George Yeo on the state of the world economy
The TOC reported that George Yeo, Singapore’s Foreign Minister George Yeo discussed the state of the economic crisis and its global implications during a trip to Cambridge University. Upon closer reading of the TOC report, it appears he was doing nothing more than promoting/defending Singapore’s growth model. Let’s see what he had to say.
Mr Yeo spoke out against government interventions in this global economic crisis. Public policies worldwide can hinder the market from reaching the bottom. “Many stimulus packages being proposed will make the adjustment more difficult”, he said. “For example, bailing out inefficient automobile companies may end up prolonging the pain of restructuring at tremendous public expense.”
My first thought was duh, of course the purpose of government stimulus is to prevent the economy from hitting rock bottom! Isn’t that painfully obvious? What’s wrong with not letting the economy plummet along with employment? I do not disagree that bailing out inefficient automakers who refuse to change their direction is a bad idea. Which was why the Obama administration insisted that both GM and Chrsysler come up with new plans to restructure within 60 and 30 days or face bankruptcy! It isn’t exactly an either/or question, that if we bail out those car-makers we can’t demand stringent requirements before extending a loan. Was he ignorant or what?
The minister highlighted the White House’s growing dilemma between injecting liquidity into domestic financial markets and managing an international reserve currency. “If governments try to prevent the re-pricing of assets and human beings, international markets will force the adjustment. A country that is over-leveraged living beyond its means will itself be re-priced through its currency. Its currency will be devalued, forcing lower living standards on all its citizens.”
That would be true mostly if US dollar isn’t a currency issued by fiat. The U.S. has been mired in deep deficits since the early Bush administration, but there hasn’t been much of an indication that we will be seeing a masive devaluation. It could happen, but it’s not on the radar screen at present.
The US is China’s most important export market while China is the most important buyer of US Treasuries. Moreover, today’s world is more complex due to its multi-polarity. No particular value system will hold complete sway over others. The current crisis has already caused many people to question the nature of capitalism, socialism and democracy. “With the world in turmoil, many developing countries are studying the Chinese system wondering whether it might not offer them lessons on good governance. For the first time in a long time, the Western model has a serious competitor,” Mr Yeo said.
Seriously? This guy thinks the West should emulate the China or Singapore-like model of development? Hasn’t he heard of overproduction? It is one thing for one country to emulate Singapore, but would it be sustainable for the Western world to do it? Though it may be a Marxist concept, overproduction is the idea that if producers cut costs by outsourcing and mechanising labour, over time they’ll realise that there aren’t enough consumers/labourers (because these people lost their jobs and their effective spending means) to sustain effective demand for their output. As a consequence, prices would fall and a recession would develop as a market correction. Of course such a view is naive and untenable if one were talking about an open economy like Singapore’s where there would external demand for our exported goods. But lately as consumers overseas (especially the Western world) have cut back on spending, we’ve seen our trade volume and exports decline and along with it the economy. An interesting report (circa 2005) on overproduction may be found here.
Anyway why should we take George Yeo seriously? This was the guy (as a comment on the TOC article points out) who was the driving force behind the Esplanade and Integrated Resorts (aka. casinos) which were both a huge waste of taxpayers’ money:
1) lego on March 31st, 2009 10.09 am
He was the one who insisted on building esplanade and casinos.
Indeed, George Yeo was the one who suggested the IR:
UNDERSTANDING THE IR IN PRACTICAL TERMS
For these reasons, the Cabinet decided that we could not dismiss the idea of an IR out of hand, merely because it contained a gaming element. We had to study it seriously. So Mr George Yeo, then Minister for Trade & Industry, floated the idea in the Committee of Supply last year. This started the current debate.
And the Esplanade:
The Straits Times:
What a difference a minister makes (editor’s note: Indeed, what a difference)
Feb 7th, 2004
Then there’s former Information and the Arts Minister George Yeo, whose passion for the arts gave Singapore its most recognisable icon, the Esplanade, aka the Two Durians.