Who’s (not) on the Economic Strategies Committee?
Some time back, the Singapore government formed a committee to study possible economic strategies the country could pursue in the long term. The Economic Strategies Committee consists of a main committee which is staffed by 25 members and various subcommittees. The composition of the main committee may be viewed here. As written earlier, Alex Au criticised its composition as devoid of academic staff, noting that only 1 out of 25 members was an intellectual. The rest were government ministers and business leaders; CEOs and chairmen:
I glanced at the list of names that accompanied the news story. Indeed, 24 out of 25 were either government leaders or people from the business world. Only one was an academic — Prof Bernard Yeung, dean of the National University of Singapore Business School. There were no fulltime economists or intellectuals (other than perhaps Yeung).
One has to wonder whether the composition of the committee serves its putative purpose. Without meaning to belittle their intelligence and capabilities, the fact remains that the non-government members are (a) already busy with their fulltime jobs running businesses, and (b) will tend to see the future through the perspective of the industry they are in. They are hardly going to tell the committee that theirs is a sunset industry, or one in which Singapore has no hope, and we should abandon it.
On top of that, we have nearly half the committee made up of government ministers, whom one can expect to get highly defensive should one criticise the very economic model that we have operated with. Can anyone expect truly counter-orthodox ideas to surface in this committee and be fairly considered?
Why is the government neglecting the input of academia? By shutting out the voices from those whom are likely to be considered critical, the government risks promoting groupthink. Why is this so? Because opinions from academia are likely to be more varied and in-depth compared to those from business leaders and government ministries, who more often than not have to contend with various conflicts of interests pertaining to their official capacity elsewhere.
Of course, there’s always the charge that academic people may be too distracted and misled by unswerving belief in their economic models which may break down in the face of sobering reality. Before we conclude so, let’s examine a survey of whom accurately predicted the financial crisis.
Recently I did some research on the Web for information as to how many accurately forecasted the housing bubble bust and the resulting recession. I found this post in a blog whose web address ominously read “Debt Deflation”. In it, the author discusses a paper written by Dirk Bezemer of Groningen University, published June 16th here. Bezemer identified twelve analysts whom not only warned of a depression, but made specific, accurate and dated predictions regarding the recession before it happened. To weed out non-mainstream crackpots who were warning perpetually of the collapse of capitalism or Austrian adherents who made fuzzy or inaccurate predictions, Bezemer adopted a strict criterion for including an analyst/commentator as having accurately predicted the meltdown:
In collecting these cases in an extensive search of the relevant literature, four selection criteria were applied. Only analysts were included who provide some account on how they arrived at their conclusions. Second, the analysts included went beyond predicting a real estate crisis, also making the link to real-sector recessionary implications, including an analytical account of those links. Third, the actual prediction must have been made by the analyst and available in the public domain, rather than being asserted by others. Finally, the prediction had to have some timing attached to it.
Here’s an extract from the paper identifying the twelve analysts and their predictions:
Of these twelve analysts, seven hail from academia. The rest were consultants and economic commentators. Get that? A majority of 58% of those whom accurately forecasted the financial crisis came from academic world. Only one of the twelve was a CEOs and/or chairman, namely Eric Janszen and none were government officials or civil servants. In particular, Yale professor Robert Shiller was quoted in this 31st Dec 2007 article warning of a major recession.
With this in mind, I wonder why the Singapore government only appointed a single member (a miserable 4%) from academia to the Committee. Did it do so, as Alex Au believes, because it didn’t believe Singapore should reconsider its economic growth model? That everything was fundamentally sound and only requires minor tweaking rather than re-structuring? Indeed, with the above in mind, it appears as though the government has no intention of listening to ideas it doesn’t believe in or think it will endorse if it were to depart radically from mainstream establishment thought.
Such groupthink, if I may be so bold as to hazard a guess, was likely responsible for Temasek Holdings’ and GIC’s ill-fated and ill-timed investments in UBS, Citi, Merrill Lynch and Barclays. The belief then was that these banks were fundamentally sound, and their long history of banking successes and profits effectively trumps all the fundamental problems they were heavily beset with. The staff composition of the 25 members of the ESC board seems to buttress this line of reasoning. As I’ve said before, expect nothing to change in Singapore. More of the same is the norm.