that we have a dysfunctional economy is getting clearer with every passing year. More of us should not just be well schooled but also well educated. The government loves to equate schooling with education. Harder to control us if we are well educated.

We should not allow ourselves to be controlled. We should always allow ourselves to be persuaded and led.

Consent, not coercion.

* An economy that is run by extractive institutions in which in erstwhile successful forms they are billed as state sponsored capitalism. They will get a new derogatory name as and when they fail. E.g., Today's Chinese SOEs.   


  1. PAP has already done its homework. Not much difference to the average citizen. Companies will not give higher salary increments just becoz govt will subsidise 40%. Companies will still follow their HR strategy in setting salaries and/or be determined by demand & supply, availability of required workers and skillsets.

    I bet that less than half of the $3.6 billion for WCS will eventually be given out to the companies by 2016.

  2. The companies will just recruit a singaporean giving 60% lower salary than what it will normally pay a singaporean. Then immediately give an increment of 60% making use of this wage credit scheme. No loss to the companies at all. But the singaporean will still have higher total salary for the next 3 years.