Travelling North

Article – Taking Responsibility


Taking Responsibility

Several years ago, major companies started to change their approach to employment.  For much of the 20th Century, the model had been ‘employment for life’.  If you joined as a white-collar worker, you could expect to have a career in the company, hopefully moving up at least some levels, and, eventually, retiring with a good pension.  If you were a blue-collar worker, the concept of a ‘career’ made less sense, but, as long as you worked hard, you certainly could expect to have a job for life.

The new approach was captured in the phrase ‘manage your own career’.  What this meant that it became the individual’s responsibility to make sure that he or she kept skills up to date.  There would continue to be company courses, but employees were now being encouraged to look for outside opportunities to build capabilities and even develop new areas in which work could be sought, through technical colleges, community colleges and private providers.  This was about making an investment in yourself, rather than expecting the company to do it for you.

This shift to self-management was a function of changes in the world of work.  First, companies were operating in an increasingly competitive environment, especially internationally as Europe and especially Japan became more innovative.  Second, the resulting financial pressures on enterprises were accompanied by demographic changes:  with people living longer, and the workforce shrinking, the costs of retirement schemes began to become unmanageable, especially as accounting rules required that unfunded liabilities be disclosed on balance sheets.

This culminated in a shift away from seeing people as lifetime employees to a resource that might need to be changed from time to time.  As changes were required, some would lose their jobs, and others, with the skills now needed for the future, would be recruited or retained.  Personnel Departments became Human Resource Divisions.  Company pensions began to be replaced by employee superannuation schemes (with some contribution by the company) that were based on an ‘accumulation’ model.  You got back what you saved (together with any interest that your funds might have earned).

The logic is interesting.  It presumes that life is tough, and that the individual has to take responsibility for finding and keeping a job, for utilising the talents they have, and for saving for the future.  There is an educational system, and various forms of retraining.  There are superannuation schemes:  choose to use them or not, for it is your choice.

Now the same attitude is being explored in government.  Just as companies abandoned defined pension plans and replaced them with accumulation plans (thereby shifting risk from the company to the employee), so questions are being asked about a social security system that shifts responsibility from the individual to the taxpayer.  After seventy years of the welfare state, governments are finding the bill is getting too big.  Most countries in the Western world carry huge budget deficits, and even larger future commitments in terms of pensions and health care in particular, deficits are close to unsustainable.  Governments now live on credit, funded through the debt market.  Every system has its limits, however, and just as was the case with companies thirty years ago, governments now are facing up to the need to make some choices to remain sustainable, not all of which are exclusive.

What are the choices?  The first is to cut costs and increase efficiency.  There is a great deal of evidence to suggest that many governments have become over-regulatory, inefficient, and poor at managing services.  Cost cutting and slimming down government operations seems both necessary and inevitable.

The second choice is to move to a user-pays model, where access to goods and services formerly provided by the government becomes part of the market economy, and private providers deliver the programs in areas like welfare, education and health, competing with one another while seeking to maximise profits and extend the reach of their operations.  The voluntary sector and not-for-profit agencies may help by covering those whose ability to pay for what they need is inadequate.  While there are strident advocates for this approach at present, even the most extreme still expect that the government will deliver some of the services they need – ranging from defence and police to education, infrastructure and farming subsidies; from a court system to enforce contracts and property rights to “rules of the game’ (i.e. regulation) where private contracting is not feasible, and even to protection from competition foreign goods and workers through tariffs and levies.  At the same time, the staunchest supporters of the welfare state acknowledge that something has to be done, and will agree to some changes:  increased fees for education and private health insurance, for example.  This is the contested area for today – fighting over what to keep within the scope of government, and what to push out.

Is there a third choice?  The authors of The Fourth Revolution, John Mickelthwait and Adrian Wooldridge, argue there is.  It is a government version of the approach of companies:  take responsibility for yourself.  The prized example for this approach is Singapore, and the poster boy is Lee Kwan Yu.

In the nearly 50 years since it split away from the rest of what is now Malaysia, Singapore certainly has been a high achieving country despite its tiny population. Nearly five million residents live on a small island with no natural resources at the bottom of the Malayan Peninsula.  What it had, in physical terms, was a good location for an entrepot, a centre for trade from the West and going to the East, and vice versa.  What it has to day is one of the highest standards of living in the world, and a range of major businesses that range from logistics to banking and hi-tech of various kinds.

The Singapore miracle can be described as a guided democracy, or as a paternalistic state.  Based on the assumption that people pursue their own self-interest (a philosophy with a long history), Lee Kwan Yu believed that the government has to control and direct, and that the best people should be selected to govern (it sounds a bit like Plato’s Republic).  For those reasons, it is not really a democracy, and Yu’s PAP has held a massive majority ever since independence (it is not a particularly good idea to stand for the opposition, as you are likely to be fined or imprisoned on any grounds that are deemed to create a risk for the state).  What is effectively one-party rule allows the PAP to take a long term view, and at the same time identify and groom the most able to participate in government.  Meritocracy rules, and meritocrats are well paid.

The state’s paternalism extends to guiding and shaping the economy, with investments in key businesses like Singtel and Singapore Airlines, while making it easy for multinationals to set up shop with relatively low taxes and tariff barriers.  There are two other characteristics that really mark out the character of this ‘take responsibility for yourself’ approach.  Everyone pays 20% of his or her income into the Central Provident Fund (and employers contribute a further 15.5%:  these rates drop as someone approaches retirement age, or only very low wages). Singaporeans use this money to pay for housing, pensions, health care and even tertiary education.  There is also a compulsory health insurance scheme, Medisave, met through deductions from payrolls: no medical treatments are free and individuals have to pay for each medical treatment episode.   The government does meet some social costs – particularly for school education and public housing, and it provides a safety net to cover the very poor and the very sick.  However, even the care of the elderly is to be paid for from their contributions to the CPF, together with family support.

The Ministry of Social and Family Development states its four principles as ‘Self Reliance, Encourage Individuals to Work, Family as First Line of Support, Many Helping Hands’, in that order (the last refers to the role of voluntary organisations).  Encouraging individuals to work is central, and the government imposes a heavy level on employers who use overseas labour for low and medium level jobs (this is not applied in the case of highly skilled foreigners).  While primary and secondary education is provided by the state, childcare assistance is only available to low income working mothers.

Support is available to assist the work capable but suffering financial hardship:  funding is limited and short term, and the emphasis is on training programs to develop needed skills (and hence find better paid employment).  The Workfare Income Supplement is provided to low income workers to encourage them to keep working, and undertake training.  Part of the money is provided in cash, and part (the larger part) goes into the person’s CPF account.  The maximum amount a person might receive in a year can be over $3,000, but many receive much less than this – and the recipient must be working, and undertaking job-related training.  There is no unemployment benefit scheme, and those losing a job are expected to use their savings while looking for a new job, or rely on the support of their family.  There is some support for those in extreme hardship – one study suggests this was provided to 3,000 people only, out of a total population of 4.5m.  It is ‘tough love’.

All this means that Singapore’s government, and the cost of government, is low.  It has a low income tax, but also collects the money for the CPF (which then can be loaned to the mysterious Temasek, Singapore’s investment arm).  However, it makes it quite clear that Singaporeans will do as the government determines.  Some of its strictures can seem quite laughable to outsiders (not being allowed to chew gum on the street being the favourite example); others, on restricting the press seem more ominous (as well as also rather childish – it was only recently that Singaporeans were allowed to buy Cosmopolitan magazine).  The reach of the government does go quite far in some areas – it controls the rate at which cars can be purchased through requiring that any would be purchaser has to get a Certificate of Entitlement (adding some $60,000 to the purchase price of the car).  Similarly Singapore has a sophisticated electronic road pricing system, allowing a congestion charge to be levied on expressways and in central areas during the day.  It even extracts a levy on any Singaporean entering one of the casinos that recently opened on the island.  More to the point, the elite that runs the country makes key strategic decisions about areas for future business development that have been instrumental in ensuring the country’s growth over the past few decades.

The ‘manage your own career’ approach of companies caused a lot of angst when it was introduced.  Today, it is accepted as a way of life:  companies don’t really care about their employees (hence the common wry remarks when a CEO says ‘our people are our most important asset’).  The Fourth Revolution argues that ‘take responsibility for yourself’ may well be the government way of the future:  it limits the role of the state, while allowing it to play a more strategic role in terms of business development and economic management.  Have Singaporeans accepted that this is ‘the way of life’, suggesting that this, too, becomes accepted over time?

Older Singaporeans tend to see everything that has happened as contributing to a great life style.  They can look back at the privations of the past, and enjoy a very good standard of living today.  In comparison, and after many years of teaching in Singapore, I find the attitudes of younger university students very complex.  They tend to grumble about small things (like getting the magazines they would like, or smoking pot – the latter being a serious matter, as dealing drugs leads to automatic capital punishment in the island state).  Many study overseas, but most return to Singapore, where they are likely to benefit from their investment in higher education, joining the meritocratic elite.   They grumble, but only a little, they would like to see some changes, but they certainly don’t protest.

Ethnic minorities are a different matter.  Race is included on a person’s Identity Card, and until recently, a person had to choose between one or other of his or her parent’s race.  Now, a mixed race person can be ‘Indian-Chinese’ for example (and there is a historical hangover that allow Eurasian to be used where appropriate).  Those of Malay background fill the service and blue-collar jobs to a disproportionate extent.  Indians seem to do better, in the sense those of Indian background that do well in school move up, but there is an underclass there, too.

To some extent, it could be said that the Chinese Singaporeans live with their Malay and Indian counterparts unseen and underappreciated, with Mandarin and English as the two preferred languages (Mandarin in Singapore is distinctive, and it is still the case that many Chinese speak Hokkien, a result of the fact that many Chinese in Singapore trace their background to Fujian province, and would be able to speak quite easily with people from that province and Taiwan).  Racial tensions occasionally emerge, and there has been a growing pressure to make Malay a real alternative language in Singapore.  Nearly four hundred years ago, Hobbes suggested, in the Leviathan, that the individual made a social contract with the state, giving up some freedoms in exchange for protection and security.  Some groups in Singapore, ethnic minorities, and even the young in the future, might feel that the contract has required some to give away more freedoms than is fair.  Certainly Singapore seems closer to the model of the Leviathan than the welfare state imagined by the Webbs when developing their arguments for change in Great Britain a hundred years ago.

Mickelthwait and Wooldridge go on to examine China as an emerging example of the same kind of approach that Lee Kwan Yu has followed in Singapore.  Is a model where the government is small but directive, (perhaps controlling and paternalistic), with strong support for the free market and a philosophy of ‘look after yourself’ the path for the future?  Singapore is a tiny country, where compliance is relatively easily obtained.  Perhaps the China experiment, and the ‘Singaporean’ path Xi Jinping appears to be following for the next few years, will be more revealing as to whether or not this is a genuine alternative.

August 2014

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