Mixing welfare and elitism in
Singapore By Alex Au
SINGAPORE - Is Prime Minister Lee Hsien
Loong moving to soften the island state's
time-tested capitalist credentials with state
welfare policies for the poor?
Growing
economic inequality has put Lee to the political
test, one that is challenging his economic
lieutenants to devise ways to redistribute
national wealth consistent with Singapore's strong
laissez-faire capitalist tradition. The formula
they've arrived at, however, seems likely to widen
rather than bridge the divide.
In
mid-November, Lee announced government plans to
raise the
goods and service tax (GST)
from 5% to 7%. The tax hike is designed to
generate about S$1.5 billion (US$960 million)
annually, funds that will be earmarked to develop
a more generous social safety net. "It's essential
for us to tilt the balance [of spending] in favor
of lower-income Singaporeans because globalization
is going to strain our social compact," Lee said
upon announcing the policy.
It was an
unusually candid admission for the leader of the
ruling People's Action Party (PAP), the political
machine that Lee's father, former premier and
current Mentor Minister Lee Kuan Yew, founded and
that has ruled Singapore uninterrupted since the
country's founding in 1959. Strict adherence to
neo-liberal economic prescriptions and policy
promotion of an export-oriented economy
contributed to Singapore's emergence as one of
Asia's richest countries in the 1980s and 1990s.
Now, it appears those same policies are
disproportionately lifting the top tier of society
while leaving a growing number of lower-wage
earners in the economic lurch. That trend arguably
began with the 1997-98 Asian financial crisis
when, government statistics show, the wages of
lower-skilled workers fell by about one-third.
Despite economic recovery, the income gap
has continued to widen as Singapore's past
advantage in manufacturing industries has been
eroded by China and other lower-cost countries in
the region. Over the past five years, about 20% of
Singapore's households have suffered from
declining incomes. And that's arguably starting to
take a toll on the PAP's popularity.
Political reaction Prime
Minister Lee's pronouncements and policies are
clearly a reaction to those shifting perceptions.
Details of the various proposed new welfare
schemes - known provisionally as "offset packages"
- will be announced in February along with the
state budget. Indications are that existing modest
schemes to subsidize elderly health care, housing
and education will be topped up and many new
welfare schemes introduced.
Lee has said
that the so-called "workfare bonus" - an
unprecedented cash payout to low-wage earners
introduced as a one-off measure just weeks before
last May's general election - would be employed to
redistribute government budget surpluses back to
taxpayers.
The PAP in the run-up to the
polls doled out S$150 million of bonuses to about
330,000 low-wage earners, representing about 9% of
Singapore's population of citizens and permanent
residents. That payout anticipated but didn't
blunt opposition parties' class-oriented attacks
against the PAP-dominated government, claiming it
systematically neglected the island state's many
low-wage earners.
The PAP won those polls
handily, capturing 82 of 84 parliamentary seats -
though the weak opposition has since the 1980s
claimed that the election system is structured and
regulated in ways that inhibit small parties from
fielding candidates, including the requirement
that parties must assemble an ethnically balanced
six-member committee to contest some electoral
constituencies.
Yet the prickly
income-inequality issue was quickly resurrected
one month after the elections when a blogger
writing under the pseudonym Mr Brown pointedly
asked why official data that showed that 20% of
national households were suffering from declining
incomes were released after rather than before the
general polls.
For his pains, Mr Brown's
regular column in the government-owned Today
newspaper was brusquely terminated - fueling
outrage in Internet chat rooms about the
government's heavy-handedness and apparent lack of
transparency. Meanwhile, the PAP-led government
proposed this month to tighten laws that govern
the Internet as part of an overhaul of the
national penal code.
The proposed
amendments would hold Internet users liable for
statements the government deemed to "cause public
mischief" or "wound racial feelings". If passed,
the legislation would appear to institutionalize
the ban on posting inflammatory political content
the government enforced temporarily in the run-up
to this year's polls and would give it broad new
powers to curtail freedom of expression.
It's unclear whether public debates over
the Internet about the GST rise would be
considered "mischievous" under the proposed new
rules. Some commentators have already dared to
note that raising the consumption tax is by
definition regressive and will hit poor households
harder than rich ones as they are forced to spend
a greater proportion of their income on
tax-inflated necessities.
The Singapore
Chinese Chamber of Commerce, a grouping of about
4,000 mostly small businesses, likewise took the
chance to express its "great concern and
disappointment" about the tax hike. That's because
the policy has the dual purpose of also covering
the expected shortfall in tax revenues that will
occur when the government cuts corporate-tax rates
from their current level of 20%. It has not yet
been announced when the new lower tax rate will
take effect, but Singapore is under growing
competitive pressure to reduce its tax rates to
remain attractive to foreign investors.
To
justify his government's corporate-tax cut, Lee
recently said in parliament that developing Baltic
nations such as Latvia and Lithuania levy a flat
15% tax on corporations. More to the competitive
point, Hong Kong's top personal income-tax rate is
currently 16%, a full 4 percentage points lower
than Singapore's rate.
"Such a reduction
would only benefit profitable companies and not
the significant majority of small and medium-sized
enterprises which have to contend with high
business overheads and a dwindling bottom line,"
the Singapore Chinese Chamber of Commerce said in
a statement.
The unspoken subtext is that
raising the GST while cutting corporate taxes will
in effect shift the tax burden from big companies
to ordinary citizens, particularly lower-income
Singaporeans, some commentators say.
While
the details of the promised new welfare schemes
are still pending, the PAP-led government is
headed into an uncharted and difficult
interventionist direction.
On the surface,
Lee's government appears to have shaken its
historical aversion to welfare schemes and taken
on board providing long-term state assistance to a
large cross section of the population. Singapore
currently does not impose minimum wages, nor are
there state-backed pension plans as in many
Western countries. In nanny-state fashion, each
Singaporean is currently compelled by law to set
aside a certain proportion of his or her income
for retirement purposes.
The government
insists it will fashion the new assistance schemes
in a way that avoids institutionalizing the
economic lethargy and dependence inherent in
Western welfare systems. Lee recently told
parliament: "I would like to caution members that
we should proceed with care ... it is a real
slippery slope. And many, many social-welfare
schemes which have ended up in serious trouble
have started off with good intentions."
Notwithstanding those words, the scale of
the proposed changes suggests a fundamental
philosophical shift for the PAP. That's largely
because the growing chorus of complaints about the
widening income gap has grown politically too loud
to ignore.
Entrenched elitism The issue is also significantly tied to
growing public perceptions about elitism among PAP
members of parliament (MPs) and their family
members - a perceived social arrogance and
economic selfishness that increasingly sticks in
the craw of many Singaporeans, particularly among
low-wage earners.
Sin Boon Ann, a PAP MP,
recently highlighted the danger of class conflict
in a speech to parliament. "The perception exists
that Singapore is a society bifurcated between the
elites and the commoners, the scholars and the
normal streams, the gifted and the ordinary, the
[public housing] dwellers and the private property
owner, the rich and the poor," the parliamentarian
said. It is necessary to "break down the
institution of snobbery within our society", he
said.
He spoke amid a surge in
cyber-criticism aimed at PAP MP Wee Siew Kim. In a
now-famous exchange in Singapore's vibrant
blogosphere, Derek Wee (no relation to the
parliamentarian) wrote in his blog on October 12
about his economic insecurities as he approached
middle age. He opined that Singapore's liberal
immigration policies were putting his job at risk,
and he urged the government to be more
understanding of ordinary citizens' plight.
An 18-year-old girl in her own blog
replied and disparaged Derek Wee's concerns,
saying, "If you're not good enough, life will kick
you in the balls ... There's no point in
lambasting the government for making our society
one that is, I quote, 'far too
survival-of-fittest'.
"If uncertainty of
success offends you so much, you will certainly be
poor and miserable," the young blogger added. She
went on to refer to Derek Wee as "one of many
wretched, under-motivated, over-assuming leeches
in our country", and rounded off her attack by
telling him to "get out of my elite uncaring
face".
It was quickly discovered that the
girl, Wee Shu Min, was the daughter of a
less-known PAP MP, demonstrating to many Internet
users that Singapore's highly touted meritocracy
was being undermined by an intolerant elitism at
the top. Her name, "Wee Shu Min", rocketed to the
top of keyword searches in Singapore as measured
by Technorati.com.
Her father, Wee Siew
Kim, later unapologetically waded into the
controversy. "I think if you cut through the
insensitivity of the language, her basic point is
reasonable," he told the government-controlled
Straits Times newspaper, adding: "Some people
cannot take the brutal truth and that sort of
language, so she ought to learn from it."
It is against this ferment that Lee's
government is now emphasizing the need for
long-term social support for the poor, and at the
same time moving to curtail political debate over
the Internet. Yet Lee's tax reforms and welfare
promises are unlikely to bridge quickly the divide
between his government and its low-income
constituents. It's an issue that promises to
dominate Singapore's popular discourse and give
Lee political headaches for years to come.
Alex Au is an independent social
and political commentator and freelance writer
based in Singapore. He often speaks at public
forums on politics, culture and gay issues.
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