While I would agree with Deputy Prime Minister Tharman Shanmugaratnam (DPM) that the ability to operate a sustainable level of current account deficits will be helpful for economic growth in countries, I would stop short of calling it crazy that the trend these days is for countries to consider deficits a “sin”. Looking at the way world events have transpired, it is increasingly clear that the haloed capitalist economic growth has not delivered improved lifestyles evenly. To pretend that it should be business, as usual, is foolhardy because from an ideological standpoint, things have changed.
I was talking to new graduates a few weeks ago. I wanted to understand why they were less interested in working long hours in a corporate set up. What they said to me was sobering and thought provoking. They felt that no matter how hard they worked, they would never be able to have the lifestyle that the generation before them had. In other words, they did not feel they could aspire to the lifestyles their parents had. As populations increase and house prices skyrocket, there is certainly less bang for your buck. From that perspective, they would rather work more “remotely” and enjoy their life and experiences outside the work environment.
Now, is this phenomenon resolvable by more economic growth? Only if economic growth transpires to more opportunities for everyone. Not just a small group of people getting more opportunities while the rest of the population remain static whatever the economic growth figures are. A contributing reason as to why there is a fear of deficits by many governments is because people are now afraid that mistakes made by those in power will lead to the entire population having to bail the country out of miscalculated deficits. While the DPM may lament the fear of debt, he is not looking from the perspective of the common people – those who have not really seen the fruits of debt leveraging but have had to bail out the mistakes made by the powers be.
Looking at the perspective of Brexit and Trump’s victory, it is pretty clear that those decisions were made at a very ground up level. It was not the small slice of economically prosperous people who voted for these. Rather, it is the majority working class. The authorities can go on and on about how sound a particular economic policy is but at the end of the day, the people don’t care. They look at the costs of things around them, the lack of opportunities, stagnant salaries while at the same time looking at how the more privileged among them live, rightly or wrongly assuming that these so called elites have manipulated the economy to only benefit themselves. In this kind of climate, the general population is not going to be of the opinion that debt is a good thing. Then enters a new breed of politicians who promise to do something different.
Where does the Peoples’ Action Party (PAP) stand on these things?
Singapore is still by and large a prosperous country but if prices and salaries are not managed, inequality is likely to increase. Will this affect the PAP’s popularity? In saying what he has said in the way he has, the DPM has come across as patronising, unaware of why people would consider deficit a “sin” and why new politicians have also preached the debt demon ideology. He should have focused on spreading the fruits of economic growth more evenly.