PM Lee made some great points regarding the global and Singapore’s economy; and our place in relation to the world (full speech here):

Developed economies will gradually recover from the current crisis, though each will have its own problems for some time: European countries will be troubled for many years by the Eurozone’s structural flaws, the US by its fiscal deficits and its social security and healthcare standings, and Japan by its ageing and shrinking population. Emerging economies will continue to grow in importance, even if their path will not be smooth. These include not just China and India, but also some countries in Latin America and even Africa. Our ASEAN partners like Malaysia, Indonesia, Thailand and Vietnam will be more prosperous, with bigger populations, and larger roles in regional and international affairs.

Globalisation and technology will widen income distributions all over the world. You can see this trend in all developed economies, from capitalist USA to socialist France, over the last 30 years. Talented and enterprising individuals will continue to earn a high premium, while pressure will grow on jobs in the middle, because competition is intensifying globally. So inequality will grow worldwide, and angst and social pressures will go up.

I don’t think many will disagree with his assessment of the world and Singapore’s economy. In fact, how different countries’ economies turn out will in turn affect their political situation and influence in the global arena. I believe the guys at the top have a pretty good feel of the pulse of global affairs.

Where I’m pretty sure PM Lee is going to get some brickbats is this:

(in talking about the pitfalls of using GDP per capita on a country to country basis) But despite the impressive numbers, we have far from arrived. First of all, we are comparing ourselves against other countries, not cities, and comparisons with other countries flatter us. Singapore is completely urbanised, whereas bigger countries have rural areas, even advanced countries like the US have places that are not doing so well. Their leading cities are usually much wealthier than their national averages. So if you compare Singapore to global cities, you will find something closer to the truth, and find that Singapore has some way to go.

So now that PM Lee himself has said that we’re more a city than a country, that begs the question of whether we need that many MPs in parliament. After all, if we’re more a city than a country (at least in terms of area), our top dog in the executive is doing more of a governor or mayor’s job no? Ok, granted that since we’re a country, we would need someone to perform all the duties pertaining to international affairs, so I can understand the need for the Prime Minister and his cabinet. Even then, won’t a single person be enough for most districts rather than teams filled by GRCs? Are our MPs that unproductive that we have teams of them in a tiny island like ours?

The second part I think he’s going to get brickbats for is this:

Unlike most other countries, we have emphasised boosting Singaporeans’ assets more than their incomes, and one asset in particular, HDB flats. Our HDB programme has been a major means of uplifting our people. The large majority of Singaporeans own their homes, including low-income households. They have used their CPF savings and received very generous subsidies from the state. In recent years, we have gone further with the state subsidies to enhance housing subsidies for low-income home buyers, through the Additional Housing Grant and Special Housing Grant. In fact, households in the lowest income quintile (20 per cent) have on average more than S$200,000 of equity in their HDB flat! This is the direct result of government policy and government grants. It is unmatched by any other country, but our capital grants do not show up in the Gini coefficients.

I’m not sure what the response of the lowest income quintile would be if they were asked whether they’d prefer S$200,000 of equity locked in their HDB flats or more transfers to deal with the cost of living for basic necessities such as healthcare, education and basic food supplies. It seems to me the question could be translated to “Do you prefer to sleep with a more expensive roof over your head or do you prefer to sleep better at night?”

The third point of contention I think people will have is this:

We run an exceptionally lean system of government. Our whole Government expenditure is 17 per cent of GDP, including defence. Our tax revenues amount to only 15 per cent of GDP. Returns from investing our past reserves contribute another 2 per cent. As we enhance our social safety nets, expenditure will inexorably rise, and revenue must keep up. At some point – not in this term of government, but surely within the next 20 years – the Government of the day will need new sources of revenue, which means raising taxes. I hope that when this becomes necessary, the government of the day will have the courage to do so, and the electorate will understand why it is in everyone’s interests that we do so. Otherwise we will eventually end up like the Southern Europeans, or the US.

First off, let me say that I don’t think our government expenditures relative to our economy is high. The bone I have is with the way past reserves are used. I don’t have the data (maybe another blog post is needed for this) but if 2% of government expenditure is covered using reserves, then given the record reported by GIC and Temasek over the years, there must be a hell lot of reserves being built up over the years (although some are getting skeptical. See Lucky Tan and Christopher Balding for more). If there are indeed a hell lot more reserves available, then I believe we can do more to help the lowest 5-10% of our citizens, children and elderly without raising taxes.* Also, the scare-mongering at the end is, in my opinion, totally unnecessary.

*All figures arbitrary but does not seem improbable to me. After all, the lowest 10% of Singapore citizens number some 320,000. Boosting their average household income to S$2,000 per month (see here for current) will take roughly S$2 billion, not even a percentage point of our official foreign reserves (see here). Also, Singapore citizens are a dying breed. It’s not as if the economically lowest 10% of Singaporeans are all young and have decades to go. I’m willing to bet that more of them are nearer the end than the beginning.