The path to a more equitable, sustainable economy for Singapore

Rock climbing wall at Duke University, USA Image credit : Duke University

How to shift the economic system such that it behaves more cooperatively and produces more equitable, sustainable outcomes?

A reasonable starting point to consider for systemic change of the economy is national policy. Given the knowledge gaps and complexity of social systems, policy design often adopts a strategic, risk management approach. A strategy is selected by choosing a set of reasonable, testable working assumptions, applying best practices, and case studies of what has worked elsewhere. 8 policy reforms are proposed here based on 5 trends on the horizon to consider for working assumptions to achieve the transitions to prepare Singapore’s economy for the 21st century.

This article continues from the policy reforms for a humane economic policy laid out in an earlier article, and moves into a strategic roadmap for how that transformation could occur. The strategy calls for an updated map of society which reflects the role of institution and borrows the tactics and strategy of the discipline of global nonviolent pro-democracy movements.

1. Policy reforms
2. Critique of the policy perspective
3. Institutions in society
4. The Democratic state

Policy reforms

Looking ahead, the economy for the 21st century not only will need to address the current shortfalls of inequality, environmental sustainability, but also meet the upcoming foreseeable challenges. Three overall drivers are rural-urban migration, labor-saving technology advancement and climate change — mitigation and adaptation. Each of these transformations could be managed with overall neutral or even positive welfare benefit with the right policy and economic system. Under the status quo system that tolerates socioeconomic inequality and neglects environmental sustainability, these changes could be a disrupting factor to accelerate those inequalities and further undermine future economic health.

Trends on the horizon

1. Urbanization, convergence, transition to service economy
2. Slowing productivity growth rates globally
3. Growing middle class in Southeast Asia, Africa, South Asia
4. AI, automation — polarization of labor
5. Climate change — direct impacts, transition impact

The reforms can be summarized as a movement towards a social democracy such as the Nordic model (Deloitte,2020). The social democracies aim to move to a more egalitarian, inclusive society where the means of the economy are owned collectively and managed democratically. The Nordic model is characterised by a social compact of large, low cost or free universal public services financed by higher taxes. It is associated with Keynesian economics and the welfare state model.

1. Structural shifts towards growth, away from sunset
2. Decarbonization
3. Human capital investments — healthcare, education
4. Subsidize social mobility
5. Progressive taxation
6. Strengthen regional diplomatic, trade relationships
7. Stable, assimilation focused immigration
8. Strengthen labor rights and protections

Network diagram of feature relationships in an economy

The case for social democracy as a remedy to the malfunction of the current economic system is based on the trust-cooperation framework and empirical evidence. The transparency and public ownership of democratic governance builds the public trust that is essential for a higher investment, egalitarian social compact and long term decision making by leadership. This new social contract makes the public investments in human capital and public services in an urbanized post-materialistic society. The strengthened public trust, long term decision making and human capital investments are instrumental for sustained prosperity and environmental sustainability. The empirical case for the Nordic model is their stronger performance on national measures of social progress, environmental sustainability, inequality, high employment and national incomes. The Nordic countries also report high levels of public trust (Deloitte, 2020).

In recent years South Korea, Japan, Taiwan and to a lesser extent Singapore have been moving towards the welfare state economy associated with social democracies (Lee, 2017). This list of reforms is neither necessary nor sufficient as there are numerous possible ways of achieving the same desired outcomes. They are a summary of pragmatic reforms based on a literature of economic reports and best practices from other advanced economies facing similar challenges.

Critique of the policy perspective

Where to start? Getting started on the roadmap to social democracy

Having a clear understanding of solutions from a national policy perspective is an important first step in the problem solving process. While some form of vision of what the end solution could look like is critical, it is incomplete. For a strategy to be motivating and actionable it must be able to explain how individuals and small scale organizations can act in their own capacity to move the system from where we are today to where we need to be. Policy makers themselves have some autonomy, but also face a number of constraints on precedence, existing laws, interest groups and what is considered politically feasible in Parliament and in the electorate. Four challenges to the national policy perspective are that it leaves open questions of roadmap, consensus, implementation, and behavior model.

Roadmap

Beginning from the policy perspective may be intimidating and discouraging to someone who is not a policy maker. There are several stages of the policy making process from ideation to enactment as law. In the later stages this process is outlined in the formal rules of the Parliamentary procedure, but before anything is even presented as draft legislation the constraints and conditions have been set by what is considered politically acceptable — the overton window. For those ideas outside the overton window there is an additional set of steps and milestones of grassroots campaigning and activism in which there is no set rulebook or predictable roadmap to shift the status quo and move the idea into the formal political process. Building confidence in this roadmap is another learning effort which could be equal or greater than what would be required to develop the policy proposals.

Consensus

At a national level the uncertainty increases and a level of detail appropriate would be limited to a policy blueprint rather than a set of policies. There are a range of policy strategies which could all achieve similar outcomes within the blueprint. The problem of designing policy on fundamentals is likely under-determined and needs a popular consensus on the free choices in order to fully specify a set of policies. The process of incorporating feedback with constituent interests is non-deterministic. These open uncertainties of design choices which must be made but are not critical to the end outcomes could undermine the ability to keep a coherent mission focus and also draw unnecessary energy into tangential division debate.

Implementation

Policy alone is not sufficient to ensure the end outcomes. Well intentioned policy may in the end not achieve the intended results if the implementation risks are not well anticipated. The situation is a form of principal-agent problem for how to ensure that the policy is implemented as originally intended. The state apparatus is made of a network of interacting organizations. The policy making body, Parliament and the PMO office, rely on a set of interfaces of agents and institutions to implement the policy from civil servants, private sector firms and households. Policy is worded to cover a wide range of situational decisions. Budgets are approved with just the overall number for a department, but the exact details of how that budget is spent is left to the department. Details on how policy is implemented can be equal or more important than the generic policy objectives.

Behavior model

The policy solutions are conservative proposals based on conventional practices in economics and constructed from models which are based on standard neoclassical assumptions about rational self-interested economic agents. Some of the deeper knowledge gaps in the field of economics brought by the new discipline of Behavioral Economics are not dealt with directly. There is still the open question of how the real, imperfect humans subject to bias, bounded by heuristics can either be mitigated, organized to either solve collective problems or otherwise amplify into systemic hazards.

The approach of the New Institutional Economics to the riddle of how to organize productive collective action from imperfect agents is recognition that individuals make decisions within institutional environments.

Economic outcomes are a function of the institutional situation within which imperfect individuals interact
-Boettke, 2005, The new comparative political economy

Institutions in society

Institutions and the networks they operate in determine the distribution of power and flow of information. They also are instrumental for organizing society towards common goals. In her thesis “Governing the commons : the evolution of institutions for collective action” Elinor Ostrom provides a definition of an institution.

“Institutions” can be defined as the sets of working rules that are used to determine who is eligible to make decisions in some arena, what actions are allowed or constrained, what aggregation rules will he used, what procedures must be followed, what information must or must not be provided, and what payoffs will be assigned to individuals dependent on their actions
— Ostrom, 1990 Governing the commons : the evolution of institutions for collective action

Shifting the attention from national state policy, to institutional policy, structure could have the advantages

1. Deal directly with the interface of how institutions shape decisions for imperfect humans
2. Leave fewer questions for implementation by getting more direct to where decisions are being made
3. Bringing the reform focus down to local specific cases where all of the stakeholders interests could be considered in the consensus.
4. Numerous entry-point opportunities for a low resource team to learn and experiment on small scale groups and then gradually build on those successes in a sequence of milestones towards greater scope and reach.

Two general paths towards a social democracy society are to reform the political dynamics of the state and to reform the ownership and governance of the means of production in the economy. A first step in constructing a strategic road-map for that transition is to have the right map that represents these features of society.

Getting the map right

The conventional household-centric view may provide a misleading image of how change occurs by omitting influential intermediary agents, relationship networks and difficulty to distinguish democratic from non-democratic systems. The conventional view is based on a standard form of a household family unit, physical dwelling interacting with the state and the market through four roles as a citizen, investor, employee and consumer.

Household centric model of society

This model is incomplete however, omitting features in the political economy dynamics that could inform strategy for reforming. Four areas could enhance the institutional perspective are the authoritative institutions, civil society, family, friendship networks and firm governance structures.

1. Add semi-autonomous, authoritative institutions — media, universities and the courts to the view to show their intermediation role between the state, markets and households
2. Add civil society organizations — non-profits, non-governmental organizations (NGO), religious institutions which act as intermediaries for households and either the state or the market
3. Households are represented as discrete autonomous units. Account for the dynamics of family and friendship network relationships which distribute resources and information, and may cooperate and coordinate in blocs and clusters of associations
4. Firms are treated as a single type — “businesses”. Show the distinction between different types of firms by sub-classifying the governance structures of those firms.

The Democratic state

An updated map of society that represents the political economy dynamics can be used to develop and communicate transition strategies. The two general strategies aimed at the state and the market are complementary and use the institutional perspective. A more democratic state builds the public trust that is necessary for the egalitarian social compact, upscaling of human capital investments and long term decision making. Reforming the state provides the opportunity for the majority of citizens to take control of the decisions on national priorities on pace and equity of economic growth, and rate of transfers between productive sectors of the economy and the human capital investments from those who have been left behind on the margins. Greater representation of human capital interests in the state decisions could help to shift the negotiation strength of labor in wage bargaining. The transparency and oversight features of a stronger democratic state could also provide greater accountability oversight into firm governance decisions.

Singapore is rated as a “flawed democracy” from the Democracy Index and a lower rating as an Autocratic Electorate in the V-Dem Democracy Report (V-Dem, 2020). The report breaks up the transition from autocracy to democracy broadly into the primary foundation of civil liberties and the secondary outcomes of electoral integrity that depend on that foundation. The regression from liberal democracy to autocratic regime begins with an erosion of civil liberties and the democratic institutions, and only in a later stage is the electoral integrity undermined. The report breaks up the civil liberties foundation as association, expression, and assembly.

Institutions critical for sustaining the intermediary functions of critique, deliberations and checks on power of the state and market agents are first civil society organizations, the media, academia, arts and the courts. The liberties of these institutions from the state are what enable them to perform their supervisory functions autonomously, assuring public trust in the system as a whole and ensuring separation of powers as well as fraud and corruption surveillance. A roadmap for building a democratic society would focus on practice exercising these liberties, enabling these institutions autonomy with resources and where possible consolidating these liberties into law and policy. The role of civil society and non-government organizations is also to build public participation and support at the local grassroots scale where citizens can practice regular meaningful experience in deliberative discourse. This experience can cultivate positive associations of the democratic process ability to solve problems in daily life and connect them to the broader civil society democracic transformation movement.

Child holding placard in English during Arab Spring 2011 pro-democracy protests in Egypt. Photo credit AP

There are different theories of how social change from autocratic to democratic states occur through intentional effort. One strand which has gained popularity and a track record of successes from pro-democracy regime change in Serbia in 2000 to the more recent democratic movements in Arab Spring in 2011 is nonviolent resistance. The study of the tactical and strategic logic of nonviolent pro-democracy movements has a history that has evolved through practice and refinement in the 20th and 21st century (Chenoweth, 2011 ; Engler, 2017 ; Sharp, 1993). The field treats the political transformation as a nonviolent form of conflict and uses the metaphors of war and violent conflict to communicate the theoretical and tactical elements which could be applied to a strategic roadmap. One guiding strategy theory asserts that the coercive force used by the authoritative regimes is only the tip of the iceberg and the base of their power is various forms of obedience, distortion of truth and suppression of dissenting opinion. The simple logic is to not confront the regimes with the tactics of their strength — coercion and violence — but instead to systematically weaken the support for the authoritarian regime by withdrawing agreement, consent and obedience at the base of society and replacing it by forming new voluntary associations, strengthening the liberal deliberative, critical and impartial institutions such as academia, arts, media and the courts. Other aspects of the theory are engagement and maintaining solidarity with a broad coalition of society and not only the privileged and well-educated, nonviolent discipline, and leveraging on the appeal of truth-seeking as a public good (Chenoweth, 2011 ; Engler, 2017).

While over time confidence has gained for the strategy for navigating the conflict for the transformation of a single regime, there are still open questions about how to predictably establish lasting democratic institutions (Chenoweth, 2011 ; Engler, 2017). One of the more notable case studies, Otpur in Serbia had initial success in overthrowing Slobodon Milosevic in 2000, the country since 2009 has been reported to be on the same global trend of autocratic regression with similar observations in the Middle Eastern countries after the Arab Spring of 2011 (V-Dem, 2020). An alternative path to social democracy from the transformation to a democratic state could be a shift to a more social style of governance for the institutions that control the means of production in the economy. Such a path which aims to reform the role of businesses and their relationship with individuals and the communities they are embedded in may not only be complementary to the state reforms but also necessary to ensure they are sustained in the long run.

In either case it may end up that the first steps to take from here are the same for both strategies. Whether aiming to reform the state or the firms, a lasting democratic movement is built from the ground up, building cooperative relationships with everyday people.

References

Boettke, Peter J, George Mason University 2005 The new comparative political economy
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=869115

Chenoweth, 2011 Why civil resistance works, the strategic logic of nonviolent conflict
https://www.jstor.org/stable/10.7312/chen15682

Deloitte, 2020 The Nordic social welfare model : lessons for reform
https://www2.deloitte.com/content/dam/insights/us/articles/43149-the-nordic-social-welfare-model/DI_The-Nordic-social-welfare-model.pdf

Engler, 2017 This is an uprising : how nonviolent resistance is shaping the 21st century
https://www.amazon.com/dp/B06XCDS3T4/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1

Hickem, 2020 Human centric economic policy for Singapore
https://medium.com/@taylor.hickem/human-centric-economic-policy-for-singapore-1f4954a9b991

Hickem, 2020 Learning to cooperate
https://medium.com/@taylor.hickem/learning-how-to-cooperate-837504b9c6f8

Lee, 2017 The Evolving Singaporean Welfare State
https://onlinelibrary.wiley.com/doi/pdf/10.1111/spol.12339

Ostrom, Elinor, 1990 Governing the commons : the evolution of institutions for collective action
https://wtf.tw/ref/ostrom_1990.pdf

Sharp, 1993 From Dictatorship to Democracy
https://www.amazon.sg/Dictatorship-Democracy-Gene-Sharp/dp/1846688396

V-Dem Institute, U of Gothenburg, 2020 Autocratization surges, resistance grows : Democracy report 2020
https://www.v-dem.net/media/filer_public/de/39/de39af54-0bc5-4421-89ae-fb20dcc53dba/democracy_report.pdf