Get To The Root Cause Of Income Inequality

THE SUCCESSFUL recent private fund-raising campaign by Workers’ Party leaders Low Thia Kiang, Pritam Singh and Sylvia Lim was a positive sign for opposition politics in Singapore.

It only took them three days to collect more than S$1 million before they closed down the appeal.

It showed that there are many in Singapore who have been following the civil suit and want to show their support to the beleaguered opposition leaders. It also suggests that many believe that the suit was politically motivated.

For the record, there were 6,155 donors to their cause.

Signs Of Life

If no support had been shown to Low, Singh and Lim, it would have been an indication that the political landscape in Singapore is stuck in the past — apathetic, afraid and unimaginative.

At least there are some signs of life now.

This is important because all of Singapore’s neighbouring countries appear to be maturing politically these days. While their progress is often piecemeal, non-linear and often controversial, it should still count as progress. The harder politicians try to cling onto the methods of the past, the more they lose their stranglehold. History has shown that while the redistribution of political power may be a gradual, sometimes glacial, process in this part of the world, the outcome is inevitable.

It has become increasingly evident that Singapore is now a political backwater as societies around it mature politically.

The same ideas, thoughts and motherhood statements are churned out by stakeholders from the city-state such as politicians, academics, economists, diplomats and mainstream journalists.

They take themselves seriously but their narratives have tended to become tired, monotonous, and focused on forwarding their own joint agendas. One big concern for Singapore to mature politically going forward should be how to break away from this institutionalisation of ideas and thought. 


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Impractical Optimism?

As an example, the government gives the impression that the path to tackling income inequality in society is to continue pursuing an economic growth model so that employers can be in a position to give their workers wage hikes when the economy expands. This method is hinged on optimism and wishful thinking, which are not bankable features in this era of disruption and rapid change.

This was a view articulated by Manpower Minister Josephine Teo at a panel discussion during a recent conference organised by Institute of Policy Studies. The Straits Times reported her saying that pursuing economic growth is not at odds with reducing inequality and that it is typically easier to negotiate for bonuses and salary increments when businesses are more profitable, which tends to coincide with periods of rapid growth.


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It is typical current mainstream thinking that the income inequality issue can be addressed by raising salaries across the board. However, you could also argue that raising salaries or effecting transfers to the lower-income groups are just treating the ailment rather than trying to fix its root cause.

The root cause of inequality is never given as much exposure.

So, one question worth asking is this: What has created extreme income inequality not only in Singapore but also in many other parts of the world?


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The United Nations Conference on Trade and Development (UNCTAD) recently linked rising inequality to growing indebtedness in a report titled Trade and Development Report 2018: Power, Platforms and the Free Trade Delusion.

The Rise Of Indebtedness

In his foreword, the Secretary-General of UNCTAD, Mukhisa Kituyi from Kenya, wrote that while the public sector in advanced economies has been obliged to borrow more since the Global Financial Crisis in 2008, it is the rapid growth of private indebtedness, particularly in the corporate sector, which needs to be monitored closely. He noted that this has been a harbinger of crises in the past.

Kituyi added: “The growing indebtedness observed globally is closely linked to rising inequality. The two have been connected by the growing weight and influence of financial markets, a defining feature of hyperglobalization. Banks becoming too big to fail came to epitomize the reckless neglect of regulators prior to the crisis. But the ability of financial institutions to rig markets has survived the early rush of reform in the aftermath of the crisis and efforts are underway to push back even on the limited regulations that have been put in place.”

UNCTAD noted that global debt has risen sharply to US$250 trillion today, from US$140 trillion in 2008, and that borrowing has not generally been used to invest in businesses.

It warned that the excessive reliance on debt in the current global economy “will not end well for many economies”. 


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Feeding On The System

We can identify two main takeaways from UNCTAD’s report.

First, global economic growth has been fuelled by debt in recent years and this is not sustainable. This could mean that a catastrophic economic downturn is just around the corner.

Second, extensive borrowing has led to the global debt being three times total world income. This suggests that much of income today goes towards paying debt, whether you are an individual, corporate or sovereign. Logically, we are close to a stage when income can never pay off debt, especially if interest rates embark on an uptrend.

The UNCTAD report points to a dysfunctional global economic system that is seriously in need of an overhaul or even a paradigm shift. This will be slow to come though. The main players in this system, including Singapore, are keen to keep it going because they benefit from it. Any fallout, like rising income inequality, cannot be helped.

At the end of the day, politics in Singapore is not about becoming a politically mature society but about remaining on the table of the world’s economic elite. After all its hard work in getting there, from a “swampy marshland in the 1960s”, the Singapore government is not about to let that go without a fight.

Income inequality is just one of the inconvenient end-products to maintaining the status quo. 


One-Five-Four Analytics presents alternative angles to current events. Reach us at 154analytics@gmail.com


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