An internecine conflict between Singapore’s leaders?
Say what? Are Singapore’s leaders finally rethinking Singapore’s developmental model? The Asia Times reports:
But, the impact of the global financial turmoil on such a strategy has been such that Lee raised the unthinkable here when he said in an interview with the CNBC network, earlier this month, that Singapore might have to rethink its export-led growth strategy.
“There will have to be a global rebalancing because we cannot expect the Americans to be consumers of things made all over the world – and with the rest of the world as savers, lending money to the US to buy things from you.”
He acknowledged that this would mean a shift away from Asia’s export-driven economic development model.
A few months ago this would have been blasphemous for a Singaporean leader to say, as the city-state’s economic success with a per capita annual income of over US$24,000 is attributed to its open economy, with about three-quarters of its income coming from external trade and investments.
In the above article, Lee refers to Singapore’s PM Lee Hsien Loong. The article then goes on to say that for too long, Singapore has been too reliant on the growth of debt-fueled consumption in America powered by the rise of economic bubbles:
Former ASEAN secretary general Rodolfo Severino, writing in Singapore’s Straits Times newspaper, recently argued that many countries in the grouping benefited by the bubble generated by the “heavily debt-dependent spending binge of American companies and consumers, and clung to the profit-making and job-creating model of export-led growth”.
He argues that ASEAN should do more as a group to develop its economies and be less dependent on such bubble economies and that it should stimulate domestic demand with investments in the health, education and rural sectors.
Granted, the former Sec Gen may not have Singapore in mind when he penned those words. Indeed the mention of “rural sectors” automatically rules out Singapore as a consideration. But that does not necessarily exclude Singapore from his other suggestions. Merely a week ago, another of Singapore’s leaders also named Lee was quoted as saying:
On top of that, Mr Lee spoke about where Singapore’s economy could go from here.
“I cannot tell you what’s going to happen. I can say the optimistic scenario is in two or three years, we’re out of this (crisis). At the worst, four, five or six years. As the IMF said, Hong Kong, Singapore and Taiwan are going to be hit. Why? Because we are export dependent.
“I’ve got economists saying you’ve got to change your system. Wall Street Journal has said, ‘Oh, this won’t work, consume yourself’. Four million people to consume and keep an industry that supplies the world with top-end goods – it’s rubbish,” he said.
Lee as quoted directly above, refers to MM Lee Kuan Yew, father of PM Lee who was quoted in the above Asia Times article. Now, I am not claiming that the two men are contradicting each other, especially if you parse the words of MM Lee (a Cambridge-trained attorney) more carefully you’ll realise that the MM hasn’t explicitly ruled out what his son has been open about. But one can’t help feel if PM Lee might have felt constrained in any way when it comes to formulating policy which may lean away from senior’s Lee conception of Singapore’s economy being export-dependent especially since such a move may tantamount to an admission that Singapore’s economic growth model, largely championed by LKY through much of Singapore’s history is not sustainable.
This isn’t the first time Singapore’s two concurrent leaders (MM Lee retains powerful influence as MM) appear to have differed. In a 27th Feb 2009 interview with the Bangkok Post PM Lee said:
Q: In the end everyone is coming up with stimulus packages. US President Barack Obama has come out with his. The question is how do you resolve the real problem, the banking system in the United States? And that’s where the dilemma is: Do you adopt the bad bank approach, the good bank approach or nationalise the banks? In your view, how should this problem (in the United States) be approached?
Lee: I think there are no good solutions. It is not just the United States banking system, but in many European countries too, the banks are quite severely affected because it was really one inter-connected system. They invested in one another’s assets and the European banks in some cases undermined the American banks. For example the British have got some very serious difficulties.
So there are no good solutions. There are also no politically easy solutions because you must make some very difficult choices. Either you have to put capital into the banks or you have to buy the bad assets at some favorable price, which is doing a favor to the banks, the shareholders, which is politically very difficult. Or in effect you have to nationalise the banks one way or another. The government takes it over and runs it for a while, sorts things out, cleans up the balance sheet and privatises it again.
I think the choices are not easy but they have to be made. If you do not make the choice then the outcome will be like what happened in Japan in the 1990s. It went on for more than a decade because the problem just lingered. There was one fiscal package after another but the financial system was broke, and fiscal packages could not revive the economy.
Anyone who possess a modicum of knowledge of finance would know that should the U.S. nationalise its banks the existing value of its shareholders’ equity would be severely diluted. Surely as GIC Singapore’s deputy chairman, he must realise that nationalised banks imply that both GIC’s and Temasek’s stake in both Merrill Lynch and Citigroup would be greatly devalued. Nevertheless, he appeared to tacitly endorse nationalisation even though doing so would hurt GIC’s investments in Citi. In a certain sense he appeared to have ursurped the interests of his immediate superior in GIC, namely MM Lee Kuan Yew who is the Chairman and the highest ranking staff of GIC’s board of directors. Indeed, as recently as Mar 4th 2009, MM Lee still maintained that GIC’s only mistake was that it bought too early in Citi, rather than having bought at all.
Now some may think I’m taking this too far, and that nothing that either PM Lee or MM Lee has said so far indicates that there are genuine disputes between the two of them. But there is one recent development to consider, the recent Cabinet reshuffle:
Defence Minister Teo Chee Hean will become one of two deputy prime ministers on April 1 alongside the veteran Wong Kan Seng, who also serves as the home affairs minister in charge of internal security, Lee’s office said.
S. Jayakumar, a former foreign minister, was shifted from deputy prime minister to the post of senior minister alongside Goh Chok Tong, the city-state’s former prime minister, the official statement said.
In Singapore’s political system, senior ministers serve as key advisers to the cabinet.
I posted earlier that the Wayang Party was quick to criticise the Cabinet reshuffle as a means to inflate the ranks of ministers holding senior leadership posts. Yet could there have been other reasons why this was done?
I digress as follows: Sometimes in a disagreement it may become necessary for an individual to bring in others to judge the merits and demerits of each side of the dispute. Sometimes those whom are brought in end up siding with one over the other; the purpose of having brought them in is to exert “peer pressure” on the other party that the majority is not with them, or that they are likely wrong since another thinks likewise as the opposite party.
We all know that MM Lee is an extraodinarily stubborn man, and it would not have suffice if a moderately ranked minister (read: any average minister in the Cabinet) were to agree with the position of the person who disagrees with him. Could PM Lee’s decision to increase the senior leadership posts to four (1 MM, 2 SM’s 1 PM) from three might be a way of getting more senior calibre to bring to bear pressure on MM Lee?
Enough speculating for now. It took some time for me to source all those hyperlinks and quotes and piece them together. I leave the reader to consider the above. Any comments or feedback on the above is welcome.