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The Singapore government leads the way

Just think about it. If government controlled SMRT can treat their workers with such disdain, if government controlled SMRT can openly and unlawfully confiscate workers passports, if government controlled SMRT can hire workers through dishonest overseas agents without providing native language employment contracts, if government controlled SMRT can hire a repatriation company (“they acted like gangsters”) to detain and deport employees that complain about unsanitary living conditions, then who is to say the problem is not widespread? Who is to say the problem is not systemic? Government controlled corporations and other related entities are almost certainly the largest employers in Singapore. If GLCs do not set a good example, what hope is there for hiring practices elsewhere? Clearly, in the case of their Chinese bus drivers, SMRT set the worst possible example.

I wrote some time ago about why Singapore has no minimum wage – with the government owning or controlling more than one hundred billion dollars of investments in Singapore’s largest listed companies, the ruling party have a huge incentive to keep the cost of doing business as cheap as possible. Unfortunately, exploiting workers by not paying bonuses, providing cheap but unsanitary dormitaries and unilaterally re-writing contracts to reduce overtime pay would all be ways to achieve that goal. While it is impossible to say for sure that a desire to keep costs down is an actual driving force behind GLCs such as SMRT treating workers badly, the government sets itself up for huge conflicts of interest by being such a large and active player in the same labour market which MOM appears to regulate so ineffectively.

Some of the solutions to the problems faced by foreign workers are obvious. Singapore is lucky to have some very committed and thoughtful NGOs working in this field and it is time for MOM to listen to them. Requiring companies to issue payslips would apparently help to resolve many low level disputes. Beyond that it is time for the government to reduce its level of political involement in the local economy. Temasek and GIC should move away from holding politically sensitive controlling stakes in key local industries. A balanced, passive investment model which attempts to track local and global benchmark indicies would almost certainly be cheaper, give better returns and also remove many of the conflicts of interest inherent in Singapore’s current economic and investment model. But with PM Lee as Chairman of GIC and his wife CEO of Temasek, it is clear that the government is anything but concerned about such questions.

The pessimist take on Singapore’s economic model was championed by Paul Krugman, the Nobel-prize winning economist, who in 1994 compared the city-state to the Soviet Union under Stalin.

“Singapore grew through a mobilisation of resources that would have done Stalin proud,” Prof. Krugman wrote in the Foreign Affairs journal. “There is no sign at all of increased efficiency. In this sense, the growth of Lee Kuan Yew’s Singapore is an economic twin of the growth of Stalin’s Soviet Union”.

Prof Krugman’s remarks were largely based on controversial research by Alwyn Young, a professor of economics at the London School of Economics, who sought to understand what exactly drove economic growth in Singapore between the 1960s and the 1990s.

He found that, much like in Communist Russia, economic growth was the result of more workers joining the labour force, a larger proportion of the population entering formal education, as well as higher levels of investment. There was no evidence that Singapore became any better at turning these inputs into productive output.

“Rising participation rates, inter-sectoral transfers of labour, improving levels of education, and expanding investment rates, serve to chip away at the productivity performance of East Asian [countries], drawing them from the top of Mount Olympus down to the plains of Thessaly,” Prof Young wrote.

These results implied that the Singaporean model was not sustainable. Unlike technological growth, which in theory can drive economic growth for ever, governments cannot rely on doubling the number of workers entering the labour force. No surprise Lee was outraged at Prof Krugman’s findings.