The Legal Janitor

This post is cross-posted at Singapore Angle.

Globalisation and neo-capitalism have little regard for talent and merit that do not help sustain them. Hence, while Singaporeans believe that all our talents will be justly rewarded, globalisation is a fussy benefactor that only rewards what the market demands.

– Terence Chong

This post examines three issues: the “old” social compact, the “new” social compact as characterised by Terence Chong, and the misunderstanding of the role that globalisation plays in the wealth divide.

Globalisation and the Free Market

When we talk about “the market” and “globalisation”, we must first establish clearly what we are talking about. What is “the market”? What constitutes “the market”?

The reality is that “the market” consists of you and me, and every other person. The market is made up of billions of individuals pursuing their own agendas and interests by engaging in voluntary transactions. The market has no controlling mind, nor does it have sentience of its own. When we say what “the market” demands, we actually mean to say it is what “the people” demand.

The same analysis applies to “globalisation”. “Globalisation” does not possess independent agency. The word “globalisation” describes a process by which barriers to transactions between individuals from different countries are removed. As such, the key driver of globalisation is the desire of individuals to trade and transact with each other, across national and jurisdictional boundaries.

The essential feature that must be emphasized is that these transactions between individuals are voluntary. This feature is the foundation for the arguments in this post.

The section of the middle class increasingly marginalised by capricious market trends will wonder what happened to the mantra of honest pay for honest work. For them, the ideology of meritocracy could ring hollow.

The concept of “honest pay for honest work” has no meaning. “Work” cannot be considered in isolation from its context. Why do we work? What is the purpose of work? People work to obtain a benefit for themselves, but the only way people can obtain remuneration from work is when their work benefits someone else willing and able to pay for that benefit.

Hence, “honest pay” can only come about from “honest work” IF what you do or make is something that someone else wants. If what you do or make is something that nobody wants, how can one’s expectation of remuneration be justified?

Accordingly argument that globalisation or the free market is somehow to blame for the middle class being squeezed is flawed. If blame is to be accurately attributed, then it has to be on the people themselves.

The justification for this argument is twofold. Firstly, the market is capricious because the people themselves (primarily the middle-class) are capricious. Businesses can only profit when they give people what they want, and since people want the cheapest and most innovative goods and services, the only way these wants can be served is for businesses to move to where it costs the least to produce those goods and services, and to where people with unique skills and talents can be found.

If one is dissatisfied at this state of affairs, what is to stop people from organising boycotts against imports of cheap goods and services? Alternatively, there is also nothing to stop them from starting up their own businesses that focus on producing higher cost goods and services, but provide better pay to local workers.

Of course, neither of the two courses of action are economically viable. And why are they not? It is because that is not what the people want. And if this is what people want, then those people themselves cannot complain of the consequences of their wants.

Forgetting the gains

It is also noted that the perspective of globalisation is skewed towards the negative: seldom is there any concrete explanation of the benefits.

Firstly, all people, including those in the middle-class, have benefited vastly from the cheaper goods and services available from globalisation and the free market. The availability of such goods from trade has kept the cost of consumption low in Singapore. Despite the complaints about costs of living, the fact is that ALL imported goods and services in Singapore are cheaper than if there were no globalisation or the free market. This fact is important because the rich can easily afford higher costs of living, while the poor cannot. Cheap imports are of particular benefit to the poor and the middle-class.

Furthermore, the goods and services for which the costs disproportionately affect the poor and lower income are those provided by domestic monopolies. This dichotomy strongly supports the argument that globalisation and free markets are NOT the real reasons why the middle-class are being squeezed.

Secondly, globalisation means that workers are no longer confined to plying their trade for a limited audience: where the potential buyers are billions of diverse individuals from all cultures and creeds, the likelihood of finding someone willing and able to pay for your work is infinitely greater.

It is not an accident that in Singapore’s past, in an era where our central planners cultivated a culture of dismissive neglect amongst Singaporeans towards spheres of knowledge deemed to be useless, so many of our artists and creatives sought recognition from more appreciative audiences overseas.

Think for yourself

Under the “old” social compact, the middle class received sweeteners from time to time in the form of the Progress Package or Singapore Shares, but has, in general, been largely left on its own. This is because it was, unlike the working class, assumed to possess the necessary skills and qualifications to survive global market trends.

Two questions to consider at this point. Is the assumption that they “possess the necessary skills and qualifications to survive global market trends” correct? If not, why not?

I think it is not contentious that more and more of the middle-class find themselves ill-equipped to survive changes in the global market. I argue that this state of affairs is the result of the combined efforts of the government bureaucracy and the people.

The “old” social compact was a Faustian bargian: give up your capacity for individual thought, listen to us, and we will take care of you. Like waves of lemmings, people blindly followed the latest decrees on manpower requirements from the central planners, from engineering to IT, from biosciences to digital media in the present.

In essence, the central planners promised the impossible. To give credit where it is due, they DID achieve the impossible, in the short run at least. However, when the people abdicated their personal responsibilities to pursue their own choices, they forfeited the right to expect a solution when those purporting to possess economic omniscience fail to control the economic tides.

Choose your destiny

Hence, the Government’s initiatives and promise of a “new” social compact are a timely intervention in the ongoing renewal of state-society relations.

The real question here is whether the “new” social compact can save the middle-class from themselves. If the cut to subsidies have merely a “symbolic impact” and do not “deter foreigners from coming”, then is it not mostly an exercise in managing perceptions rather than reality? The sheep have grown teeth, but now they bite because they DEMAND to be herded. My sympathies extend to our leaders, for they face a difficult choice. Cut the flock loose, and face incessant bleating and electoral pressure; continue herding the sheep, and the result is an eternal codependence on the quality of the leaders.

If Singaporeans do not master themselves, exercise their mental faculties and choose to determine their own individual destinies, then they will forever be victims of circumstance.

TodayOnline - Singapore’s Middle Management
The Becker-Posner Blog: World inequality–BECKER
The Becker-Posner Blog: Should We Worry about the Rising Inequality in Income and Wealth?–Posner