Monday, August 27, 2012

Singapore’s Gradualist Descent to the Welfare State

This is sad news. Using demographic conditions, Singaporean politicians are considering to embrace more welfare policies.

From Bloomberg,

Singapore will need to raise taxes in the next two decades as the government boosts social spending to support an aging population, Prime Minister Lee Hsien Loong said as he proposed measures to boost the country’s birth rate.

The prime minister pledged to ensure sufficient affordable housing for citizens, invest in pre-school education and add nursing homes for the elderly. He urged Singaporeans to build a more compassionate society, reject anti-foreigner sentiment and have more babies, saying the nation needs to re-invent itself as the economy faces slower growth after years of rapid expansion.

“As our social spending increases significantly, sooner or later, our taxes must go up,” Lee said late yesterday in his annual televised National Day Rally address, which ran for more than two hours. “Not immediately, but if we are talking about 20 years, certainly within that 20 years, whoever is the government will at some point have to raise taxes because the spending will have to be done.”

The government has sought to address public concern that Singapore’s economic progress has left its poorest citizens vulnerable to rising living costs while an influx of foreigners increased competition for jobs, education and housing. After the ruling party last year suffered its smallest electoral win since independence in 1965, Lee tightened rules on hiring overseas workers and boosted aid for the poor

This just goes to show that politicians everywhere and of all stripes are cut from the same cloth. They use up all kinds of populist excuses to justify the expansion of political power over society which benefits them more than their constituents.


(chart from

The reality is that rising costs of living has been a result of Singapore’s negative real rate regime and hardly from foreign workers.

This easy money regime has fueled a property bubble… (chart from Department of Statistics Singapore)


…through a build up of unsustainable private debt (Chart from

Crises emanating from busting bubbles have been frequently used to justify social controls. The Emmanuel Rahm famous quote during the peak of the 2008 crisis resonates

You never want a serious crisis to go to waste…Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before.

Once the ball gets rolling for the feedback loop of tax increase-government welfare spending then Singapore eventually ends up with the same plagues that has brought about the current string of crises, particularly loss of economic freedom, reduced competitiveness and productivity, lower standard of living, a culture of dependency and irresponsibility and of less charity and unsustainable debt conditions. The outcome from politically instituted parasitical relationship would not merely be a financial or economic crisis but social upheavals as well.

As Cato’s Doug Bandow write,

The history of the welfare state is the history of public enterprise pushing out private organization. The impact was largely unintentional, but natural and inevitable. Higher taxes left individuals with less money to give; government’s assumption of responsibility for providing welfare shriveled the perceived duty of individuals to respond to their neighbors’ needs; and the availability of public programs gave recipients an alternative to private assistance, one which did not challenge recipients to reform their destructive behavior

The sad truth is that people never really learn.

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