Goh Keng Swee
о
FEDERAL PUBLICATIONS
Singapore • Kuala Lumpur • Hong Kong
© 1977,1995 Goh Keng Swee
This edition first published 1995 by
Federal Publications (S) Pte Ltd
A member of the Times Publishing Group
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Singapore 536196
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 Contents 
Preface	vii
Part One: ECONOMICS________________________________________
1	Why Singapore Succeeds	1
2	Singapore in the International Economy	20
3	Regional Economic Cooperation	31
4	Moral Order and Economic Progress	44
5	The Case for Free Enterprise in Developing Countries	47
6	Some Lessons of Recent Development Experiences of
ASEAN Countries	51
7	Some Unsolved Problems of Economic Growth	63
8	The Growth and Economics of Tourism	90
9	A Socialist Economy that Works	94
10	The North-South Confrontation	107
Part Two: INDUSTRIAL RELATIONS
11	Some Problems of Manpower Development in Singapore 113
12	The Labour Movement’s Response to World Inflation	134
13	Some Lessons from World Industrial Discord	140
14	Trade Discrimination by the Industrialized Nations: Some Suggestions	143
15	The Engineering Industry in Singapore
16	The Meaning of Productivity
17	Organized Labour: The Japanese and British Experience
18	The Pitfalls of Western Intellectual Radicalism
19	Adam Smith on Productivity
Part Three: SOCIOLOGY
20	ASEAN and the Pacific Basin
21	Modernization in Singapore: Impact on the Individual
22	Labour in a Technological Society
23	The Asian Struggle
24	Education in Singapore and the “Teacher Image”
25	Aspects of the Drug Problem in Singapore
Part Four. MISCELLANEOUS
26	Qualities of a Strong Military Organization
27	The Role of Civilians in National Defence
28	Adam Smith on Defence
29	Town and Gown
30	Zero Growth Rate for Private Motor Vehicles
 Preface 
In the preface to my earlier book, published in 1971, Economics of Modernization, I said that Singapore’s political leaders had often to assume the role of Moses when he led the children of Israel through the wilderness in search of the Promised Land. We had to exhort the faithful, encourage the faint-hearted and censure the ungodly. During the years covered by the essays in that book, Singapore went through a series of traumatic experiences. The “slings and arrows of outrageous fortune” seemed unending. Between 1959 and 1963, there was a fierce and continuing engagement with the communist united front. Between 1963 and 1965, merger into Malaysia brought none of the benefits expected (other than the crippling of the communist united front), but brought a host of unexpected troubles. After we parted company, we sailed into uncharted seas on our own, a journey made more perilous by the announcement in 1968 by Her Majesty’s Government of their intention to end their military presence in Singapore.
By 1972, Singaporeans knew that they could make the grade. While we had not reached the mythical Promised Land, we had not only survived our misfortunes but became stronger and wiser in the process. As a result we came to believe that we understood the formula for success, at least in the field of economic growth. The performance of the economy is described in some detail in chapter 9 (“A Socialist Economy that Works”).
During the period covered by these essays, I moved out of the Ministry of Finance into the Ministry of Defence. As such I was no longer concerned with economic matters. Nevertheless, opportunities to speak on these subjects came through invitations from international conferences, trade unions, and professional and academic associations.
Few people could have appreciated the phenomenal strength of the Singapore economy better than those in the Defence Ministry. Defence
ministries the world over consume enormous resources which, in the opinion of many, could be better devoted to other purposes. I have much sympathy with such a view. However, the stern realities of Singapore in the post-independence era make it imperative to spend enormous sums of money on such regrettable expenditures. More than 60 per cent of this money was spent on imported military hardware. At one time, our annual defence expenditure was close to 10 per cent of the GNP. The money was made freely available by the Ministry of Finance. What was remarkable was that on no occasion during the build-up years did it become necessary for the Government to introduce tax increases. The balance of payments continued to be strong despite imports of defence hardware. Nor were other ministries deprived of funds. The additional government revenue resulted from increased tax yields produced by exceptionally fast economic growth rates of those years.
What are the main lessons learnt? Our experience confirms some of the conventional wisdom of growth theory but refutes much of the rest. The role of government is pivotal. Non-economic factors, which have yet to be reduced to a coherent multi-disciplinary system, are more important than economic variables. These latter are of finite dimension and can be quantified by expert studies, their parameters estimated in feasibility studies. Such studies may be expensive to undertake and time-consuming to digest. But if they are not carried out by frauds or cranks (in an imperfect world, alas, these do crop up) economic decisions finally taken will be informed and rational.
Despite the current prejudice against fast economic growth in some Western intellectual circles, its importance in poor countries remains undiminished. Fast economic growth produces visible results and the free market mechanism untampered by monopoly restrictions will ensure the spread of benefits to all strata of society. As a result, public morale is increased and national unity and confidence strengthened.
But Singapore’s experience has limited application to the general run of third world countries. The reason is simple. We are an urban society without any rural peasantry. This has certain consequences which are often overlooked by the Singaporeans themselves.
First, Singapore’s high per capita GNP, allegedly second only to Japan’s, is a misleading indicator of her affluence. Institutions such as the World Bank and the Asian Development Bank have been influenced by this simple figure to effectively exclude the Republic from the benefits of its normal loan operation. What has been overlooked here is that, in terms of per capita wealth, Singapore is not that much
richer than other capital cities of Southeast Asia. Indeed there are probably more rich citizens in these cities than in Singapore. However, the per capita GNPs of these countries are severely depressed because some three-quarters of their population live as subsistence peasants or poorly paid agricultural workers.
It is true, of course, that we do not see in the Republic the extreme and offensive inequalities of wealth noticed in some developing nations. There are two reasons for this. First, income tax is efficiently collected. Second, entrepreneurial incomes are re-invested rather than wasted on conspicuous consumption, unlike landlord incomes or incomes derived from monopoly or other kinds of privileges.
This concerns the rich. As regards the poor, since the Republic has no rural hinterland and no peasantry, the rural-urban drift takes the form of population movements crossing international frontiers. They can be limited by immigration controls and this in fact is what is happening. The result is that workers in Singapore are able to achieve substantial wage increases over the years, in line with increases in work productivity and general economic growth.
This result would not be possible if Singapore had a large peasant population, as economists familiar with the Arthur Lewis growth model will readily agree. Under this model, which accurately represents the circumstances in most third world countries, industrial growth in cities results not in wage increases but in more rapid flow of the rural population into the cities. It is true more jobs are offered but this merely attracts even more people so that urban unemployment is increased and not reduced. This simple proposition is often forgotten by kind-hearted Western observers who fault governments of developing nations because incomes of the poor have not visibly increased when growth takes place.
I have called this collection of essays The Practice of Economic Growth to emphasize the standpoint taken here, that of a practitioner, and not a theoretician. Though I have delved more deeply into theory in chapter 7 (‘ ‘Some Unsolved Problems of Economic Growth”) than a practitioner should, the object of the exercise was to assess how far theory conforms with practice in the real world. My conclusion was to give fair grades to Arthur Lewis and top marks to an obscure Russian, N.D. Kondratieff, who perished in one of Stalin’s Siberian labour camps. The Keynesians get the wooden spoon. No doubt theoreticians will disagree.
Theoretical economists teach the subject in universities and write learned articles in economic journals. I think it is fair to say that their
criteria of excellence differ from those the practitioner must adopt. Academics place much importance on rigorous logic. There is also admiration in the profession for subtle reasoning. And mastery of the craft shows itself in the elegance of the intellectual super-structure. It is not for the practitioner to quarrel with all this; indeed there is nothing wrong about it since economic principles are derived from deductive reasoning.
The practitioner, on the other hand, uses economic theory only to the extent that he finds it useful in comprehending the problem at hand, so that practical courses of action will emerge which can be evaluated not merely in narrow economic cost-benefit terms, but by taking into account a wider range of considerations. Again this must necessarily be so in the world of affairs.
A practitioner is not judged by the rigour of his logic or by the elegance of his presentation. He is judged by results. Experience is a harsh school in which there are no alibis for failure. From my observation, those in the third world who graduate successfully from this school share one common characteristic. They have an abundance of what Lord Keynes called ‘ ‘animal spirits’ ’.
Practitioners need to be innovative in grappling with tasks of a third world economy. The book of rules tells you very little, and precedents borrowed from advanced countries have a nasty habit of coming apart in your hands. It is true that feasibility studies can be commissioned and conducted by reputable agencies, experts from the UN, the World Bank and the like. But most of these are confined to terra cognita— transportation systems, power stations and the like. It is when the practitioner ventures beyond these well-trodden paths that he encounters complex and seemingly intractable problems. Without an abundance of “animal spirits’’, he would move quickly to a more congenial occupation.
The period covered by this book ends in May 1977. By then the world economy was showing unmistakable signs of deep-seated ailment. These include continuing pressure in rich countries for import restriction, prolonged unemployment at levels seldom experienced since World War Two, stubborn price inflation and recurring jitters in the financial markets. So just when the Promised Land seems to be in sight, the prospects for Singapore are further trials and tribulations.
6 June 1977 Ministry of Defence Singapore
Goh Keng Swee
 Part One 
Economics
Why Singapore Succeeds
Anyone trying to describe the outlook for Singapore faces an immediate difficulty. And this is that the economy of Singapore is so unique in its structure, and the functions it performs are so different from those of most national economies, that there is a great risk of failing to get across one’s ideas, especially to an audience which may not be familiar with the workings of Singapore’s economy. For this reason I have decided to approach the subject in a somewhat indirect way. I intend to give an account of the role and functions of Singapore’s economy when it was administered by British governors, and show how rapid growth took place despite seemingly insuperable obstacles. I will then explain the situation which my Government faced in 1959 when we first took office, why we had to do the things we did, and what was the outcome in recent years. It is only after this rather lengthy explanation that I will look at our prospects in the years ahead. For without some historical grasp of Singapore’s economy, it is all too easy to fall into error. This has happened to a number of writers.
Writing in 1967, in an article significantly entitled “Singapore’s Dark Horizon’ ’, Mr David Bonavia concluded that there was no future for an independent Singapore. “The only sensible answer is a fresh accommodation with Malaysia to restore the natural economic relationship ... It is depressing to tour the wind-swept empty acres of site-land in Jurong today, ’ ’ wrote Mr Bonavia, ‘ ‘and reflect on what it might have been. ’ ’1
Speech at she Financial Times conference in London on 21 November 1972.
In a book published this year, Mr Iain Buchanan, a geography lecturer in the University of Leicester, was even more dogmatic about Singapore’s impending doom. And he described it with much eloquence. ‘ ‘The early 1970s, ’ ’ he said, ‘ ‘might well see a resurgence of civil unrest reminiscent of the mid-fifties, when a disgruntled mass of people decided that considerations of domestic well-being were more important than those of a foreign strategic stake in Southeast Asia— and fought in the streets, in the schools, and in the factories and business houses, for a new and more representative government. ’ ’2
“Singapore’s tragedy,’’ said Mr Buchanan, “is not merely that insurrection will occur in the near future, but that if and when it does occur, it will threaten the very survival of Singapore in Southeast Asia. ’ ’
On 2 September this year, the mass of people in Singapore decided on a new government but they did so not by insurrection, but by the exercise of their votes. My party received 70 per cent of the votes and won all the 65 seats in Parliament. Mr Buchanan was quite certain that no more than 10 per cent of Singaporeans supported the Government.3
How was it that these writers, by no means men of meagre intelligence, could have been proved so wrong so quickly? Was it a case of the intellectual being led astray by his lurid imagination, unrestrained by serious judgment? While there is an element of this, the prophet-of-doom syndrome is not a recent affliction among observers of the Singapore scene.
Let me quote Mr C.W. Derbyshire, one-time Chairman of Singapore’s Chamber of Commerce, writing some 53 years ago, when Singapore was a British colony. Speaking of the 1840s, he said: “At this time there were misgivings as to the future of our trade; the acquisition of Hong Kong and the opening up of commerce with China were expected to affect our interests injuriously; it was thought that the zenith of Singapore’s prosperity had been reached. When Labuan was ceded to us, many were the evil prognostications in circulation. And so down the century, we have always had from time to time these gloomy forebodings. In our own time, most of us can call to mind doleful prophecies that Singapore’s supremacy must decline in these advanced days of communications and direct shipment. ’ ’4
We must ask ourselves two questions. First, why these habitual woeful predictions? Next, how was it that Singapore repeatedly confounded the prophets-of-doom?
The basic reason for pessimism is perhaps rooted in the traditional function Singapore performed as a trading centre for Southeast Asia.
The products of the industrial West were imported in bulk into Singapore and then broken up into smaller parcels for re-distribution to nearby territories according to the requirements of customers. That was one branch of the trade. The other branch consisted in the collection of the produce of Southeast Asia, the grading and processing of such produce, and their marketing and shipment to industrial countries.
It is easy to see the vulnerability of such economic arrangements. Where the economic hinterland lies in other countries, this trade, the entrepot trade as it is called, can be influenced by political decisions of outside governments.
In the postwar years, as countries in the area established their own national governments, it was thought natural enough that these new governments would look askance at the middleman activity performed by Singapore. It was to be expected that these governments would seek to bypass Singapore, develop their own ports and communications systems, establish their own processing industries, and in this way keep for themselves the wealth that was believed to have been extracted by the merchants of Singapore.
Indeed this happened. But it is by no means a recent phenomenon. On the contrary, the history of Singapore abounds with examples of governments which had been doing precisely this thing. As early as 1823, four years after Singapore’s founding by Sir Stamford Raffles, the first discriminatory measures against Singapore’s trade were introduced. In July of that year the Dutch imposed a special levy on piece goods imported into Java from Singapore, 15 per cent if carried in Dutch ships, 25 per cent if in British and other ships. The following year an additional 10 per cent duty was imposed if piece goods were of British origin.5 By 1834 the duty was increased to 70 per cent. Further, shipments from Singapore could not be made directly to Sumatra, Borneo or the Celebes but had to be transhipped through certain ports in Java.6
Trade discrimination and flag discrimination were only two of the perils Singapore merchants had to contend with. Another took the form of the establishment of rival trading centres. In 1847, Makassar was converted into a free port by the Dutch to take away the flourishing Bugis trade from Singapore. In the next five years five more free ports were established at other places in the Netherlands East Indies. None of these measures checked the growth of Singapore and, indeed, it was claimed that some of them even enhanced Singapore’s prosperity.7
How was Singapore able to overcome these threats to her economy? Was the history of Singapore, to quote a recent Financial Times article, ‘ ‘a series of gambles most of which paid of’ ’ ?8
While it is true that in special circumstances the Government of Singapore might accept calculated risks which would have daunted other governments, this is not the whole story, nor even the more important part of it. There are four reasons which enabled Singapore throughout her history as a British colony, and today as an independent republic, to survive and even prosper in the face of apparently insurmountable difficulties.
First, there is the well-known fact of a superb central geographical location with a natural harbour swept by the currents flowing between the South China Sea and the Straits of Malacca. Dredging is not needed to prevent the silting of the harbour, an expense which is usually necessary with ports in this region which are usually sited at the estuaries of rivers.
The second reason must be ascribed to government policy. Sir Stamford Raffles’ great vision of the island growing into a great emporium was founded on the Victorian belief in the virtues of free trade. Successive colonial governors zealously nurtured the port, maintained lean and efficient administrations, and allowed merchants and bankers full scope for the exercise of their talents. Taxes were reduced to a minimum and no harbour dues were levied as these were thought to have a bad effect on shipping. When Horsburgh Lighthouse had to be constructed because of frequent shipwrecks occurring at the eastern approaches to the harbour, it was financed by public contribution and not by taxation.9 The private sector, on occasions, even engaged in military action such as the suppression of piracy. In 1832, the Chinese Chamber of Commerce, with the blessings of the Government, fitted out four large trade vessels for combat. This private navy operated on a piece-rate basis, receiving $200 for each pirate boat attacked.10
In the modern idiom, the Victorians who governed Singapore established and maintained an infrastructure at minimum cost with maximum efficiency. By contrast to these free trade principles, the Dutch for the most part adopted a mercantilist approach as well as an interventionist policy in trade and economics—not an unfamiliar situation to one who observes the contemporary scene.
The third reason for Singapore’s ability to survive derives from the second condition, that is, the nurturing of the free enterprise system. In the absence of monopolies and privileged business interests, keen and
free competition ensured efficient business. Efficiency meant low costs, and in turn this meant that if neighbours wanted to bypass Singapore they incurred a high penalty in cost differential.
Even when this happened, Singapore was able to adapt to changing circumstances. When one line of trade declined as a result of changes in consumers’ taste or technology, or political decision in a neighbouring country, the skills, entrepreneurship and the financial and business networks which at first created this line of trade turned their attention to some other lucrative line of business. Sometimes individual firms, especially those which had over-specialized, went out of business, but the system went on from strength to strength.
Finally, what made Singapore grow as a trading centre despite the mercantilist policies of neighbours was that the economics of the business did not add up to a zero-sum game. In other words, it is not a matter of “the more for you, the less for me”. The position, rather, is one of “the more for you, the more for me”. This happy result emerges from the continuous and rapid economic development of the countries in Southeast Asia under British and Dutch colonial administrations up to, at any rate, the Great Depression of the 1930s. In this development, particularly that in the Malay Peninsula and in some areas of Sumatra, capital, entrepreneurship and management based in Singapore, of British as well as local origin, made notable contributions.
For well over a hundred years Singapore learnt to adapt her economy to changing circumstances. Throughout these years, first as an adjunct of the Imperial Indian Administration, and after 1867 as a Crown Colony, she developed as the supreme entrepot centre of Southeast Asia as well as a supplier of capital, enterprise and management to extend the new economic frontiers—the tin mines and rubber estates of the Peninsula and Sumatra. This ability to adapt which was won in the hard school of experience remains an asset which the Government of independent Singapore decided to retain, and even to enlarge.11 It might have been politically tempting to rid ourselves of institutions and practices that bore, or seemed to bear, the taint of colonial associations. Had we done so we would have thrown away a priceless advantage for the sake of empty rhetoric.
Independent Singapore had to adapt itself to a situation radically different from what colonial governors had to contend with. These differences stem from political and demographic conditions.
Throughout the nineteenth century the population of Singapore consisted mainly of transients. People from the four corners of the globe, attracted by the lure of wealth, arrived in Singapore to test their
fortunes. But most of the population were Chinese, some arriving from various parts of the archipelago but in increasing measure migrating from South China as a result of the disorders during the declining years of the Ch’ing Dynasty and the chaos following the overthrow of the Dynasty in 1911.
One indicator of the transient nature of the population then can be found in the ratio of adult males to adult females. In 1891 there were four adult males to one adult female. Even as late as 1931 the ratio was two to one. But in the postwar years migration was strictly controlled. As the old migrants died or returned to their homeland, the population became more settled and the ratio of males to females approached equality.
The combination of representative government and settled population made it impossible to follow the completely laissez-faire, trade-oriented policies of the colonial administrations. This is strikingly illustrated by what happened to Singapore (and Malaya) during the Great Depression of the thirties. Just as in previous decades when, as the economy expanded, there was a large and continuous inflow of immigrants from South China and South India, so when the economy contracted during the depression years, a large outflow of population took place. Between 1931 and 1933 there was a net outflow of 389,000 people, mainly to India and China.12
But such population movements are no longer possible today. Moreover, natural population increase replaces migration as a determinant of population size. Before birth control measures began to take root in Singapore in the early 1960s, annual population increases took on frightening proportions. As*a result of this, large numbers of postwar babies reached working age each year in the last decade, setting Singapore as severe a test as it had ever experienced in its history.
It is no longer possible for population size to adjust itself to fluctuations in the level of economic activity. It has become necessary for the level of economic activity to at least keep pace with the natural growth of population so as to avoid social disruption. Further, an elected government is expected to provide certain basic social services. It is necessary to provide schools for the children of citizens, and housing and medical care for all citizens. And since 1965, when we became independent, it has been necessary to provide for defence and security, an expensive business these days.
Even before June 1959, when my party first assumed office, it had been increasingly evident that economic expansion was failing to keep
pace with the number of entrants into the labour market each year. Poor career prospects formed a major reason why the young, particularly students from the Chinese Middle Schools, responded so willingly in the mid-fifties to communist united front anti-colonial agitation.
Since the traditional entrepot trade could not provide the additional jobs needed, it was necessary to seek new sources of economic growth. The manufacturing industry was one obvious option. But the obstacles to successful and rapid industrialization, as they appeared in 1959, were pretty daunting. There were three adverse factors and any one of them could have proved fatal to an industrial take-off.
First, the small domestic market of a country with a population of two million limited the number of products that could be produced to replace imports—a favourite method of stimulating industrial growth in developing countries.
Second, in the anti-colonial campaign mounted by the communist united front, labour unions were well to the forefront. These politically-inspired labour disturbances became dangerous in I960 and 1961 when the communist united front tried to unseat the Government.
Finally, there was a lack of industrial skills. There was only one Polytechnic, then in its infancy, and one trade school, producing a small number of artisans. The Faculty of Engineering at the University was also in its infancy, the first graduates appearing only in 1969. The school system, like so many education systems in the underdeveloped world, concentrated on the three Rs, good enough to produce only clerks and storemen.
There were, of course, some manufacturing enterprises in products —low-value articles which are costly to transport such as bricks, tiles, glass bottles, bottled drinks—in which the domestic producer has a natural advantage over foreign producers. In other instances access to raw materials also gave rise to industry, such as the canned pineapple industry. The repair of ships and the construction of small vessels were activities natural in a large seaport. But there was no deliberate policy to foster the growth of new industries. Since 1959, however, the attempt to industrialize Singapore has been taken seriously. A number of policy initiatives were introduced, all with the object of fostering industrial growth under conditions which were none too favourable.
Some of these initiatives proved abortive, such as the ill-fated attempt to establish a common market with Malaysia. But before these specific measures could yield results it was necessary to stabilize the political situation, which from I960 to 1961 had taken a grave turn for
the worse as a result of communist united front activities. The long-drawn-out struggle we had with them need not concern us here.13 It was only after their power was broken, particularly their stranglehold on the labour unions, that it was possible for real industrial progress to take place.
The principal measures to encourage new industries in Singapore can be grouped under the following headings:
(i)	Provision of infrastructure.
(ii)	Tariff protection.
(iii)	Fiscal incentives.
(iv)	Supply of trained labour.
(v)	Maintenance of industrial peace and wage stability.
(vi)	Encouragement of savings.
They were not all introduced at the same time but occurred approximately in the above sequence. Let us consider these measures in turn.
As regards infrastructure, just as the early founders of Singapore strove to provide attractive terms to ships of all nations to bring their cargoes to Singapore, we tried to make it easy and attractive for manufacturers to set up business in Singapore. A large industrial estate was built in Jurong, with its own port to handle bulk cargo, equipped with rail and road transportation as well as adequate supplies of power and industrial water.
Jurong estate covers 7,000 acres and is being expanded to an ultimate size of 14,000 acres. As at 31 October of this year, there were 417 factories in production, giving employment to 48,000 people. Another 29 factories are under construction and a further 45 are in the pipeline. The Jurong Town Corporation also manages 13 other industrial estates. At some of these estates large multi-storied factories have been constructed, and they are proving popular as they are sited near the labour-available housing estates built by the Housing and Development Board. There are 396 factories in production in these 13 scattered industrial estates, giving employment to 43,000 people.
At the end of 1971 the fixed assets of the Corporation amounted to $419 million. These included not only the industrial facilities, but also public housing and social amenities such as playing fields, parks, shopping centres, cinemas, etc.
As regards tariff protection as a means of industrializing through import substitution, this proved a short-lived affair as we quickly ran out of products that could be manufactured without paying an unduly high price. Steel bars, chocolates, flour, electric bulbs, soap and a few
other items exhausted the list. However, some tariffs, though they failed to produce new industries, proved useful for revenue purposes and were retained by the Finance Ministry.
The basic fiscal incentive consists of the granting of pioneer industry status carrying exemption from income tax for up to five years. Further concessions are available in respect of accelerated plant depreciation, interest on foreign loans and royalty payments. To encourage export-oriented industries, export earnings may enjoy concessionary tax rates after the expiry of pioneer status.
By 1968 a change in emphasis took place in our industrial promotion policy. Industrial development acquired a fresh urgency as a result of the decision announced by the British Labour Government to accelerate the end of the British military presence east of Suez. The economic consequences were estimated to be severe, as military expenditure contributed substantially to Singapore’s GNP, giving employment to more than 40,000 civilian employees.
To meet the new challenge, three major policy innovations were introduced. They were intended to achieve the following objectives:
(i)	To secure industrial peace.
(ii)	To increase the future supply of skilled labour.
(iii)	To increase the volume of national savings.
These measures required a stern self-discipline among citizens of Singapore and a willingness to put in greater effort. The mood of the country was favourable to the adoption of these measures.
In August 1968 tw.o major pieces of legislation were introduced in Parliament, the Employment Act and the Industrial Relations (Amendment) Act. The Employment Act replaced three former ordinances relating to employment and working conditions. It abolished certain discriminatory practices, rationalized the pay structure by doing away with certain abuses on overtime practice and also protected young industries against excessive retrenchment benefits.
The Industrial Relations (Amendment) Act removed some ambiguities regarding the jurisdiction of management and trade unions which had long been a source of friction. The Act placed certain subjects clearly within the prerogative of management, such as the promotion of employees, their transfer, recruitment, retrenchment and assignment of tasks. These subjects were held to be outside the range of labour-management negotiations. The Act encouraged collective agreements of longer duration, from three to five years.
The effect on industrial peace was gratifying. Less than 10,000 man-days were lost in each year after 1968. There were only seven
strikes in the three years following the enactment. In 19<> 1 there were 116 strikes leading to 410,889 lost man-days. Even after the communist grip on labour unions was broken in 1963, Singapore lost some 35,000 to 45,000 man-hours each year through strikes.
To upgrade skills in the future labour force, the Government decided to accelerate the establishment of new technical and vocational training in schools. Before 1968 there was only a vocational institute, teaching a limited number of trades. In addition, there were nine secondary technical schools teaching up to General Certificate of Education level, with emphasis on theoretical instruction rather than on workshop practice.
In 1969, six new vocational institutes were established and another two have been established since then. Whereas previously the intake of the vocational institute was one or two hundred a year, in 1969 it was increased to 2,151 and by this year it has grown to 5,666.
Standards at the secondary technical schools were raised to provide training at Higher School Certificate level. Further, 14 secondary schools were restructured to provide classes for similar technical education. The enrolment of these 23 schools in the technical education stream is 6,974 this year.
Because the boys could clearly see better job prospects for those with craft or technical education compared to the general run of those equipped only with an academic education, there was a keen demand for places in these institutions. Applications usually exceed available places by two to one.
The third policy innovation was the increase in the rate of contribution to the Central Provident Fund. This is a Provident Fund managed by the Government and contribution to it is compulsory except for those employers who offer better terms. It was introduced in 1955 and the rate remained virtually unchanged until 1968. The Government then decided to raise, in gradual stages, the rate of contribution, which was then 5 per cent of salary by employer and employee. In September 1968, the rate was increased to 61/? per cent by each side, the following year it was increased to 8 per cent, and in January 1971 to 10 per cent. In July this year the employer’s contribution was increased to 14 per cent while the employee’s contribution remains at 10 per cent. Eventually the rate will go up to 15 per cent each by employer and employee.
The increase in rates as well as the rapid growth in employment in recent years resulted in a substantial increase in annual collections. In 1965, $46.9 million was collected, increasing to $68.0 million in
1968. Since then the figures have been:
1969—$106.6 million
1970—$156.4 million
1971—$223.6 million
1972—$310.0 million (estimated)
The Central Provident Fund contributions serve a number of useful purposes. First, it reduces the pressure on prices which might otherwise increase faster as a result of more employment and increased pay. Second, it provides the Government with a non-inflationary source of funds for development finance.
Let me give a brief account of the impact of these policies. Necessarily, this account will be confined to the more essential economic aggregates covered in the routine statistical reports or estimated in regular annual exercises. The subjects to be reviewed will include external trade, balance of payments, growth of Gross National Product, volume of investments and savings, and performance of the manufacturing industry.
I. External Trade of Singapore (1960-71)
(S$ million)
Year	Imports	Exports	Trade Deficit
1960	3,497	2,964	-533
1961	3,358	2,750	-608
1962	3,431	2,860	-571
1963	3,996	3,291	-704
1964	3,252	2,601	-651
1965	3,570	2,810	-760
1966	3,825	3,168	-657
1967	4,149	3,239	-910
1968	4,759	3,589	-1,170
1969	5,863	4,471	-1,392
1970	7,047	4,428	-2,619
1971	8,090	5,075	-3,015
Source: Yearbook of Statistics, Department of Statistics, Singapore. Extracted from Balance of Payments estimates. Imports and Exports are both valued f .o.b.
The first table gives the value of annual imports and exports from 1960. At first sight, the continuing and alarming increase in Singapore’s trade deficits may suggest an improvident people living recklessly beyond their means. Actually, the trade deficits result from two factors. First, nations which live by trade and commerce, such as Singapore and Britain, normally show a deficit in the visible trade
account, covering these by earnings on “invisibles”. This has always been the case with Singapore’s external trade and students of the early history of the trade were often puzzled by the persistent annual trade deficits.14
The second reason for the large trade deficits in recent years is the substantial import of capital goods. When an electric generating plant or a Boeing 707 or a freighter is imported into Singapore in any year, the trade figures give the full value, even though these purchases would have been financed on credit terms.
II. Balance of Payments (1960-71) (S$ million)
Year	Trade Deficit	Invisibles and Net Capital Inflows	Overall Balance
1960	-533	647	114
1961	-608	623	15
1962	-571	762	191
1963	-704	785	81
1964	-651	561	-90
1965	-760	728	-32
1966	-657	844	187
1967	-910	1,269	359
1968	-1,170	1,718	548
1969	-1,392	1,860	468
1970	-2,619	3,080	461
1971	-3,015	3,846	831
Source: Yearbook of Statistics, Department of Statistics, Singapore.
The second table presents the overall balance of payments, taking into account invisible earnings such as interest and dividends on investments abroad by Singapore nationals, earnings of Singapore shipping lines and airlines, earnings on tourism, as well as net capital inflows. This last element, capital inflows, is difficult to measure with any precision. But the overall result of substantial and increasing balance of payments surpluses can be accurately ascertained from the levels of overseas assets held by government agencies and private banks. Table II gives a more reassuring picture. As a result of these balance of payments surpluses, Singapore’s external reserves have increased over the years from SS336.2 million in 1959 to S$4,770.7 million at the count in June this year.
The third table shows the growth of the Gross National Product of Singapore from 1960. The GNP is given at current market prices. To
get growth at constant prices we have to allow for price increases. Singapore’s consumer price index shows an average increase of about 1.5 per cent a year, though in recent months the rate has gone above 2 per cent. However, if we take into account items not adequately covered by the consumer price index, a rather higher figure has to be taken to deflate for price increases.
III. GNP of Singapore (1960-71) at Current Market Prices (S$ million)
Year	GNP	Annual Average Growth
1960	2,193 )	
1961	2,408 )	7.8%
1962	2,549 )	
1963	2,877 )	
1964	2,903 )	6.5%
1965	3,266 )	
1966	3,630 )	
1967	3,962 )	12.1%
1968	4,568 )	
1969	5,238 )	
1970	6,140 )	15.6%
1971	7,001 )	
Source: Statistical Appendix to Singapore Annual Budget Statement, March 1972.
These last twelve years covered by the table show a robust rate of growth. Even during the troublesome years of 1960 to 1963 growth averaged 7.8 per cent, declining during the years we were in Malaysia, but picking up substantially thereafter. Performance has been excellent since 1968, the average annual increase being 15.6 per cent at current prices, and probably around 12 to 13 per cent at constant prices.
What is the reason for the fast rates of growth in recent years? The short answer is: “A high rate of capital investment which resulted from the policies described earlier. ’ ’ In particular, the response to the policies introduced since 1968 has been especially gratifying in terms of increased capital investment.
The fourth table shows growth investment compared with the GNP since 1965. Figures for 1961 are also given in this table, for the sake of comparison. Gross investment was only 9 8 per cent of GNP in 1961. By 1971, it had increased to 25.1 per cent. It will be seen that prior to 1968 this figure stayed between 13 and 14 per cent.
IV. Gross National Product and Gross Investment (S$ million)
Year	GNP	Gross Investment	% of GNP
1961	2,408	235	9.8
1965	3,266	476	14.6
1966	3,360	473	13.0
1967	3,962	518	13.1
1968	4,568	736	16.1
1969	5,238	954	18.2
1970	6,140	1,376	22.4
1971	7,001	1,759	25.1
Source: International Monetary Fund, Statistical Appendix to “Singapore Background Material for 1972, Article VIII, Consultations”, October 1972.
Perhaps an explanation is due here as to why the rapid increase in GNP as well as the increase in capital investment each year has not brought about serious inflationary pressures. There are several reasons for this. First, since a high proportion of consumer goods is imported from abroad, increasing expenditures will be reflected in increased imports. Inflation is imported, but the effect is reduced as importers are free to choose the cheapest sources. The second reason flows from the policy on labour described earlier. The third reason is that there has been an equally rapid increase in national savings. While figures on national savings derived from the National Income Accounts are subject to wide error, they suggest that the increase in savings has been at least as fast as the increase in gross investment. The figures, as calculated by a mission of the International Monetary Fund in the 1972 consultation papers, give the estimates in Table V.
Finally, I want to present some data on the growth of the manufacturing industry, measured in terms of its contribution to the GNP.
In Table VI, details are given of the value of the output of manufacturing and allied industries, namely manufacturing, construction and public utilities.
Whereas in 1960 these three sections contributed only 12.4 per cent of the GNP, in 1971 the figure had risen to 28.4 per cent. The increase in the manufacturing sector proper has been very rapid, averaging 20 per cent a year between 1965 and 1968, and 29 per cent a year between 1969 and 1971. Without doubt, the main impulse to Singapore’s rapid economic expansion has been generated in the
V.	Gross Investment and Savings (S$ million)
Year	Gross Investment	Savings
1961	235	175
1965	475	507
1966	473	643
1967	518	693
1968	736	1,066
1969	954	1,432
1970	1,376	1,756
1971	1,759	2,001
Source: International Monetary Fund, Statistical Appendix to Singapore, “Singapore Background Material for 1972, Article VIII, Consultations’ *, October 1972.
VI.	Growth of Manufacturing and Allied Industries (S$ million)
Year	Manufacturing	Construction	Public Utilities	Total	% of GNP
1960	183.4	41.9	47.3	272.6	12.4
1961	214.3	66.0	47.2	327.5	13.6
1962	241.8	71.0	53.0	365.8	14.4
1963	289.0	94.7	52.8	436.5	15.2
1964	323.3	113.9	59.2	496.4	17.1
1965	407.9	130.6	54.0	592.5	18.1
1966	480.2	128.7	73.3	682.2	18.8
1967	609.2	150.1	92.7	852.0	21.5
1968	706.1	179.8	108.8	994.7	21.8
1969	886.6	205.5	119.5	1,211.6	23.1
1970	1,131.7	302.2	138.3	1,572.2	25.6
1971	1,476.5	352.5	157.3	1,986.3	28.4
Source: Department of Statistics, Singapore. Specially prepared by the Department of Statistics to meet the above classification. A different classification can be found in the Singapore Yearbook of Statistics.
manufacturing sector. Moreover, figures show a Continuous increase over the years. It is not a one-shot effort.
Since the reason for embarking on a policy of industrialization was to provide work for the large number of young persons entering the labour market each year, a look at employment figures may be of relevance. These are shown in Table VII.
VII. Work Force in Manufacturing (1960*71)
Year	No. of Persons
1960	32,900
1961	33,109
1962	34,699
1963	42,131
1964	45,178
1965	50,721
1966	56,334
1967	62,109
1968	79,218
1969	105,971
1970	125,121
1971	145,072
Source: Census of Industrial Production, Department of Statistics, Singapore.
The early years when the initial major effort was put in had little to show by way of returns. However, after 1965 employment in the manufacturing sector began to show a faster rate of increase and this became very rapid after 1968. In fact, the present position is one of labour scarcity, which made it necessary to import labour from Malaysia and elsewhere.
Because unemployment is no longer the problem it was a decade ago, it is now our policy to be more discriminating in the kind of industries we actively encourage through incentives. Labour-intensive industries, such as garment manufacturing or the wiring of integrated circuits, which are enormous consumers of labour, will no longer enjoy incentives, nor will they be allowed to use imported labour. It is far better that these industries be located in Malaysia, as indeed is happening. The industries we encourage are those requiring the use of trained and skilled workers. These are the industries that can enjoy free access to any grade of labour from any part of the world they wish. Work permits and professional visit passes are freely granted to those employed in these industries.
After this circuitous detour, I now arrive at the subject of my address, that is, the outlook for Singapore in the next few years. It will be clear from what I have said that despite the changes in demographic structure and the introduction of representative government the economy of Singapore works in much the same way as it did under British management. True, there has been a change in objective of economic policy, to expand industry rather than trade and shipping. It
is also true that Singapore now serves not merely the immediate region, but looks to a worldwide market for its manufactures.
Yet the basic thinking and philosophy underlying this policy is essentially unchanged. And this is that Singapore must excel in business and in whatever it attempts. And government policy, now as before, must be directed to the support of this pursuit of business excellence. The colonial governors did this in trying to provide the most efficient trading and shipping services, and today we are trying to do the same for the manufacturing industry, without, at the same time, discarding the traditional entrepot trade. Whether for trade or industry, Singapore has found by experience that the free enterprise system, intelligently supported, gives her that degree of flexibility which has ensured her survival and prosperity, through her ability to adapt quickly to changing circumstances.
It is this thread of historical continuity which indicates that the recent high rates of economic growth are not a flash in the pan, but are the result of sustained effort over the years, underpinned by a firm and consistent economic policy. The next few years should see the continuation of good rates of growth.
A number of industries recently established are at the first stage of development. Among these are several well-known European and multinational corporations such as Philips of the Netherlands, General Electric of the USA, and Rollei of West Germany. General Electric has established seven plants in Singapore, manufacturing a wide range of consumer electronic products and components and speciality motors. Their work force today exceeds 5,000 and is expected to reach 8,800 by 1975. Rollei now employs 3,300 people and their expansion plan up to 1975 envisages a work force exceeding 10,000. Philips has four plants with a work force of 1,600 which will be trebled by 1975.
In addition to these, there are others, as well as a good number in the pipeline, which should ensure a continued expansion of the manufacturing industry. In addition, we have enjoyed, as a side bonus, rapid increases in the tourist trade.
These forecasts assume that external conditions will not deteriorate badly. In particular, one assumes that there will be no world trade recession and that the unresolved currency problems of the world will not lead to the erection of antagonistic regional trading blocs.
The second assumption is that there will be no major political upset in our neighbourhood. In particular, this means that the equable political climate in Malaysia and Indonesia will continue and rational leadership will remain at the helm. Stability and progress in these two
countries are to Singapore’s advantage. As in the past, we contribute to their development as best we can. For instance, Singapore provides the largest source of investment in pioneer industries in Malaysia, $116.2 million as at 31 December 1971, ahead of the UK ($84.5 million) and the USA ($60.7 million).15 As regards approved foreign investment projects in Indonesia, we rank fifth, behind the USA, Japan, the Philippines and Hong Kong, but ahead of Canada and all West European countries.16
The outlook for Singapore, in short, is good. May I conclude my talk with some suggestions as to how British industry can take advantage of conditions in Singapore. I am aware that the major preoccupation of Britain must be with her entry into Europe. Nevertheless, there may be opportunities outside Europe, and indeed British industry may find ways and means of strengthening its competitive advantage by locating some production lines in Singapore. This could be by way of the manufacture of components or even whole products, to take advantage of preferential entry into the EEC through the Generalized Preferences Scheme.
But even without the European market in view, two types of industry may find it advantageous to consider production in Singapore. The first type are those with export orders larger than the production capacity in Britain. They may be able to supplement production very quickly by setting up a plant in Singapore.
The second type, curiously, are those industries with declining export orders if this decline is a result of Japanese competition. Industrialists who are troubled by rising costs may find it useful to look at what Singapore has to offer. The three large enterprises I cited earlier moved to Singapore in part to strengthen their competitive position, which had suffered through Japanese competition, in the world export markets.
To all such industries, and to all others who may want to strengthen their competitive position in the world markets, may I extend a warm welcome.
References
1	David Bonavia, “Singapore’s Dark Horizon” in Far Eastern Economic Review, 23 February 1967.
2	Iain Buchanan, Singapore in South-East Asia, An Economic and Political Appraisal, Bell, London, 1972, p. 310.
3	Iain Buchanan, op. cit., p. 311.
4	W. Makepeace (ed.), One Hundred Years of Singapore, Vol. II, John Murray, London, 1921.
5	Wong Lin Ken, “The Trade of Singapore, 1819-69”, Journal of tbe Malayan Branch, Royal Asiatic Society, Vol. XXXIII, Pt. 4, .Tien Wah Press, Singapore, 1961, p. 40.
6	C.M. Turnbull, The Straits Settlements, 1826-67, Indian Presidency to Crown Colony, Oxford University Press, London, 1972, p. 166.
7	See Wong Lin Ken, op. cit., pp. 86-105, and Turnbull, op. cit., pp. 169-70.
8	Harvey Stockwin, “Container Gamble Pays Off”, Financial Times, 12 September 1972.
9	C.B. Buckley, An Anecdotal History of Old Times in Singapore, 18191867, University of Malaya Press, Kuala Lumpur, 1965, pp. 510-19.
10	Buckley, op. cit., pp. 224-5.
11	Charles Smith, “A Talent for Adaptation”, Financial Times, 10 November 1972, Singapore Supplement.
12	Malaya Year Book, 1938, Government Printing Office, Singapore, 1938, p. 43. See also P.T. Bauer, “Some Aspects of the Malayan Rubber Slump, 1929 1933”, Economica New Series, Vol. XI, 1944.
13	This subject is perceptively analyzed in Thomas J. Bellows’ The People 's Action Party, Emergence of a Dominant One Party System, Yale University, South-East Asia Series, New Haven, 1972.
14	Wong Lin Ken, op. cit., pp. 6-7.
15	Malaysia Industrial Digest, First Quarter, 1972, Kuala Lumpur, 1972.
16	Business News, 2 June 1972, Jakarta, Indonesia.
Singapore in the International Economy
Since this symposium is being held in the University of Singapore, the right thing to do seems to be to begin with a plea for academic freedom. However, I am making this plea not on behalf of the University but on behalf of myself. The views I am expressing here are my own personal views and not necessarily those of the PAP Government. I have not consulted my colleagues or cleared the text with them, as I should if I were to speak as their representative.
The reason is that the Minister who can speak with authority on the economic problems of Singapore is my colleague, the Finance Minister. By the nature of his work and his responsibilities, he has a close and direct feel of the pulse of the economy. He has access to current information, statistical data and specialized studies and reports which are not available to me. Accordingly, he is in a better position to make a practical judgment on economic affairs.
I am therefore speaking as an ordinary citizen in this exercise of academic freedom. This means that not only do my views lack official sanction, but that my colleagues, and indeed anybody else, are free to disagree. When a person exercises his right of academic freedom, there is also the critics’ right to tell him that he is talking nonsense, a point which, I fear, academics do not always appreciate.
To minimize the risk of a shattering rebuttal with consequent bruising of one’s ego, I propose to avoid discussing current problems
Address to the Symposium on “Singapore in the International Economy” at the University of Singapore on 19 March 1972.
and, instead, take a look into the distant future. This is a safer and more prudent course of action as one can always fall back on the defence that “My guess is as good as yours.” I would like to look at the shape of our economy as it could be towards the end of this decade.
First, let me draw attention to some aspects of our economic growth which have not been generally grasped. Table I gives our Gross Domestic Product at current prices for 1959-71. Few people, for instance, realize that by 1977, if present rates are sustained, our per capita Gross Domestic Product would have reached the 1970 level of the United Kingdom. The calculations are as follows. In 1970, the per capita GDP of Singapore at factor cost was $2,736. The figure for the UK is $5,683. If we allow for a population increase of 2 per cent to 3 per cent a year, our per capita GDP will increase at about 12 per cent a year at rates of growth of 14-15 per cent a year. At this rate of 12 per cent growth, our per capita GDP will be $5,399 in 1976 and $6,047 in 1977.
I. Gross Domestic Product of Singapore (at factor cost)
Year	$ million	Population (mil.)	Per capita GDP
1959	1,968	1.59	1,240
1960	2,046	1.65	1,243
1961	2,240	1.70	1,316
1962	2,371	1.75	1,355
1963	2,683	1.80	1,495
1964	2,700	1.84	1,466
1965	3,043	1.90	1,613
1966	3,365	1.93	1,740
1967	3,692	2.0	1,867
1968	4,257	2.01	2,116
1969	4,833	2.04	2,366
1970	5,675	2.10	2,736
1971	6,471	2.11	3,066
Source: Department of Statistics, Singapore.
These are projections at current prices. If we allow for inflation, not a major problem in Singapore and not likely to be one in future if the present policies continue, we should reach present British levels in real terms in 1978 or 1979. Not long after the turn of the decade we would have overtaken the British in per capita Gross Domestic Product, if both economies grow at current rates.
May I interpose two cautionary points. First, please note that I use the aggregate GDP and not GNP, for reasons which will become clear later. Second, I am not saying that all this will actually happen. A lot can take place in ten years which would falsify linear projections of current trends which is what this exercise is about. But even if the assumptions on which the projections were made are realized in the years ahead, there is likely to be a levelling off of growth rates in later years for reasons which I will discuss later.
Despite their limitations, these projections are useful. They give us an idea of the magnitudes involved. They also give us some idea of the time scale. If, as the figures show, we could be reaching present British per capita GDP by 1977, a fast economic growth that brings about this situation will certainly have social, economic and political consequences which would be not only massive and far reaching but also rapid, more rapid than most people are inclined to think. We would do well to investigate in advance what these consequences are likely to be.
The second aspect of our economic growth that needs to be highlighted is its motive power. Basically, the push comes from foreign trade. Economists will remember that many of the leading theorists discounted the policy of export-oriented economic growth as a realistic policy for underdeveloped countries. The constraints on these, such as deteriorating terms of trade for primary products, non-tariff restrictions on exports of labour-intensive products such as textiles, and other obstacles, seem to bar this approach to affluence. However, in the 1960s the economies which performed spectacularly adopted just this approach. The countries were Hong Kong, Taiwan and South Korea. Singapore now joins this select band.
There have been no studies, to my knowledge, of the relative dependence of these countries on foreign investment as an instrument of economic growth. My own subjective impression is that this dependence is strongest in Singapore and that the participation of national entrepreneurs in promoting industrial development is smaller here than in the other countries. Certainly the inducements offered to foreign investment are stronger and more varied in Singapore.
Both Hong Kong and Taiwan were able to mount an early and substantial industrialization effort on the basis of refugee entrepreneurship from China.
Not only is Singapore more dependent on foreign entrepreneurs than are Hong Kong, Taiwan and South Korea, but her position is probably unique in that she is now dependent on a continuing supply of foreign workers to sustain growth. It is true Hong Kong once had a
large population influx from China, but the annual influx now is probably a small figure. Last year we had to import more than 40,000 workers from Malaysia. This year the figure is likely to be around 60,000. And we shall continue to need them if we continue to grow fast.
This, then, is the setting against which we have to consider our long-term problem of income distribution. The high dependence on external markets and foreign entrepreneurship in the form of multinational corporations implies that our fortunes are sensitive to world trading conditions. Should something badly wrong happen to world trade the rapid growth we have been enjoying in recent years could come to a grinding stop. However, these are not matters within our control and we need therefore not worry unduly about them, except to prepare contingency plans. I shall assume that major catastrophies such as that of the Great Depression of the thirties will not take place during this decade.
There is one more matter which we have to dispose of before we can get down to our problems. All this involves a fundamental matter of policy. The question we must answer sooner or later is this: ‘ ‘When do we stop growing?” Or to be more precise, at what point do we stop importing foreign workers and cease to encourage foreign entrepreneurs and capital into Singapore? Because of our limited land area, industrial expansion together with the concomitant population expansion will produce overcrowding to increasingly uncomfortable limits. Dr Albert Winsemius who has studied this subject at some length suggested that the limit be set when the number of workers in the manufacturing industries reaches 500,000. It is as good a first approximation as any other.
Table II gives the number of workers engaged in the manufacturing industry since I960. The number increased from 33,799 in I960 to 148,587 in 1971. The rate of growth from 1960 to 1966 was 9.5 per cent; in the last four years the increase averaged an annual rate of 21 per cent. If this rate continues we will have the half a million mark in the manufacturing industry in 1978. That year, 1978, will be a fateful year for Singaporeans if the course of history runs along the lines of our linear projections of current trends. By that year our per capita GDP in real terms would have reached the current British level. In that year too, we would have half a million workers in the manufacturing industry. That would be about the time when we might want to stop growing, or at least to stop growing at present rates.
Earlier, I expressed some reservations about our ability to sustain a
II. Workers in Manufacturing Industries in Singapore (Establishments with 10 or more workers)
Year	No. of workers
1960	33,799
1961	33,885
1962	35,533
1963	43,184
1964	46,284
1965	51,959
1966	57,521
1967	63,195
1968	80,533
1969	107,235
1970	126,361
1971	148,587
Source: Annual Census of Industrial Production.
12 per cent per capita growth of the GDP even if the rate of increase of investment in export-oriented manufacturing industries can be sustained. An examination of the increase in the work force figure will tell us how unlikely it is that the projection will be realized. By 1978 the projection shows a figure of 566,900 workers in the manufacturing industry. If this represented an increase of 21 per cent over 1977, this would mean that about 120,000 workers will have entered the manufacturing industry in 1978.
With increases of employment in the manufacturing sector there will be increases in the rest of the economy. It is not easy to predict the increase in the working population in 1978. Between 1965 and 1970 the total working population—farmers, hawkers, capitalists, shopkeepers, industrial workers, everybody—increased from 557,000 to 693,000, an increase of 136,000. Workers in manufacturing establishments employing 10 persons or more increased by 74,400. If the same ratio holds in 1978 there could be an increase of 220,000 in the working population. Since Singapore can provide an additional 40,000 or so persons, we will have to import 180,000 from abroad in one year ^lone. It is unlikely that we will have found a method of absorbing such a large influx by then.
It is therefore likely that some fall in growth rates will be unavoidable in the latter half of this decade. The fateful year will not be 1978 but possibly some year in the first half of the next decade.
By how much will we have to slow down our growth? I do not want to pursue this in detail for data available are too crude for
dependable estimates. This may be a useful research subject in itself. AU I want to say now is that the slowdown wiU be less than what the figures quoted suggest. The reason is that a good part of the 74,400 increase in the manufacturing sector was generated in labour-intensive industries such as electronics and textiles which we will not be encouraging. Accordingly the labour influx and the growth of the working population would be smaUer than the figures I gave. But we also have to take into account that as standards of living go up, the demand for “tertiary industries”—services, education, entertainment and recreation—goes up very rapidly.
Let us now consider the question of distribution of income against this backdrop. When people discuss distribution of income in Singapore they automaticaUy think of what increases in wages or salaries, which many well-meaning people think is long overdue, our workers should get.
Actually, there is a more fundamental matter to be dealt with. And that is the division of the Gross Domestic Product between Singaporeans and foreigners. At present this is not an issue of much importance. So much so that it has attracted very little public interest. Further, up to now Singapore enjoys a net surplus of factor income from abroad, so that our GNP exceeds our GDP. Currently, this is running at more than $100 million a year. But if the main thrust of economic expansion will be provided by multinational companies basing their offshore operations in Singapore, the position could well change. In the second half of the decade the GNP could well fall short of the GDP by a substantial amount, as the profits of multinational companies increase with their numbers. It is as well that we try to foresee how these national income components move in future years, what kind of problems they give rise to, and what we can do to influence trends.
What are the factors that influence the division of the GDP between ourselves and others? There are four main ones listed below, not necessarily in their order of importance:
(i)	Tax incentives.
(ii)	Equity participation by nationals.
(iii)	Type of industry and its structure.
(iv)	Level of wages.
We might add a fifth, the general level of profitability of offshore operations of the multinational companies. But this depends on a number of factors beyond our control, such as the world trade situation, trade policies in our export markets and competition from
other offshore operations in developing countries. I will therefore discuss only the four factors over which we have some control.
When, during my last term of office in the Finance Ministry, the decisions now embodied in legislation were made on tax incentives for the export industry, I did not expect, nor did anybody else, that they would have produced such an immediate and substantial response. Our thinking then was that Singapore might not reach the European per capita GDP until the 1990s: hence the 20-year tax privilege for export profits at a concessionary 4 per cent. Nor was there a policy to encourage a measure of national equity participation in these offshore operations of multinational companies. We were then in what was generally believed to be a desperate position, as a result of the prospective loss of earnings due to the British military withdrawal.
If present conditions continue and the inflow of investment by multinational companies proceeds without abatement, it may be to our long-term interest to review this policy. Of course, those who have already received such incentives will continue to enjoy them in full measure. But future investment could, perhaps, be offered less generous terms, for instance 10 years’ tax at 4 per cent and thereafter increasing in, say, 3 or 4 years, to the full 40 per cent. A requirement of national equity participation could be insisted upon except on special grounds where the project is very desirable. But the question of national equity participation has always been a delicate one and needs to be handled with care.
As regards the type of industry and its structure, we have already moved away from encouraging labour-intensive industries to be located here. This is merely one aspect of trying to close the gap between the GNP and the GDP. However, we should do more than just discourage industries whose continued existence depends on low wages.
We can have a clear insight into the problem if we look at it not from the viewpoint of 1972 but of 1978 or whatever the fateful year would be. By that time, if all goes well, we will have a manufacturing industry employing some half a million workers. What kind of industries would afford the greatest benefit to the Republic? By the criteria we use, this means the highest proportion of local content in the manufacturing process, the greatest potential for wage increases, and the greatest prospect for national entrepreneurs to move into allied industries. If we can so select our industries as to maximize these elements, we will have reduced the gap between the GNP and the GDP.
It is not easy to find answers to these questions. The reason is that there is no one discipline that trains a person to form a correct
judgment on such matters. Technical people are certainly required, but the trouble with engineers and scientists is that they are easily dazzled by technology, rather like children playing with a new toy. Accordingly, their judgment on economic affairs is often suspect.
In this connection, I have a suspicion that when a definitive economic history of Britain in the postwar era is written, it is not only the British Trade Union Congress that will be held responsible for the economy’s poor performance. I suspect that the scientists and engineers in the Ministry of Technology (or Mintech) have a lot to answer for.
What happened was that a substantial effort was mounted in the frontier-of-knowledge industries—jet aircraft engines, civilian and military aircraft, rocketry and missiles, sophisticated electronic systems—where the British engaged with American industries in an unequal contest. The Japanese and Germans, having lost the war, set their sights lower and concentrated on relatively low technology products—motorcars, ships, steel mills, industrial machinery, radio and television sets, cameras. As their best brains were engaged here, they had no difficulty in outperforming British products in the export markets. The British got the worst of both worlds because Mintech’s scientists deployed high-quality brain-power in the wrong way.
I am not saying that our scientists and engineers are of no value in planning our future industrial structure. Their opinion must be sought, but it needs to be tempered with economic realism. Economists, on the other hand, know little about industrial processes. In making judgments on the type of problems described above an economist needs to have an extensive knowledge of technical processes in industry. Only then can he have an adequate grasp of inter-industry linkages, a matter which lies at the core of the problem.
We want our industries to be so structured that components strengthen each other and we maximize our gains from external economies of scale. Such support between industries takes several forms. The most obvious is the supply of components, packaging material, tools and dyes, maintenance and supporting services. A coherent structure will enable a more effective training programme to be mounted in our schools, the Polytechnic and the Universities. Further, it will be easier to mount a research and development effort worthy of the name. All this will mean that in the long perspective, Singaporeans themselves will not only be able to man the technical and management positions, but also to contribute to product development and innovation.
I may perhaps make my point clearer by considering what will happen if we fail to establish industries which fall together coherently. Perhaps we may have a petro chemical plant here, a watch factory there, a computer plant elsewhere. Each of these is linked to the headquarters of the multinational companies, to their overseas markets, depending for development and progress on the research efforts overseas. This is the danger we are facing, and which we want to avoid if we can by a policy of selective encouragement.
This is a long-term problem as I see it. I have defined the problem somewhat sketchily. It is not easy to see a solution in sufficient detail as to be of operational value. It seems to be a field to which research economists should devote their attention. However, if they are to be effective, it is necessary for them to acquire additional technical knowledge, possibly by some formal course of training, both theoretical and practical. In this respect, I may mention that the Japanese economists seem to have a much firmer grasp of technical and engineering matters than economists trained in the British and American tradition. Perhaps this is one reason why the Japanese have been able to select industries with the greatest growth potential, on which they mounted a concentrated effort with such conspicuous success.
I now turn to the level of wages, the other aspect of income distribution. The factors influencing the long-term level of wages are as follows:
(i)	The inflow of Malaysian workers we allow each year.
(ii)	The mobility between occupations granted to Malaysian workers under the conditions of their work permits.
(iii)	Competition from other underdeveloped countries to attract multinational corporations.
(iv)	Trade union policy and action.
It is one of the ironies of history that a few years ago relations between Malaysia and Singapore deteriorated visibly as a result of our action to replace Malaysian workers by Singapore workers as a means of reducing our unemployment. Now the inflow of Malaysian workers in substantial numbers will be required to sustain our growth. There seems to be a convergence of interests here, as our employment of Malaysian workers contributes in no small measure to relieving their unemployment difficulties. Should Malaysia achieve full employment at a general wage level comparable to ours, thereby stopping this source of labour, we will have to look to other sources. Fortunately, over-populated Asia gives us many options.
The Malaysian worker is of excellent quality, being more serious, diligent and persevering than the Singaporean worker who is a rather demanding employee. Further, the work permit issued to the Malaysian worker is valid only in respect of the employer who engages him. This makes him an even more attractive acquisition than the young Singaporean who hops from one employer to another in the mistaken belief that he is thereby improving his future prospects.
The third factor is competition from other lesser countries: the contestants at present are South Korea, Taiwan and Hong Kong, with Malaysia a potential candidate. There is no reason why other underdeveloped countries should not enter the field. All they have to do is to provide a firm, stable and efficient administration, stop the habit of dipping their hands into the public till, discipline their work force, provide the infrastructure and introduce the kind of economic policies that we have. Competition is not a matter which should worry us unduly. There are probably more multinational companies looking for an offshore haven than Singapore can possibly play host to. But we should not at the same time take unnecessary chances, either by allowing an uncontrolled wage hike to take place, or by letting up on our promotion efforts, at least until we reach the fateful year I talked about.
As regards trade union action, the point to note is that in an export-oriented economy such as ours wage increases not matched by productivity increases do not lead to the kind of domestic inflation which they do in other types of economies. They will lead to the lessening attraction of Singapore as an investment location and to that extent they will endanger the growth of our economy. This is why the decision to establish a Wages Council was a wise one. The prospects, so far as I can see them, are for a steady, sustained, but moderate wage increase over the years until the point when we decide to level off our economic growth.
After that, much will depend on whether we have wisely selected the industries for location in Singapore. If we have, our dependence on multinational companies will be lessened and we will be able by our efforts to develop export markets for such products as we have the capacity to specialize in. The scope for improvements in wage level will be all the larger and will depend on the resourcefulness of our salesmen, the ingenuity of our scientists and engineers, the efficiency of our management and the skill and industry of our workers. Under such conditions, there is no reason to believe that wage levels cannot eventually approach those of the modern industrial states.
If, on the other hand, our industries consist largely of a hotch-potch of unrelated manufacturing enterprises dependent on the markets and management of multinational companies, there may be severe constraints on wage increases. Even if it were no longer necessary to attract new enterprises into the Republic, it is likely that by the end of this decade we will have several competitors among developing nations, as hosts to these multinational companies. As I said earlier, the prerequisites are not so difficult to achieve as to make our case unique for all time. For instance, Sri Lanka could enter this league if her people were to stop politicking and got down to serious business. Malaysia, too, could provide a congenial environment, though she will have to adopt economic strategies and policies different from those recommended in her Second Development Plan.
Should other developing countries succeed in attracting multinational companies and if we fail to develop our own indigenous industrial effort, and if our dependence on the multinational companies is complete, a difficult situation may emerge with a growing gap between our GNP and our GDP. It will be accompanied by increasing, not diminishing, inequalities in the distribution of income. This is not a prospect that we can contemplate with equanimity.
One concluding observation: I am not saying that we should be wary of multinational companies. Quite the contrary, we should continue to welcome them and give them the inducements, incentives and support that they require. But we should be more selective and discriminating in our role as a host country. Most important of all, we should ensure a sound growth of indigenous entrepreneurship, management, scientific, and engineering skills.
Regional Economic Cooperation
It is easy enough to make out a case for regional economic cooperation and to understand why so many developing countries have made repeated attempts to achieve various kinds of regional economic grouping.
The case for regional economic cooperation rests on the benefits that would accrue to participating countries by pooling their markets and integrating their development plans. The regional market would be several times larger than each national market. Producers could therefore take advantage of economies of scale, achieving lower cost of production or working off their excess capacity. In the course of time, free competition within the regional market could ensure that specialization develops in industries according to the comparative advantage in geographical position, natural resources or skills. Thirdly, a wider range of industries would be feasible in a larger market than would be possible with separate fragmented national markets.
Many developing countries have been attracted to this idea not only for these theoretical considerations but as a result of more pressing needs. The postwar years have seen a general deterioration in the terms of trade of primary produce which have been the principal source of export earnings of developing countries. The attempts to escape from the adverse consequences of this trend have led many of them to seek a diversification of their economy, principally by means of setting up
Address to a seminar on ‘ ‘Development Problems” at the International Development Centre of Japan, 26-8 March 1972.
The Practice of Economic Growth manufacturing industries to produce goods which they formerly imported.
In practice, however, they found that import substitution (based on a protected national market) as a means of developing industries has severe limitations. Modern enterprises require large plants with heavy capital investment for optimum production. The output of many industries is often in excess of national markets. So the idea developed of a pooling of national markets as a means of accelerating industrial growth. Such regional markets may be of two types. First, a fully developed Customs Union with common external tariffs and free or nearly free trade between members. Such is the case of the European Common Market.
Developing countries, however, cannot attain this kind of regional cooperation in one step. They invariably choose a looser and more flexible arrangement commonly called the Free Trade Area, where members retain their existing tariffs against the outside world, that is, outside the regional group. Between themselves, there is a commitment to reduce tariff and non-tariff barriers to the free movement of goods. Trade liberalization is achieved in stages and by the employment of various techniques. The expectation is that within a larger protected regional market there will be much greater opportunities for industrial growth and, as a result, a better rate of economic development. It should be noted that such regional arrangements are merely an extension of the policy of import substitution from smaller national markets to the larger regional market.
The ASEAN group of nations have for some time been deliberating upon a scheme for regional economic cooperation. A team of experts provided by the United Nations has been preparing various technical studies. These reports have not been published but it should not be long before this happens. So far, only the official communique, published in October 1971, gives an indication of the lines along which the experts in the ASEAN Advisory Committee have been thinking. The relevant passage reads as follows:
“Special attention was focussed on the possible techniques of trade expansion and industrial cooperation suggested by the UN Study Team, such as preferential trade arrangements, complementarity agreements and major industrial projects of regional interest.
It is clear enough from the statement that the ASEAN experts are thinking of regional cooperation much along the lines of the Latin American Free Trade Area or LAFTA. No doubt they will introduce
innovations intended to make the ASEAN scheme more workable in practice than LAFTA. LAFTA is the largest scheme of regional cooperation between any group of developing nations and it has been in operation for more than a decade. It would be an advantage for economists in ASEAN countries to make a study of Latin American experience. We can learn from their difficulties and try to avoid their mistakes.
The Latin American Free Trade Area was established by the Treaty of Montevideo signed in February I960. The original participants were Argentina, Brazil, Chile, Mexico, Peru and Uruguay. Later, five other nations joined the group—Paraguay, Columbia, Ecuador, Venezuela and Bolivia. LAFTA represents a total population of 222 million.
The aims of LAFTA are threefold. First, expansion of national markets by a gradual elimination of tariffs to form a large regional market. Second, eventually to establish a full-blown Latin American Common Market. Third, to achieve progressive complementarity and integration of their national economies on the basis of an effective reciprocity of benefits. This last aim means that countries will not duplicate plants unnecessarily and that at the same time there should be ‘ ‘equitable” sharing of the benefits arising from the pooling of national markets.
Two functions are crucial in regional arrangements of this kind. First, how barriers to intra-regional trade are to be lowered in gradual stages. Second, by what means ‘‘reciprocity of benefits” can be ensured. A brief look at the mechanism established in the Treaty of Montevideo will be useful.
The basic principle of the Treaty was that common action can only result from voluntary agreement of member states. In other words it is open to any member to withhold consent to any measures which it considers detrimental to its own interests. There is no automatic extension of obligations agreed by some members to the others. This has a number of consequences, as we shall see.
Because the consent of member states is required in the implementation of trade liberalization and other measures, agreement has to be negotiated either jointly with all states or separately between subgroups of states.
Liberalization of intra-regional trade in LAFTA is effected in two ways. First, each member state is committed to reduce import duties and non-tariff restriction on goods they buy from other member states. Every year each government is obliged to submit a schedule of com
modities for tariff reduction. The rate of tariff reduction each year is taken at 8 per cent of the weighted average of tariffs on imports from outside the region.
Second, every three years all states meet to prepare a list of agreed products for which total liberalization would be effected within twelve years of the signature of the Treaty of Montevideo. The objective was to include commodities entering into intra-regional trade to the value of at least 25 per cent for each round of negotiations, the whole process to be completed in four rounds.
Regarding the complementarity agreement, the aim was to coordinate regional plans for industrialization so that industries may be located to the best advantage for the region and in this way promote specialization between countries in the region. Complementarity agreements are negotiated industry by industry between governments who have an interest in establishing such industries. Such agreements set out trade liberalization programmes as between signatory parties in accordance with an agreed timetable. The initiative with regard to complementarity agreements is taken by private industry wishing to rationalize production in the countries in which they operate or wish to operate.
What has been the experience of LAFTA in contributing to the growth of intra-regional trade and, through it, to the rapid development of industries in member countries? The consensus of opinion among observers is that performance has been disappointing and that the original hopes raised by the Treaty of Montevideo have not been fulfilled. Several reasons are given for this. The mechanism for trade liberalization, depending as it does on item by item negotiation, is considered time-consuming and cumbersome. But the real reasons probably go deeper than the complex negotiating procedures established by the Montevideo Treaty. For the basic explanation we need to look into the structure of the national economies of Latin American countries, the history of their economic development and the nature of their governments. First, Latin America does not possess the highly efficient transportation network which, for instance, has long been in existence in Western Europe. Because of poor communications, trade is not necessarily stimulated merely by tariff reductions when very substantial barriers are created by high transport costs in respect of movements of goods between certain countries.
Second, Latin American countries, like most developing countries, initially developed their economy by the production of primary commodities. These have their markets in the modern industrial states.
In other words, most of the exports of LAFTA were to countries outside the region. Similarly with their imports. In fact some 90 per cent of LAFTA trade is with non-LAFTA countries.
Third, many Latin American countries had begun energetic programmes of industrialization on the basis of import substitution. At the time the Treaty of Montevideo was signed, Latin America as a whole already produced between two-thirds to three-quarters of many manufactured consumer goods.
Fourth, because of the different sizes of population, different stages of economic development of the member states and different endowment of natural resources and other factors, cost of production varied considerably between these countries. In general, because these industries developed on the basis of highly protected domestic markets (the general practice under the policy of import substitution) industries introduced tended to be high-cost industries, not competitive in the world market. But because of cost variations between member states it is not easy to reach an agreement as governments are generally reluctant to see their industries lose out to imports. It does not seem to make much difference whether imports are from modern industrial states or from member countries—the result is the same.
In spite of these difficulties the presidents of LAFTA countries held a summit in 1967 and declared their intention to establish a common market within fifteen years. Agreement was reached that the Organization of American States, with the financial support of the USA, would provide funds to make the transition to a fully-developed common market less painful. These measures are to help out in balance of payments difficulties arising from trade liberalization, to pay for retraining of displaced workers, and to finance export credits for intra-regional trade.
The Latin American experience hardly encourages an optimism that progress in economic cooperation along these lines between the ASEAN members will be swift and easy. The major decisions under any form of international agreement concerning trade liberalization will be political decisions, not technical decisions made by experts. Latin America, from this point of view, at least has the advantage of having a common cultural heritage with all countries except Brazil, speaking a common language. All countries observe the Roman Catholic religion.
By comparison, there is a variety of languages, religions and cultures among the countries of the ASEAN group, making it less easy to produce a common political will. In size of total population the two groups are comparable, LAFTA with 222 million in 1969, ASEAN
with 201 million. However, the total LAFTA GNP is much higher than ASEAN’s: $106 billion compared with $42 billion. There is probably just as great a variety in size and stages of development in ASEAN as in LAFTA. As against these factors, intra-regional transportation, carried mostly by sea, is probably more developed and efficient here than is the case of Latin America where large areas in many countries afe landlocked.
A positive factor in favour of the ASEAN states is, ironically, their lower achievement in import-substitution industries. This means that there will probably be fewer vested interests to resist trade liberalization and large opportunities for the establishment of new industries based on the entire market of the region.
But even here differences in stages of development and size of population may create as many difficulties in Southeast Asia as they did in Latin America. In Latin America countries at earlier stages of development were more reluctant to liberalize trade, whereas those with well-developed, if high-cost, industries were anxious to obtain preferential access to these markets for their products. In Latin America, it is the larger nations, Brazil, Argentina and Mexico, which are most highly industrialized. In Southeast Asia, the position is reversed. Indonesia has the largest population and is possibly richest too in natural resources, but is the least industrialized. Her willingness to allow preferential access to her market must be determined by what she believes she cart achieve by her own efforts.
If the ASEAN regional cooperation were to rest on liberalization of trade in commodities already traded between countries of the group, it is unlikely that performance will be any better than in LAFTA. In the case of LAFTA, we have seen that matters reached such a stage that the further trade liberalization needed external support through the Organization of American States to provide finance for re-training of displaced workers, to assist in funding of export credits and aid in balance of payments difficulties. The requirement for external aid sources will prove no less necessary with ASEAN. In practice, however, it may be more difficult for ASEAN nations to obtain such aid than it was for the Latin Americans.
ASEAN has greater prospects in registering success in the establishment of new industries in which economies of scale require markets larger than any single national market. The opportunities, as I said, are larger here than in Latin America. It is to be hoped that the question of “reciprocity of benefits’’ can be resolved by enlightened political decisions supported by good technical assessments.
Successful implementation of regional economic cooperation in Southeast Asia may well demand new techniques and approaches to overcome the difficulties which LAFTA had found intractable. The basic problem here is that decisions on trade liberalization measures and policies on regional location of industries are ultimately political decisions. To be sure, a vast amount of technical preparatory work will have to be done and negotiating teams of participating nations will have to make accurate technical assessments of the impact of measures under negotiation on their national economies. Finally, the decisions will be made by the political leadership of the country who are necessarily sensitive to local pressures and concerned over the immediate consequences to their own economies. They are not likely to be impressed by theoretical dissertations on comparative cost and the long-term benefits of international specialization.
There is another major consideration in making comparisons between Latin America and Southeast Asia. Latin America has had experience in schemes of regional economic cooperation before the Treaty of Montevideo was signed. In Southeast Asia the position is quite different. It is true that there are groupings, such as those concerned with the marketing of rubber in which four of the five ASEAN states are involved. But these are concerned with technical matters and do not involve any major political decisions.
It may be an advantage for the ASEAN countries to try out as a first step a more limited regional scheme than a Free Trade Area, the limitation being either in respect of countries or in respect of products.
I would like to propose an outline of a limited scheme of regional cooperation which may avoid some of the difficulties which the LAFTA countries were unable to solve, as well as provide the ASEAN nations with a scheme which may not prove too difficult to reach agreement on. In this way confidence for larger regional schemes may be increased.
Because the difficulty in implementing schemes of regional economic cooperation is fundamentally political, the scheme should be such as to be attractive to the governments of the countries without at the same time being economically unsound. To be attractive to governments the scheme should be such that benefits could be seen to be immediate, tangible and credible. Further, the scheme should relieve governments of some pressing and urgent problems which have so far evaded solutions. The scheme should not upset established interests because governments are more sensitive to pressure from those who are faced with actual loss than to the support of those who hope to gain
in the long run. Finally, it must be within the technical competence of existing industries to implement the scheme, though, unavoidably, a modest amount of financial aid will be needed from outside sources. However, the amount is not large and, if the scheme is properly implemented, the prospects of repayment are not bad.
Those visiting the capital cities of ASEAN countries will be impressed by two concurrent phenomena. First, the shortage of housing, not only of the very poor but also of those who are better off—teachers, clerical workers, journalists, junior professionals and the like. Concurrent with this shortage of housing there is a large pool of unemployed or underemployed young men. With some organization, effort and capital, it should be possible to make use of idle resources in the form of unemployed youths to overcome the housing shortage.
There are certain principles on which the public housing scheme should be managed if it is not to be a liability to the nation. First, because it is not intended to be profit-making, the scheme should be undertaken by a government authority. But it is essential that, while not making profits, it should give a reasonable return to capital invested. The scheme should not be run on a subsidized basis.
Next it should cater to a large number of people. It is likely that in overcrowded conditions in these cities it will be possible to identify the income groups for which public housing can be provided at rentals which will be within their means and yet be much lower than what they normally have to pay when they rent private dwellings. Under the congested conditions of these cities, such income groups exist and could be very numerous. The actual situation in each city can only be determined by on-the-spot investigations. But it is likely that large numbers of the very poor cannot afford to live in these apartments. This situation must be accepted. In later years, as income levels rise with economic growth, it may be possible to provide for these people too.
Third, houses should be made of permanent material, bricks and cement with reinforcing steel bars, not of makeshift material which will be costly to maintain. To reduce costs to a minimum, design and finishing must be functional and reduced to austere standards. But all the necessities of water, electricity and modern sanitation should be provided. Fourth, an essential factor to cost reduction is mass production of standard types of apartments. Because overcrowding is extensive, it will take many years of effort to provide sufficient housing for those who want and can afford it.
This means that it will be necessary to have an assured continuous
supply of construction material at low cost. At the same time it is essential that the use of construction material in the public housing programmes of each country should not involve the country in balance of payments difficulties. Otherwise, there may be doubts whether such public housing schemes could be justified on grounds of broader economic policies in the case of those countries which need to economize in the use of foreign exchange.
It is therefore necessary to develop local production of construction material and, where existing capacity is not adequate, to instal new capacities. I have made rough estimates of the consumption of construction material in ASEAN countries based on data on their Gross Domestic Fixed Capital Formation. In 1969 the value of construction material in US dollars was as follows:
Thailand	$600 million
Philippines	$387 million
Malaysia	$ 215 million
Singapore	$95 million
Indonesia	$64 million
Construction material imported, and adjusted for value at construction sites, was as follows:
Thailand $203 million
Philippines	$77 million
Malaysia	$48 million
Singapore	$52 million
Indonesia	$36 million
The Indonesian figures are valued in I960 US dollars, and represent a substantial understatement of the real position.
It will be seen that imports form a small proportion of construction material used in the ASEAN countries. In other words, the domestic capacity to produce them is already there to a great extent. This is highest in the case of Malaysia and the Philippines which produce 78 per cent and 80 per cent respectively of their requirements of construction material. The countries most dependent on imports are Indonesia and Singapore.
What is the size of the effort that needs to be mounted in each of the capital cities? How much will this cost? How many people will benefit? How much increase in the production capacity of construction material need be installed?
Accurate answers to these questions can only be obtained on the basis of thorough on-the-site surveys. Here I can only give an indication of approximate magnitudes, using the experience of
Singapore’s public housing programme as a point of reference. The Singapore Housing Authority is currently constructing some 20,000 apartments a year. These are sited in large housing estates in satellite towns, the largest of which covers an area of 260 hectares. Because of a shortage of land, the Housing Authority has to build high-rise apartments up to 15 or even 20 storeys. But, by producing only certain standard types of apartments in large numbers, it has been able to reduce costs to a minimum. Four basic types of apartments are built, with one room, two rooms, three rooms and four rooms. All apartments are supplied with electricity, water, modern sanitation and, in some areas, gas. In order to simplify calculations, I shall use the Housing Authority’s 3-room improved flat as a typical example.
In Singapore, a 3-room apartment has an internal floor area of 62 square metres, with two bedrooms, a dining and living room, bathroom, kitchen and toilet, and costs about US$2,700. This cost covers the costs of common passages, staircases and lift areas as well as apportioned costs of access road, electricity, water and gas mains. The cost per square metre is about $43.50.
Building cost excludes the cost of land. However, it includes the cost of piling and lifts. This is very substantial because these apartments are in high-rise blocks. Piling and lifts cost nearly $350 per apartment. Since other countries have much greater land areas than Singapore, it is unnecessary for them to resort to expensive, high-rise apartments. For instance, if apartments are constructed up to four floors, it will be unnecessary to instal lifts and considerable savings can be achieved with regard to piling.
Labour costs in Singapore are much higher than those in other cities, with the possible exception of Kuala Lumpur. As against this, our construction materials probably cost less than in most other places. These are either imported from the cheapest sources, or if produced locally, have their prices strictly regulated as is the case with cement and structural steel. Also, the construction industry is highly competitive and efficient.
If construction materials could be made available at prices not much higher than Singapore prices, it is likely that, under mass production conditions, contractors and workers in ASEAN cities will achieve, after some time, levels of efficiency comparable with Singapore’s. With savings in wages and in cost of lift installation and piling, there will be a margin to meet the extra costs which may be required to provide facilities such as sewage systems, electricity and the water supply. The cost in Singapore is very low for these items because of the well-
developed systems of public utilities and the concentration of apartments. On the whole, there is no reason why construction cost per unit of apartments of similar size could not eventually be reduced to about the same level as in Singapore.
For the purposes of estimation of the financial implications of the proposal, I assume that costs will be similar. If we assume that the cost per apartment is US$2,700, annual rental at 10 per cent of capital cost, say US$270 a year, the building programme could be for 2,000 units for the first annual output, increasing to 5,000 and 10,000 thereafter. Under such a scheme, the cash flow in gross rentals would increase from a small sum of $*/4 million for the first year to $4.6 million in the third year, increasing thereafter by $2.7 million a year. (Actually rentals will be slightly less than this because these figures assume that all houses are simultaneously available for letting on the first day of the year.)
It will be seen that, if some part of the rentals can be re-invested, after some time less and less capital will be required each year to keep the scheme going at the same level. Therefore, the amount of external financial aid that is required is limited. The initial sum depends on how much the national government is able to finance its share. In countries where incomes are high and tax collection efficient, such as Malaysia, the Government can meet the entire cost of the scheme. On the other hand, countries in the process of recovery and reconstruction, such as Indonesia, will probably need more foreign assistance, and for a longer time.
Ten thousand apartments in high-rise blocks would consume 25,000 tons of steel, 120,000 tons of cement, 370,000 tons of stone, 240,000 cubic yards of sand, 8.7 million clay bricks, 9 million cement bricks, 1.75 million square feet of tiles as well as US$1 million worth of pipes and plumbing of various dimensions, US$355,000 worth of sanitary ware, water-tanks, etc., US$500,000 worth of electric cables and switches, US$1.52 million worth of building hardware, such as locks, bolts, steel gates, window casements, etc., and US$1.52 million for other items, including earthworks, lifts and TV antennae.
The total cost of building materials of all kinds adds up to US$21 million for 10,000 apartments. Approximately 5,000 workers will be engaged on the construction sites. This assumes Singapore prices of construction materials and high-rise apartments type of construction. The four-storeyed apartment blocks would probably use less steel but more roofing tiles.
It will be seen that the provision of an additional $21 million of
building material a year does not require a very substantial increase of production capacity in Malaysia, Thailand or the Philippines. Though this is the overall situation, there could be a requirement for large increases in respect of particular items. However, in the case of Indonesia there is a clear need to substantially expand production capacity of construction material to support the public housing programmes. Published data are not sufficient to give close estimates, but it is likely that the output of cement and structural steel needs to be greatly enlarged. Such expansion does not call for an over-ambitious scale of plant development and should be well within the capacity of the Indonesian economy to absorb.
It may be advantageous, as part of the public housing programme, to examine the state of the industries producing construction materials in ASEAN countries. The figures I quoted earlier show that the value of construction material imported by ASEAN countries adds up to a substantial total. Together with new capacities required to supply the public housing programme, there could be some opportunities to improve the efficiency of these industries by rationalization in each country. We should also examine whether there could be opportunities for intra-regional specialization, particularly in projects requiring substantial capital investment. One constraint on specialization is the need not to endanger a country's balance of payments as a result of the housing programme. As against this, it may be easier to liberalize trade in these products since transportation costs provide natural protection to each national market. And then there is the long-term consideration that, in the course of economic growth of these countries, there will be a continuous increase in the demand for construction materials.
May I make two concluding observations on the proposal. The first is that the housing programme must be self-supporting except, possibly, for the initial grant of capital on soft terms. Thorough studies must therefore be made on construction costs and the ability of enough citizens to pay the rentals charged. Where certain kinds of employees cannot afford even the comparatively low rates of rentals, because of their low income, such as, for instance, government employees or teachers in government schools, the employing authority should pay the full rental to the housing authority, if it is decided to give such employees subsidized housing. Such subsidies should not be at the expense of the housing authority.
Secondly, the foreign aid component which may be necessary with governments under severe budgetary constraints is not intended to pay for imported materials. It is the general practice of foreign aid to pay for
the import content of development projects. This public housing plan represents a departure from such principles, except insofar as foreign exchange is required for imported machinery and equipment needed to expand the domestic production of construction material. Because the initial capital assistance to the housing authority is intended to pay mostly for local goods and services, repayment of such loans should be in local currency.
Our two countries are anxious to find ways of contributing to the development, prosperity and stability of countries in Southeast Asia. The public housing programme offers some scope in our mutual cooperation with national governments of the area. Singapore has a great deal of experience in public housing programmes and we will be very happy to cooperate with Japanese experts in preliminary social and economic investigations as well as in subsequent work in the detailed planning of housing estates, in providing advice on policy, as well as in technical assistance in the establishment and management of national housing authorities.
The advantages of the project are quite substantial. Basically, what Southeast Asian countries need most is stable government. With some stability, progress can be achieved, and confidence and progress in turn increase stability. The provision of large-scale public housing in the capital cities would increase the stability of the government to a considerable extent. Even though the majority of people live outside the capital, it is often political developments in the capital city that are decisive, for they influence the rest of the country. The existence of large numbers of badly housed people is a source of instability, particularly if they belong to the educated classes.
Moral Order and Economic Progress
Few people outside the Methodist Church itself are aware of the size of the Church and the wide extent of the educational and social services which it provides in Singapore and Malaysia. The Church manages no less than 83 schools with a student population of more than 77,500. The schools engage some 2,550 teachers.
As regards religious activities in its strict sense, there are 142 Methodist Churches in Singapore and Malaysia with 164 pastors. The flock of the Church, adults as well as their families (excluding the nonMethodist students in the schools), adds up to more than 140,000. In addition, the Church provides two agricultural extension services in Sarawak, maintains a small but well-equipped hospital in Kapit and a number of medical clinics in Sarawak and West Malaysia.
By any standards, these add up to very substantial activities, contributing in no small measure to the progress of the two countries. When we consider that the Methodist Mission first began less than a hundred years ago—to be exact in February 1885, with the arrival of its first missionary, William F. Oldham, in Singapore—the achievement is all the more commendable.
However, if we look at the contemporary scene in the world today we can find little cause for rejoicing. Some distressing situations have emerged in recent years. Take the rich industrial nations of the West.
Speech at the opening ceremony and dinner of the General Conference of the Methodist Church in Malaysia and Singapore, at the Singapore Conference Hall Restaurant on 13 November 1972.
By the increasing application of science and technology to production they have enormously increased their wealth and general standards of living. Poverty as we know it in Asia, in the sense of hunger, deprivation and poor health resulting from inadequate incomes— poverty in this sense has been abolished. Rising standards of living and the spread of affluence have been remarkable in these societies in the postwar years.
Yet material progress has brought neither contentment nor an increase in happiness and security. On the contrary, strife between classes and communities within a nation continues on an increasing scale. There is even basic disagreement between the young and the old in some Western societies. Many of the old beliefs, such as the belief in hard work, respect for the virtues of honesty, thrift, etc., have given way to a reckless pursuit of pleasure by all means, including drugs and permissiveness. This is the tragedy of the industrialized nations—that the enormous material progress that they have achieved seems to have created as many new problems as they solved old ones.
In the other part of the world, the underdeveloped portion, we see neither material affluence nor the moral and spiritual uplift which poverty is supposed to encourage. Instead, over the vast stretches of Afro-Asia we see ignorance, superstition, intolerance towards people of different races, and a lowering of standards of public morality as corruption subverts public administration in country after country.
The reasons for this sorry state of affairs are many and complex. I do not think we need go into them here. Suffice it to note that both the haves and the have-nots are going through a trying period, though for different reasons and in different ways.
But however different their circumstances, the one group being rich and the other poor, whatever their standing with regard to social, economic or political development, societies which find themselves in trouble have one factor in common.
This is the absence of a belief in moral standards, or a decline in such belief where it exists. Take the case of underdeveloped countries trying to modernize their economies and uplift their people. The traditional societies in these countries do not possess in their systems of belief, or in their religions, ethical codes appropriate to the conduct of modern business and administration. Accordingly people are guided by selfinterest and are inhibited by few scruples when they assume positions of responsibility in business or administration. The vast literature on economic development has not given sufficient thought to this subject.
Economists like to deal with things that can be counted, quantified
and computerized. There is nothing wrong in this, but it is a short step from this position to the serious error of believing that quantifiable variables are the only things that really matter. And they seem surprised and disappointed when their prescriptions for economic growth do not work in country after country.
Recently I had an interesting after-dinner discussion with a widely travelled American banker. Over coffee, when the mood became expansive, he asked what my choice would be if I had to recommend one single prescription to solve the economic problems of a poor country. I said I would recommend that the population be converted to some demanding, narrow-minded, intolerant form of the Protestant religion, such as one of the more extreme Calvinist sects. This would bring about the end of easy-going thriftless habits among the populace and the beginning of scrupulous honesty in public administration. This combination must result in spectacular economic growth.
This fanciful idea puts, in an extreme way, the view that a firm moral order need be established in a society which seeks economic progress. For only then can we get high standards of conduct both in public administration and in private business. As you all know, this is what we constantly strive for in Singapore, and the good rates of economic growth in recent years are a vindication of this point of view.
In the world today, many people turn away from the Christian religion in the mistaken belief that it is old-fashioned or even irrelevant to contemporary problems. In fact, the contrary is the case. The solid virtues which the Christian faith proclaims are just what sick societies need most, whether they are sick through a surfeit of material wealth or sick through poverty and deprivation.
In Singapore we are experiencing some of the problems created by rapid economic growth in a society open to influences from all corners of the world. The young especially need guidance if they are to avoid the many pitfalls awaiting them. I am sure that these problems are receiving urgent consideration in your conference and that the Church will render invaluable service in giving the guidance that is greatly needed.
The Case for
Free Enterprise in Developing Countries
PICA (Private Investment Corporation of Asia) is a somewhat unique enterprise. Its formal structure is that of a business corporation with the head office registered in Panama City. Its principal shareholders are commercial and investment banks of industrialized countries. Yet its purpose is neither to seek maximum returns on shareholders’ capital nor to carve out an industrial and financial empire in Asia. PICA’s objective is to assist developing nations in Asia which welcome and support its operations. Yet it is not a philanthropic organization, for it insists on sound business practices and adequate returns on its investments.
By actually working on the ground, PICA can demonstrate to the world that the private enterprise system can confer considerable benefits on developing nations. Perhaps this may be the right occasion to say a few words about the role and prospects of the free enterprise system in developing countries.
The world is going through a difficult period. There is probably as much discord and dissension within nations as between them. Much of our cherished social and individual beliefs and values, such as respect for hard work, prudence, individual self-control and social discipline, are being openly challenged, even held to ridicule. This is true both of rich and poor countries, though the areas of domestic conflict are different.
Opening address at PICA’s Fifth Annual Meeting of Shareholders at the Shangri-la Hotel, Singapore, on 29 April 1974.
It is therefore not to be wondered at that criticism has recently been expressed at the manner in which the free enterprise system operates in developing nations. There are, of course, countries whose governments have always distrusted private enterprise and controlled its activities in detail. This, however, need not concern us as what they do is their own business.
What is worrying is that in several countries in Asia which have based their growth strategies on the assumption that private enterprise plays a major role—even in these countries a certain disenchantment has found public expression in recent years. I think this discontent has arisen out of frustrations whose causes are complex. To over-simplify the subject, the basic cause of recent troubles is this: as is the practice everywhere, frustrated people search for convenient scapegoats who have, in this instance, been the wealthy and, by simple extension, the free enterprise system through which they obtained and accumulated their wealth.
I think this attitude towards free enterprise is a dangerous tendency which, if unchecked, will do great harm. The case for the free enterprise system as an instrument of economic growth, however self-evident it may be for converts such as are assembled here today, needs to be restated in terms which can be understood by the man-in-the-street. Even more important than this is the need for governments to ensure that the man-in-the-street derives visible material benefits from the growth process.
I will say a few words about the second of these two topics—the first will need more time than is available to me. A policy to ensure the full benefits of economic growth generated by private enterprise has two crucial aspects. The first is associated with the widening income disparities which are unavoidable in this kind of growth process.
Income disparities arise from business profits. I would like, conceptually, to distinguish between two types of profits: first, those arising from the discernment and seizure of business opportunity and the satisfaction of market demand through effective management in an open competitive environment, and second, those arising from a monopolistic arrangement of one kind or the other, usually the result of privileges granted by licensing authorities.
Profits of the first kind are the generating force of economic growth. Much, probably most, of it will be ploughed back for further expansion to generate more growth and employment. Further, where there is a dependable taxation system, the government receives a good part of these profits. People in charge of enterprises which make profits of this
kind usually devote all available time and energy to their businesses and do not engage in the kind of ostentatious living that gives rise to social resentment when it occurs against a background of widespread poverty.
Ostentatious living is exactly what earners of monopoly profits, as a class, are prone to engage in, and this is at the root of much of the trouble we have seen. Because monopoly privileges depend on keeping on good terms with whoever dispenses the licence and not on efficient management, a strange host of undesirable practices emerge. Since the monopolists have established special relationships with the powers that be, the task of the tax collector becomes an unenviable one. The end result is not merely social discontent but the leakage of substantial resources out of the economic system as people prefer to keep gains of doubtful legitimacy out of the country.
Let me now return to the second part of the question: how does the government ensure that the man-in-the-street gets visible material benefits from economic growth? The answer rather suggests itself from what I have said. Namely, it is to encourage profits of the first kind and to avoid at all costs policies and practices that would create the second type of situation. And what this means is more free enterprise, not less.
It is easy for the man-in-the-street to enjoy continuing benefits of growth in the first type of situation. The surpluses generated by growth remain within the system in two ways, first in the form of re-invested profits, and second as receipts of income and corporation taxes. I may add a third: increased wages. This gives the government a wide range of options. Let me describe some of the things being done in this respect in Singapore and Malaysia.
In Singapore, nearly 30 per cent of the earnings of workers are channelled into compulsory savings in the Central Provident Fund. These savings may be withdrawn to purchase apartments which the Government sells at cost and not as a subsidy. The large public housing schemes are financed by this scheme of compulsory savings and, in turn, savings of such magnitude are possible because of economic growth and regular wage increases.
In Malaysia, the Government establishes very large agricultural resettlement schemes under which the traditional subsistence farmer is introduced to profitable cash crops such as rubber and oil palm. Again these schemes are managed on a self-supporting basis. The incomes earned by farmers are large enough to give them a decent living with a surplus to repay initial loan capital. This means that the benefits of the scheme can be continuously extended.
As this is not an academic dissertation, I am afraid I have compressed my arguments to the point of over simplification. Time does not allow me to do otherwise. But the thrust of the argument is clear enough. There is nothing startling or original in what I have said. In fact, you can find it all in Adam Smith, who should be regarded as the proper mentor for policy makers in the third world. Regrettably, many of these third world policy makers have allowed themselves to be bemused and befuddled by the New Economists, and that even more dangerous breed, the Econometricians.
It is a matter of gratification to me in reading PICA’s reports and documents to note that the inarticulate major premise underlying much of the thinking probably does not differ much from my own. It is on this happy note that I wish to conclude my inaugural address and it only remains for me to wish you success in your deliberations.
Some Lessons of Recent Development Experiences of ASEAN Countries
It seems prudent to preface my address by making clear the standpoint from which these observations are made. First, my training has been in economics, but as any economist who has been involved in government will tell you, economic development in lesser developed countries (LDCs) often depends more on non-economic factors than on economic variables.
Next, the events in ASEAN countries which I am relating and their significance are seen from the point of view of a member of the political leadership of one of the ASEAN states. While some of the observations which I make are personal, and I shall indicate where this is so, a good deal of what I say is shared by members of the political leadership of other ASEAN countries. This is hardly a surprising matter, for when governments are faced with the same type of problems, in situations not broadly dissimilar, the logic of events must lead to a similarity of perception.
One word of caution and I will plunge into the subject. There are areas in the subjects under discussion on which I must tread with delicacy as I wish to remain on speaking terms with other leaderships and cannot invoke the enviable principle of “academic freedom’’ as a pretext for indiscretion.
Since 1970 the five ASEAN countries have managed in most years to achieve a GNP real growth rate of between 7 to 12 per cent. Even in
Address at the conference on ‘ ‘The Emerging Era of Pacific-Economic Development, Stability and Rivalry”, at the Kahala Hilton Hotel in Honolulu on 4-7 February 1975.
1974, when industrial countries were overtaken by a prolonged recession which still continues, the ASEAN states did remarkably well. Three of them had completed provisional estimates of their GNP. Malaysia showed a real growth of more than 7 per cent, the Philippines and Singapore each registered around 6 per cent.
Even more surprising than GNP growth during a period of world recession was the large favourable balance of payments achieved by every country in the group in 1974, a year in which quadrupled oil prices were supposed to inflict disastrous balance of payments deficits upon less developed countries. According to statistics published by the International Monetary Fund, as at September 1974 the combined balance of payments surpluses for the year for the five ASEAN countries totalled US$2,098 million. Not surprisingly, Indonesia, an oil-producing state, registered the largest surplus, US$782 million. But both Thailand and the Philippines, who are non-producers, achieved a surplus of close to US$500 million each.
I quote these figures to underline one point. And it is that it would be a serious error to think of the ASEAN states, individually or as a group, in terms of the stereotyped perception of LDCs being stricken by economic stagnation, chronic balance of payments problems, scarcity of development capital and other economic ailments. This is not to say that the experience of the last few years has been one of trouble-free progress. On the contrary, there were many problems which continuously engaged the attention of the governments.
The first lesson comes from Indonesia. It concerns an obvious point, yet one that is often overlooked both in the literature and in learned discussions about economic development. The point is this: the most important single factor in determining the rate of economic progress in an LDC is the government. Economists from developed countries are accustomed to observe that alternations of governments through elections produce minimal impact on the economy. Perhaps unconsciously they may think that this would also be the case for LDCs. There are specific cases in which this is so, two examples being Sri Lanka and the Philippines before martial law was imposed. It is true that alternating governments produce the same results, i.e. increasing chaos and confusion, principally because no rational economic policy was possible when contending political parties had to court popularity, making electoral promises at general elections which are impossible to fulfil.
Indonesia, however, provides a happy example of a change for the better. We need not argue at length that Indonesia under President
Sukarno saw continuing deterioration of the economy and a visible lowering of living standards, at least in the cities. The remarkable improvement under President Suharto’s government is also a point which can be readily accepted.
But what is ironical in the situation is that a civilian leader totally ignored economic reality in the pursuit of revolutionary romanticism. The military leadership, on the other hand, understood the limitations of force in governing a country, appreciated the need to achieve a working consensus among elite groups and to secure an acceptance of such consensus by the general population.
The Indonesian military leadership also understood that popular support would be forthcoming only if there is a general belief that the future will bring better standards of living, and that such a belief can be maintained only on the basis of sustained economic growth. Hence the orientation towards growth policies and the abandonment of political rhetoric.
It is fortunate for Indonesia that this is the case. For, as is true for LDCs in general, capital investment in the private sector is perhaps the most important single determinant of economic growth. Such investment may come from abroad or from domestic sources. Whatever the case, a good part of such capital investment projects are long-term ventures in that returns to capital must be assured over many years. Therefore a crucial element to investment decision is the confidence with which potential investors view their prospects. And in the assessment of future prospects, the character of the LDC government, its dependability, survival prospects, and past record are as important as purely technical assessments of cost and market size.
The second lesson, from the Philippines, again demonstrates a self-evident but often neglected proposition—that political stability is a necessary condition for economic growth. Before the imposition of martial law by President Marcos in 1972, political processes in the Philippines, including the mass media, enjoyed a degree of freedom probably without parallel in both advanced and backward states. The situation produced at least two elements harmful to economic development. First, an inordinate proportion of the nation’s energies was directed towards the political contest, whereas they could have been more usefully deployed to constructive purposes. Second, the contest itself produced a destabilizing background for long-term investment. It is therefore hardly surprising that the abrupt termination of the old system has brought about immediate and noticeable improvements.
Thailand gives us the third lesson, a sad one, but one which highlights issues sometimes overlooked by both government leaders and academic economists. The Thai experience again demonstrates what should be self-evident, that economic growth in itself does not produce greater happiness, contentment or social harmony. An increase in real GNP should be taken for what it stands for and no more—an increase in the volume of services and goods produced in a country. In a vague sort of way, one can suppose that people who are better off, that is with more income to spend, are or should be more contented than those with less. It is by no means the case, even in modern societies, that this is universally true. But it would be quite wrong to deduce from this that as a country’s GNP increases, the level of contentment and happiness rises pari passu. But the reverse proposition, however, is probably true: if a country’s GNP is going down, there is likely to be widespread and increasing unhappiness and discontent.
Changes in the GNP either way seem to introduce social tension in LDC societies, the nature and sources of which do not seem properly understood. Few empirical studies have been conducted on the subject. Attention is aroused only when discontent has reached such proportions as to erupt in extensive violence. Even here the interest seems to be on immediate causes and the underlying predisposition usually receives scant and inaccurate treatment.
It is clear enough that economic development necessarily involves the introduction of new methods of production requiring the participation of large numbers of persons. In LDCs many of these persons leave their traditional societies, which as a result of population growth or other factors could no longer provide them with an adequate living. But their participation in the modern economic process, principally in wage employment as distinct from peasant agricultural labour, often involves a traumatic change of social regimen. This is sometimes wrongly thought to be a problem of urbanization: it is basically a problem of social change, or to be more accurate, a compound of both.
The circumstances leading to the October 1973 student uprising in Thailand are many and complex. There is therefore a danger that observers may draw incorrect conclusions. One of these incorrect conclusions is that the disorder supports the view, now becoming increasingly popular among development economists and others, that it is not merely important to increase the GNP but also to ensure its equitable distribution, if need be even by special measures to redistribute wealth. I do not agree that this is the lesson we should draw
from the Thai experience, at least in the rather simple terms in which the case for equity of income distribution is sometimes presented.
I will refer to this subject later, but in the meantime there is a second error to dispose of. And it is that if the students were somehow to benefit from development, at least if they believed that they would themselves substantially benefit from their government’s economic development policies, these disturbances might not have arisen.
And here I come to the last lesson, from Malaysia and Singapore. The experience of these two countries does not support the view that those who stand to gain most from the governments’ economic development policies are always well disposed towards the government. Machiavelli was perhaps the first writer to caution governments against depending on the gratitude of citizens who had received benefits and favours. It is a sad commentary on man’s moral progress that his warning applies as much today, at least in the LDCs, as in fifteenth-century Europe.
As in Thailand, the scenario takes places in the university campus. In Singapore, as a result of more than a decade of rapid industrial growth, the demand for engineers, architects, scientists and those with technical education far outstrips supply. Graduates in these disciplines can choose between employers whom they wish to serve and hold out for good terms. Yet, in the recent disturbances ih the university campus, the hard core of student activists belonged to the faculties of engineering, architecture and science.
The Malaysian experience provides an even more remarkable vindication of Machiavelli’s caveat on human frailty. One of the conclusions that the Malaysian Government drew from the disorders of May 1969 was the need to accelerate the material well-being of the rural population, mainly of Malay ethnic origin. It was the disparity of wealth between the rural dwellers, mainly of Malay ethnic origin, and the urban dwellers, mainly of Chinese ethnic origin, that was believed to provide the impetus to these disorders. Accordingly, the Malaysian Government devoted undivided attention to the subject, re-orienting their capital development programme to rural upliftment. An important element of the basic strategy was to raise, as rapidly as possible, education standards of the ethnic Malays, at all levels of education, including the tertiary level.
Before 1969, there were only two institutes of higher learning with a student population of about eight thousand. Since then the number of institutions has increased to eight, and the student population has more than trebled.
Future employment prospects of these students are rated good, not only on account of the robust growth of the Malaysian economy in recent years, but also because of conscious government policies to promote the entry of Malays into business enterprise of all kinds. It would therefore be reasonable to expect that these students would devote their time and energy to study and that, insofar as they take up political attitudes, these should be overwhelmingly favourable towards the Government.
But nothing of that sort happened. In last year’s general elections, student activists worked for an opposition party which, however, failed to win a single seat. But this did not prevent the students from proclaiming themselves guardians of the people’s welfare.
And it was in this role that they mounted their demonstrations which led to a six-day confrontation with the authorities. The disasters of the Thai situation were avoided principally because of the exemplary manner in which the Malaysian police handled the situation, exercising a judicious mix of firmness, patience and resourcefulness. On no occasion were firearms used and no serious injuries of any kind resulted.
Let me now discuss the general bearing these episodes have on the specific issues studied by this conference. The first concerns problems of income distribution, an issue of relevance to both the Thai and the Malaysian student demonstrations. The visible co-existence of extremes of poverty and wealth is a common observation in LDCs. Most people will condemn extreme inequality of wealth on grounds of social justice. So far as governments of LDCs are concerned, there is a more compelling argument against extreme inequality of income, particularly when it is visible. This threatens the stability of the political system and, of course, the position of incumbents.
An important question therefore is “What can be done about it?” One obvious solution is a progressive system of income tax, taxes on wealth, on inheritance and even on gifts inter vivos. These are standard practices of income re-distribution practised in developed countries. Why have they not been extensively applied in LDCs? The reason is that they are not relevant and will not produce the result desired, that is, a transfer of wealth from rich to poor.
The explanation why this is so is both complex and delicate. Here may I state that I am expressing my own views. Let us first distinguish between two ways in which wealth is accumulated, namely by legitimate means and by “irregular” means. By legitimate means, I refer to income earned by way of salaries, business profits, rent of
properties and earnings from other normal economic activities.
The other source of income, that is “irregular” income, covers those kinds of activities which one does not mention in polite conversation.
It is this kind of income which gives rise to political tension because it is resented. Resentment is made worse as recipients, when they form an identifiable class, are prone to flaunt their wealth. This is in striking contrast to business profits when these are earned by hard work and enterprise. Entrepreneurial incomes of this kind are almost invariably ploughed back into business and not dissipated in conspicuous consumption. This has the advantage of promoting further economic growth as well as of being less visible. Where, however, business profits result from monopoly privileges granted by government licensing authorities, there is no guarantee that either of these desirable consequences will follow.
The unfortunate fact about LDCs, which one must be courageous enough to face, is that the unequal income distribution that creates political tension results from irregular income and monopoly profits, these two usually going together. Why should this be so? Why is it that this subject does not loom large in developed countries, other than when an occasional scandal is exposed in the media?
One searches development literature in vain for guidance on these matters. Is it because they are of subsidiary importance? I do not think so. It is being increasingly recognized, in the ASEAN countries at any rate, that these lie at the heart of the more intractable problems arising out of the development process in all their economic, political and social ramifications. But because no distinction is made in the literature between these two types of incomes, legitimate and irregular, the argument for more equitable income distribution misses the real point. This may explain why LDCs are recommended to introduce policies which will restrain all types of wealth accumulation, including legitimate returns on capital investment. A continuation of this trend of thinking is to question the usefulness, even legitimacy, of the activities of multinational corporations in LDCs, as is, regrettably, already happening.
If such views are translated into government policies, the results will be highly detrimental to the LDCs themselves. What would happen is that more obstacles will be placed on private investment, both of national entrepreneurs and of multinational corporations, while the abuses that gave rise to complaints of social injustices in the first instance continue unabated, indeed unmentioned in the literature. So we
get a ludicrous situation in which the recommendation is to throw out the baby and retain the bathwater.
It would be unkind, and probably untrue as well, to suggest that LDCs got into this kind of trouble because their people lacked moral fibre. Many of the men who fought for their countries’ independence possessed the highest standards of probity. The decline that has occurred since then is partly a matter of unfortunate history but mainly the result of wrong economic policies.
LDCs generally emerged into nationhood under strained economic circumstances, coupled with expectations of rapid and spectacular achievement. In most, but not all, instances, the principal constraint was foreign shortages, which made necessary a control over imports and the rationing of foreign exchange to businessmen. Where the revenue collection system was weak, as is generally the case, and where development plans called for large public sector expenditure, governments resorted to deficit financing.
If these dangerous trends are not quickly reversed, the governments concerned get caught in a bind from which escape is usually politically unacceptable. For it calls for a reduction of expenditure and an increase of taxes usually in situations where the government is under criticism for having caused hardships and privations. But if the situation is allowed to drift, as has happened all too often, the widening gap between external prices and domestic prices assumes dangerous proportions. In such a situation, imported goods for which foreign exchange allocation is made can be sold at enormous profit. An import licence or foreign exchange certificate then becomes no different from a winning lottery ticket. Similarly, when entry into profitable industries (whose products enjoy high domestic prices as a result of inflation) is governed by licensing permits, again these permits are in no way different from winning a multi million dollar lottery prize ticket. So the day to day business of economic control consists of deciding who gets winning lottery tickets, with values ranging from a few hundred dollars to multi million dollar bonanzas.
When an economy is run in this manner—and this is hardly a parody of how many LDCs conduct their affairs—is it to be wondered that monopoly profits and irregular income form the principal means of accumulation of wealth? Perhaps an administration staffed entirely by saints and angels might avoid this result but mortal men have been unable to do so.
The debilitating effect on growth is not confined to wasteful consumer expenditure by the rich, loss of capital through transfers to
secret bank accounts overseas, and the general destabilizing effect resulting from mass discontent. There is also the perversion of entrepreneurship. Because monopoly profits depend on close connections with those who decide on licences, the main part of a businessman’s activities consists of cultivating these decision-makers, not of increasing the efficiency of the business, reducing cost, searching for export markets, and other normal functions of entrepreneurship in a competitive system, which are, however, of marginal importance in this context.
The remedy to the malaise does not lie in the activities of the tax collector, for, by the very nature of such incomes and the manner in which they originate, they fall outside the purview of the tax collector.
The remedy has to be more drastic than this. It requires no less than the removal from the economic system of all the harmful encumbrances which have accumulated through the years: in other words to restore to the free enterprise system its true source of strength and flexibility which is based on the freedom of businessmen, in competition with all others, to meet the needs of the country by providing goods and services in accordance with the free market mechanism and not in accordance with bureaucratic controls.
Parallel to this effort, there should be substantial increase of pay for state officials. The money to meet the additional cost could be met in large measure if revenues due to the government were actually collected. The strengthening of the revenue services of the government should therefore be accorded top priority. There are, to be sure, numerous other problems of implementation, but I do not wish to go into these. It is sufficient to state that if the will exists to free the development process from damaging bureaucratic controls, the gains from such policy would be substantial and immediate, and with continuing prudent management of the state, should form a viable long-term policy.
In the context of economic freedom of this kind, the proper role of the multinational corporations (MNCs) can then be better understood. Detractors of the MNCs sometimes tend to ignore the fact that they are business enterprises and cannot be expected to assume some of the functions of philanthropic institutions.
Among the ASEAN countries, the political leadership at least are aware of the benefits which MNCs can bring to their countries. If, for example, IBM or General Motors were to decide to establish a large facility in any one of the ASEAN countries, the MNC party which brings such glad tidings can be assured of a red carpet reception at the
airport. Further, the event will be watched with open envy in the other four capitals.
The principal reason why this is so is that ASEAN governments recognize that endemic large-scale unemployment constitutes a serious political and social problem. Since MNCs provide employment and therefore help to alleviate the situation, they are well received.
It is, however, necessary to point out that the nature of unemployment in LDCs is totally different from that in industrial countries. Unemployment in developed countries when it assumes serious proportions, as at present, is generally the result of business cycles. As such, it is temporary, seldom lasting beyond a year or eighteen months, and is usually responsive to government management of aggregate demand. In LDCs, unemployment rises because, in the process of economic development, there is a long-term movement of population from peasant agriculture to work in cities and townships, where new trades and industries are established and where economic growth is most pronounced.
This urban drift occurs not only in present-day LDCs, but did so in today’s advanced countries during their period of transformation in the eighteenth and nineteenth centuries and continued even to the twentieth century in some instances.
This means that in countries with substantial peasant agriculture, as is the case of four of the five ASEAN countries, unemployment will remain as a continuing problem until only a small proportion of the population is eventually left in agriculture. In fact, if we view economic development as a historical process, it is the large supply of labour available from the countryside which makes possible continuing growth of industries in the towns. But, if the experience of developed countries provides a guide, unemployment will remain endemic in the four ASEAN countries for perhaps another sixty years, if they continue their present growth rates and improve on them. If they achieve this, they would have reached the position of today’s developed nations, and they would have out-performed the Japanese effort since the Meiji era.
I mentioned four of the five ASEAN countries, because the fifth, my own, has no peasant population engaged in the production of food grains. Hence, we were able to achieve full employment, and indeed had to import substantial numbers of guest workers from Malaysia, soon after a decade of growth. But Singapore’s circumstances are quite exceptional.
Let me summarize the main issues and consider some of their
longer-term implications. First, it is clear that the development process is not a simple matter of achieving annual increments of GNP because for some reasons the process produces stresses or strains of many kinds and origins, much of which is not understood. There is the trauma of social change as large numbers of people move out of traditional societies into new environments. Next, economic controls which were found unavoidable at the time of independence tended to proliferate, producing economic distortions which in turn gave rise to political tension. Third, the rapid expansion of tertiary education as well as cheap means of mass communications through the transistor radio and improvements of internal transportation have raised widespread expectations of improved livelihood as well as quicker awareness of social injustices.
At the same time, the process of bringing LDCs to the level of modernity and affluence of developed states will be a long one, extending over many decades. Further, sustainable progress is possible only on the basis of a continuing firm political framework. It is my assessment that the political leaderships of ASEAN countries are becoming increasingly aware that the combination of these two elements—the destabilizing forces resulting from development and the necessity for political stability—introduces a challenge of unprecedented proportions. They know that they are no longer governing docile and submissive populations upon whom the use of force can provide an enduring solution. Pandora’s box has been opened. The more perceptive recognize that it is no mere rhetoric to describe the process of profound change which is now going on as a social revolution, the control and management of which will make extraordinary demands on the sagacity and resolution of the political leadership.
The process of detente between the superpowers will not diminish these difficulties. There are two reasons for this. First detente comes at a time of, and is perhaps motivated by, a change of mood in the Western world. Part of this mood takes the form of a diminution of confidence in the free enterprise system, increasing the prejudice against successful large business corporations (at least to go by the tone of much of the media), and an increasing resort to welfare state solutions to problems of perceived social injustices. A good deal of such thinking is irrelevant to LDCs, and indeed harmful, for at their stage of development the prime need is the accumulation of capital. Nevertheless these ideas filter into important sections of the population through the universities and the mass media.
Second, the situation provides new opportunities to the indigenous communist parties which exist in every ASEAN state, although as underground organizations. They can take increasing advantage of, for instance, starry-eyed idealists and romanticists among student radicals to further their interests. They can exploit frustrations among workers should the world recession seriously damage the ASEAN economies.
All this is true and must be conceded. Yet, I think it would be wrong to conclude that the position is being lost, or even that the balance of advantage lies with the communists. Three of the ASEAN states, Indonesia, Malaysia and Singapore, have had experiences of engaging their communist movements in decisive political confrontations and the communists have come out second best.
The experience of Indonesia is instructive. Prior to the gruesome destruction of the Communist Party of Indonesia—the PKI—the majority of experts, including those of Rand Corporation, were agreed that the ultimate victory of the PKI was only a question of time.
The generally poor performance of communist movements in ASEAN countries is only in small part due to good rates of economic growth. There seems to be certain cultural traits in the societies of these countries which go against the kind of fierce sustained hatreds which must motivate and underpin a successful revolutionary party organized on Leninist principles. The PKI was never organized as a Leninist party and that was why they lost out so easily.
To sum up, the emerging era of the Pacific will see exciting, sometimes even tumultuous, events in the ASEAN states. The experience of the last ten years gives grounds for hope that they will be able to ride out storms immediately ahead, if they put to good use the lessons they should have learnt from past events.
7
Some Unsolved Problems of Economic Growth
Introduction
Singapore’s circumstances are such that her progress and prosperity depend on successful adaptation to world events, political and economic. This means that those who have to make decisions on important policy matters must have up-to-date knowledge and correct understanding of what is going on in the world outside. Much time must therefore be spent in reading the more important national and financial dailies of the world as well as specialized journals.
In reading the popular Press, one must take into account that the writers, even though they may be professional economists, often fall victim to the prevailing business mood or sentiment and their views must be discounted accordingly. But there is another difficulty.
It is becoming increasingly apparent in recent years that not only is the world economy in serious trouble but that the experts themselves are divided as to the cause of these troubles, and accordingly differ on the measures to solve them. And their collective reputation suffered accordingly (Greene, 19; Heller, 22).
The substantial postwar consensus among professional economists built round Keynesian doctrines is being eroded. But there is yet no new consensus appearing on the horizon. Therefore trying to understand what is going on becomes more difficult and time-consuming.
Speech on 30 November 1975 at the University of Singapore’s First Kesatuan Lecture, originally published by the Kesatuan Lecture Planning Committee. (Kesatuan Akademis is the Academic Association of the Singapore University.)
In this paper, I shall first discuss the problems of rich countries and then those of poor countries.
The Rich Countries
Since 1973, the rich countries have been plagued, in varying degrees of severity, with two problems simultaneously. A high rate of inflation has been accompanied by stagnant or declining real incomes and outputs accompanied by, in many cases, high rates of unemployment. Past experience has been either with inflation or recession. In the postwar years, rising prices and declining output and unemployment did sometimes occur together, but only briefly. It was the persistence and severity of present inflationary recession that puzzled economists.
It is not tenable to attribute these troubles to ad hoc causes such as the OPEC cartel, the failure of the Humboldt current to bring its annual harvest of anchovies to Peruvian fishermen, crop failures and so on. These have affected prices but they are either short-term and reversible or else, like the oil price hike, a one-shot affliction (Keran, 29).
It is easy enough to say that the Keynesians have failed in that their predictions were off target and their remedies did not work. But why did they fail when they had been successful previously? Does this mean that Keynesian economics is intrinsically wrong as Milton Friedman maintains or that some abnormal, but temporary, disturbances had been introduced into the world economy which had spiked the Keynesian variables? If so, what are the disturbances? Are they purely monetary? If so, have central bankers been more indulgent than they had been in the first two decades of the postwar world?
These are wide-ranging issues but the starting point of any discussion of inflation and unemployment brings us straight to the Phillips curve. Professor A.W. Phillips introduced his celebrated concept in an article published in November 1958 (Phillips, 44). Phillips collected material on the rate of change of money wages in the TJK each year and compared it with the level of employment for that year. The period of his study covered the years 1861 to 1913.
This gives him 53 observations to plot on a scatter diagram, the horizontal axis representing the percentage rate of unemployment, the vertical, the percentage change in money wages. He applied the usual least squares method of fitting a curve, combined with a fair amount of visual adjustment.
The curve turns out to be a downward sloping one, as expected. At
low rates of unemployment, 2 per cent or less, wage increases rise faster than for those periods for which unemployment rates were greater.
The reason is as follows. When unemployment is low, denoting a tight labour market, employers will have to raise wages substantially to get the labour they require. However, when there is much unemployment, employers do not have to bid up wages, but workers are reluctant to offer their services at less than what they used to get.
The rate of wage change depends not only on the level of employment but also whether unemployment is increasing or decreasing. During a business upswing, with unemployment decreasing, employers will have to bid more vigorously than in years when the level of .employment is declining.
Phillips then applied data for individual business cycles during 1861 to 1913 to his curve and obtained interesting results. During an upswing of a business cycle, as unemployment decreases, money wage rates increased at faster rates. During the downswing, wage increases moderated with increasing unemployment. The lines joining the points relating to a cycle crawled up and down the curve in an anti clockwise direction in an intriguing manner.
One remarkable result of his study related to the period 1948 to 1957. When the change of wage rates was related to unemployment lagged by seven months, an extremely good fit was obtained, the results for six years being virtually on the curve itself.
This seems to suggest that there is a stable long-term relationship between these two variables, persisting through nearly a hundred years. The implications of such a relationship to policy makers are obviously far-reaching. It means that governments do a trade-off between the level of unemployment and the rate of inflation.
Prices and wage rates are interconnected through the cost of living. However, Phillips believes that so long as prices rise less than wages, price changes will not have any impact on the rate of wage changes. For instance, if productivity increases 2 per cent a year, with unemployment constant at 2 per cent, and wages go up 3 per cent, the retail price will go up by 1 per cent, the effect of wage increases on prices being reduced by productivity increases. Workers will be only 2 per cent better off and they will not demand an extra 1 per cent increase to make up to 3 per cent.
The trade-off between unemployment and inflation for the UK was stated by Phillips as follows. If productivity increases at 2 per cent a year, stability could be obtained at about 2Уг per cent unemployment.
However, to maintain stable money wage rates, unemployment will have to increase to 5 */2 per cent.
In subsequent years, the literature proliferated enormously. Studies extended over other countries for their version of the Phillips’ trade-off. New variables were introduced and empirically tested. Variables that could have influenced wage levels were studied, including the level of profits made by employers, changes in productivity, trade union aggressiveness, as measured by growth of the proportion of the work force unionized, the effect of sub-division of labour force by occupations, ethnic groups and geographical locations (Goldstein, 18).
Despite the effort that went into the analytical and empirical work on these extensions, they do not amount to a significant improvement on the original Phillips’ simple regression of rate of wage changes on the rate of unemployment. The main trouble seems to be that the other elements taken as explanatory variables, such as profits, productivity, union aggressiveness, are themselves related to each other, and hence the contribution of each component is not easily separated (Spitallor, 51).
The crucial point on which the Phillips curve stands or falls as a durable relationship is the effect of price changes, especially when they are substantial and continuous. That is to say, whether the trade-off between unemployment and inflation really exists as a long-term relationship if price increases, having occurred over a long period, are then built into the expectations of workers and employers.
Milton Friedman contends that under these circumstances, the Phillips relationship does not exist (Friedman, 15). Once wage increases fully take into account expected price increases for the period, the trade-off between unemployment and inflation ceases to operate. This is because when wage increases are less than price increases, employers find themselves in a favourable position, the prices of their products increasing faster than factor prices including wages. They then employ more workers, thereby reducing unemployment. Wages will then increase. When wages increase as fast as prices, there is no longer this advantage in expanded unemployment, and accordingly the level of employment returns to the original position.
This contention of the monetarists is contested by some proponents of the Phillips curve (Rees, 46). It is contended that so long as there is a time lag between wage increases and price increases, the trade-off still exists.
How much inflation, and for how long, would destroy the Phillips relationship? There is evidence that in the United States, when price
increases of more than 2Уг per cent occur for more than two successive years, wage increases will take full account of price increases expected (Eckstein and Brinner, 8).
It is clear that the high rates of price inflation experienced in rich countries in the last 2*/2 years have destroyed the Phillips relationship. As Dr Arthur Burns, the Federal Reserve Board Chairman, recently said, “There is no longer a meaningful trade-off between unemployment and inflation. {Newsweek, 29 September 1975).
Why did the trade-off fail? The explanation of the monetarists tells us that the level of unemployment after going down in response to a dose of inflation will go back to the original position. It does not explain why unemployment should go beyond that level and remain at high rates for a long time. Can we find an explanation in some other branch of economics?
Let us now turn to the modern theory of economic growth to find out whether it can shed light on our present-day dilemma. Modern growth theory is an offshoot of Keynesian economics, which itself grew out of attempts to explain the persistence and severity of the Great Depression of the 1930s. Until Keynes, the general belief among economists was that the free workings of the capitalist system would ensure that all those willing to work will be employed, except during short periods of recession, in the course of business cycles. But Keynes has demonstrated that the classical concept of long-term full employment equilibrium is a false notion and that the economy could settle down to an equilibrium level at which large numbers of willing workers are unable to find employment. Keynes not only provided the explanation for the Great Depression but also worked out the remedies.
Modern growth theory therefore reverted, in a sense, to the classical concept of full employment equilibrium. But it does not regard this as an inevitable state of affairs but only as the result of the government, in the role of a deus ex macbina, steering the economy to full employment by fiscal policies of demand management, combined with low rates of interest through its monetary policy.
The modern theory of economic growth dates back to 1939 in an article by Professor Roy Harrod, who examined certain propositions about long-term economic growth in a closed system (Harrod, 21). Professor E. Domar approached the same subject in much the same way and reached similar conclusions (Domar, 6). The outcome is a growth model, the Harrod-Domar growth model, which now forms the standard framework within which certain economic variables are studied.
The model assumes unchanging values for certain variables such as proportion of income saved, the capital-output ratio, the rate of growth of the population (more strictly, the labour force). Also assumed are constant returns to scale, fixed factor proportions and full employment.
Harrod concluded that the rate of long-term growth of the economy under these conditions is determined by two factors: the rate of savings and the rate of population growth. Savings provides the increased capital equipment needed by the growing work force. But his model contained the alarming property that should the rate of growth depart from the rate warranted by the savings rate, the capital-output ratio and population increase, there will be no movement towards that warranted growth rate as is normal in adjustment processes with most economic variables. Instead, the economy will move further away either towards increasing unemployment or endemic inflation. So the full employment growth path permits no trouble-free departure from it. This is Harrod’s celebrated knife-edge.
Later writers, varying some of Harrod’s assumptions such as fixed factor proportions, made the system more stable so that departure from the warranted rate of growth could set off forces to move the economy towards stability (Solow, 50; Swan, 52).
The least satisfactory aspect of modern growth economics is its treatment of technical innovations. Because the rate of growth with given production functions and capital-output ratio depends purely on the rates of savings and population growth, technological innovation is not considered as having a direct bearing on the growth rate. Instead its effect is considered from a specialized and rather unusual angle. Growth theories pay special attention to the effect of technical innovation on efficiency of factors of production, labour and capital. This follows from another curious property of the Harrod-Domar model. It is only if technical innovations are of a certain kind, called Harrod-neutral, that the system can move along Harrod’s knife-edge. Harrod-neutral innovations are those which increase the efficiency of labour but not of capital.
Another aspect of the impact of technology closely examined is in respect of distribution theory. What types of innovation would increase the share of labour as against capital and vice versa?
Modern growth theory does not shed light on current economic problems for a number of reasons. First, it assumes a continuing state of full employment, except under certain special conditions, thereby assuming away the very problem troubling the world today.
Next, being concerned with long-term relationships, the growth
model operates in a “moneyless” economy and hence disturbances caused by expansion and contraction of money supply does not fall within its purview. Third, technical innovation is not considered a determinant of the rate of growth. Because of the assumption of fixed capital-output ratio, the rate of growth is determined by savings, not by the effect of innovations on, for instance, the rate of investment. The impact of technical innovations would be on the distribution of shares of total output between labour and capital. And much subtle reasoning has gone into the effect of different types of innovation.
For a more realistic treatment of innovation, we must turn to a prewar economist—Professor Joseph Schumpeter. He set out his views in a two-volume book Business Cycles (Schumpeter, 48). Schumpeter regards the main effect of innovation as disturbing the economic system mainly through reducing the cost of production. These cost reductions are not movements down the cost curve of a firm or the collective cost curve of an industry, but a shifting of the whole curve so that a much larger output could be produced at a lower average cost. It is important to note that this cost reduction is also distinct from those possible under conditions of monopolistic competition, or cost reductions arising from external economies of scale or from indivisibilities.
Innovations are embodied in new plant and equipment, introduced by new firms under the leadership of new men. In fact, it is the intrusion of improved methods of production in this way that destabilizes the classical system by compelling older firms either to adapt or eke go out of business.
Schumpeter’s analytical framework is an uncomplicated one. Assuming perfect competition, all firms are in a Walrasian state of general equilibrium, with optimum output, minimum cost and full employment. Innovation then takes place.
In the first phase, embodiment of innovation in new plant and equipment must be at the expense of consumption. Schumpeter assumes that entrepreneurs borrow from the banking system which provides the needed funds through credit expansioil. This sets in train higher prices through increased demand which will spread throughout the economy. Because of the uncertainties connected with innovation, businessmen find it difficult to make accurate forecasts and usually over-react through the chain of business from retailers, through wholesalers and to ultimate producers.
Eventually a new equilibrium is reached when the larger output of consumer goods is made available at lower cost. Entrepreneurs repay
their loans and money supply contracts accordingly. The new equilibrium will show a larger social product, new production functions, zero profits, same total money income and lower prices. The lasting effect of innovation passes on to consumers in the form of increased real incomes.
Because innovations are not of the same scale in terms of their impact on the economy and the time taken to reach maturity, minor innovations cause less disturbances over shorter periods. But major innovations, such as the steam engine, railways, and the internal combustion engine, take several decades to work out their chain effects. Accordingly, Schumpeter stated that these basic inventions, while they were working their way through the economies of Western countries, produced lasting effects over several decades. As these inventions approached maturity, their impact progressively lessened. For instance, in the case of railways, the most profitable routes will be laid earlier than those linking less prosperous centres of population. In course of time, the expansionary forces generated by major innovations such as railways get progressively smaller. The long wave then peters out until the next cluster of major innovations comes into play.
Schumpeter calls this long wave a “Kondratieff”, after Professor N.D. Kondratieff, one-time Director of the Institute of Business Research in Moscow. Kondratieff studied certain economic variables in France, England, the US and to a lesser extent Germany, over a period of 140 years. The time series he studied included general price levels, interest rates, wage rates, foreign trade, output of coal and pig iron.
Based on these studies, Kondratieff concluded that the capitalist system generates a long cycle of nearly 60 years. This is in addition to the better-known shorter business cycles of about nine years. During the upswing of the long cycle, recessions ill the nine-year cycles are milder and shorter, booms are stronger. The reverse holds true during the downswing of the long cycle (Kondratieff, 30).
In the Soviet Union, Kondratieff’s Statistical methods and theoretical reasoning were severely criticized by other academicians. But he defended his position vigorously and eventually was hauled off to a Siberian labour camp under the improbable charge of directing an illegal underground organization, the Peasant Labour Party (Garvy, 16).
According to Schumpeter, the first Kondratieff started with the Industrial Revolution in the late eighteenth century going on to about 1845. The innovations propelling the long wave were the first applications of machinery in factory production such as the spinning
machine, as well as steam-powered pumps in coal mining. The second Kondratieff began around 1845, the major propelling force being railways and steel. The third Kondratieff started in 1898, based on electricity, industrial chemistry and the internal combustion engine.
Although Schumpeter gave detailed accounts of the operations of these three long waves in Western Europe and the United States, it cannot be said that he was more successful than Kondratieff in establishing beyond a doubt the existence of these long waves, either in terms of a satisfactory theoretical model or of supporting data. (Schumpeter is a difficult author to read as he is in the habit of qualifying his propositions with warnings, asides and digressions so that one easily gets lost in a maze of byways.)
There is little doubt that basic inventions like the steam engine, the internal combustion engine, electricity, steel making and others, did have lasting effects on growth. Growth is affected directly by the creation of investment opportunities and the establishment of industries which expand very fast in the early stages. Then there are the secondary effects, as Schumpeter pointed out, on consumer demand. Thirdly there is also the expansion of economic opportunities in many ways, such as the creation of supporting industries and demand for new raw materials. But there is also the general effect through extension of market through better transport and communications, Which cannot be precisely attributed to a given innovation.
While all this can be conceded, the question still arises: why should these basic inventions generate waves or cycles? The question can be answered in two parts. First, in favour of the long cycle theory, it can be said that any given invention would grow rapidly at first, partly because of inherent characteristics of the innovation. Eventually, not only are subsequent improvements less significant than the earlier ones, but the supply of the product itself reaches saturation through normal market processes. In other words, in the early phase of the development of a major innovation, the industry concerned grows much faster than the average growth of the GNP, and in this way contributing an underlying bouyancy. As the industry approaches maturity, its further expansion depends on GNP growth itself. It is even possible that where competitive products or services are introduced by further innovation, the industry declines, such as has happened to coal-mining, railways and passenger ships.
The second part of the answer does not support regularity of the long cycle. For this to happen, there must be some reason why major innovations are introduced in clusters spread over half a century or so.
On this point, neither Kondratieff using loan funds to spark off a wave of innovations nor Schumpeter postulating resistance to change has given a convincing answer.
With these qualifications in mind, we can regard the long postwar expansion of the world economy as the fourth Kondratieff. The long secular boom was based on a number of basic innovations—to mention the major ones, jet propulsion, the transistor and its descendants, the integrated circuit and the computer chip, petro-chemicals, the rocket engine and nuclear power. The scientific discoveries making most of these innovations possible were made before the war and their applications were hastened in a few instances, notably the transistor and the jet engine, by the pressure of war itself (Jewkes, 26, pp. 263 et seq.).
We have seen the rise of new industries which did not exist before the war or, if they did, only to an insignificant extent—intercontinental airlines, plastics and synthetic fibres, transistor radios, tape recorders, satellite communications and above all television and the electronic computer. These have not only produced vast new industries but have also changed the way of living for a good part of mankind.
The cost reductions possible in a new product are of a different order of magnitude from those we associate with established products. For instance, the price of a transistor decreased by 99-9 per cent between 1960 to 1970. If motorcars could have their cost reduced in this way, the ex-factory price of a Mercedes would be around $20. Growth rates for new products are also of a different order of magnitude. The growth rate of sales of integrated circuits is around 38 per cent a year (Bylinsky, 4).
Is there any reason to believe that the fourth Kondratieff has peaked off now, as previous long waves are reported to have done in their time? If we are superstitious, we could say that the timing is about right, about three decades from the start. But there is some indication that several of the growth industries have reached maturity in the sense that competition has led to such an expansion of capacity that profits in these industries are approaching zero. This is clearly the case with the airlines and aircraft industries, and possibly to a lesser extent with the petro-chemical industry.
A downswing of a Kondratieff is marked not only by maturity of the growth industries, but also by the absence of new major innovation to draw in new investments and expand economic opportunities.
The Japanese, who manage their economy better than most people, are becoming increasingly concerned with this possibility. The money
they spend on research and development, per head of population, is the lowest among industrial nations, being less than one-fourth that of Britain (Goldsmith, 17, p. xv). Because of an intelligent policy on the purchase of know-how, they overcame this handicap and ensured that such investments secured maximum benefits for themselves (Oshima, 43, pp. 33-41).
But there is evidence that their industrialists are concerned about the declining pace of technological innovation among rich countries. For instance, the Senior Managing Director of the Mitsubishi Research Institute Inc. believes that the tempo of technological innovation slowed down during the 1960s. In this way, economies of rich countries have been deprived of investment projects which could either expand markets or increase productivity (Makino, 36).
The Japanese response to this situation is curious. Some enterprises are paying special attention to product development and have even set up special commodity planning departments which operate in an unusual way. The staff are selected on a multi-disciplinary basis. They are not given any special assignments, nor are they required to work to a set programme. In short, they are a group of idlers and the company’s directive to them declares ‘ ‘Do whatever you like for three years. We don’t set any limits to your budget. The only condition is to search out germinal ideas for future commodities. ’ ’ The Japanese claim that this is already producing results, but they give no indication what these are (Japan Economic Journal, 5).
Let me now return to inflationary recession and the difficulty governments of rich countries encounter in finding solutions in the way of Keynesian demand management policies. The tentative explanation is as follows. If we accept, with Schumpeter, that technological innovation provides the prime driving force towards long-term economic expansion, the postwar years were particularly favourable to the rich countries.
Several major new growth industries were established which for at least two decades expanded at a rate faster than average growth of the GNP. During this period, full employment policy of the government was easier to achieve because the growth industries could be depended on to resume their upward trend and start the upturn before long. Expansionary policies need not be strong or sustained. But as these growth industries reach maturity and they themselves depend for their future expansion on the growth of their markets, which in turn depends on general economic expansion, the Keynesian remedy during the downswing of a business cycle has a bigger load to carry. Reflation
has to be effected in stronger and more sustained doses. The increasingly large budget deficits in the UK and US show how intractable the problem has become. Spending one’s way to prosperity has proved a snare and a delusion (Brittan, 3).
Increasing aggregate demand by government deficits financed by Central Bank credit creation merely increases prices with little effect on employment. Financing the deficit by borrowing from the market serves to increase the rate of interest and does not generate growth to the extent that the private sector is denied funds. In the recent inflation, there are, in addition, special elements which make the disturbances worldwide. This is due largely to the uncontrolled Eurodollar market whose funds move from one currency to another in massive amounts, thereby making the final collapse of the Bretton Woods system inevitable. No doubt these financial upheavals made matters worse, but they are different from the basic long-term trends we have been discussing.
If we do not see the establishment of new growth industries resulting from another cluster of innovations, it is likely that the rich countries will not be able to maintain the full employment and growth rate records of the first 2Vi postwar decades. They may have to settle for what Professor Friedman calls the ‘ ‘natural rate of unemployment’ ’ at a higher level than they had been accustomed to. But this does not mean that economic retrogression or a lowering of living standards will occur. But it does mean a more deliberate pace of growth, with greater emphasis on domestic social policies and greater interest in the quality of life.
The Poor Countries
The difference between poor and rich countries lies not so much in the gap between their per capita GNPs, substantial though this is, but in the distribution of the working population between agriculture and the rest of the economy. In rich countries, the percentage of working population engaged in agriculture is generally below 15 per cent. In poor countries, the percentage is around 60 to 70 per cent. Taking into account occupations allied to farming, such as village traders, craftsmen and those in the service trades, the percentage of people living in rural areas in poor countries is around 7 5 per cent to 80 per cent.
Needless to say, farm techniques are traditional and output is low. Where there is pressure on land, and farms are small, food grown on the farm is usually just about enough to feed the family. Even where
there is no pressure on land, as is the case in some countries in Africa, farm output remains small because there is no point in producing more than what the family can consume, as the surplus cannot be profitably sold. But availability of land provides opportunities to grow export crops introduced either by capitalist plantation systems or by peasants as a sideline.
It would be wrong to consider that peasant subsistence agriculture, because of low productivity, is wasteful or uneconomic. Field studies have demonstrated that peasants do economize on scarce factor inputs such as water, labour and cattle for ploughing. Within the constraints of their technology, they make the best use of available resources (Hopper, 23; Schultz, 47, chapter 3; Firth, 14). Where resource endowment is more favourable, peasants are able to seize economic opportunities even when this involves effort over many years (Bauer, 2).
But traditional agriculture, being stagnant in respect of technology and vulnerable to weather, does not in itself provide the means for generating self-sustaining economic growth.
The strategy of economic development of poor countries is most clearly set out by Professor Arthur Lewis in his article “Economic Development with Unlimited Supplies of Labour”, published in 1954 (Lewis, 33). It is fitting that Arthur Lewis provided the growth model for poor countries, the counterpart of the Harrod-Domar growth model for rich countries. Lewis’ model has the advantage of being relevant to contemporary problems.
Lewis notes that not only is there excess population in the countryside, in the sense that the withdrawal of part of the population would not significantly reduce agricultural output, but this surplus labour can be seen in the cities of poor countries. There are large numbers of hangers-on engaged mostly in service occupations, such as trishawmen, porters, shoe-shine boys, hawkers.
The right growth strategy is to develop a capitalist industrial sector which can absorb surplus labour at low wages. Low wages are the result of low output in farms, more strictly low marginal product of farm labour. Wages will remain low in industry so long as peasants are willing to offer their services at real wages slightly better than what they can earn in farms, either as family or hired workers. Why a capitalist sector?
The answer is that capitalists not only create industries to provide employment, but they are the people who save. Lewis contends it is not always true that rich people save more than poor people. For instance, in traditional societies, princes, the landed gentry, priests and generals
are much given to lavish expenditure as a means of establishing their social status. But capitalists are different and they save most of their business profits, re-investing them to expand production.
It is therefore important, in Lewis’ growth model, that real wages should be kept constant at low levels over long periods so that increasing profits can provide the means for continuous capital accumulation. “If unlimited supplies of labour are available at constant real wage, and if any part of profits is being invested in productive capacity, profits will grow continuously relative to the national income and capital formation will also grow relative to the national income. ’ ’ (Lewis, 33, p. 158)
Lewis’ and the Harrod-Domar growth models agree on the crucial •function of savings. Whereas the model for rich countries assumes a constant rate of savings, in Lewis’ model, savings must be increased by keeping wages low and constant so that profits earned in industrial expansion will bring a self-sustaining source of savings for future capital accumulation. The difference between stagnation and self-sustaining growth is the difference between 5 per cent of the GNP saved and 15 per cent saved.
The Harrod-Domar equations give us some idea of the different impact on growth between 5 and 15 per cent. If we assume that the capital-output ratio is 3, the usual figure set by conventional wisdom, a 15 per cent rate of saving will generate a 5 per cent annual increase in the GNP. If population growth is 21/2 per cent a year, this would provide a significant if modest increase in per capita GNP. At 5 per cent savings, per capita income will decline.
How does one give a stagnating economy the first initial push towards self-sustaining growth when savings stand around 5 per cent? Lewis thought that, unlike the classical model where savings can only be realized by reduced consumption, this need not apply to a laboursurplus economy. The first push could come from credit creation. If judiciously applied to investments which will yield consumer goods within a short period of, say, less than two years, the initial inflationary effect would be cancelled when consumer goods reach the market.
Lewis thought that improvement in technique will enable agricultural output to be maintained with a smaller work force or be increased with a constant one. He stated that Malthus and Ricardo both greatly underestimated the possible effects of technology. But he was aware of the troubles that would arise if, in fact, traditional agriculture fails to live up to expectations (Lewis, 3 3, p. 173).
Lewis’ two-sector growth model, agriculture and the rest, has been
refined in a good deal of subsequent literature (Fei and Ranis, 13).
The process of transfer of labour from farms to industry is not taken to be a smooth process, with peasants waiting passively in the farms, so to speak, until their turn comes to move to industry. Much attention is focussed on the relation between supply of labour and the supply of “wage goods” available. In particular, because expenditure on food amounts to some 75 per cent of household budgets of poor families, a troublesome problem arises because this circumstance is combined with the limits to output posed by a fixed supply of land in over-populated countries.
Also studied is the impact of improved farm techniques on factor supplies, on the terms of trade between agriculture and industry, and finally on the transfer of labour to cities. There is also theorizing on the supply function of a poor peasant, relating production opportunities with w6rk-leisure preference schedules (Myint, 40; Mellor, 39; Fei and Ranis, 13).
There have been attempts to relate the two-sector model of surplus labour land-scarce growth models of poor countries to the kind of analysis used on the Harrod-Domar type, land being the constraint on output in the sense that labour is in the rich country model (Mellor, 38). There has even been a wondrous effort to quantify such a model for poor countries using parameters obtained from rather limited field experience (Kelley, el al., 28). In addition, much attention was paid to the historical experience of countries which have successfully transformed their economies, such as Japan and Taiwan.
Later writers are less optimistic than Lewis about poor agricultural countries achieving self-sustaining growth. In particular the more facile arguments on the growth process are elegantly demolished by Professor Myint (Myint, 40).
Let us examine some of the major new ideas that have emerged. There is the notion of a critical minimum effort to ensure that growth process takes off. This requires a sufficiently fast rate of capital accumulation in industry and technical improvements in agriculture to overcome the inherent tendency towards stagnation noted in poor countries. The notion that a certain minimum effort must be made is based on two other concepts, themselves as old as economics, which we shall call ‘ ‘the Malthusian Trap’ ’ and ‘ ‘the Ricardian Bind”.
The Malthusian Trap is built out of two elements, the first being the well-known theory of Malthus that population growth tends to exceed increases in food supply. The second element derives from the Keynesian theory of savings, that savings increase with income. The
argument goes like this. The rate of savings depends on the level of income, more specifically, when we consider the whole economy, per capita income. A rise in per capita income in poor countries will have two effects. First, an increase in rate of savings; second, an increase in population through reduced death rates as standards of living go up. If the increase in income is not sufficiently large, per capita incomes will decline as population growth overtakes income. Then the rate of savings goes down. Both savings and income spiral downwards till the whole system reverts to square one.
The Ricardian Bind works through rising demand for food as incomes and urban industrial population increase under conditions of diminishing returns resulting from unchanged technology. Because the supply of land is fixed, increases in output become more and more costly to achieve. Increased food supplies could be obtained only at sharply rising prices.
Stagnation in agriculture is transmitted to other sectors through increases in food prices. As the terms of trade move against manufactured goods in favour of food, the cost of industrial labour goes up, reducing profits in industry to zero at the margin, thereby putting a stop to further expansion (Myint, 40, pp. 94-6).
That is how the Ricardian Bind works in a closed economy. In the open economies of the real world, where countries can import food when there is a shortage, the Ricardian Bind works through the balance of payments. Food imports use up foreign exchange at the expense of the requirements of the industrial sector, thereby affecting its growth. The magnitude of the problem is not small; FAO calculated that if the GNP of poor countries increases at У/2 per cent a year, food output at 2.7 per cent, they will need to import US$40 billion worth of food by 1985 (FAO, 12).
It is therefore clear that the process of economic growth of the typical third world countries with large agricultural populations at low levels of technology is full of pitfalls and is not the easy smooth process it was once thought to be in the early postwar years.
At that time, low agricultural productivity and large rural populations were regarded as assets, not handicaps to growth. A comparison of output per head or per acre between traditional and modem agriculture shows potentials of staggering dimensions.
Consider the net value of output per worker from agriculture in rich and poor countries. This varies between US$106 and US$130, taking typical countries such as Thailand, the Philippines, India and Indonesia. By contrast, the output in Japan is US$1,259 and the United
States, US$8,356 (UN, 55; FAO, 9). These differences in productivity seem to reveal dazzling prospects for poor countries which only had to adopt modern farm techniques, knowledge of which is freely accessible.
Thirty years after the war, very few countries have been able to set up the self-generating growth process envisaged by Professor Lewis. Excluding city economies without grain-producing peasants, such as Singapore and Hong Kong, they could literally be counted on the fingers of one hand—South Korea, Taiwan and Mexico. Brazil and some countries in Southeast Asia show promise, but not complete assurance, of joining the three.
For the great majority, the picture is bleak. The poorest of the developing countries have a total population of 1,000 million. Between 1969 and 1973, their average per capita income grew at an annual rate of 0.5 per cent. But these gains have been virtually cancelled in the last two years when per capita income declined at -0.5 per cent and -0.7 per cent. If the world recovers from its present recession and capital flow for the rest of the decade is maintained at the same rates in real terms as in the past, per capita income of these 1,000 million people will increase during this decade from US$105 to US$108, a minute annual increase of 0.2 per cent (McNamara, 35).
Obviously something has gone wrong and the cumulative growth processes outlined by the economists bear little relationship to the reality in poor countries. In this instance, however, it is not the analyses or prescriptions of economists that are wholly at fault.
What has gone wrong has been in the performance of poor countries. In part this was due to wrong policies of the governments, in part it was due to high rates of population growth resulting from public health measures so that the combined effect was for these economies to fall into the Malthusian Trap or get caught in the Ricardian Bind or suffer both these misfortunes simultaneously.
We shall study how this happened, paying special attention to three aspects of the growth process—first, the shift of population from countryside to cities; second, the transfer of resources from countryside to cities; and third, difficulties caused by rising food prices. (I use the word “city” to mean what the literature refers to by inelegant terms such as “non-farm”, “off-farm” and “non-agriculture”.)
The rate of population transfer from countryside to cities is necessarily a slow long-term process. It is, however, much slower than most people think. The number of years required to change a population structure of one with distribution between agriculture and
cities at, say 75 to 25 per cent, to a modern structure with only 15 per cent engaged in agriculture, can easily be calculated by applying compound interest formula. But since total population is not static, but increasing, the rate of population growth must be taken as the first variable. The other determinant is the growth of urban population. This depends on the growth of the modern sector, Professor Lewis’ “industry”. A 3 per cent annual growth rate of the working population in “industry” is, for reasons which will become clear later, exceptionally fast (Johnston, 27, pp. 66-71).
If population grows at 1 per cent a year, assuming the same rate for both city and urban populations, and starting at 75-25 per cent rural-urban distribution, a 3 per cent expansion of urban work force will enable the country to reach halfway house, a 50-50 per cent split, in 35 */2 years. Thereafter, decline of rural population to 15 per cent will take a shorter time, 27 years. The process of modernizing the population structure under these conditions takes 621/2 years.
When population grows at 3 per cent a year, an urban work force growth of 3 per cent will leave things permanently as they are. With a population growth of 2*/г per cent, and urban expansion at the same 3 per cent, the process of reducing agricultural labour from 75 to 15 per cent takes 251 years.
In practice, if they can escape all the pitfalls to growth for 142 years, when they would have reached the halfway house, the second part of the journey could be accelerated because birth rates will fall and hence population growth will moderate.
Is it possible to achieve over an extended period faster rate of growth of the urban work force than 3 per cent a year? Japanese experience suggests that this is difficult. Their urban rate of increase was 3.5 per cent during 1893-97; this came down to 2.8 per cent in the next decade, declining steadily to 1.9 per cent by 1940 (Johnston, 27, pp. 73-5).
Despite these modest rates, the Japanese were able to effect the structural change in a smooth process. This is because of their low rates of population growth mainly because of high death rates persisting until World War Two. Japanese population growth since Meiji averaged less than 1 per cent in the nineteenth century. It slowly increased in the twentieth century to 1.3 per cent in the first three decades when death rates slightly declined. For a brief period during the war, it exceeded 2 per cent, but thereafter population growth moderated as falling birth rates more than offset further declines in the death rate. It is now back at 1 per cent (Ueda, 54; Taeuber, 53).
Since Meiji, the farm-working population remained virtually constant in numbers, but declining in ratio to total population, over the decades until World War Two, after which it fell sharply. The same number of Japanese farmers were able to produce enough food to feed an increasing population during Meiji, because the government paid special attention to increasing the productivity of farmers (Johnston, 27, p. 60). This means that a developing nation with 2.5 per cent population growth that wants to sustain a 3 per cent annual increase in their urban work force will have to out-perform the Japanese by a wide margin.
Even then, if they are unable to bring down their birth rates, they will arrive at the promised land some time in the twenty-third century A.D. It is little wonder that an expert appointed by the UN Research Institute for Social Development concluded that neither new technology nor economic growth at feasible rates can help poor countries in Asia until their population increase has been reduced to between 1.0 and 1.2 per cent a year (Rao, 45, p. 86). However, no one knows how this can be done, although there is much rhetoric on the subject.
In the Lewis growth process, accumulation of capital occurs in the capitalist-industrial sector through rising profits. Peasants contribute nothing except labour when their appointed time arrives. In the real world, it was discovered that things do not work out this way. Successful economies, such as those of Japan and Taiwan, show evidence of a continuing and substantial transfer of resources from the countryside to the city. These transfers are effected in several ways, the most visible being through government taxes on agriculture. In the case of Japan, agricultural taxes accounted for 85 per cent of total government revenues during 1888-92. Thirty years later these taxes grossed 44 per cent (Johnston, 27, p.81). The Japanese tax on land is much admired in the literature.
Another method of extracting the surplus from agriculture was through rents paid to the landlord. The literature on the woes of third world peasants invariably deplores the rapacity of present-day landlords who take as much as 50 per cent of the crop. But the Japanese landlord of the Meiji period, often regarded in literature as a paragon of economic virtue, helped himself to a much bigger slice, varying between 58 and 68 per cent (Ohkawa, 41). However, it was noted in extenuation that he invested a good part of this in industry, as well as introducing technology to his tenants (Fei and Ranis, 13, pp. 164-70).
Other means of resource transfer include producing for export markets, the foreign exchange proceeds of which being at the disposal of the government to pay for imported capital and other equipment. Yet another way was the savings of farmers and landlords deposited in financial institutions. In these varied ways, including a tax on fertilizers, agriculture in Taiwan made a notable contribution to the growth of the modern sector (Lee, 32).
By contrast, the record of many poor countries, particularly the poorest and most overcrowded of them, shows a flow of resources in the reverse direction, from city to countryside, from the modern to the traditional sector (Mellor, 37; Fei and Ranis, 13, p. 134). The large countries of South Asia provide special tax privileges for incomes arising from agriculture. The reason why this happens is given as the political power of landlords (Griffin, 20, p. 253).
Another reason, perhaps the more important one, arises from the distortion of the growth process introduced by the Ricardian Bind.
This is a much dreaded happening, calculated to wreck the Lewis growth model. Unfortunately for the poor countries, Ricardo’s curse on farmers has a singularly vicious effect, and this is due to Engel’s well-known law. This states that a larger proportion of the budget goes to food in poor families as compared with rich families. In many poor families, expenditure on food consumes three-quarters of the monthly budget. Any increase in incomes means that demand for food goes up fast. The income elasticity of demand for food is estimated to be around 0.9 in poor Asian countries (Schultz, 47). FAO rates it at 0.66 (FAO, 11, Vol. 1, p. 31). It is the misfortune of these countries that a high income elasticity of demand for food is associated with uncertain food supplies. Thus any rise in money income quickly results in price inflation, should the weather turn out to be unkind.
A 5 per cent increase in GNP would mean that demand for food would increase by nearly 4 per cent on account of high income elasticity of demand and high rate of population growth. Could this be moderated by a high price elasticity (Mellor, 39)? No dependable studies of price elasticity of demand for food in Asian countries have been made, but it is unlikely that the figure will be large. Price fluctuations suggest low price elasticity, even allowing for the activities of hoarders. Even the act of hoarding would be profitable and worth the risk only under conditions of low price elasticity.
Given such high income elasticities of demand, a 5 per cent annual increase in GNP will throw a country into the Ricardian Bind unless it can increase agricultural output over an extended period by nearly 4
per cent a year. The experience of Japan as well as the postwar experience of developing countries do not give grounds for optimism that this can be done. FAO gives the annual increase of food supplies in Asian developing countries at 3.1 per cent for the decade 1952 to 1962 and 2.7 per cent for 1962 to 1972 (FAO, 10, p. 74). These figures of food increases are by no means derisory, despite unending criticism heaped on backward Asian agriculture. The much-admired Japanese farmer of Meiji averaged only a 2.3 per cent increase in net output between 1878 and 1917 and even less after that (Ohkawa and Rosovsky, 42).
What about capital accumulation financed through ever-increasing profits in the capitalist industrial sector? Again the reality departs from the model, except perhaps during the first phase of industrialization in the 1950s. In the large Asian countries, manufacturing industries ran into considerable trouble, partly due to weaknesses in planning and management, shortages of foreign exchange for required imports, leading to unused capacity, and increased cost (Singh, 49, pp. 213-26). The belief is widespread in the literature that it is a mistake for large poor countries to choose the path of capital-intensive industrialization. (Fei and Ranis, 13, p. 134). One effect of this has been that the increase in industrial work force could not even absorb existing urban unemployment much less being able to offer employment to rural migrants.
Under these circumstances, it is difficult to understand how and why the Provisional Indicative World Plan of FAO thought it possible to project urban job opportunities increasing at a rate of 3.8 per cent a year. It was only when the Japanese achieved their postwar economic miracle, investing 34 per cent of their GNP, that the urban work force increased to 3.7 per cent in the decade ending 1964.’In the case of Taiwan, during the decade 1950 to I960, when the manufacturing industry was growing at 17 per cent a year, the urban work force annual growth rate was 3.6 per cent (Lee, 32, pp. 138-9).
Can the “Green Revolution’’ provide an escape from the dilemma facing the third world? The Green Revolution is based on the discovery of new strains of rice and wheat which would increase yields spectacularly provided the right inputs of water and fertilizers are arranged. These new strains yield large increases of output, up to 6 or 7 tons per hectare being possible as against 1700 kg for traditional varieties (Barker and Winkelmann, l,p. 141; FAO, 11).
It is important to note that adoption of the IR8 and similar seeds introduces new elements to traditional farming. First, the right mix and amount of fertilizers and water are critical to success. This implies that
the farmer must have first knowledge how to use the seeds and second the resources to procure fertilizers and an assured water supply. This has limited its spread, reported to have reached to only 13 per cent of Asia’s rice growing area in the first three years (ECAFE, 7).
Because of this characteristic of the new seed, the effect of its use in traditional agriculture has been unsettling. This arises from the fact that better-off farmers, with more income and education, could use the seeds and benefit from greater output (Griffin, 20, p. 245). The poor peasants, being unable to obtain credit for fertilizer purchases, or to install tube-wells, or to learn how to use these seeds from agricultural extension officials, are placed at a disadvantage, with the inevitable result that the poor get poorer and the rich richer. So one outcome of the Green Revolution has been to accelerate the process of dispossession of poor farmers. This is because wealthier farmers could make profits, which increase proportionately with the size of their holdings (Ishikawa, 24).
The Japanese, who could do nothing wrong, were successful in preventing the dispossession of poor peasants. The size of the farm remained stable, one hectare per family being the norm, and the percentage of tenant farmers remained virtually constant, 44.5 per cent in 1903 and 46.2 per cent in 1917 (Ohkawa and Rosovsky, 42).
The Green Revolution has got off to a bad start. However, there is no reason to believe that the lessons of the recent past could not be learnt and that new policies and better implementation could not produce a sustained increase in food output in the decades to come. It is not difficult to say what has to be done, the prescription for success recurring in almost identical terms in the literature. Mr McNamara summarized them neatly as follows:
(i)	Accelerate the rate of land and tenancy reform.
(ii)	Better access to credit for poor farmers.
(iii)	Assured availability of water for everyone.
(iv)	Expanded extension facilities backed by intensive agricultural research.
(v)	Greater access by poor farmers to public services.
(vi)	Most crucial of all, new forms of agricultural institutions and organizations that will give as much attention to promoting the inherent potential and productivity of the poor as is generally given to protecting the power of the privileged (McNamara, 34, p. 17).
Can this be accomplished? The answer, as the World Bank President puts it, depends on whether governments of the third world
have the requisite political will. However if these governments summon the requisite political will to get the Green Revolution going, it must not be assumed that all will be well. A new sets of problems awaits them—overproduction leading to low prices for farmers (Islam, 25, pp. 549-52). In fact, this was exactly what happened in the Philippines after two seasons of the miracle rice (FAO, 11). The reason lies in the very nature of the Green Revolution which provides for a quantum jump of food output.
As this account of the tribulations of third world countries could be dispiriting, I will conclude with an anecdote to revive the spirits of the depressed. This concerns a well-known condition in third world countries, where the numbers of universities, academic staff and university graduates show a more robust growth rate than the GNP, a risky and unrewarding business at best, as Professor Myint observed (Myint, 40, p. 177).
I had occasion to raise this subject with a General of one of the ASEAN states and I asked him why his government had been establishing so many new universities. He said that when large numbers of students graduated from high schools, there were not enough jobs for them, so they thought it a good idea to keep the kids busy with university education. The General and his colleagues, perhaps unwittingly, had sharpened the teeth of the Malthusian Trap, with painful consequences to them when the Trap was eventually sprung on them.
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The Growth and Economics of Tourism
I am happy to be present at your annual dinner. May I take the opportunity to make some observations about the tourist industry.
Over the years, the growth of tourism in Singapore has been impressive. In 1965, we had about 100,000 tourist visitors; last year almost 1.2 million visitors came here. This is a 12-fold increase over ten years, or an average annual growth of 29.1 per cent. This year we are likely to pass the 1.3 million mark, and according to the Singapore Tourist Promotion Board’s Projection the number is expected to double by 1981, to reach some 2.5 million.
When the Changi Airport becomes operational we can receive more tourists. The Ministry of Communications estimates that some 20 mihion passengers will be passing through Singapore by 1990. On the basis of past ratios, some 5 million will be staying behind as tourists. The average tourist stays 5.3 days in Singapore and spends $527. The amount of foreign exchange earned from tourist spending in 1980 will be in the region of $2.6 billion, as compared to the $616 million in 1975. If we take into consideration employment created in hotels, passenger revenue to SIA, and shopping by tourists, you can see that the contribution of the tourist industry to Singapore is very large. But if we are not careful, there could be unexpected problems. I will refer to these later.
In August 1973, at the official opening of the Mandarin Hotel,
Speech at the Annual Dinner of the Singapore Society of Tour Agents at the Island Ballroom, Shangri-la Hotel, on 15 December 1976.
there was some gloom over the temporary hotel glut. The hotel occupancy rate then stood at 65.7 per cent and I sounded an optimistic note by suggesting that it could be the beginning of an upward trend. Events have happily borne out my forecast. At the end of 1975 there were 69 gazetted hotels with a total capacity of 9,904 rooms. The occupancy rate rose to an average 78.3 per cent at the end of last month. There is now an air of confidence in the tourist industry and some hotels are forging ahead with new expansion plans. By 1980 another 3,000 more rooms will be available, bringing the total to some 13,000 rooms. But on the basis of past trends, this may not be enough if we see a good recovery of the world economy beginning soon. However, this is a big “if”.
Growth in numbers is not all that matters. Singapore must achieve a high standard of service and efficiency to ensure that visitors arriving in Singapore return with pleasant memories. The recent implementation of “The Travel Agents Act 1975” and “The Travel Agents Regulations 1976” to license travel agents who provide tour and travel services to visitors in Singapore is intended to raise standards. Among other things, a Compensation Board was set up to compensate travellers who may suffer from the financial collapse of a travel agent or from the malpractice of a travel agent. We have witnessed the bankruptcy of some of the largest tour operators in UK in recent years, when thousands of frustrated tourists were stranded at airports and hotels. So far, Singapore has not undergone such nasty experiences. It is important that visitors who come here to enjoy themselves are not mistreated. Singaporeans too would feel disgusted if they had to undergo such unpleasant experiences when travelling abroad. Therefore, the tour agents have a big responsibility not to let the visitors down and to ensure that they get value for their money.
In recent years the number of ASEAN visitors to Singapore has increased. Between 1971 and 1975 it grew at an annual average of 17.5 per cent. ASEAN visitors to Singapore in 1975 numbered some 300,000 and this represents about 26 per cent of total tourist arrivals in Singapore. Singaporeans themselves are mighty travellers. We live in a-congested island and claustrophobia comes easily. In 1974, some 560,000 visits abroad were made by Singaporeans and the number is increasing. Unlike the populations of most third world countries, Singaporeans are not constrained by foreign exchange controls and this is as it should be. Those who have earned their money have the right to spend it as they wish. They too must be properly served by travel agents.
Slightly more than half of the 560,000 visits by Singaporeans were to ASEAN countries. The high level of intra-ASEAN tourist trade is gratifying. Close neighbours can get to know each other better, appreciate their respective cultures and understand their living conditions.
However, I would like to remind Singaporeans that when visiting neighbouring countries, they must conduct themselves with patience, courtesy and decorum. There is no need to raise a scene over minor things when treatment or service differs from what they are used to in Singapore. Too many of such incidents have come to my knowledge. No doubt the persons concerned were a boorish ill-mannered minority, but they give all of us a bad name. Singaporeans travelling abroad carry the Singapore name with them and the reputation Singapore gets abroad is partly formed by the inpression they leave behind.
The rapid growth of the tourist trade has both its blessings and its problems. On the one hand, it has contributed to significant foreign exchange earnings, created employment, and added to the construction boom in the recent past.
This is for the good. But can we keep on growing forever? Let me return to the 1990 estimate I referred to earlier, when some 5 million tourists are expected to come each year. We need more than 40,000 hotel rooms to house them. This means building some 210 new hotels of the same average size of today. Where are we to site these? Even if we can squeeze them somewhere, how long more can we keep going? We will need to employ some additional 50,000 workers in these new hotels. Where do we get them from when the number of school leavers will decline quite rapidly each year in the 1980s because of family planning? More than 70,000 foreign visitors will be moving about on any one day, adding to traffic congestion. They will go to our gardens, places of amusement, beaches, and restaurants. Our golf courses will be teeming with them.
I am not suggesting that we will have reached the limits to growth by 1990. For one thing we cannot be certain whether 15-year projections of tourists’ arrivals will actually materialize. But sooner or later, as the Singaporean finds that he gets crowded out by overseas visitors in available places for recreation and relaxation, he will wonder whether all this is really a good bargain.
What I am proposing is that we should look closely at the long-term problems which will arise from limitation of space, slow growth of population, and the requirements of our own citizens when they have to compete with the demands of the overseas visitors. When we have
understood these matters better, we can probably raise the maximum number of tourists we can receive each year, and still provide tourist visitors and local citizens with enough elbow room.
We can also ensure that every increase in the number of arrivals each year gives the optimum return to our economy. These are matters for close study by the experts both in the tourist industry and in government planning agencies. It is a pleasant problem to work on, unlike many situations which the Government has to deal with, the solution to which often requires the enforcement of unpopular measures. The problem is still a long way off. That is why it is better to start working on it now, rather than wait until it is upon us, when many options will have been closed needlessly, for want of foresight.
A Socialist Economy that Works
Between 1959 (when the PAP Government first took office) and 1975 Singapore’s GNP grew from US$643 million to US$5,773 million. During this period, the consumer price index increased by about 70 per cent. In real terms, it could be said that Singapore’s GNP multiplied five times, and that the annual compound growth rate was 11 per cent. Singapore’s foreign exchange reserves increased during this period from US$ 110 million to US$3,351 million.
These are gratifying results for an underdeveloped country to have achieved. However, the process was not, as many foreign observers believe it to be, a simple or painless one. Regrettably, many Singaporeans are also coming to share the same belief, thereby making themselves complacent.
Indeed, when we took office in June 1959, under a constitution which provided for limited self-government, the setting could hardly have been less auspicious. The People’s Action Party, which was formed in 1954, was a junior partner of the communist united front, against British imperialism. There were extensive acts of violence, largely communist-inspired, in the course of this anti-imperialistic struggle. Apart from acts of terror on individuals, such as the execution of recalcitrant trade union and student leaders by underground terror gangs, three large-scale riots occurred between May 1954 and October 1956. Seventeen people lost their lives and seventy -eight were seriously injured. In addition, acts of arson caused serious
Published originally in Socialism that Works—the Singapore Wa у (Singapore, 1976).
loss of property.
Major riots of these proportions were by no means exceptional occurrences in Singapore’s history. There was, for instance, the “Bertha Hertogh riot” in 1950, which was directed against the European population of Singapore. They, and those resembling them, suffered grievously; 8 were killed and 118 injured. The Singaporean’s propensity for violence has a long history which goes back to the nineteenth century. This is often forgotten by present-day observers who comment on the orderliness and self-discipline of the Republic’s citizens; and this also explains why the discerning Singaporean is not impressed when petite-bourgeois amateur European revolutionaries call, from the comfort of their universities, for the violent overthrow of the Government in Singapore.
The anti-imperialist united front campaign of the 1950s represented not only a demand for independence: it was also a protest against those social and economic conditions which people regarded as intolerable. Living conditions in the city’s overcrowded slums were appalling. There was widespread unemployment, particularly acute among those with secondary education, and especially among those from the Chinese language schools. But the mass agitation and mass action which the united front mounted made it less likely that any solution could subsequently be found to these problems: to create employment, it was necessary to increase the rate of investment in employmentcreating industries, but the semi-revolutionary atmosphere of these years hardly provided the right kind of setting to encourage expansion of investment.
Those were stirring years for patriots, fellow travellers, and communist cadres, all working towards a single purpose—the downfall of British colonial authority. The PAP was, as stated above, the junior partner. We were, so to speak, the apprentices to the magician, who had a far longer experience and expertise than we had in struggle and political organization. Their penetration and control of student societies, trade unions, farmers’ associations, women’s associations and others, were marvels of political organization. Their manipulation of these mass organizations and their orchestration in strugglecampaigns displayed extraordinary finesse and skill. As apprentices to the magician, we occupied a vantage point from which to observe the master’s virtuoso performances as he drew thunderous rounds of applause from the mass audiences. More than once we said to ourselves, “Ah, that’s how it is done!” We took these lessons of apprenticeship to heart, and later, when the social democrats broke off
from the communists, we were able to apply them to good effect.
In June 1959 I was appointed Finance Minister and was charged with the duty of solving Singapore’s endemic problem of mass unemployment, as well as that of obtaining funds to rehouse people living in urban slums and to educate the children produced by the postwar population explosion.
It was by no means easy to find a solution. The stock remedy was to industrialize: but how to do this? Apart from the political climate, which hardly inspired investors’ confidence, there were other constraints on industrial growth. Besides sand and granite, Singapore had no natural resources. The domestic market was too small to support import-substitution manufactures. Further, if the industrial effort failed, there was no fall-back position. The land area, then 225 square miles at low tide, was too small to provide an agricultural refuge for the unemployed. Moreover, the main source of Singapore’s economic activity, which centred round her port, was made more difficult by action taken in neighbouring countries, whose newly independent governments saw no reason to continue their countries’ dependence on Singapore as a transit centre for their exports. Both the Malaysian and the Indonesian Governments took active measures to divert trade away from Singapore, and to establish direct contacts with their terminal markets as well as with their import sources.
Under conditions then prevailing, the problems were insoluble. As a condition for assuming office, we had secured the release of the communist united front leaders who had been jailed by the British. The mass organizations were, therefore, once again under complete communist domination, and the government elected on a social democratic platform was virtually their political prisoner.
By I960, the social democrats in the PAP reluctantly came to the decision that they had to break with the communists, and possibly bring the fight into the open. Their chances of success were extremely small, and it was likely that the communists would then take over the reins of government, either directly or, more likely, through proxies willing to prostitute themselves for a brief illusion of political glory. The supply of such people was plentiful in Singapore, as it probably is in other countries. Vanity is a common human failing, especially among political aspirants.
The other option left to the social democrats in the PAP was to have the communist united front leaders arrested and locked up again. This was not only dishonourable, but politically suicidal. There would probably have been extensive rioting, and we would have had to depend
on British military power to keep the situation under control. We would have, therefore, exchanged political captivity by the communists for that by the British. There was no future in this option: we would have lost the moral authority to govern.
That was why, when Tunku Abdul Rahman, Prime Minister of the Federation of Malaya, publicly announced in May 1961 his interest in forming a larger federation which would include Singapore and the Borneo states, we responded favourably. Communist political strength in Singapore, based on control of mass organizations, would be diluted in the larger federation. Further, it could be expected that an anticommunist Federal Government would take immediate security action against the open front leaders and the mass organizations. These were simple calculations to make, and the communists, of course, came to exactly the same conclusion. It was this issue of merger with Malaysia that led to the parting of ways between the social democrats and the communists and their supporters, within the People’s Action Party.
We are not concerned here with the open fight between the social democrats and the communists which went on from 1961 to 1963: the events have been documented elsewhere. In relation to prospects for economic growth, the merger proposals had two advantages: first, with the achievement of political stability in Singapore, a more favourable climate for investment would be created; second, it was expected that the Malaysian common market, on which we had insisted as a condition for merger, would provide a larger domestic market. In this way, products could be manufactured in Singapore which it would otherwise not be feasible to produce.
In the event, both these hopes were doomed to disappointment. The setting up of the Malaysian Federation was opposed by President Sukarno of Indonesia, who mounted his “Confrontasi” against the new Federation. This consisted of military action at a low level of violence, together with international diplomatic action to isolate the Federation. Indonesian Confrontation had immediate and adverse effects on the economy of Singapore. Virtually the whole of Singapore’s entrepot trade with Indonesia ceased. The Indonesian economy was also damaged (perhaps to a larger extent in absolute terms, as they were unable to set up alternative trade, shipping and credit arrangements to handle the trade that had been going through Singapore). In addition, there were two race riots in Singapore, in July and in September 1964, which resulted in much bloodshed.
With regard to the common market, from which much had been hoped for, this never came about. Singapore’s experience as a con
stituent state of the Federation of Malaysia was therefore not a happy one. It was with some relief that people greeted our expulsion from the Federation on 9 August 1965.
The establishment of Singapore as an independent republic in 1965 did not signify an end to our troubles. It was true that the communist united front and their mass organizations had been crippled by security action taken by the Malaysian Government, but independence brought with it a new set of problems. A diplomatic effort had to be mounted to have the Republic accepted as a sovereign state by the international community. A defence force had to be built, virtually from a zero base: there were, at that time, two infantry battalions, two-thirds of whose personnel were either Malaysian or British. Both internally and externally, grave doubts were expressed about the viability of Singapore. Many observers, including, regrettably, Singaporeans who should have known better, believed that we would have to seek re-merger with Malaysia within a matter of months and under less favourable terms.
To add to these troubles, in July 1967 the British announced their intention to end their military presence in Singapore. This was certain to have grave consequences. First, it was feared that the impact on business confidence would be detrimental to investment. Second, British military expenditure was stated to have accounted for some 15 per cent of Singapore’s GNP. Further, some 40,000 Singaporeans worked as civilian employees at British bases. The already serious problem of unemployment would be made even worse.
The misfortunes that befell Singapore in the first decade of her existence, from a self-governing state to a fully independent republic, are forgotten by observers who believe that ours has been a smooth and easy transition to self-sustaining economic growth. The truth is quite the reverse. On the political scene, which dominated events in the first decade, there was an almost unending series of confrontations: domestically, between the communists and the social democrats; within Malaysia, between the State and Central Governments; and internationally, between Malaysia and Sukarno’s Indonesia. The outcome turned out, in every instance, to be favourable to Singapore and her democratic socialist leadership, but it was no pushover. The outcome hung in the balance for excruciating months, even years. Sometimes, it seemed that escape from disaster was achieved only through the assistance of a benevolent Providence! However, a more mundane explanation is that Singaporeans had the grit and stamina to persevere in adversity. When the lucky breaks came, we were able to take advantage of them.
Yet, throughout the turbulent first decade, some progress was achieved, though not sufficient to make a sizeable impact on the grave social and economic problems of the day. Progress was achieved because of two reasons. First, the economic strategy (details of which will be given below) was set in motion right from the beginning. It achieved some limited results. But more important than what we did was the generally favourable background of world economy.
The industrialized nations of the West and Japan experienced a long and sustained postwar boom almost to the end of the 1960s. The boom was itself a result of many new growth industries established in the postwar years and based on new technologies and inventions. To name a few, there was the electronics revolution, beginning with the transistor and progressing to the integrated circuit. A whole range of new products—battery-powered transistor radios, tape-recorders, television, stereo sound systems, electronic computers, satellite communications—gave rise to vast new industries. There were other new growth industries. For instance, the jet engine and rocket propulsion bred the burgeoning aero-space industry, mass air transportation, and global tourism. Then there was a spectacular growth of the petrochemical industry, leading to the production of all kinds of plastics and synthetic fibres.
Economic growth in industrialized countries produced full employment in most industrial nations by the early 1960s. Insatiable demand for these products led to two developments: first, the import of guest workers to some Western countries, mainly to Germany, Switzerland, and even to Britain; the second development took the form of the establishment of offshore manufacturing facilities in those less developed countries with governments whose policies were considered credible, which had a supply of disciplined and trainable labour, and infrastructure facilities needed by the manufacturing industries.
So, despite the adverse political conditions of the first decade, some progress was registered. During the pre-Malaysian years there was some investment in Singapore in anticipation of the common market. It was, however, in the post-independence years that industrialization really took off. Singapore was in full control of her affairs, both domestic and foreign. Her people realized that nobody owed them a living and that the price of failure was likely to be social disintegration. Curiously, the Great Cultural Revolution commencing in 1966, and in full swing by 1968, proved beneficial to the young Republic, as it induced multinational corporations to look beyond their traditional
investment areas on the periphery of the People’s Republic of China. The end of Confrontation and the revival of the Indonesian economy under President Suharto’s Government also produced beneficial effects.
The growth strategy which the social democrats adopted can be described as follows. First we need to define what we were trying to achieve. We tried to achieve a society where all citizens could have a decent living. In Singapore, this meant that we had to provide decent homes for the vast majority of the working population who were then housed under overcrowded and unsanitary conditions. This called for a massive programme of public housing. This, in turn, required that a substantial allocation of finance should be made for public housing.
Next, the object was to provide jobs for everybody who was willing and able to work. The demoralizing evils of unemployment, experienced by industrial countries in the inter-war years, and today a source of grave distress in many developing nations, are too well known to need elaboration. Mass unemployment was not only a serious problem in Singapore in the 1950s and also in the first half of the 1960s, it was also a source of political tension and instability. Where mass discontent of this kind is exploited by the communists through manipulation of mass organizations, the problem tends to be unmanageable because instability and unemployment feed on each other. Many third world countries, as well as some countries in Western Europe, find themselves caught in this bind. Escape from this is not easy.
Third, the aim was not only to provide jobs for everyone but also to give our workers rising incomes and improved standards of living over the years. It is clear that all these three objectives could be achieved only through continuous and rapid economic growth. How was this to be done?
Singapore’s strategy to achieve economic growth works along two lines. The first concerns the development of her human resources. In a country with no oil, minerals, or a large land area, this aspect is of crucial importance. People are Singapore’s only productive asset. The second aspect is concerned with the more technical methods of accelerating the expansion of the manufacturing industry.
As regards human resource development, this begins with basic education. A largely illiterate people cannot adjust easily to the modern world. Here we inherited a problem. Colonial governments the world over have never regarded universal education as a desirable or a necessary policy objective. All that was required, then, was to produce
a sufficient source of literate people to man the lower levels of the colonial bureaucracy and to service the banks, import agencies, and similar organizations. Furthermore, most of the educational effort was left either to missionaries or to local philanthropic organizations. There was, therefore, much to be done in the educational field in Singapore. New schools had to be built, thousands of teachers had to be trained— and all this in a hurry. The first phase of the education programme was to concentrate on the expansion of primary schools. However, after five years, it was necessary to expand the secondary schools, and later, the institutions of higher education. Total student enrolment in Singapore increased from 305,758 in 1959 to 522,441 in 1975. The increase was largest in the fields of secondary and tertiary education. Enrolment in secondary schools increased from 48,723 to 176,224 during this period. Enrolment at tertiary education institutions—the universities and polytechnics—increased from 4,981 to 17,816.
The development of human resources has also to take into account employment opportunities. When it appeared evident that the manufacturing industry’s growth prospects were such as to require increasing numbers of technically-trained workers, the school system was restructured towards vocational and technical education. This began in 1969.
The policies to induce the growth of manufacturing industries in Singapore excited much comment, in Singapore, when they were introduced. Later they attracted international attention. But our policies were not novel, innovative, or path-breaking, though Singaporeans believed them to be such because, to them, they were new. The general policy line follows what had already been attempted in many developing countries. What was different was perhaps that our policies produced results. This could be because they were implemented more thoroughly, and with a high standard of integrity.
The object of economic policy, in its narrow technical sense, is to provide an environment favourable to investment in employmentcreating and output-raising industries. In practical terms this means the provision of certain infrastructure services and facilities to supplement Singapore’s advantage as a convenient and efficient communications centre by sea, air, telephone and wireless. Infrastructure includes the supply of industrial estates equipped with all requirements—roads, power, telephones, water, and easy access to seaports and airports. Further, these services and facilities should be made available on terms which are reasonable and secure. In addition, industries should have access to finance, ranging from temporary
banking accommodation, to medium and long-term loans. Tax incentives in the form of tax holidays, resorted to widely in less developed countries, also have their place in the economic policy. To bring the opportunities available in Singapore to the notice of the industries of Japan, Western Europe and the United States, an active industrial promotion agency was created by an Act of Parliament in 1960—the Economic Development Board.
The details of economic policy varied from time to time, depending on the ebb and flow of the world business cycle as well as on domestic progress. For instance, in 1968 we decided to expand the scope of Singapore’s financial institutions by inviting large international banks to commence operations in Singapore and start the now well-known Asian Dollar Market. And as industrial growth mopped up available labour in Singapore, it became necessary to shift the emphasis from labour-intensive industries to skill-intensive industries. One result of this was the diversion of producers of semi-conductors and integrated circuits to neighbouring countries such as Malaysia and Indonesia, a spin-off from our growth policies that was as welcome to them as it was satisfying to us.
Singapore’s growing industries produced goods not for the domestic market, which was far too small, nor even for the regional market in Southeast Asia. The latter did not prove attractive because the governments concerned could raise sufficiently high tariff barriers as a means of inducing these industries to move out of Singapore to their countries. Our market was the world market. A number of consequences follow from this.
First, the best vehicles for achieving this kind of industrial growth are large foreign manufacturing enterprises who wish to reduce costs in order to remain competitive in the world market. The multinational corporations, much maligned nowadays for real or imaginary grievances, were the prime targets of the industrial promotion effort of the Economic Development Board. They offered real advantages. They brought with them not only production and management know-how, but also the world market for their products.
The second consequence of this policy was the need to maintain a high degree of efficiency in Singapore. This, in turn, meant that services and facilities such as power and factory sites had to be made available at the lowest, but not subsidized, cost. Labour productivity had to be raised to the highest possible level by good work attitudes and keen management. Last, but by no means least, the credibility of government policies had to be maintained by rational and consistent
application.
In addition to policy definition with respect to tax incentives and other inducements, the PAP Government embarked on an extensive programme to create new institutions and agencies to build the required infrastructure where these did not exist, and to improve and extend existing ones when these were not adequate. To provide industrial sites as well as ready-made factories, the Jurong Town Corporation was created by an Act of Parliament in 1968, to take over certain functions discharged by an overworked Economic Development Board. By 1975, the Corporation’s industrial estates covered 3,883.7 hectares, on which 613 factories were sited. These employed 68,000 workers. The Corporation also provided apartments for a good number of these workers. The Housing and Development Board, the main agency for public housing, established their own industrial estates, and these too proved popular because of close sources of labour.
The Development Bank of Singapore was incorporated in 1968 to take over the financing activities of the Economic Development Board. Half the equity was owned by the Government, the other half by commercial banks. By 1975, the total value of loans advanced, equity positions taken, and loan guarantees undertaken amounted to US$561 million.
The Public Utilities Board was created by an Act of Parliament in 1963. It took over the functions of utility supplies—power, water and gas—from the former City Council. The supply of electric power was vital to industry, and the PUB had to plan many years ahead so that industrial growth would not be curbed by supply shortfalls. The generating capacity of electricity increased from 152 megawatts in 1959 to 1,055 megawatts in 1975.
Apart from supplying the infrastructure, the Government had to involve itself in direct ownership and control of many industrial, financial and commercial enterprises. Some of these constituted risktaking ventures in partnership with the private sector, in the early years when investors needed encouragement. Some were established to fulfil new needs, e.g. setting up a national shipping line, or a maintenance workshop for military equipment. Others were items of “colonial heritage’’ such as Keppel Shipyard. In all, the Government had equity participation in fifty-two enterprises. As at 31 December 1975, these had a capital investment of US$173 million and an annual sales for 1975 of US$771 million. These companies earned net profits, before tax, of US$64 million in 1975. The above figures do not include the enterprises initiated and owned by the National Trades Union
Congress or subsidiaries of the fifty-two companies, of which, with regard to this, the Development Bank was prominent.
Before describing the results of our policies, I would like to briefly sketch the people’s response to them. Singaporeans accepted the objectives of our policies, as these were obviously desirable. They were also willing to give the experiment a try. As the economy expanded, gradually at first but rapidly in the last seven or eight years, new opportunities arose for people in all social groups. They found that they had a contribution to make, either as entrepreneurs, engineers and technical personnel, managers, supervisors, or factory workers. Not unexpectedly, they responded to these opportunities, since these provided them with a better livelihood.
Collectively, workers formed the most important organized social group. This must be so in any free society in which every citizen enjoys voting rights. Organized labour is important simply because it represents the majority of the electorate. The labour movement took an enlightened long-term view of their group interests. They were willing to give the growth policy a chance to succeed. They reigned-in the labour militants who, either from past experience or individual disposition, believed that the right thing for trade unions to do was to get at the employers’ throats. Had such a policy been adopted by the NTUC unions, our attempt at industrial growth would have been abortive; the two major social problems we inherited from the colonial past, mass unemployment and wretched housing, would have remained unsolved. But the NTUC took the path of enlightened long-term selfinterest, and this gave our growth policies a chance to succeed.
Taking an overall view of Singapore’s economic policy, we can see how radically it differed from the laissez-faire policies of the colonial era. These had led Singapore to a dead end, with little economic growth, massive unemployment, wretched housing, and inadequate education. We had to try a more activist and interventionist approach. Democratic socialist economic policies ranged from direct participation in industry to the supply of infrastructure facilities by statutory authorities, and to laying down clear guidelines to the private sector as to what they could and should do. The successful implementation of these policies depended on their acceptance by the people, generally, and on the active cooperation of organized labour in particular. All these conditions were fulfilled.
The Government’s direct effort in promoting industrial growth is substantial. The companies wholly or partly owned by the Government, which have been described in earlier paragraphs, had a payroll of
25,107 as at December 1975. This compares with 25,199 persons in the manufacturing establishments in 1959. In other words, the industries initiated by government effort was as large as the entire sum of industries existing when we took office! In addition, the number of persons on the payroll of statutory boards, which provided infrastructure services, amounted to 50,723 as at December 1975. All these, the companies and the statutory boards, are thriving concerns. They are not sick enterprises taking away resources from social expenditure and being kept alive by continuing state subsidies. This is all too often the outcome of so-called “socialist economic policies”. This happy result in Singapore is due to good planning, keen management, and an industrious work force.
The results of our economic policy are best summarized in terms of the value of industrial output, employment and investment. Singapore’s industrial sector—manufacturing, construction and utilities—contributed US$83.7 million to the GNP in 1959. In 1975, the value of industrial output was US$2,002 million. Percentage terms show how greatly the structure of Singapore’s economy has altered in the past sixteen years. In 1959, industry accounted for 13 per cent of a small GNP; by 1975, it accounted for 35 per cent of a much larger GNP. The manufacturing industry employed 25,199 persons in establishments engaging ten or more workers. By 1975, the number had increased to 218,096. Annual total investment—Gross Domestic Capital Formation in the annual Social Accounts—increased from US$49 million to US$2,589 million during the period, from 7.6 per cent to 37.6 per cent of the GNP.
The growth of the industrial sector solved the problem of unemployment, not only by generating jobs directly, but also through secondary effects. By the early 1970s it became necessary to import large numbers of guest workers from Malaysia to alleviate labour shortages. By 1975, the number of guest workers came close to 100,000.
Economic growth generated by industrial expansion also helped to solve the other acute social problem in Singapore—housing. The Government was able to provide adequate funds for public housing without resort to inflationary methods of financing. The total number of apartments in Housing Board estates increased from 23,091 at the end of 1959 to 211,282 at the end of 1975. Improved living conditions reflect themselves in various ways. Family limitation is a natural outcome of rising standards of living and a higher status of women. In 1959, Singapore’s population was growing at a record rate
of 4.1 per cent per year. By 1975, this had been reduced to 1.3 per cent. Better care of children resulted in a rapid decline in the infantile mortality rate, from 36 per thousand in 1959, to 13.9 per thousand in 1975.
But behind this array of figures lies the reality of a progressive and industrious people, who have achieved what many experts and observers had regarded as impossible in 1959, under the embattled condition in which Singapore was then. In the last sixteen years, Singaporeans overcame seemingly impossible handicaps and obstacles. We are not likely to give up these hard-won gains for the nebulous ideas offered by armchair pundits in the West. As for communist subversion conducted with or without violence, it is the duty of the Government to fight and to suppress it, in whatever form it takes. Singaporeans have been too close to disaster to be beguiled by those performing as the minor supporting cast to the real revolutionaries.
The North-South Confrontation
One way of looking at nations involved in the north-south confrontation is to group them as aid givers (the industrialized rich nations) and aid receivers (the poor third world). Of course it is more complicated than this. Some countries of the third world group, the Middle East oil states, are extremely rich. These played a special role in hotting up the confrontation, as we shall see later. Even among the others not all are equally poor, but the distinction between aid givers and aid receivers holds generally true. In fact, a great deal of the dialogue between the two groups centres around how the north can more effectively assist the south in its desperate struggle to escape poverty.
There are some curious features in the confrontation. Unpopularity of individual northern countries seems to vary in direct proportion to the amount of aid that they give. Conversely some of the most hostile, or at least most vocal, among the third world are the largest recipients of aid.
Nor is this apparently perverse outcome of aid-giving confined to the non-communist states. The Soviet Union was the sole provider of financial and technical assistance to the People’s Republic of China from its foundation in 1949 to 1960. Today China is the implacable enemy of the USSR. Egypt received enormous supplies of military hardware and some economic assistance from the Russians. It has not been a happy experience for the Russians.
Addressat Williamsburg VI. Penang. Malaysia, on 15-18November 1976.
Then we have the odd case of Switzerland. The Swiss offer no aid to anybody though they have the strongest currency and one of the richest countries in Europe. Further, their system of secret bank accounts is believed to be widely patronized by corrupt politicians and officials and nervous businessmen of the third world, thereby creating a reverse flow of capital from poor to rich. Switzerland has done all this without incurring the rancour of any poor country.
Today, there is disenchantment on both sides. The north-south dialogue is often marked with public acrimony and there does not seem to be much hope of an early resolution of their differences. What has gone wrong?
Clearly many things have gone wrong. Here we shall confine ourselves mainly to the economic aspects of the subject. It is a good starting point, even though for a complete explanation we need to look at other fields. Nevertheless the economic approach is important. For the whole object of aid is to assist countries of the third world to achieve economic growth at a faster pace and with less hardship than would otherwise be possible.
Let us take our minds back twenty-five years. Third world countries were emerging into independence by the score. There was a mood of confidence, even euphoria, that, freed of colonial rule, people everywhere would rapidly march forward to achieve material progress and social advancement which had been denied them under colonial rule. On 25 September 1961 the President of the United States, addressing the UN Assembly, proclaimed the 1960s as the UN Decade of Development.
The reasoning behind such beliefs, if simplistic, is by no means faulty. Poverty is the result of ignorance, which prevents the use of improved working methods in farms, industries, transportation and other spheres of economic activity. The knowledge to do things better exists and can be obtained either through learning or by engaging foreign experts. Vanquishing poverty and achieving the better life is largely a matter of applying knowledge and techniques already in use in other parts of the world, suitably adjusted to local circumstances.
It is accepted that this will take time and effort. It is also true that the application of scientific methods to production requires not only trained personnel but also capital equipment which would have to be imported in nearly all cases. This is the rationale for foreign assistance both with regard to the flow of funds and the supply of technical assistance.
It seemed in those early years that all that poor countries needed to
do was to use their resources judiciously, establish training and educational institutions to promote technical and scientific knowledge among their nationals and generally encourage new and improved methods of production. The ferment of capital funds and technical knowhow would progressively increase output and thereby raise living standards, slowly at first but with gathering momentum.
Except for a few countries, things have not worked out this way. Why have they failed? Despite the enormous research effort and unending conferences on the subject, leading to a vast proliferation of literature, no consensus has emerged among economists as to why third world countries have generally failed to take off into self-sustaining growth. But there is no questioning the dire troubles in which the poorest of them find themselves.
Mr McNamara, in his 1973 address to the World Bank meeting, stated that the poorest of these countries had a total population of 1,000 million. In the four years preceding 1973 the increase in their per capita income was a miserable 0.5 per cent a year. Since the oil crisis, declines have set them back to the starting point. If capital flows during the rest of this decade could be sustained at past rates, these countries will achieve, in the present decade, an annual increase in per capita income of 0.2 per cent.
One result of foreign aid received by third world countries is to increase the burden of debt service payments—interest and capital repayments. The World Bank estimates that, in seven countries, these used up more than 20 per cent of total foreign exchange earnings in 1973. Another five spent between 15 and 20 per cent of foreign exchange earnings on debt service payments, while another thirty devoted 10 to 15 per cent to these. It goes without saying that the growth rate of annual debt service payments far exceeds the rate of GNP or of export earnings.
It was under such desperate conditions that they witnessed the stunning success of the OPEC cartel which, in their perception, was achieved by united international political action. Until then, there had been conferences between the rich and poor in various international forums—in UNCTAD and other UN agencies, and in institutions like the World Bank and the International Monetary Fund. Limited and grudging concessions that were extracted from the rich, after years of apparently interminable negotiations, stood in sharp contrast with the spectacular bonanza produced by the OPEC coup. The two groups of the third world saw mutual advantage in joining forces. The poor thought that OPEC’s strong bargaining position could be used to prise
more concessions from rich countries. The OPEC states thought that the support of the largest voting group in the UN would lessen the risk of reprisals against them.
One result was to introduce a new aggressiveness among third world countries in their dialogue with the rich. In particular, the renewed demand for a new international economic order became more insistent and the tone of righteous indignation more strident.
However, it is not easy to see what is novel in the concept of a new international economic order, apart from the startling proposition that bankers and industrialists should be motivated by compassion and not by profit. Doubtless many problems can be resolved if businessmen become philanthropists, but nobody seriously expects this to happen. As for practical ideas, commodity price stabilization schemes have high priority. But these can hardly be called innovative. Such schemes emerged by the dozen in the aftermath of the Great Depression of the 1930s. There was even one introduced in this part of the world as early as 1922, the Stevenson Rubber Restriction Scheme.
Then there is the proposal for the reduction of tariff and other barriers to ease the flow of manufactured goods from poor countries to the rich. The cry for free trade goes back as far as Ricardo, even to Adam Smith. As regards more aid on better terms, this is a hardy perennial. Even the proposal for a moratorium on debt, or its cancellation, which has startled the financial world, is old hat. It has many respectable precedents, including the West European experience after World War One.
Even if the poor countries get what they want in aid from rich countries, that is to increase this to 0.7 per cent of the latter’s GNPs by 1980, this is likely to leave things much as they now are.
In these circumstances, it is difficult to understand what the excitement is about. The hostile reaction among the media of rich countries and even in some academic circles, though understandable, seems to miss the real point. Harsh words such as blackmail have been used. Blackmail implies a capacity to harm the victim. It is difficult to see how the poor states can harm anybody other than themselves. The media now delights in projecting a new stereotype of the poor countries as having corrupt leaders, grossly immoral inequality of wealth between rich and poor and repressive authoritarian governments. No doubt such strictures are by no means inaccurate in the general case, but again they miss the essential point. What is not realized is that these are not the intended results of policy, nor are they the outcome of moral depravity among poor people and their leaders. They are the
usual consequence of the dismal failure of economic development policies in these unhappy states.
What is the right thing to do? Clearly one has to distinguish between the rich and poor members of the third world. The oil states and their cartel constitute a problem quite distinct from those of poor countries. But even here, however painful the impact of their action, the oil states cannot be accused of acting contrary to the rules of the game. Moreover these rules cannot be changed other than by the use of force, a course of action few would care to contemplate.
As for the poor countries, aid to them should not be reduced or discontinued. It might help to defuse the situation if less aid is supplied through bilateral arrangements between governments of poor and rich countries and more channelled through international agencies of the UN set up for this purpose, such as the World Bank, the IMF and regional banks like the Asian Development Bank. The World Bank’s policy is to concentrate whatever aid is available on the poorest of the poor. Further, these agencies have technical staffs to evaluate the feasibility of projects on which aid funds are to be spent and in this way they can safeguard against misuse of funds by recipient governments.
At the same time, both sides must guard against unrealistic expectations of what aid can produce. Aid proponents in rich countries sometimes speak as if it is within their dispensation to determine success or failure of the poor countries’ attempts to develop. In part, it is the disappointed hopes of both rich and poor countries about the effects of aid that have led to the present mutual disenchantment. All that aid can achieve, given the volume that can be realistically expected, is to prevent things from getting worse.
If we expect aid to fulfil a role no greater than that of a holding operation, we may not be disappointed. Despite its modest objectives, this is a worthwhile effort. Eventually, man will find some way of learning from his past mistakes and find new methods whereby modern technology and capital funds can be made to produce the catalytic effect on backward societies to propel them forward, an objective hoped for but rarely achieved in the poor countries of the third world. The real problem is not what to do—this has been argued ad nauseam—but how to do it. Most likely, these countries have to work out new systems of social organization to replace existing institutions that have clearly failed. But nobody knows just how this is to be done.
What can the ASEAN states—Indonesia, Malaysia, the Philippines, Singapore and Thailand—do to ease the confrontation between north and south? As a group, the ASEAN states generally exercise a
moderating influence in third world councils at which they are present. This is hardly surprising. The ASEAN countries have consistently achieved better economic performances than the general run of third world countries. In most of the last ten years, their individual annual GNP increases ranged between 6 and 14 per cent; even during the recent recession years, growth rates were maintained at between 4 and 7 per cent a year. The reason for better than average performance is twofold.
First, the ASEAN states have a more favourable resource to population ratio than the overpopulated states of the third world. Apart from the islands of Java and Singapore, there are vast stretches of virgin territory awaiting development. There are also importartt natural resources, minerals and oil.
Second, the experience of the ASEAN states with the free enterprise system has not been unhappy. Private investment from abroad is widely encouraged through domestic policies on tax and other incentives. The shrill condemnation of multinational corporations is not heard among government leaders, though governments try to strike the best possible bargain with them in enterprises concerned with natural resource development. This is not an irrational attitude.
All this is not to say that the ASEAN states are free of the vexatious problems afflicting other third world countries. Nearly all of these are present—a backward and ignorant peasantry, an urban drift leading to visible and substantial unemployment in cities, weaknesses in economic administration, inequality of wealth. In addition, the region has special problems of its own, in particular, the threat of externally assisted communist insurgency. After the fall of Vietnam this has become a matter of concern. But these states have not been reduced to the level of despair and desperation that is apparent in the poorest of the third world countries. This is mainly due to their superior economic performance in past years. However, only the future can tell whether this cautious optimism rests on solid grounds.
 Part Two 
Industrial Relations
Some Problems of Manpower Development in Singapore
May I first say how privileged I feel by the invitation from the Council of the Academy of Medicine to deliver this address? It is by no means easy to select a theme which will do justice to the distinguished person whose outstanding contributions to the teaching and practice of medicine this series of biennial orations commemorates. Professor Ransome was noted as an outstanding scholar and practitioner; high though his attainments were in this field, what made him so widely respected, is, I think, his total and undivided commitment to his profession.
In Singapore, where distractions are many and the criterion of success is often taken to be the size of one’s bank balance, Professor Ransome’s example of total commitment cannot but be an example and inspiration to all of us.
In saying this, I am not expressing a conventional honorific, for in Singapore we survive and prosper or we decline into insignificance, depending solely on what our combined human effort amounts to. Because of the crucial importance of human effort, I thought it appropriate to speak on this occasion on some of the problems we face as a people in raising the performance level of the work we do. I have therefore chosen as the title of my address: “Some Problems of
The Second Gordon Arthur Ransome Oration by Dr Goh Keng Swee, Eighth Singapore-Malaysia Congress of Medicine, at the Auditorium, Regional English Language Centre, Orange Grove Road, on 26 July 1973.
Manpower Development in Singapore”. *
This is a very broad subject, but I intend to approach it from a rather specialized viewpoint, the point of view of the economist. The questions that are raised here go something as follows: ‘‘Are we training the right sort of people and in sufficient numbers? In fact, do we know what sort of trained people are required to sustain the momentum of our economic growth? And in what numbers? Who should do the training? If it is the Government, can we be sure that the taxpayer’s money spent on technical education, for instance, yields a reasonable return? What do we mean by reasonable return? In fact, how do we measure what the returns are?”
These and similar questions are studied in a sub-discipline of economics called “manpower planning”. Let me therefore say something about manpower planning and what manpower planners do, or to be more exact, what they hope to do. For this is a new subdiscipline of economics, though a rapidly growing one. Interest in manpower planning is of recent origin, the major theoretical formulations being developed not much more than ten years ago. Interest in the subject grew from various causes.
Among the poorer countries of the world, people were asking whether the prescriptions of the experts for achieving fast economic growth were correct. The main emphasis in expert recommendations for economic growth centred on capital investment. When, in many instances, this did not produce the results hoped for, people began to ask whether this was not due to the neglect of the other sectors of the economic system.
A natural component to examine was manpower or the labour force. Since these have to work in the factories or installations created by capital investment, some people believe that, perhaps with the proper development of skilled manpower, the missing link to fast development will be found.
There was also another reason for interest in manpower problems in many of these countries. This was the increasing and widespread unemployment of educated youth.' In a sense, unemployment of school leavers and even of university graduates ran contrary to the theories about economic growth.
To oversimplify a complex argument, we can set it out as follows. One of the causes of poverty is ignorance. Ignorance is due to lack of
* Mr Chua Seng Kiat has given me considerable assistance in the collection of data and documents. I have also benefited from discussions with him and Dr Pang Eng Fong.
education, and uneducated, superstitious people cannot be trained in modern techniques of production and management. Therefore, the extension of education and the raising of educational standards are necessary conditions of economic growth.
Experience in many countries, however, has shown that increasing the number of school leavers merely increased the number of the educated unemployed. It was not only a puzzling outcome of public expenditure but also a dangerous one. For nothing is more likely to produce political instability than an increase in the numbers of such people. And so the educators, the economists and government administrators in these countries decided to take a fresh look at the subject and in this way became entangled with the problems of manpower planning.
What is manpower planning? There are probably as many definitions of the term as there are economists. But broadly, what is grandly called “manpower planning” consists of a number of activities.
The first activity is collecting information about the labour force. This is done either by routine administrative exercises, such as the decennial census of population, or periodic returns of employees to the Ministry of Labour, or by ad hoc studies conducted either by government agencies or by universities and other research institutions. Such data give details of number of people engaged in various occupations, in various industries, as well as details of their ages, place of residence and whether they are men or women.
The second stage of manpower planning consists of making forecasts of future requirements of manpower. Such forecasts could be made either in minute detail, that is, for each and every occupation appearing in the official classification used in labour statistics, or they may be made in broad categories such as the requirements of skilled, semiskilled or unskilled workers. Or forecasts may relate to a specific industry, such as the number of cooks, chambermaids, barmen, receptionists and other occupations required in the hotel industry in the next five years.
There are many ways of making these forecasts, but they share one common feature, and that is that they are usually undependable. The reasons are not far to seek. You may ask employers what their labour requirements would be twelve months from now. Let us assume that all employers take this exercise seriously—a very big assumption, which in real life is not always fulfilled. While some employers may have an accurate idea of what they .need, this is by no means true of all or even
most of them. It is one of the inescapable facts of business in a free enterprise system that the future is uncertain. So, even with the best will in the world, you get data of uncertain reliability.
Where manpower forecasts are required for the planning of education, long-term forecasts extending to ten years or more are required. Such forecasts begin with the current stock of gainfully occupied population as distributed over various industries and occupations. Assumptions are then made about the following:
(i)	Annual growth of the Gross National Product.
(ii)	Growth of individual industries or sectors of industries consistent with assumed growth of GNP.
(iii)	Increase in productivity, enabling a given output to be produced by fewer men.
(iv)	Certain demographic and social factors—death rates, migration, age of retirement, etc.
Given the assumptions, projections do not call for more than simple, if tedious, arithmetic.
Experience of government collection agencies in countries which have made enquiries of employers of future manpower requirements generally shows a pronounced bias towards optimism. Also, the more detailed the manpower classification is, the greater the likelihood of error of individual items. Further, the longer the period of forecast is, the more undependable is the projection. This is hardly a surprising result.
The next step in manpower planning is to study the supply of labour. Again, this could be done on a comprehensive basis covering the whole economy and using detailed statistical classifications. Or the study could be done in broad aggregates. As with studies of requirements, supply studies could deal with specific sectors or industries.
Estimation of supply is usually based on output expected from schools and tertiary and professional training institutions as well as from general population data, such as the number of males and females in specific age groups expected to survive in a given year. In working on the latter, that is, general population data, we have to apply what is called “a labour force participation rate”. This gives the proportion of people, within a given sex and age category, who can be expected to be working or looking for work. As with studies of requirements, forecasts of supply may be produced for each year over the next five, ten or even twenty years.
The next stage in manpower planning is the matching of future pro
jections of manpower requirements with estimates of future supplies. In this way, shortfalls or excesses can be detected in particular occupations or industries, at least in principle, though not always in practice. There are some conceptual and theoretical problems as to what this matching up process means. But these need not detain us here.
The matching of expected manpower supplies with forecasts of requirements really completes the manpower planning exercise. If we leave it at that, one may well argue that this is an exercise in futility, juggling about with data of uncertain reliability, resulting in estimates open to question.
Despite these very serious limitations, there is no evidence of any diminishing interest in manpower planning as a subsidiary discipline of economics, or even, as some would like to have it, as an independent discipline in its own right. On the contrary, the evidence is one of growing interest, to judge by the number of international conferences held on the subject and the proliferation of literature on it. In Singapore, an international conference on manpower planning took place in May 1971. The conference assembled more than 70 scholars and policy-makers from East and Southeast Asia as well as from several developed countries. The conference discussed the problems of measuring labour supplies, problems of unemployment and problems of manpower development and training.
What is the reason for this sustained interest, apart from the tenacity and will to survive of manpower planners themselves? First, the planners defend their activities on the ground that it is better to have some kind of estimates than none, and that, anyway, estimation techniques continue to improve.
The second, and I believe, the real reason, is the importance of the subject for government policy purposes. To be sure, government interest in the subject varies from country to country. In the United States, for instance, the Bureau of Labour Statistics publishes biennial forecasts of requirements of more than 700 occupations. These are released to the public and to the main customers such as school-leavers or their parents, university graduates and, persumably, vocational guidance counsellors attached to institutions of learning.2
In Singapore our interest in manpower planning is a simple one. It is to ensure that there is sufficient labour in all grades and skills to meet the demands of the rapidly growing manufacturing industry. The main concern is to ensure that industrial growth, particularly in new industries using more advanced technology such as those introduced by multinational corporations, does not experience such difficulties over
labour supply that factories are unable to fulfil their production plans. Should this happen, not only will it slow down the rate of economic growth, it will also reduce the effectiveness of our industrial promotion work in foreign countries.
I propose to describe our experience in manpower development in Singapore in three stages. First, I will discuss studies of Singapore’s manpower situation, carried out by academic institutions and government departments, comprising mostly the kind of work associated with manpower planning. I will then discuss what changes and innovations have taken place in Singapore, both in training institutions and private industry, to produce skilled manpower. Finally, I will put forward some ideas about how one could integrate the activities of the planners and implementors into a coherent system.
By Singapore standards, the subject of manpower planning has received widespread and intensive attention, both in academic and official circles. In a paper to the “Committee for Asian Manpower Studies’’, Dr Pang Eng Fong reported an inventory of research material, carried out between 1967 and 1971, of no less than 72 titles.3 There were 20 published articles produced by the staff of the Economic Research Centre of the University of Singapore and other university scholars. There were no less than 22 unpublished academic exercises and Ph.D. theses in the library of the University of Singapore. The National Productivity Board was another prolific source with 22 studies. The Economic Development Division of the Finance Ministry contributed 8 publications on manpower problems.
This does not exhaust the list of research. The Ministry of Science and Technology has conducted one survey of scientists4 and is planning two other surveys next year, one on engineers and another on scientists. The latter is a follow-up of the first survey. The Engineering Faculty of the University of Singapore, in conjunction with the Singapore Institute of Engineers, also conducted a survey of engineers in 1970.5
The Research and Statistical Unit of the Ministry of Education has undertaken a number of research projects, which, though unpublished, are made available to serious students. They consist of studies of the electronics, electrical, hotel and engine repair industries.6 These make use of the pupils of the vocational institutes and other training establishments under the control of the Technical Education Department. The studies try to forecast future requirements, enquire into the experience of new workers as well as the attitudes of employers towards the products of the Ministry’s training efforts.
The other studies can be conveniently grouped as follows. First, descriptions of training methods and institutions in Singapore to produce the personnel required by industry, sometimes supplemented with comparisons of what is done in other countries. Such studies deal with both on-the-job training as well as formal systems of training. The Finance Ministry’s studies belong to this category.
Then there are studies relating to forecasts of manpower requirements in various industries, particular attention being paid to recently established industries with growth potential. The National Productivity Board between July 1970 and September 1972 produced a number of such studies which have now been discontinued.7 Industries covered included metal and engineering, shipbuilding and repairing, electronics, textiles, plastics and others. Particular attention in these studies was paid to methods of recruitment of new workers, categories of workers difficult to recruit, estimates of labour shortfalls and labour turnover. These reports were circulated to government ministries but it is not certain what action, if any, was taken in consequence of their findings.
A Manpower Planning Unit was set up in the Ministry of Finance in 1971 and is currently preparing the forecast of national manpower supply and requirements for the next five years. The methods used follow the general forecasting technique I described earlier. One interesting result that their preliminary estimates indicate is that it should be possible to sustain our present growth of 15 per cent a year, and at the same time reduce the number of migrant labourers imported each year.
The third category of manpower studies consists of those produced by the Economic Research Centre and the University of Singapore. These are of three kinds. First, the unpublished academic exercises produced by final year honours students of economics. These were mostly studies of the use of manpower in particular industries, dealing with numbers, categories of workers, wage structure, productivity and output, training, and other aspects. Industries studied included banks, printing, public utilities, textiles, and metal-working, to give a few examples. There were also studies of the employment of university graduates.
The weightier studies were carried out by the permanent staff of the Economic Research Centre which has always displayed a special interest in manpower subjects. In the early years of the institute, the emphasis seemed to have been on the demographic structure and the social and economic characteristics of Singapore’s population. Much of
the work was based on material collected in the sample household survey of 1966 carried out jointly by the Economic Research Centre (ERC) and the Ministry of National Development.8
Later work of the ERC analyzed the data collected in the manpower survey carried out in 1969, a joint operation of the ERC with the Ministry of Science and Technology, the Ministry of Labour and the Singapore Institute of Management. It was a manpower stock-taking exercise and covered all establishments employing 50 workers or more, not only in manufacturing but also in trade, finance and other services. Both private and public sector enterprises were included. Two types of questionnaires were used—one for each employee and one for the establishment.
The more recent works of the ERC, particularly those by Professor David H. Clark and Dr Pang Eng Fong, are important landmarks in manpower studies in Singapore. It is not only their intrepid treatment of uncertain data which is noteworthy, but also their broader assessment of the manpower situation in Singapore.
The studies by Clark9 and Pang,10 on the earnings of workers with various grades and types of education, concluded that the structure of secondary, technical and tertiary education in Singapore seemed to be consistent with market supply and demand. The differentials between different levels of academic education are in keeping with the cost of education; the same can be said for technical education, higher pay keeping pace with higher cost training. The conclusion suggested in the studies supports a policy of subsidies from public funds for both apprenticeship training schemes, on-the-job, as well as technical, craft and vocational education provided in Singapore.
The paper on “Manpower in Larger Manufacturing Firms in Singapore’ ’11 rather confirmed the opinion of an informed layman as to the nature of Singapore’s business practices. The study reveals a remarkable adaptability on the part of these firms. For instance, it was found that few of their skilled and semi-skilled workers have had either a technical or a vocational education and that they acquired their skills in the course of their working careers. Those with technical education, say, of Polytechnic level, are usually not found in jobs classified as technicians, but are doing work at higher levels, as supervisors or in managerial or even in professional capacities.
The general picture emerging seems to be that of a Singaporean doing work much beyond what his educational and technical background would normally have prepared him for. For instance, out of 886 persons classified as professional and technical, no less than 172
claimed to have either a primary education or no education at all. Out of 557 in managerial positions as many as 35 received a primary education or no education. The study concluded that not only in blue-collar jobs but also in professional, technical and managerial positions, while firms may prefer workers with an adequate educational background, many workers have risen to these ranks through informal job training.12
So much for manpower studies and planning. The picture is one of scattered, uncoordinated, if zestful work.13 Despite the lack of coordination, which is freely admitted by the participants themselves, it would be wrong to decry the value of the work. Taken together, they amount to a useful increase in our knowledge of manpower problems in Singapore. The experiments with techniques of data collection and data analysis will improve future efforts if the lessons learnt are applied.
Despite all this, these studies had virtually no impact on government policies and action to solve manpower problems. Studies and planning on the one hand and policy and action on the other moved in two separate watertight compartments. Before I go into the reasons for this extraordinary state of affairs I will describe the Government’s perceptions of what manpower problems were, and what it did to surmount them.
The Government was primarily concerned that economic growth would not be stifled by shortages of skilled manpower. While it was possible to ease a difficult situation by importing skilled workers, the basic solution must be found in training our citizens in required skills.
The Government’s efforts to provide technical training and instruction can be considered conveniently under four headings:
(i)	Crash programmes mounted in response to some foreseen urgent situation.
(ii)	Some experimental trials sponsored by the EDB with the assistance of UN agencies and foreign governments.
(iii)	Structural innovations in the system of formal education, (iv) Joint training programmes with employers.
Two crash programmes to provide technical training were carried out in recent years. In March 1968 a scheme was introduced to retrain clerical and other workers expected to become redundant on the closure of British military bases. There were 20,324 Singapore citizens known to be in need of re-employment; in addition, there were 5,021 non-citizens. It was estimated that some 9,000 citizens could be retrained and would benefit from it.
Training facilities in the form of instructors, classrooms and
workshops were found in the vocational institutes of the Ministry of Education, the secondary technical schools, and the workshops of the Engineering Industry Development Agency. Because these British base employees were still working, courses had to be arranged in the evenings and during weekends. Courses offered included turning and fitting, sheet-metalwork, plumbing, radio maintenance and repairs. Of the 3,309 citizens who applied, only 1,749 were found suitable on grounds of education, age, and willingness to undertake the courses offered. In all, seven sessions at elementary level were conducted between April 1968 and March 1971. Two additional sessions of upgrading training programmes were also conducted for some 295 trainees who had completed the elementary session.
Unfortunately, the follow-up on the results of this interesting experiment in the retraining of redundant labour was less than thorough. Perhaps this was due to other urgent preoccupations on the part of those in charge, or it could have been due to the belief that with the rapid growth of the economy, laid-off British base workers would find little difficulty in getting re-employment. In the event, only 232 of the 1,749 trainees were traced to their new occupations, and of these half were re-employed by Sembawang Shipyard, the former Naval Base under a new management.
The second crash programme occurred in 1970 when it became evident that the economy was experiencing a grave shortage of welders. This shortage was expected to worsen unless the output of welders was increased substantially and rapidly. The unexpectedly rapid increase in the demand for welders was due to the rapid increase in ship-repairing. This was again a consequence of the closure of the Suez Canal so that ships plying between Europe and the Far East no longer found it convenient to dock at one of the Mediterranean ports for repairs. Also, the burgeoning offshore oil exploration in the Southeast Asian archipelago created an entirely new industry in Singapore—the fabrication of oil drilling rigs and associated equipment. And this required large numbers of welders. The construction of new oil refineries and the expansion of existing refineries also increased the demand for welders.
The Technical Education Department of the Ministry of Education made use of all available training facilities to turn out welders in specially designed courses. From 1970 and up to June 1973, 1,789 trainee welders were trained through full-time, ad hoc and part-time courses.
While this effort undoubtedly got Singapore through a critical
situation, the same cannot be said for an elaborate and expensive experiment in training which was initiated by the Economic Development Board.
Because of its vigorous promotion activities, the EDB succeeded in attracting to Singapore not only a wide range of new industries but also technical and financial assistance from a number of foreign governments and from the United Nations Development Programme aimed at producing industrial skills.
By 1968, no less than six training centres had been established, namely:
(i)	The Metal Industries Ltd.
(ii)	The Prototype Production and Training Centre.
(iii)	The Electro-Mechanical Training Centre.
(iv)	The Electro-Chemical Engineering Centre.
(v)	The Woodworking Industries Ltd.
(vi)	The Precision Engineering Development Centre.
Foreign governments donating both machinery and experts included Japan, Britain and France. The six training centres received substantial donations of machine tools and a lavish supply of experts. One feature of these centres was that they trained workers by producing articles or components needed by industry. But there were certain restrictions on sales which somewhat nullified the value of this approach.
It soon became apparent that the management of six different training and production centres, sponsored and assisted by different countries, possibly for different purposes, each working under constraints of one kind or another laid down by the donors—all these added up to a severe management problem. In fact, management became unmanageable.
Nevertheless, the EDB struggled manfully. It set up the Engineering Industry Development Agency, or EID A, in April 1968, to exercise supervision and control over these six centres. A six-man committee was formed to run EID A in January 1969. In just over a year, an entirely new committee was appointed and this again was replaced by another clean sweep after fifteen months.
EIDA was one of the unsolved problems which I left to my successor when I left the Finance Ministry in August 1970 to assume my present position. Failure to solve this problem was not due to lack of trying. I had no less than three experts as advisers—two Americans sent under the International Executive Service Corps scheme and an Australian, an outstanding industrialist. However, after due consideration, I felt that their recommendations either involved a risk of
throwing good money after bad, or required the services of high-powered management personnel which did not exist.
Between 1968 and 1972, EID A turned out 886 trained personnel at a total cost of some $12 million in government subsidy. There are, obviously, more economical ways of industrial training.
EIDA’s woes may soon come to an end. The last Committee proposed converting the Agency into a business enterprise which must survive on its earnings. This recommendation was accepted by the Finance Ministry and accordingly a new company named National Engineering Services Pte. Ltd. was incorporated on 1 July this year.
The third effort of the Government was to restructure the system of education. By 1968 it was becoming increasingly apparent in the Ministry of Finance that the prospective output of technically trained workers produced by the school system, by on-the-job training schemes, and by other means would not be sufficient to meet the requirements of new industries which have decided to commence operations in Singapore. It did not require any elaborate process of manpower planning or research to reach this conclusion. Because of certain external developments favourable to Singapore, and as a result of energetic industrial promotion abroad, together with developed physical infrastructure at home, a substantial increase in the rate of industrial growth was expected, for which skilled manpower was clearly not available in Singapore.
Accordingly the Government decided to accelerate the plans under consideration in the Ministry of Education for the expansion of technical education. In addition, other training schemes were initiated.
In April 1968, a ministerial committee, chaired by the Minister for Education with the Finance and Labour Ministers together with their staff as members, was established to expand technical education in schools as quickly as possible. A Technical Education Department was set up within the Ministry of Education in June 1968 to implement this programme.
The new education policy aimed at increasing the proportion of secondary pupils in the technical stream to one-third of the total. It also sought to improve standards of instruction in terms of curricular content, classwork and workshop facilities, and the number and quality of instructors. Secondary I and II students in the academic stream were also required to do a minimum amount of workshop practice, i.e. three hours per week.
To enable the Education Ministry to achieve the targets in respect of construction of new buildings, classrooms and workshops, the pur
chase of equipment and training aids, and the recruitment and training or retraining of teachers, the Finance Ministry made funds freely available for such purposes. As a result of these exertions it was possible to expand the volume of technical education very rapidly. For instance, in 1968 there were only 425 technical teachers in the school system. By 1970, this had increased to 1,386 and had reached 1,950 in 1972. This was no mean achievement as the labour market was getting increasingly tight. The number of vocational institutes increased from 3 in 1968 to 11 in 1973. The output of students increased from 287 in 1969 to 3,544 in 1972. Similar increases were registered in the secondary technical schools, which, unlike the vocational institutes, did not train students in individual trades or craft, but gave them an academic education with a technical bias.
The vocational institutes offer a wide range of courses. The most popular courses include electricity, electronics, maintenance and repair of motor vehicles, refrigeration and airconditioning, and plumbing. These classes are running to capacity. The courses on building, carpentry and masonry are not popular, a strange situation when there exists a severe shortage of construction workers in Singapore.
The output of technical and vocational training in schools, while they gave a background knowledge in a craft or trade, had sometimes to be supplemented by specialized training. For this purpose two schemes were resorted to. First, the Government encouraged and subsidized the cost of training overseas in the case of foreign investors starting a branch in Singapore. By 1972, 1,264 trainees had been sent on such courses.
In addition, training in Singapore under a formal system of apprenticeship was revived. The apprenticeship system has had a long history in Singapore, but as there was no compulsion or incentives for firms running such programmes to acquaint the Ministry of Labour with what was going on, information was scanty. When responsibility for supervising apprenticeships was transferred to the Technical Education Department and, more particularly, when graduated apprentices obtained deferment from full-time national service, a clearer picture of the position emerged.
The terms and conditions of the apprenticeships, as embodied in the agreements, syllabus content and training programmes, have to be submitted to the Department for approval.
At the end of June 1973 the number of apprenticeship agreements on the Live register of the Industrial Training Board was 1,029. Of these, 756 were of national service age, but were deferred from full
time national service by virtue of their apprenticeship training.
Let us now take a broad view of the process of manpower development which I have just presented. The most outstanding feature is the virtually total absence of communication between those who study manpower problems and those in the Government who have to make decisions to solve these problems. There are several reasons for this. Partly, manpower planning as a sub-discipline of economics, being newly arrived, has yet to win recognition. Also, the introduction of manpower studies in academic circles, principally the Economic Research Centre, came at a time when the Government itself had to face critical problems and make urgent major decisions about them. Yet, even within the government machinery, there seems to be little evidence that those who collected data and made studies on manpower problems had any influence, or even contact, with the decision-makers. It may be surprising, under these circumstances, that the major decisions on manpower development by the Government turned out to be generally correct according to Professor Clark’s assessment.14
This happy outcome may be possible in a small country like Singapore with an uncomplicated one-tier system of government. Even so, while the decisions may be correct in broad outline, the implementation of policy embodied in such decisions would be more effectively carried out if up-to-date and accurate data were available to the administrators. This is particularly so when matters such as the types of courses to be offered in vocational institutes are being planned. Decisions on such matters involve costly outlays in specialized equipment as well as in recruitment and training of instructors. Mistakes may result in substantial financial losses, as such equipment is usually specific to a trade or craft, as we have seen with EIDA.
Coordination is not only poor between planners and decision makers, it is also virtually non-existent among the researchers themselves. One gets the impression of groups of highly educated personnel working in virtual isolation from one another. It is true that they did not always deal with identical subjects, yet they were all working in the same field. The reason is partly historical: different government agencies either felt the need to collect information, or else parts of such organizations thought it incumbent upon themselves to do so, regardless of whether their efforts were read by anybody, let alone appreciated or understood.
No less than five ministries are directly interested in manpower studies—the Ministry of Education, the Ministry of Finance, the Ministry of Labour, the Ministry of Science and Technology and the
Ministry of Defence. All these are in addition to the academics of the University of Singapore and the Economic Research Centre, not to mention Nanyang University and the Polytechnic.
Undoubtedly, the most valuable work in this field is done by the Economic Research Centre of the University of Singapore, led by the pioneering work of Professor You Poh Seng and Professor D.H. Clark. The work done by them and their assistants in the Economic Research Centre included not only field studies but applications of techniques of analysis and evaluation to the situation in Singapore. In the process of their work they have produced a number of trained personnel, who are now available to contribute to manpower planning in the light of this accumulated experience.
The last comment that I want to make on manpower studies is on the long time taken to complete the studies. For instance, much of the results of the manpower studies initiated in 1969 did not appear until two or three years later. The census of population, basic to all manpower planning, was carried out in June 1970. Today, three years later, the main report has still to be published. If research findings are to be used for policy decisions, some way must be found to produce quick results without sacrifice of accuracy or quality.
Obviously the present state of disjointed and uncoordinated effort needs to be remedied. The gains from teamwork are tangible and immediate. This is because manpower studies consist of a number of phases, each of which needs specialized knowledge and experience for good performance. Where the study requires the collection of data by field studies, as is often the case, the process of data collection involves the following steps: design of the questionnaire, definition of terms and preparation of field manuals, design and selection of the sample, selection and training of field staff, preparation of codes and classification, checking and editing of field returns, preparation of statistical formats, and, finally, the analysis, interpretation and evaluation of data.
Each stage in this process requires specialized knowledge. One gets the impression that much of the field work carried out in manpower studies was done by people with rather limited knowledge and experience.
By now, a good number of workers in the field will have accumulated the necessary experience and this should be made available in future efforts, provided coordinated teamwork is practised. In the course of time, workers in the field will specialize in one aspect or the other and their participation in any given project cannot but raise the
quality of work and reduce the time of planning and preparation.
The second requirement is to raise standards of work in all aspects in the treatment of data collected, such as data processing into statistical formats, their analysis, interpretation and evaluation. Most of the studies that have been produced are by no means of negligible significance or of inadequate standards. Nevertheless, many show evidence of weaknesses, which are hardly avoidable in first efforts. These are of no great concern as improvements will take place with accumulated experience.
There is, however, a danger that needs to be guarded against, and that is the very natural fault of human bias. To give a concrete example, take the forecast of future requirements of engineers. Engineers are prone to believe that their activities are essential to human progress and happiness. This is debatable, seeing that some human societies have reached great heights of enlightenment before engineers existed, such as Athens of the age of Pericles, China during the reign of the T’ang Emperor Hsuan Ts’ieng and Italy in the later Renaissance. Nevertheless, from this premise, it is a short step to the proposition that the more the engineers, the greater would be human progress and happiness. Accordingly, a forecast of requirements of engineers, if made by engineers, must be regarded as highly suspect. To be fair to engineers, this kind of tribal feeling is not peculiar to their profession.
The third aspect of work in which improvement can take place relates to the subject matter of manpower study. In place of what looks like a free-for-all, there should be a method whereby an agreement over priorities could be reached in the interests of our better understanding of these problems. In other words, manpower planners must begin to plan their own activities.
It is not merely a matter of avoiding duplication, but of giving some sense of direction and purpose to all those who are engaged in this work. One could divide the field of study into three convenient divisions. First, there are the basic studies which are not related to immediate needs. These would include work on the theoretical concepts underlying the thinking on manpower planning. These are still at an early stage of development. In addition to what one might call pure research of this kind, there could be applied research in the way of, for instance, refined analysis of past census data.
The second scope of research work would relate to experiments in methodology. This is rather important for Singapore as our economic system is quite unlike those of countries which have introduced
techniques of data analysis. The long-term manpower forecast conducted by the Manpower Planning Unit of the Ministry of Finance belongs to this category. Systems of data collection in field work under the multiracial conditions of Singapore need to be studied as a project in itself, so that we can have a better idea of the accuracy and efficiency of different systems of field work. While sampling theories have developed advanced methods of relating sample design to cost and accuracy, very little work has been done on minimizing errors resulting from data inaccuracies in field work. Yet these errors—called non-sampling errors—are probably more dangerous than sampling errors in practical work.
Third, part of manpower studies must serve the practical needs of decision-makers in the Government, in private industry, in trade unions and, if possible, of the more enlightened members of the general public. It would be wrong to insist that all research must have a practical policy orientation. Nevertheless, because policy decisions and, more particularly, policy implementation can be more efficiently effected on the basis of ascertained facts instead of inspired guesses, this constitutes a fair claim on the resources available for manpower studies. The difficulty here is not merely the identification of policy needs and translation of these into relevant research operations, but there is also the need to have the results satisfy certain conditions. First, they must be made available quickly. Second, they must be accurate. Third, they must be presented in a way that can be understood by decision-makers or policy implementors. It is not easy to satisfy all these requirements, especially in Singapore where, despite progress achieved, the amount of expertise is still limited in relation to what has to be done.
The importance of manpower development need hardly be emphasized. We are being repeatedly told that a small, overcrowded island republic with no natural resources must depend on the efforts of its citizens to survive and prosper. Yet an interest in manpower problems, even a knowledge of what these are, can hardly be said to be widespread. This curious lack of interest in what is a matter of crucial importance can be gauged by the scant attention given to the subject in the business section of the local Press. On the other hand, space allotted to the gyrations of the stock market and the activities of companies whose shares are quoted is exceeded only by reports on the current form of race horses.
Even among the specialist circles who have to make decisions or carry out government policies, amorig employers and trade unions, it is extremely doubtful whether more than a handful of people have read
any of the 72 manpower studies I mentioned earlier, even though many of these are relevant to their work.
The root of the trouble is that the subject matter concerns not one agency but several. But there is already an awareness of the need for better liaison and some steps have already been taken to effect this. But instead of ad hoc measures so typical of efforts in the past, one should aim for something more durable. To do this, it is necessary to define both immediate and distant objectives. The long-term objective should be to create a feeling of common identity among those working in this field. While manpower planners may be interested in different stages of work, such as the study, planning or implementation process, the ultimate purpose is the same. And that is to raise the performance level of all categories of manpower in Singapore by ensuring that adequate and timely resources are made available for their training and absorption, and, as far as possible, that requirements are foreseen and made available in time. There is a community of interest here which could be developed and sustained in several ways.
First, seminars could be held from time to time. The subjects should be not so much the findings of studies as discussions of methods and techniques in field work, in data analysis, in effective means of presentation, and the like. It is necessary to get the right approach to these seminars. The object is not to show off one’s skill or display one’s successes. It is rather to highlight problems and difficulties which were only partially resolved. Exchange of experience along these lines will be more productive to improvements in future work, and, in this way, will make it easier to earn respect and recognition from others.
A second way of fostering this community of interest is to issue what may be termed a “house paper” at regular intervals. Again, this should not be a channel for the publication of research findings, as there are other well-established media of publications, such as the Malayan Economic Review, for such publishing. Papers of narrow technical or professional interest which may not be suitable for publication in a journal like the Malayan Economic Review are best delivered at seminars. The “house papers” should give news about studies being planned, reports on progress of projects under way, and give resumes of findings of completed studies. There may also be news items about important developments in training projects, the starting of new ones, changes in curricula or syllabus content, departures or arrivals of trainees to and from abroad, and such topical items. The object of the “house paper” is to give an impression to workers on manpower studies that they work in a real, living and changing en
vironment in Singapore. At present, a good number may be overcome by the feeling of working in isolation, a condition which does not produce an attitude of mind conducive to creative work in applied social research.
The “house paper” should also take into account the needs and interests of those who read or should read their studies. In particular, the decision-makers at policy or action levels need to know what studies are going on which may be useful to them. But many of them may not be trained in manpower economics, and presentation must therefore make a point of avoiding jargon or technicalities so beloved by the specialist but also so irritating to the potential user.
If the steps recommended above are successfully taken, there will develop, in the course of time, an awareness of common interests. That will be the time when a less informal kind of association may be formed which would be the principal machinery through which a consensus on priorities may be developed. The association could also ensure that professional standards are safeguarded. It is too early to say just when this would take place, who should be responsible for forming such an association, and what kind of leadership is required to make it effective. One would hesitate even to suggest where the boundary line should be drawn between the kind of work described here and other closely allied subjects in labour economics such as industrial relations, productivity and demography.
Wherever the line of demarcation among the specialists, it will be necessary at some time to bring in the non-specialists in the administration so that they will know the tools of data collection and analysis available to them for decision-making purposes. I do not know when this will or should happen and how it is to take place. It is partly a matter of establishing confidence in research results, partly a matter of educating the non-specialist. Perhaps it will be a gradual process, but both sides should work to end as early as possible the present failure in communications between the two groups.
We should not lose sight of the principal objective—that is, to ensure that our sole natural resource, productive labour by brain and brawn, is used to the maximum advantage. The fact that the system has shown sufficient flexibility in the past should not lead us to believe that in running the more complex industrial system of the future, the unguided and uncoordinated methods of the past will suffice. We are more likely to succeed if we gear properly coordinated research efforts into the decision-making process. The more complicated problems of the future are not likely to be successfully solved by hunches, intuitive
judgment and inspired guesses. What we need to create is a system whereby adjustments that need to be made are quickly identified and studied with the evaluation sent to interested quarters in the administration for timely action.
May I conclude my observations with a few words of caution? First, the implanting of skill in a work force is only one way of achieving higher performance. As important, perhaps even more important, is the maintenance of proper attitudes towards work among the general population and the enforcement of work discipline in factories, offices and other work places. The weakening of the work ethics observed in so many parts of the world, both among the advanced nations and, astonishingly enough, among some poor countries as well, serves as a warning to Singapore on how necessary it is to prevent its occurrence here.
Work discipline at places of work is a specific subject in industrial relations. These matters are, therefore, outside the scope of my address. But there is one subject which is relevant, which I have not dealt with, and that is the subject of high-quality manpower. Though some of the ERC and other studies dealt with management, professional and engineering personnel, they formed a small proportion of the total effort. A study of high-quality manpower raises issues beyond those which economists are accustomed to deal with. One is immediately involved in the controversy as to whether genetic or environmental and cultural influences determine levels of excellence in intellectual performance. Then there is the subject of the celebrated brain drain, the flow of talent from poor countries to rich countries, impoverishing the one and further enriching the other.*5 Then again there is the brain drain in reverse, the inflow of expatriate talent to developing countries. People who deplore, and rightly so, the brain drain from poor to rich countries, illogically enough object to the reverse brain drain, and want to place limitations on it. These issues open up fascinating vistas of thought, but I must reserve them for some other occasion.
References
1	Blaug, M., Economics of Education 2, Selected Readings, Penguin Modern Economic Readings, 1969, p. 54
2	Lester, Richard A., Manpower Planning tn a Free Society, Princeton University, New Jersey, 1966, p. 112.
3	Pang Eng Fong, Country Statement (Singapore), Committee for Asian Manpower Studies, Division III Meeting, 26-8 June 1972 (Singapore, Economic Research Centre).
4	Ministry of Science and Technology, Singapore, National Survey of Scientists, 1971.
5	University of Singapore, Faculty of Engineering, The Engineering Profession in Singapore: Survey 1971.
6	A series of studies by the Research and Statistics Unit, Ministry of Education, Singapore, entitled “Evaluation of the electronics and related trade courses of the Technical Education Department”; “Evaluation of the electrical and related trade courses of the Technical Education Department”; “The young workers in the Hotel and Catering Industry”; and “A survey on the demand for diesel/plant mechanics’ ’
7	A series of Quarterly Manpower Surveys on various industries by the National Productivity Board, Singapore.
8	You Poh Seng and Yeh, Stephen H.K., “The Sample Household Survey of Singapore, 1966”, Malayan Economic Review, vol. XII, 1 April 1967. Issued as Reprint Monograph Series No. 3.
9	Clark, David H., “Manpower Planning in Singapore”, Conference on Manpower Problems in East and Southeast Asia, Singapore, May 1971. Published in Malayan Economic Review, vol. XVI, no. 2, October 1971.
10	Pang Eng Fong, “A Cost-Benefit Analysis of Science and Engineering Education in Singapore”. Unpublished.
11	Clark, David H., “Manpower in Larger Manufacturing Firms in Singapore”, Malayan Economic Review, vol. XVI, no. 1, April 1971.
12	Clark, David H., ‘ ‘Managerial Resources and Management Training in Singapore’s Larger Manufacturing Firms", The Singapore Manager, July 1971:
13	Clark, David H., “Manpower Planning in Singapore”, op. cit.
14	Ibid., p. 210.
15	Hoeh, F.H. Van, “The Migration of High Level Manpower from Developing to Developed Countries”. Publications of the Institute of Social Studies, the Hague (1970), pp. 19-21, give the following estimates: Between 1961 and 1967, 31,091 scientists, engineers and doctors migrated to the USA from developing countries. The brain drain of similar professionals into Canada during 1963-67 was 21,278. The disturbing feature was not only the large numbers but the accelerating pace of the brain drain.
The Labour Movement’s Response to World Inflation
Last November, speaking to a gathering of INCOME organizers, I predicted grim times for Singaporeans because of three external developments. First, poor harvests in food producing countries, second, inflation in industrial countries and third, the oil crisis.
The troubles that have befallen Singapore have come from these sources. Today, I propose first to bring you up to date with the latest developments in these three fields and next, to say what the trade union movement can do to make things more bearable.
First, let me deal with the problem of world inflation. Since last November, things have gone from bad to worse. Whereas in 1973 most of the industrialized countries had managed to keep price inflation below an annual rate of 10 per cent, the performance in February and March this year has shown a marked deterioration. Price inflation during these two months has risen between 12 and 25 per cent the annual rates, depending on the country chosen and the type of measurement taken—consumer price index, wholesale price index or GNP deflator. It is probable that industrialized countries will experience a 1974 inflation rate of more than 10 per cent with the more improvident countries reaching towards 20 per cent.
These high rates of inflation are only to a small part the result of higher oil prices. The major part of it, as my colleague Mr Hon Sui Sen has pointed out recently, was not the result of recent or temporary
Opening address at the NTUC Extraordinary Delegates Conference, at the Singapore Conference Hall on 20 April 1974.
factors. For several decades many of the developed nations have pursued imprudent financial policies. Mainly because political leaders had lacked the gumption to take sustained unpleasant measures, inflationary pressures had been allowed continuously to build up. The chickens are now coming home to roost.
Not only has price inflation reached critical proportions but there is at the same time a near bankruptcy of ideas among the world’s leaders as to how to tackle it. The experts—the economists—offer conflicting advice. In fact, the more honest of them have admitted that they do not know how the industrial nations can get out of their present mess without getting into a major world depression. So the present policy is one of drift, with governments hoping, like Mr Micawber, for something to turn up.
In fact, matters have reached such a stage that nobody really pays much notice to the experts of twenty countries who are supposed to reform the world’s monetary system. The experts have been at this job for more than a decade and people have lost interest in their work.
Since we buy a lot of consumer and capital goods from the West, the outlook for the rest of the year is that things will get worse before they get better. Of course world inflation would be checked by a sustained world trade depression. But this is like curing a patient of a high fever by giving him medicine which brings about cardiac failure.
Now, what about food prices, the second source of our troubles? There is little that can give us cause for much happiness here. In fact, there are two possibilities which will make things worse. First, high prices of crude oil mean high prices of fertilizers. A good number of countries in Asia may not be able to afford to buy as much fertilizers as they used to, and if this reduces food output, there is going to be more trouble. The second adverse factor is that most strains of the so-called “miracle rice” have recently shown increased vulnerability to pests and diseases, for reasons that are not very clearly known.
In the short term, however, things will not be too bad. Rice harvests in the last quarter have been of good average quantity. The world wheat harvest last year has also been good in most countries. The sardines which last year disappeared mysteriously from Peru have returned as a main source of protein, with the result that world soya bean prices have dropped sharply.
To sum up, the horrendous food price increases over the last eighteen months are not likely to be repeated. There may even be some decline in some food prices for the rest of 1974 if we are lucky. But the position with regard to rice still remains uncertain.
Fortunately for us this uncertainty was foreseen last year by the Government and we have a very substantial rice stockpile now in the island. While rice prices will remain high, possibly for the rest of 1974, there are ample stocks. Government stockpiles are such that it is not possible for rice merchants to manipulate prices by contriving hoarding or other forms of artificial scarcities. There is therefore little risk of violence and food riots of the kind that have taken place in several countries of the third world.
The third source of trouble I mentioned last November was oil. There was widespread alarm reaching almost panic proportions when the oil producing states jacked up their prices and reduced their output. Output has now been restored but prices have remained high. The world is now beginning to learn how to live with the high oil prices and much of the earlier prophecies of doom have turned out false. Still, the impact will be harsh on the poorer countries of the third world which do not have profitable raw materials to export. The world’s monetary system will be further upset by large additional payments which have to be made to oil producing countries, who will earn some US$40 billion more this year than last year.
As far as Singapore is concerned, we can ride out this one provided there are no further shocks. Malaysia and Indonesia are even better placed than us as they enjoy substantial gains in their exports of raw materials, and Indonesia now benefits substantially from high oil prices.
I now come to the second part of my address, and that is what should the labour movement do to meet the difficult times ahead? All of us will agree that the first responsibility of the labour movement, led by the NTUC, is to protect its members as best as it can from the harsh effects of price inflation. This means a rise in pay for lower-paid workers. In Singapore, these matters are settled in a high-level tripartite committee called the National Wages Council in which labour, employers and the Government are represented. The NWC had announced an interim increase of $25 per month to all workers earning less than $1,000 per month. The final award is in an advanced stage of discussion. I have no doubt justice will be done to all within the limits of what is possible in the difficult situation we face.
In other countries, when wages go up as a result of price increases, the results often do not benefit the worker because wage increases very quickly lead to further price increases. The country then goes into what is called an “inflationary spiral’’, with wages and prices chasing each other upwards. What we have to ask ourselves is “Will this happen in Singapore? ’ ’
My belief is that it will not do so to any important extent. There will be some domestic inflationary effect but the main impact will be elsewhere. The reason is that most of the output of our manufacturing industry are exported to developed nations. While wage increases will increase the cost of producing these goods, and hence their prices, what we risk is not so much further domestic inflation, but the loss of our export markets. So long as wage increases do not seriously endanger our export markets, they will do more good than harm. Some loss of export market is probably unavoidable; for instance, some textile plants in Jurong and elsewhere have closed down. This is the price we pay for wage increases.
Another effective way of protecting members from inflation is to stop profiteering. Many people have clamoured for price control, display of price tags, punishment of profiteers and so on. But these measures attack the symptoms and not the cause. A more effective way is to ensure a continuous and adequate supply of goods and sufficient competition among traders to make monopolistic arrangements unlikely. It is when traders gang up to create shortages, for instance by hoarding, that profiteering takes on rampant proportions.
As I have said earlier, the Government has safeguarded the people against profiteering in rice by going into the rice import business itself. While this protects the consumer during periods of rising prices, the full benefit of falling prices, if and when it occurs, will not be immediately available as stockpiles are liquidated. This is an insurance premium we have to pay for an assured supply of the most basic food we eat.
The NTUC has made a major contribution in the fight against inflation by the establishment of cooperative Welcome supermarkets. Two supermarkets have been opened, and more are in the process of establishment.
Public response to the labour movement’s entry into the retail trade has been most instructive. Toa Payoh Supermarket is now doing business at a monthly turnover of $750,000, while the Bukit Ho Swee Supermarket enjoys monthly sales of $355,000. Nearly 5,000 customers shop daily at the two supermarkets.
What is the reason for this tremendous public response? First, the management of the supermarkets provides good, efficient and honest service. Customers know that they will not get short weight nor will our supermarkets cheat them over quality. The range of products available is both extensive and attractive. The curious feature about our customers is that most of them do not want to be members of the co-op
and thus enjoy the annual dividends. Only 9 per cent of Toa Pay oh customers and 3 per cent of Bukit Ho Swee customers are co-op members.
By going into business directly and competing successfully with private enterprise, the NTUC has reduced the possibilities of price manipulation, hoarding, profiteering and other malpractices which, regrettably, some of our businessmen are not above engaging in.
What are the long-term prospects of Welcome supermarkets? I think they are excellent, provided Welcome maintains a keen management and continues to expand its operations aggressively, but after close calculations. There are opportunities in bulk purchases both locally and abroad to supply not only Welcome supermarkets but also friendly organizations such as the SAF supermarket and the Singapore Food Industries which buys food for our battalion camps. These three enterprises between themselves have an annual turnover of close to $25 million, which is not a bad base for bulk purchasing, importing and storage operations.
If we manage our business as efficiently as the best local businessmen do, I think we can more than hold our own against the private retailer. With increases in wages and opportunities for interesting careers in factories, the small-time grocer will find it increasingly difficult to engage staff. His main advantage is rent-controlled premises, and even this will diminish as urban renewal lengthens its stride in the coming years. There will always be a place for the corner shop and the private trader. But there will also be a place, perhaps of increasing importance, for the cooperative supermarkets which have got off to such a fine start.
The other two major enterprises of the NTUC—the Comfort Taxi and Mini-bus Service and the Insurance Cooperative, INCOME—in their separate ways help in the present fight against inflation. The manner in which they have developed and expanded has confounded sceptics and critics alike. Again, the reason for their success is the same as that of the supermarket: good management plus a need for the services they offer.
The directors of Comfort are to be congratulated for their firm policy on financial matters. It is only too easy in an enterprise of this kind to give credence to hard luck stories of members who say they cannot pay up their instalments when these are due. If this had happened, and malingerers are given an unfair advantage, Comfort would have headed for bankruptcy.
As it turned out, those who said they could not meet instalment
payments were threatened with the seizure of their vehicles, and as often as not this settled the issue satisfactorily. There is a saying that you sometimes have to be cruel to be kind, and nowhere is it better demonstrated than in this Comfort project. Of the $13.5 million lent by the Government to the co-op, $11.1 million has already been repaid, which includes an interest element of $ 1.5 million.
As things stand, more than 1,700 Comfort members have owned or are on the way to owning their vehicles, and hence achieving a secure decent livelihood. The co-op is in a strong financial position with an accumulated income surplus exceeding $1 million. Members will soon contribute to a savings scheme to which will be added rebates on their purchases of diesel fuel. These savings will help them to purchase replacement vehicles. A savings rate of $2 million for the first batch of 1,000 members is forecast in the first working year. What an excellent example this is for the rest of Singapore!
As regards INCOME, its expansion from the beginning until the end of last year has been gratifying. But the going has been more difficult since. Though some growth has been recorded in the first quarter of this year as compared with the final quarter of last year, it was not of the dazzling kind we have come to expect of INCOME. There may be a number of reasons for this. One possibility is that a good part of the easy cases have already been insured, and INCOME salesmen are moving to more and more difficult territory. Another reason could be that with the price inflation of recent months, wage earners might have to spend more of their income for current expenditure and hence have less to set aside for the purchase of policies. Whatever the reason, we will have to re-double our exertions.
We are facing difficult times and we do not know when our troubles will come to an end. What has been heartening is that in the past, whenever danger and trouble threatened, Singaporeans rolled up their sleeves and worked together to overcome them. But until our recent troubles, we have had several good years during which people became complacent and took their continued well-being for granted. Or else, each one pursued his own self-interest to the total neglect of our larger group interests.
So once again we have to re-learn the hard lessons of the difficult and dangerous first years of our independence: that we must work together, that the rank and file of the labour movement must rally round the leadership, and that the NTUC and the Government must cooperate to protect the livelihood of our citizens and to advance our national interests.
Some Lessons from
World Industrial Discord
It has become so fashionable to predict troubles in the months ahead that I propose to do the reverse and try to see whether there is a silver lining in the dark clouds looming over the horizon. I think this “prophet-of-doom” business can be overdone, although after the years of prosperity in Singapore a cold shower would do no harm at all in bringing about a more realistic attitude of mind.
Even in this forecasting of troubles ahead, we must distinguish between two types of forecasters. First, those who genuinely want to see what the future holds out for us so that we can be better prepared to meet these possible future troubles. Second, there are the idle gossipers and the chatterboxes who just follow the trend.
It is these latter people who, when we first foresaw economic troubles ahead, wrung their hands and said, “What a pity Singapore is so helpless, being without a hinterland.’’ These are the people who subscribe to rumours that we must seek remerger with Malaysia as the only way of getting out of our economic difficulties.
But now they discover that the people with a hinterland also have problems and troubles even larger and more complicated than ours. And that puts paid to their magic solution of merging with a hinterland.
When people are in trouble, they often look at other people to see whether or not these are also in trouble. Presumably, if they are, this would provide a source of comfort. If Singaporeans are inclined to this
Speech at the NTUC Ordinary Delegates Conference at the Singapore Conference Hall on 12 December 1974
kind of irrational conduct, they will find plenty of comfort in the world around them.
Not only are the poor countries in dire straits, with famine and unemployment prevailing, in addition to inflation and high oil prices, but even the advanced industrial countries present a. sorry picture of discord and disunity.
For instance, in Britain, the trade union movement, the Labour Government, the Opposition as well as the industrialists are at odds with each other. The unions demand very large pay increases because the consumer price index has shot up. When these pay increases are awarded, workers find themselves back in square one because the consumer price index has gone up as much as, and mainly as a result of, these pay increases. So an unhappy and frustrating situation arises.
But let us not dwell on other people’s troubles, other than perhaps to draw lessons from them so that we can avoid making the same mistakes. There are two lessons that we can draw. The first is that in an inter-dependent world that is growing smaller each year, prosperity is indivisible. This means that if one part of the world is in trouble, this will adversely affect people elsewhere. In fact, this is exactly what is happening to us today, and therefore, far from taking comfort in other people’s troubles, we should, in our own self-interest, wish them an early recovery.
The second lesson is that we must pull together as a closely-knit team. This has been said before but it bears repetition. When we look at the clamour and the discord the world over, we can only conclude that when people are at loggerheads with one another, they will make matters worse, rather than better.
The rich countries, of course, can afford more leeway in this respect. Not only because they are richer, but also because their democratic institutions are firmly rooted. Even so, there are creeping doubts in those European countries worst hit by inflationary recession about whether or not the whole system needs an overhaul.
In Singapore, we have neither the affluence and the high technology of the West, nor their long historical experience of democratic institutions. We should therefore look with suspicion at the spurious radicalism popular among some intellectual circles. These are irrelevant ideas which it is intellectually fashionable to borrow from other countries. But even there what little impact they have made has been for the worse.
The valuable lesson we learnt from past history is that if the three major partners for progress—the Government, the labour movement
and management—work together towards the common goal of increasing output, raising productivity and sharing increased wealth fairly, everybody in Singapore is better off for it.
Today, as the world economy is afflicted by the energy crisis, inflation, unemployment and recession, Singapore has come out extremely well, with a GNP real growth of 5 per cent this year, and an inflationary rate reduced to half what it was last year. We could not have achieved this if we had all gone our separate ways.
The year ahead will not be an easy one, but as Singapore has overcome major crises before, she will do so again. So long as this trinity—the Government, the trade unions and the employers—understand that their common interests are far more important than their sectional differences, we shall continue to attract capital investment from abroad as well as from our own entrepreneurs. The fact is that even as of now, new large manufacturing concerns are going into production, and major new investment proposals are being secured. All this shows that the economy is sound, confidence in Singapore remains high and that our economic problems are finite and soluble.
And this will remain so as long as we are prepared to work hard, to study and learn to improve ourselves, and to acquire new and higher skills, and as long as we recognize that our national interests sometimes conflict with our sectional interests and that, when this happens, our national interests must prevail.
Trade Discrimination by the Industrialized Nations: Some Suggestions
This is the first international conference on Asian shipbuilding to be organized by the International Metalworkers Federation. In collecting material for my talk to you, I came across the report of the Twenty-third International Metalworkers Federation Congress held in Stockholm last year. I was greatly impressed by the General Secretary’s review of the political and economic scene. What struck me most in reading through this document was the extensive coverage of significant world events and the depth of understanding displayed in the analysis of these events. The quality of presentation was such that many a foreign ministry would be extremely happy if its staff could have attained the same standard of clarity of perception and lucidity of exposition.
The International Metalworkers Federation (IMF) has shown an interest not only in the bread-and-butter issues of the trade union movement, but it is concerned also with many of the basic social and economic problems with which governments are bedevilled today. The theme which I put forward to you today should therefore fit into the broader perspective against which the IMF conceives its tasks and responsibilities.
I want to say something about the impact of economic development in developing nations on the advanced nations, particularly the impact
Address at the First International Metalworkers Federation Asian Shipbuilding Seminar organized by the PIEU and SILO, at the Singapore Conference Hall on 28 May 1975.
on workers of these countries. This is a subject which is much misunderstood, particularly, one suspects, among some powerful trade unions in Western countries.
In its simplest terms, the argument goes like this: when developing nations establish industries on the basis of low-wage labour, this threatens the livelihood of some workers in rich countries, because these industries, having to pay high wages, cannot compete with the low-wage, low-cost industries established in developing countries. Hence, from time to time, we hear a clamour for quota restrictions or shut-out import duties against products of developing nations. This has already happened in the case of textiles and textile products.
What I am suggesting here is that this is a wrong policy, not on humanitarian grounds, but on hard economic self-interest of workers of the industrial West. It may be difficult, indeed impossible, to convince workers who have been so laid off that what has happened is in fact for the good of their country. Precisely the same situation occurred in the nineteenth century, in Leicestershire in the years 1811-16, when a certain Mr Ned Ludd opposed the introduction of improved machinery because workers were laid off. Workers who followed him, the Luddites, resorted to wrecking machinery. We know now that they were absurd and were merely obstructing progress. Yet the twentiethcentury form of opposition, which involves trade discrimination by governments of industrial countries, and not machine wrecking by workers, gets widespread political support.
There is something of the Luddite complex about campaigns in advanced countries to shut off manufactures from developing nations. One can of course understand, indeed sympathize, with the plight of workers whose jobs are threatened. Indeed, it is not unreasonable that their governments would impose temporary quota restrictions if the object is to allow time for adjustments to be made to reduce the size of adjustment to- manageable proportions. This should be the object of trade restrictions, that is, to bring about a smooth transfer of labour and other resources from low-technology to high-technology industries. Such trade restrictions should therefore be temporary and be progressively reduced.
The experience of Western countries in the postwar decades has been that one of the major constraints on their economic growth has been a shortage of labour. Indeed many countries in Europe, such as Germany and even England and France, had to import millions of foreign workers in the last decade or so. In earlier decades, the additional labour required was found partly by migration of their own
rural populations to the industrial cities.
Under these circumstances it is not to their national advantage to contrive the survival of uneconomic industries by trade protection. But for political reasons, many governments have allowed this to happen.
The loss to advanced countries of such politically inspired restrictions is not merely to restrict the growth of high-technology industry because labour is being employed in unprofitable low-technology industries. There is another effect to which little attention has hitherto been paid: this is the effect on the demand in developing countries for imports of industrial machinery, transportation equipment such as aircraft, ships, trucks, telecommunications systems, and similar complex manufactures beyond the ability of developing nations to produce.
Most developing nations suffer from perennial foreign exchange shortages. It is this factor which limits their purchases of the capital goods I just mentioned, which they desperately need for their own economic growth. If their capacity to export simpler manufactures is curbed by trade restrictions imposed by richer countries, their ability to buy from these countries is reduced by the exact amount. So the high-technology industries of the West lose by the amount their low-technology industries gain. This does not make sense.
This argument is familiar to economists who recognize it as the elementary principle of comparative advantage. Nevertheless, the subject still remains only partly resolved, and especially during times of business recession the call for trade restrictions against developing nations becomes more vocal.
The difficulty here is that decisions on major economic matters are sometimes made by politicians acting on political grounds. Politicians have to look at the next elections, or even at the current opinion polls. They are all too often inclined to take a timid short-term and parochial view of events. But the short-term view is not necessarily the wisest. Politicians are apt to 'forget that economic growth, seen as a global process, is not a zero sum game. That is to say, more to the poor countries does not mean less to the rich countries and vice versa. If poor nations perform well in economic development, their demand for industrial machinery, transportation, and telecommunications equipment becomes effective as they have the means to pay for them. So the advanced nations benefit from this. Similarly, when advanced countries get richer, benefits also accrue to poor countries in the form of increased demand for their products, visits by tourists, and so on. It is a commonplace but nevertheless correct observation that prosperity
in this world is indivisible.
Earlier, I mentioned the advantage of rich nations specializing in high-technology complex industries, leaving simpler manufactures to developing states. The questions arise: “How does one draw the dividing lines between high, medium and low technology? Who decides what goes into which category? ’ ’
It is a tempting but false notion to believe that a committee of wise men or brilliant economists can make decisions on these matters. I do not believe they can, for the subject is far more complicated than simple words can describe. For instance, it is a widespread belief that textiles and garments are low-technology processes which could be left entirely to developing nations. Yet, one can immediately identify products and processes in the textile and garment industries that require high technology, skilled management and design, and advanced marketing methods, all of which are beyond the capacity of developing nations.
In these matters, the acid test is performance and not the opinion or judgment of individuals. By performance, one means the outcome of free competition unrestricted on the one hand by trade barriers and on the other undistorted by open or concealed government subsidies. Selection by this process of the market mechanism in the form of free competition is fair because it is impersonal. It measures and records economic efficiency; it weeds out the unfit; it provides consumers with goods at the lowest possible prices.
As this is a seminar conducted in Singapore on the shipbuilding industry, perhaps I should conclude with a few words on the shipbuilding industry in Singapore. Our shipyards repair as well as build ships. At one time, by far the larger proportion of work went to shiprepairing, but, in the last few years, the shipbuilding component has been rapidly increasing. This is mainly due to the search for offshore oil in the Southeast Asian archipelago, resulting in an increase in demand for drilling platforms, oil supply barges and such specialized craft.
It is important to remember, however, that though these are fabricated in Singapore, the greater part of the value of the final product comes from materials imported in many forms from developed countries, such as steel plates, steel pipes, engines and machinery, and sub-assemblies such as cranes, hydraulic systems, telecommunications systems and so on. The reason why offshore oil drilling rigs are fabricated in Singapore is that they are expensive to transport. The same argument goes for small specialized craft. In this field, there is a thriving trade going on here.
However, when it comes to bigger vessels, the comparative ad
vantage which Singapore enjoys is rather slender. In fact, it is in some respects outweighed by the disadvantage of having to pay for the transportation cost of imported semi-finished products and components.
The whole industry, whether shipbuilding, ship-repairing, or fabrication of drilling rigs, is carried out in a regime of free competition. Although the Singapore Government owns most of the large shipyards, and has an equity interest on a good number of the others, shipyards do not enjoy privileges or subsidies of any kind, open or concealed.
The Singapore Government has substantial ownership in commercial and industrial undertakings of all kinds—hotels, residential apartments, shipping lines, import-export businesses, departmental stores, banks, manufacturing industries, airlines, etc. Our guiding principle has been that these must operate on efficient business lines and compete with other firms on equal terms. They recruit personnel in the open market, both in Singapore and abroad. They are expected to make profits and if they do not come up to expectations, they are allowed to go bankrupt as we do not throw good money after bad. Mercifully, only a small number of these have suffered such a fate!
Even the trade union movement has embarked on a number of enterprises—four supermarkets, an insurance cooperative, a taxi cooperative, a mini-bus cooperative and a tourist agency, among others. Here again, the same attention is given to business efficiency, and enterprises are expected to pay their way and earn enough surplus to finance future expansion.
But this emphasis on business efficiency should not be misunderstood. Efficiency is not sought as an end in itself. It is a means whereby 2*4 million people, living in a small overcrowded island with no natural resources, can earn the wherewithal for a decent living.
The Engineering Industry in Singapore
While collecting material for this address, I thought that the logical starting point would be to find out how many engineers there were in Singapore. Imagine my surprise when the answer turned out to be “nobody knows’’.
People have been trying to find the answer to this question since 1971 and it has always eluded them. In 1971 the University of Singapore’s Faculty of Engineering carried out its first survey of the engineering profession in Singapore and last year the survey was taken over by the Ministry of Science and Technology. The 1971 survey gave a figure of 2,076 professional engineers resident in Singapore in mid-1971. But since this figure included nearly a thousand addressees who had not returned usable questionnaires to the University, the accuracy of the count must be held suspect.
The Ministry of Science and Technology did not attempt a definite count of engineers in 1974, but they got 1,991 usable questionnaires which they stated represented an 83.6 per cent response. If this is so, the number of engineers can be considered to be 2,382. But the calculation of response rate was obscure. For instance, it was assumed that questionnaires returned in the past represented engineers still in Singapore.
The 1970 census of population gave a figure of 3,449 as the total number of engineers in Singapore: 656 in civil engineering, 738 in
Speech at the Institution of Engineers’ annual dinner, at the Shangri-la Hotel on 4 October 1975.
electrical and electronic, 1,371 in mechanical, 285 in chemical and 399 in “others”. It is likely that people returned as engineers in the population census included those not professionally qualified, unlike the 1971 and 1974 surveys which used a strict definition. Census enumerators can hardly be faulted for being unable to distinguish between engineers and technicians.
Whatever the actual figures are, there is no question that the growth rate of the population of engineers in Singapore is a robust one, probably exceeding that of our GNP, for between 1971 and 1974, both years inclusive, the output of Singapore citizens graduating in engineering from the University of Singapore and universities abroad came to no less than 830: 460 from Singapore and 370 from foreign universities.
In addition during this period there was an increase of 2,414 new employment pass holders stated to be engineers. But this figure must be treated with reserve. The definition used by the Immigration Department is not certain; nor is it certain whether deductions had been made for departing engineers or lapsed passes.
The Ministry of Science and Technology survey of 1974 gave some interesting information about what work engineers do. More than half of the engineers in a sample, 50.5 per cent to be exact, were occupying what the report called “administrative positions”. By this is meant, presumably, not only administrative positions in government or the statutory boards but also management positions in private business.
In a mature economy one would expect engineers in management positions. They would have risen through the ranks of business to the top positions in the company. As a general rule, young engineers would not be in management positions. But what happens in Singapore is that while a greater percentage of older engineers do management work, the percentage among the young is by no means small. For instance, no less than 51 per cent of the youngest group of engineers under 25 are occupying administrative or management positions.
The reason for this is not clear and has not been explained in the report. But there is little doubt that an exceptionally large percentage of engineers are occupying management positions which may or may not be related to engineering work. The response to the question on what kind of upgrading courses engineers would prefer supports the belief that more engineers here are involved in business management than is the case in other countries. By far the most popular upgrading course desired was “business management”, drawing 43.4 per cent of the responses, with “civil/structural engineering” coming a poor second
with 11.6 percent.
If one takes into account the large proportion of engineers in management positions, together with the large number of expatriate engineers working on professional visit passes, one cannot but conclude that there is some kind of imbalance here even after allowing for ambiguities of the figures. It is a subject into which the Ministry of Science and Technology could well investigate further. In such investigations, they are well advised to supplement the sample survey technique which has been used so far with the method of selective case studies, which would explain more clearly what exactly is going on. Case studies could be studies of individual engineers, individual firms or individual industries.
The subject is of importance not only in the private sector but also in the public sector. The 1974 survey shows that no less than 44.4 per cent of engineers are employed in the public sector. If you take into account businesses in the private sector which are wholly or partly owned by the Government, the percentage of engineers connected one way or the other with the Government would be closer to 50 per cent.
The Government places a great deal of importance in the training of engineers. In the four years, 1971 to 1974, out of 714 first degree scholarships in overseas universities awarded by the Public Services Commission, no less than 441, or 62 per cent, were for engineering. Many of these scholarships were held in some of the most prestigious universities in the world. Our scholars usually perform well; indeed if they do not return with a first-class honours degree, eyebrows are raised in surprise.
The concentration of the best brains in engineering studies overseas has a number of important consequences which need to be further examined. The first consequence is that the best brains produced in our schools and trained in universities abroad are not available to the Government’s administrative service. In many countries, the top echelon civil servants constitute an important section of the intellectual elite of the country. And this should be so, for the task of governing a country is both complex and demanding.
The next consequence is whether there is work sufficiently challenging for these highly qualified engineers. If, during the eight years they are bonded to the Government there is not sufficient engineering work that can stretch their talents, then there will not only be unhappiness among these young engineers but the Government itself is not likely to retain their services for long.
In a mature economy, the best scientific and engineering brains are
not employed in running power stations, PWD maintenance depots, PUB waterworks, telecoms services and the like. They are engaged in research and development laboratories of large corporations, or in research institutes run by the Government or by universities. They work under people of world eminence on projects at the frontiers of knowledge. Their researches result in innovations in technology, manufacturing processes, new product design and new materials.
There is no work of this kind in Singapore. Even when a foreign firm establishes a factory in Singapore producing advanced products, such as the Hewlett-Packard electronic calculator, the design work and the R&D effort are done in the United States.
This is a problem of utilization of high-quality manpower. One of the difficulties is that the young believe that an engineering degree provides the high road to success. (At one time the rage was medicine, but now it is engineering.) While this is undoubtedly true for most, the exceptionally talented may be disillusioned by the kind of opportunities available to them, either in the civil service or in the private sector. Eventually they will make good, but if they rise to the top, it is likely to be in management positions rather than in engineering. Here again, there is scope for further study on what happened to previous batches of engineering graduates trained under PSC scholarships. The issue is not whether they remain in government service or leave for the private sector. In either case they make their contributions to our economic growth. But their contribution could have been better if we had proper career development plans for them. If the eventual position of the best engineers is high-level management, it may be advantageous both to the Government and the engineers concerned to train and transfer suitable engineers to the administrative service, providing thereby a badly-needed stiffening to that service. This is already happening, and the question is whether there should be more of it, and how it could be done more systematically.
The Meaning of Productivity
On this occasion—a trade union function—I would like to say a few words about productivity. This word is used very often and sometimes by people who do not fully understand what they are talking about.
Higher productivity does not mean working harder, in the sense of longer hours or more intense effort. When an employee is not working diligently and resorts instead to malingering, this is not a matter which concerns productivity: it concerns discipline. Slackers and shirkers have no place in a work force, and since they do not earn their keep they should be dismissed. It is a mistake for unions to take up their cause because, if reinstated, these shirkers will encourage good workers to become slack. This causes productivity to go down which is bad for workers because better pay depends on higher productivity.
When we talk about productivity, we mean the amount of the value of output related to the work force. In other words, output per worker. Output per worker is raised when the system of work is improved. This can come about in many ways, including motivating the worker to apply himself with more intelligence and diligence.
But the main increases in productivity have come from improving the system of working, either as a result of work studies, joint management-union action, or other means. In general, improved methods of working require better tools and equipment, and par-
Speech at the twenty-ninth Anniversary Celebrations of the Singapore Portworkers Union at the Port Authority Recreation Club, Bukit Chermin Road, on 6 December 1975.
ticularly the replacement of muscle power by horsepower. Higher productivity therefore means not working harder in the sense of straining your muscles, but working more intelligently, with machines and tools.
In some situations, workers object to such improved methods because this means the laying off of part of the labour force. This is a common problem when no economic growth takes place. Working more efficiently means requiring less workers to do the same work. But when economic growth is taking place, as in Singapore, higher productivity does not mean the same output done by fewer workers, but a much larger output done by the same number of workers.
The history of the Port Authority illustrates this point very clearly. In the old days, more workers were used in handling a given quantity of cargo. But, with improved methods of working, gang size was reduced progressively from 37 to 27 and then to 23, then to 15, and at present to 12 men per unit. The average working hours per day also fell from 12 hours, including compulsory overtime, to a 7-hour shift work. Clearly, productivity has gone up, but not because port workers work longer hours and use more muscle power.
The result of increased productivity has been an increase in average earnings per worker. In 1965 earnings of port workers averaged $256 per month. By 1974, average earnings had increased to $453 per month, a 77 per cent increase. This was made possible because of higher productivity. In 1965 cargo throughput at our port was 5.4 million tonnes. At that time the work force numbered 9,724. For 1974, cargo throughput was 17.0 million tonnes, and the work force was virtually the same, 10,304.
So you see, rapid economic growth which Singapore has achieved over the years has made easy the transition to a better system of work, resulting in higher productivity and higher pay with no reduction of employment.
If we compare the present position with the troubles which the port experienced during colonial times, the difference is remarkable. People today may not believe it, but there was a time when the Port of Singapore was renowned for a high rate of pilferage and a totally disgruntled, poorly-paid labour force with an unenviable record for strikes and work stoppages.
Today, because management and workers share a common objective to provide the international shipping community with fast, efficient and low-cost services, workers have benefited, the PSA has benefited, Singapore has benefited and international shipping has also benefited.
Organized Labour: The Japanese and British Experience
As the Prime Ministef told you last Sunday, Singapore now faces a new situation in the post-Vietnam era. This is due not only to the victory of communists in the Vietnam peninsula, but also to the state of the world economy. Though it is recovering from the recession, led by the expansion of the US economy, it is far from certain that we shall see again the fast growth rates of the 1950s and 1960s. This is the right time to take stock of our situation, and I therefore want to say a few words about the role of trade unions in Singapore.
It is a good practice to see what other people are doing before we decide what we ourselves should do. I therefore want to discuss workers and trade unions in two countries—Japan and Britain. As you all know, the Japanese have been extremely successful in economic management, but the British have had a lot of trouble.
First I want to describe a strange experience that I had when I visited Japan four or five years ago. I noticed that the driver of a car I travelled in was wearing a red armband. Later, when I visited the Tokyo office of SI A, I noticed that all Japanese employees were wearing red armbands. I asked whether there was some kind of festival going on. “No,” said the manager. ‘ ‘They are on strike. ’ ’
“Then why don’t they stay away from work?” I asked. The manager said: “They do not want to cause inconvenience to their employers. So they put on red armbands and turn up for work.”
Speech at the NTUC Second Triennial Delegates Conference, at the Singapore Conference Hall on 29 April 1976.
During the recent recession you will have read newspaper reports of how Japanese bosses and Japanese personnel managers who had to lay off workers committed suicide after discharging their workers. In Singapore there was, recently, considerable retrenchment in some industries, but no boss or personnel manager even contemplated this course of action.
It will be difficult to convince Singaporeans that what the Japanese did was rational and logical. Yet how does one explain the economic miracle they achieved in the postwar years? How could illogical people achieve such success?
There are certain features of Japanese trade unions, labourmanagement relationship and management philosophy and practice that make such seemingly bizarre conduct consistent and logical. Japanese trade unions are organized along lines which Western liberal intellectuals would deplore. They are company unions. Any British trade union leader will tell you that this is a thoroughly bad thing. Fortunately for Japanese workers, they did not have to learn from the British experience.
In the larger Japanese enterprises, which is the main sector in which organized trade unions flourish, workers are engaged for life. The kind of jobs they are given depends on their level of education. Since employment lasts throughout working life, annual increments are expected every year and accordingly salary scales are very long.
The pay a worker gets therefore depends on the job he does and on the number of years he has served the company. There is no such thing as a rate for the job in these large corporations. We may call them zaibatsu enterprises for most of them are organized into giant conglomerates called zaibatsu. Pay depends on seniority and so does promotion.
Dismissals or resignations are very rare events, possible only when some scandalous misconduct can no longer be concealed. This is true of what may be called the permanent staff of the zaibatsu enterprises. In addition, there are temporary workers who can be hired and fired according to market demand.
A Singaporean who is assured of lifetime employment, annual increments, regular annual bonuses, will find his eagerness for hard work and initiative greatly reduced. Why try to excel when this makes no difference to your pay? This apparently has not happened in Japanese enterprises. Why?
The answer lies in Japanese management philosophy. They believe that the way to get the most out of employees is to secure their total
commitment to their company. Such loyal employees can then be depended on to give of their best without costly and irksome supervision. Japanese employers, in the zaibatsu sector anyway, understand that commitment is a two-way process.
Loyalty of employees is secured in a number of ways. There are wide fringe benefits and big zaibatsu firms provide hospitals, creches and kindergartens, schools, holiday resorts, subsidized cafetarias and supermarkets, overseas holidays and even cemeteries.
Total commitment of a work force can be sustained only if relations between them are harmonious. Accelerated promotion disrupts this harmony and is therefore not resorted to as a general practice. However, at top management level, the really big prizes. go to executives after their retirement at the age of 55. The best join the top layer of corporate executives, the others are retired.
Harmony is also preserved within the management structure by a peculiar practice of decision-making through consensus. No major decision is taken without the agreement of all departments of the enterprise. This is a long and tedious process but it has some benefits. Once a decision is taken, all concerned are familiar with the reasons for the decision and the action which their departments have to take. Consequently, implementation is swift and thorough because coordination becomes an effortless process, in contrast to the normal system in which decisions are made at the top and filtered down.
Japanese enterprises go to great lengths to cultivate loyalty and to promote commitment. It is a common practice for employees to line up first thing each morning to sing the company song. Special care is taken to relieve frustration not only through the normal management processes but at times by special gimmicks. One company has installed a small room equipped with a dummy of the boss and a baseball bat. Frustrated workers leave the workshop floor to have a whack at their boss, and go back apparently satisfied and more productive.
Mitsubishi, one of the biggest of the zaibatsus, recently established a computerized marriage bureau for employees. The object is to pair off Mitsubishi bachelors with Mitsubishi spinsters and the computer works out who is compatible with whom. The executive in charge could hardly wait to see the results. “Just imagine,” he said, “what would happen when a Mitsubishi man marries a Mitsubishi girl. The Mitsubishi child will be totally committed to Mitsubishi right from birth!”
I have been saying that these arrangements hold good for the large corporations. Outside these, what is the position? The smaller em
ployers cannot afford either the high wages, wide fringe benefits or permanent employment which big corporations offer. In this sector of the Japanese economy, which employs nearly three-quarters of the work force, the normal competitive process applies to a harsh degree. One reason is that it is the custom for Japanese companies to depend on bank loans and other forms of borrowed capital to a greater extent than is normal elsewhere. During a recession, large numbers go bankrupt when they cannot repay these loans. So the counterpart to the idyllic scene of zaibatsu enterprises is this larger and more fearsome and fiercely competitive arena.
This sector of the economy is much involved in providing supporting services or semi-finished goods and components to the large corporations. It confers three advantages on the Japanese economy. First, there is flexibility in resource allocation—labour and capital— which the zaibatsu enterprises lack because of lifetime employment and other practices. Next, it provides zaibatsu industries with first-class low-price supporting services and products, thereby making these competitive in export markets. Third, it is a constant reminder to zaibatsu employees how lucky they are and what would happen to them should they resign, for no other zaibatsu will engage them. You can see that the system is complete and logically consistent.
I now turn to the British experience. It is a sad story. In recent years, a new term has been coined—malaise anglais or English sickness. The reasons for Britain’s economic troubles are complex and I won’t go into them here. But the nature of their affliction is less difficult to describe.
There is a high rate of inflation. When this went down to 14 per cent over the last six months, the Chancellor of the Exchequer considered this a cause for congratulation. High inflation rates are accompanied by high unemployment, now 114 million. The growth rate of their GNP has been low not merely in the last two or three years but for nearly two decades. Soon after World War Two Britain enjoyed the second highest per capita GNP in Europe. Now only countries like Italy, Spain and Portugal are behind her. What happened?
To oversimplify a complex process, let us start with a typical year when the British Government decides that the growth rate should be increased. The Government decides to spend more, reflating the economy, as they put it, by allowing government expenditure to exceed revenue. Money incomes go up, prices also go up, and for a while there is some temporary increase in employment and output. However imports also increase as people buy more. This causes a balance of
payments deficit and a fall in their foreign exchange reserves. Sooner or later, this becomes severe and the policy has to be reversed.
In the course of time this process, sometimes called the “stop-go policy”, is repeated several times. It becomes increasingly difficult to cut down expenditure. Politically, reducing the welfare state expenditure is not feasible. So taxes have to be increased, often on the most productive section of the economy. The public sector in Britain now disposes of 60 per cent of the GNP.
Over the years, workers and trade unions become restive over continuing inflation. Trade unions decide to go for really big wage hikes to keep up with rising prices. Until recently, a 40 per cent wage increase was considered reasonable. These wage claims are backed by strikes when necessary. It is a field day for militant labour leaders. But in the end what the workers get are even higher prices for the goods they buy. This is the result of so-called cost-push inflation. As the prices of the goods they export also rise, they lose out to foreign competitors, thereby increasing their balance of payments troubles. And so it goes on in a vicious circle and economic problems become more and more unmanageable.
It is remarkable that Britain of all countries should get caught in economic tribulations of this kind. For their universities have produced, from Adam Smith to Maynard Keynes, the main body of economics as we know it today. Further, the British have always been strong in science and technology. Take winners of the Nobel Prize, given for outstanding scientific achievements. From its inception in 1901 to 1975, the British had 71 prize winners, the Germans 58, the Americans 125. Per head of population, the British lead Germans and Americans by a wide margin. It is sad to see so talented a people reduced to such a stricken condition.
What lessons can we draw from the experiences of the British and the Japanese? From the Japanese success story, I am afraid there is little that we in Singapore can follow. The reason is that the system they have established is based on the cultural values and social customs which they have developed over the centuries. The stress in zaibatsu companies on loyalty and commitment, and the success which they have achieved here, is not something that we in Singapore can hope to emulate. We have a different history, and a different set of social values. Take the long salary scales, for instance, which the zaibatsu companies have found a necessary part of their management policies. Mr Devan Nair has come out openly against such practices in Singapore, which grew out of different circumstances. Does it mean that he is wrong? I
think not. Ours is a more mobile system, where, outside the civil service and some institutions in the public sector, neither life-long careers nor job security are regarded as desirable. On the contrary, many Singaporeans are inveterate job-hoppers, believing that they improve their prospects this way. You can’t change this overnight by exhorting people to be more sensible.
Nevertheless the Japanese experience shows that one basic ingredient of their economic success is the ability of unions and management to work for the common good of the enterprise. It is not unknown for Japanese unions to allow hard-pressed employers to pay their bi-annual bonuses in instalments.
We should also note that the free-for-all competitive area which employs most of Japanese workers enables the economy to adapt to changing circumstances more efficiently than most other countries can. It is a cruel process but then the world of business and finance is not made for kindly and gentle people.
The third lesson we can learn from the Japanese is the importance of supporting industries. I will deal with this in detail later but in the meantime I turn again to the British experience.
The most important lesson we can draw from their misfortunes is the danger of small or no economic growth. People who are against growth, such as environmentalists and, at one time, the Club of Rome, do not understand the dangers to which zero growth rate exposes society. They forget that in a modern industrial state, productivity grows at something like 2 */2 to 3 per cent a year, mainly as a result of the spread of better management techniques, new production methods and the accumulation of skill and experience of workers. This means that the same GNP can be produced by a work force 2 */2 to 3 per cent smaller each year. If you have five years of zero growth, this means that 10 to 15 per cent of your work force will be redundant.
Zero growth must result in an intensification of class antagonism, as is happening in Britain today. More money for the workers means lower profits and less income for management and professional people. This not only arouses their resentment but it reduces the incentive to invest, thereby making matters worse for everybody.
Next, we have seen how strong the collective strength of trade unions is in a democratic state. When this power is used not for the national interest but to advance sectional interests, the results are disastrous for everyone, especially the workers.
Third, we note that excellence in science and technology is no substitute for a sound economic policy.
The lesson of all this for all of us is clear. Singapore must at all costs strive to achieve a fair rate of economic growth. The somewhat relaxed condition of our society today, leading even to undue complacency among some people, is the consequence of the good rates of economic growth we have achieved in the last ten to fifteen years. Had we been unable to do so, the picture would have been completely different. It would be a sour position which communists and their allies could exploit to produce a vicious downward spiral. The result would be endemic political crises, increasing unemployment and poverty. Communists thrive in this situation which they regard as a prelude to a revolution in which they seize power. It is all in their textbooks; you can read it in the works of Marx, Lenin, Stalin and Mao Tse-tung.
Let us compare our position with other developing countries in Asia which have achieved growth rates as fast as ours—Hong Kong, Taiwan and South Korea. There are many similarities and differences between them and us. But one feature separates us from the three: none of them has a democratically elected trade union movement and a free vote for every citizen to elect their government. Only Singapore has this. And only in Singapore will it be possible for a misguided trade union movement to wreck the economy and bring about misfortune for the people of Singapore. Trade unions must therefore do nothing that would harm the growth of our economy.
I referred earlier to the importance of supporting industries, the lesson from the Japanese experience. As we industrialize, mainly through the establishment of medium and large-scale industries, there will be an increasing demand for components and semi-finished goods, maintenance and repair services, which have to be provided by what is termed “supporting industries”. These are mostly small enterprises with work forces of less than 50 persons. Information on these sectors of our economy is scanty. The 1974 census of industrial production showed that there were 1,528 small enterprises employing about 10-49 workers. They employed 32,200 people, double the number in 1965. No information is available on businesses with less than 10 workers.
Small enterprises are important not only in the manufacturing industries but also in the service trades and in construction. There are large numbers of small motor repair workers and all kinds of building sub contractors, mainly in specialist lines. In the aggregate, they add up to a considerable size and we neglect them to our disadvantage.
It is common knowledge among industrialists in Singapore that the level of competence of supporting industries often leaves room for
improvement. While some of the larger firms have gone out of their way to upgrade the capabilities of supporting industries to whom they give sub-contracting jobs, others find it easier to buy from Taiwan, or even Japan.
These small industries are faced with numerous problems, quite apart from attending to their real business which is producing goods for their clients. Urban renewal has meant re-zoning of land, requiring many of these enterprises to move elsewhere. Building control laws, environmental regulations, labour shortages, rising wage costs and other problems present these enterprises with difficulties. There are also other handicaps inherent in the nature of businesses. Their access to finance is less easy than in the case of large companies, since they will find it difficult to comply with normal loan criteria which commercial bankers insist upon.
At one time, the Light Industries Services (LIS), a subsidiary of the EDB, helped small industries in various ways, including loan finance. The LIS was abolished in 1973, but after two years the EDB found it necessary to resuscitate some of the work the LIS was doing. SISIR provides technical assistance services to do trouble-shooting on the production line. Many of these small firms are probably members of the Manufacturing Association or the Chamber of Commerce but because they are small in size it is not likely that they will be able individually to exert influence as effective as larger and wealthier members.
Often these small businesses are contemptuously referred to as “backyard industries”. Such is their predicament that they sometimes even approach Members of Parliament for assistance. The trouble with these small enterprises when they run into difficulties with government departments is that they seldom present their case in an effective way to the MP or other people. They are prone to make wild accusations which would be found untrue on examination; they conceal important information which they believe detrimental to their case. When the MP approaches departments concerned, all these are brought to light and the MP feels that he has been let down. He therefore drops the case, which may well be deserving of help.
For these and other reasons our knowledge of small-scale industries is not complete. This is dangerous for a number of reasons. First, government regulations—whether they be on safety, health, building control or urban renewal—may not take into consideration the special circumstances of these small industries. Next, these industries are important to economic growth not merely as providers of supporting services and products, but in many instances in their own right. Much
of the processed food we eat belongs to this category, e.g. tow-kua, tow-foo and tow-gay. Third, these are truly indigenous industries, and they give employment to large numbers of workers. Finally, they are capable of making a useful contribution to our exports, if we know how to develop them successfully.
On this last point, I suspect it is because we do not really understand how small industries are run that we have not been able to establish a worthwhile souvenir industry. More than a million tourists visit Singapore each year but the goods that they buy are nearly all imported goods. The real beneficiaries of tourist spending on souvenirs are the handicraft industries in Indonesia, Thailand, Hong Kong, Taiwan and elsewhere. We can learn a useful lesson on this subject from Taiwan. There, the Government established a thriving souvenir industry out of virtually nothing, and it is now a valuable earner of foreign exchange.
You may say “These are all businessmen and employers. What has it to do with us?” The proposal which I am asking you to consider is to organize them into an effective association of small enterprises, so that better information on how they are affected by various policies and regulations could be made available to government ministries. We could avoid unnecessary mistakes as well as unnecessary resentment. More positively, the agencies that have been set up to assist them, such as EDB’s Implementation Assistance Unit and SISIR, can do their work more effectively. Increasing the competence of small producers will add to our economic strength in innumerable ways.
You may ask: Why the NTUC? I can think of four reasons. First, the NTUC has much experience in organization. Further, it is equipped with a small but effective research unit. This research unit is equivalent to the General Staff of an army; it is the brain centre of the organization. It can undertake field studies, analyze available options and make recommendations to the NTUC Central Executive.
Second, the NTUC has not only experience in organizing people, but has successfully managed a number of complex business enterprises—taxi services, mini-bus services, a travel agency, supermarkets, an insurance agency, etc. This is an important point, for small producers are businessmen and they will be more willing to accept the credentials of the NTUC when its business capability has been proven.
Third, and perhaps most relevant to you, the NTUC can help the workers in these small industries by first helping their employers to be more efficient and productive. A direct approach to workers engaged in a myriad of small enterprises will probably not be cost-effective. But by making their employer more successful in business, the NTUC can
indirectly improve the working conditions of their workers.
Fourth, many of these small enterprises could improve their efficiency and increase their profits by combining some, though not all, of their work in cooperative ventures. The Japanese are particularly adept at this. A group of small machine-shops would jointly own and share an expensive machine tool which none of them could individually afford. The NTUC has extensive experience in setting up cooperatives.
But be under no misconception about the difficulties of these projects. You are dealing with large numbers of rugged individualists who have survived and even prospered in an environment that is far from favourable to them. Often they survive by evading regulations and breaking the law when it suits them. The sad thing is that when this happens, it is not always they who are at fault.
The Pitfalls of
Western Intellectual
Radicalism
To most of the shareholders of INCOME gathered here for the sixth Annual General Meeting, INCOME is one of the several successful cooperatives launched by the NTUC. Members of trade unions involved in these enterprises quite rightly take pride in the achievements of these cooperative ventures.
Today I want to make the point that what the trade union movement is doing in this field is not merely a concern of its members, nor only that of Singapore citizens. It has its place in the much broader perspective of the trend of world events in the last decade or two. Let me explain this in some detail.
For many years Singapore, being an open city, has been exposed to the world’s mass media through newspapers, magazines, cinemas, television, visitors, etc. Through these channels our citizens have been assailed by many new and strange ideas and practices. There is the hippie cult, the cult of permissiveness, student radicalism, ideologies of the welfare state and anti-establishment and anti-multinational company attitudes, to name a few. We have had to combat these ideas and practices because we believe that they are irrelevant to our situation and in some cases would be harmful to our interests.
These ideas have their origin in the West, principally among certain academic circles as well as among intellectuals in political and mass media organizations. Not all these ideas are bad. Their origins are
Speech at the Annual General Meeting of NTUC INCOME, at the Singapore Conference Hall on 23 June 1976.
diverse and many stem from a praiseworthy intention to improve society, to better the lot of the underprivileged, especially ethnic minorities which have been subject to discrimination. There were also major events such as the Vietnam war and the Watergate scandals which had profound, if temporary, effects on the climate of public opinion.
We resisted these influences by whatever means were available to us, and with varying degrees of success. This has had a number of consequences, both within Singapore and in the outside world. So far as the world Press is concerned, our non-conformist attitudes and actions have not endeared ourselves to them. The idea of such a small country deriding widely-accepted Western intellectual fashions seems absurd. So they call us authoritarian, arrogant, high-handed, perverse, and so on. There is an element of Caucasian arrogance behind this name-calling.
Within Singapore itself, we convinced the great majority of our people that they should not discard their traditional values, such as the belief in hard work, thrift, honesty, self-discipline, regard for education, respect for enterprise and concern over family stability. But small groups of intellectuals in academic and student circles believed that we were wrong and that these ideas from the West were the correct ones. In fact, when I was speaking to a university group, one of them asked me whether we could succeed in shutting out these ideas and attitudes when we are bringing in modern systems of production and management. The implication was that both go together and that it was a self-defeating process to separate them.
But what is actually happening now is that the Westerners themselves have grown tired of intellectual radicalism and are having increasing doubts about the validity of government policies based on them. Students have gone back to their studies. The strident antiestablishment postures and activities are no longer seen in the university campuses of the West. However, in Singapore, these have emerged in recent years. Singaporeans are always behind the times. For instance, mini-skirts are beginning to disappear only now, whereas they vanished years ago in Western countries, from whence they originated.
When we leave the lunatic fringe of political radicalism and move to more practical matters such as welfare benefits provided out of public funds, we see again that many Western countries are having serious doubts over their value in their present form. Ever-increasing welfare benefits such as free university education, generous unemployment
benefits, free health services and so on are no longer based on an admirable concern over the plight of the poor. They have become articles for auction when political parties compete for the favour of the voters at elections.
But nothing is for free in this world and the end result of indiscriminate welfare state policies is bankruptcy. New York City recently came close to bankruptcy and might yet suffer this fate in spite of all rescue attempts. In several West European countries, unemployment benefits have been so generous that some workers are better off unemployed! The money to pay for welfare state expenditure must come either from taxes or from the printing press. Increasing taxes, which mainly affects the rich, reduces the amount of money available for investment, thereby slowing down economic growth. Printing paper money to avoid unpleasant tax increases merely results in more inflation.
I believe that not only thinking people but the general public in the West are becoming disillusioned over these policies, at one time considered radical and avant-garde. In the American primary elections, for instance, the spectacular and unexpected success of Mr Jimmy Carter—a devout Christian of a fundamentalist faith—seems to indicate that the American people want to go back to the old virtues and beliefs. These are the values that made America rich and strong. And they are what we in Singapore have been advocating all these years in the face of resentment of the foreign Press and opposition by our more feebleminded intellectuals.
Some fifteen years ago, when I was in the Finance Ministry I said that Singapore must seek its salvation by its own effort and not depend on the generosity of rich countries. Some foreign journalists attacked me for being cynical. But now let us see what has happened. We have had UNCTAD I, UNCTAD II, UNCTAD III and, this month, UNCTAD IV. The poor nations have asked the rich countries to contribute to a fund which will stabilize prices of raw materials which poor countries produce. The rich countries never cease to assure the poor of their deep concern over their pitiful condition: nevertheless they have not agreed to this scheme and the poor countries have had to be satisfied with soft words instead of hard cash.
Take another example. Our trade union leaders never try to conceal from the rank and file the fact that they cannot expect to get more pay unless their productivity increases. Our union leaders repeatedly warn members that excessive pay increases will be harmful to them should these lead to a reduction in investment and a shrinking of job op
portunities as investors move to South Korea or Taiwan. Talk of this kind is unheard of among trade union circles in some Western countries in which this is most needed.
Not only trade unions but also political leaders have set before the public the plain unvarnished truth about our situation whenever we see trouble looming over the horizon. Let me relate my own experience. In December last year I was asked to address the annual meeting of the Singapore Portworkers Union. The message I gave on that occasion was that malingerers should be sacked and that the union should not take up their case before their employers. I was thereupon made honorary life member of the union!
The workers accepted this proposition because I had explained to them how their pay doubled over the last ten years, while their hours of work had declined considerably. This was possible because the same number of workers handled a great deal more cargo through better organization, use of mechanical equipment and positive attitudes towards work. Malingering endangers their future prospects and must therefore be resisted. Our workers are reasonable and are willing to accept the necessity for stern measures when they are given all the facts and a clear explanation of their meaning.
We have proved our critics wrong not merely by argument but by the concrete results of our policy. Mass unemployment, overcrowding in shophouse cubicles, inadequate schools—all these were thought insoluble fifteen years ago. They are still considered insoluble in most third world countries. In Singapore, we have overcome them. The NTUC has not only protected the interests of the workers through collective wage agreements, annual negotiations in the National Wages Council, but it has also demonstrated that the hard, realistic, businesslike approach is not the preserve of entrepreneurs and management. The many successful cooperative ventures launched by the NTUC are now part of Singapore’s everyday life.
When Mr Devan Nair went to London to put forward Singapore’s case against the absurd accusations of the Dutch and British Labour Parties, one of the documents he handed over was the book Tomorrow—tbe Peril and the Promise. This is the Secretary-General’s report to the second Triennial Delegates Conference of the NTUC. If the representatives of these two Labour Parties would study this document closely, not only would they have realized how silly they were in wanting to expel us from the Socialist International, they would also have realized how misguided their own policies are and what great harm these policies have inflicted on their own countries.
The report on INCOME appears in pages 76 to 87 of that book. So you see that, willy-nilly, INCOME has become an item in the contest of ideas that is now going on in the non-communist world. On the one hand, we have the ideologues, the soft-headed intellectuals, the opportunist politicians of no conviction who sway with the wind. They believe that the good society can be built out of increasing government cash handouts. On the other hand, there are those like us in Singapore who believe that the good society can only be created by the efforts of a self-reliant people.
Adam Smith on Productivity
Most people are aware that this year is the bicentenary of the Declaration of American Independence. Few are aware that the year 1776 witnessed another important event which was to have a profound effect on the history of mankind. This was the publication of Adam Smith’s book The Wealth of Nations.
Adam Smith was the first, and in some respects, the greatest of economists. I would like to say a few words this evening on what Adam Smith had to say about productivity.
When I was first asked to speak on this occasion, I decided to bring myself up to date on the subject of productivity. I asked for books on the subject from the NTUC Research Library which kindly forwarded twelve books to me. However I found these of limited value because they fall under three categories. The first group deals with index numbers. These are used in comparing productivity at different times or between different countries. The second is concerned with proving the obvious, for example that increasing productivity is good for economic growth and that economic growth is good for a country. The third consists of technical studies of what productivity means and how it can be measured in a firm or factory. This last group of studies is the most relevant, but we can leave them to the experts who have to devise productivity schemes in firms.
Address at the Pre-Seminar dinner, held in connection with the NTUC Seminar on “Maximizing the Benefits of Productivity”, at the Singapore Conference Hall on 28 October 1976.
What we need to discuss are basic ideas and first principles. It is far from certain that these are widely understood in Singapore. When one is unsure where to look to for basic principles, one can find no better starting point than Adam Smith. If the developing countries who are today suffering from dire economic troubles had taken the trouble to learn from Adam Smith’s Wealth of Nations instead of trying to apply sophisticated planning techniques based on Keynesian economics, they would be in a far healthier shape. They would have avoided the mistake of neglecting their agriculture in a hot pursuit of industrial growth.
Let us see what Adam Smith has to say about productivity. Productivity is increased by division of labour and this increase occurs in three ways. First, division of labour results in workers performing specialized tasks. This enables output to increase as workers improve their skills. Second, as a person does one job throughout this working time instead of moving from one job to another, there is a saving in time. To quote Smith, “When he first begins his new work he is seldom very keen and hearty ... for some time he rather trifles than applies to good purpose. Rural workmen obliged to change work and tool every half hour develop slothful and lazy habits. ’ ’ The third way division of labour increases productivity is that it allows a greater use of machinery. To quote Smith again, “The productive powers of the same number of labourers cannot be increased but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour. In either case an additional capital is almost always required. It is by means of additional capital only that the undertaker of any work can either provide his workmen with better machinery, or make a proper distribution of employment among them.
Adam Smith notes that the output of workers, whether the humblest ones, such as slaves, or the most exalted ones, such as university professors, depends on whether there is a direct relationship between what they produce and what they are paid. For instance he believes that slave labour, though cheapest in cost, is in effect the most expensive because of low productivity. To quote Smith again: “The experience of all ages and nations, I believe, demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any. A person who can acquire no property can have no other interest but to eat as much, and to labour as little as possible. Whatever work he does beyond what is sufficient to purchase his own maintenance can be squeezed out of him by violence only, and not by any interest of his own. ’ ’
Regarding university professors, what he said about British universities 200 years ago sounds refreshingly topical when we look at our own universities today. “It is the interest of every man to live as much at ease as he can; and if his emoluments are to be precisely the same, whether he does or does not perform some varied laborious duties, it is certainly his interest. . . either to neglect it altogether or, if he is subject to some authority which will not suffer him to do this, perform it in as careless and slovenly a manner as that authority will permit.
“If the authority to which he is subject resides in the body corporate, the college, or university, of which he himself is a member, and in which the greater part of other members are, like himself, persons who either are, or ought to be, teachers, they are likely to make common cause, to be all very indulgent to one another, and every man to consent that his neighbour may neglect his duty, provided he himself is allowed to neglect his own. In the University of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching.” Adam Smith himself taught at the University of Glasgow.
To summarize what Adam Smith has said, productivity increases will be encouraged if the worker gets more pay for better performance. While the principle is simple, its application to modern enterprises is complex. How does one measure productivity of salesgirls, barmaids, bus-drivers, army cooks, petrol station attendants, and what have you? Even in the manufacturing industry where the application of productivity incentive schemes is most common, output is the result of combined team effort. Further, the work of several teams doing different things is involved in production, not merely the workers on the assembly lines. These are the technical matters with which the third group of books I referred to earlier is concerned. They are specialized subjects but I get the impression that expertise on this subject is rather limited in Singapore because of apparently widespread obscurantist attitudes toward it.
This is most noticeable among some employers who object to productivity schemes because they believe that these will result in them having to pay higher wages and salaries. Of course they will, but this is no reason for opposing the productivity schemes. Wages and salaries will go up in Singapore so long as our GNP increases as prosperity must be shared by everyone who contributed to it. It must surely be in the interest of employers to ensure that they get higher output when they pay higher wages. This is what productivity schemes are about.
Let me now discuss the wider implications of productivity increases on the economy, especially on workers. There are four scenarios, two happy and two unhappy.
First, consider the case when our economy expands very rapidly. More output is required as our products become in great demand the world over. Even with productivity increases, more workers need to be employed and trained as existing industries expand and new ones are established. This is happy scenario Number One.
The second scenario arises in industries where demand increases at more or less the same pace as the increases in productivity. Greater output is produced by the same number of workers. These enjoy pay increases, but there is no increase in employment. This is happy scenario Number Two. The Port of Singapore is the best example here. Between 1965 and 1974, cargo throughput increased from 5.4 million tonnes a year to 17.0 million tonnes, while the work force remained about the same. The result was much higher pay coupled with shorter working hours.
Unhappy scenario Number One goes like this: there is no economic growth in a particular sector or industry; at the same time, there is an increase in productivity; the same output can be produced by less workers; some therefore will have to be retrenched; those who remain can receive pay increases.
Unhappy scenario Number Two comes about when the demand for the product or services of a firm or industry declines. Workers have to be retrenched. In the extreme case, the firm goes bankrupt and closes down. Everybody loses his job. In such a situation, we get bogus trade union leaders such as Tan Wah Piow pretending to champion the cause of laid-off workers, not because they care for them but because they want to make a name for themselves.
In most years of the last decade our experience in Singapore has been with very happy scenarios. This is because most of the time our GNP grew at between 11 and 15 per cent a year. During the recession years of 1974-75 we had some experience of unhappy situations, but the number of laid-off workers fortunately had not reached serious proportions by the time the recovery began towards the end of last year.
It has not always been like this. In the 1950s and part of the 1960s, retrenchment often resulted in confrontation between employer and union. This was because jobs were scarce during those years and laid-off workers faced genuine prospects of a long period of hardship.
When the economy is expanding briskly this is not the case, as laid-
off workers quickly move to other jobs. When in 1968 the British decided to close down their military bases, 40,000 civilian jobs were imperilled. Many thought a major crisis of unemployment would befall the Republic. In the event, this did not happen. Instead, there was a smooth transfer of laid-off workers to other jobs because of the exceptionally fast rate of economic growth we had achieved. It is therefore vital in Singapore to sustain a good rate of economic growth. The trade union movement must remember that they should not resist the laying-off of workers in industries which are not competitive or whose overseas markets have declined. Even when retrenchment results from the installation of new equipment, this must be-accepted by trade unions because it makes our industry more competitive and it enables the wages of those who remain to increase faster.
Only in this way can Singapore’s economy adjust quickly and efficiently to changing patterns of world demand for her products. So long as economic growth takes place, laid-off workers can be absorbed into new and expanding industries—as happened to former British base employees. And only in this way can we reduce cost, increase productivity, and remain competitive with countries such as Taiwan and South Korea where wages are lower than in Singapore and the people no less hardworking.
When trade unions are strong, they can pressure governments to act contrary to this policy. This happened to a number of countries, with disastrous consequences, especially upon the workers themselves. In order to save jobs, the government subsidizes unprofitable industries. Once a start is made, it is amazing how many industries can claim to be unprofitable and therefore deserving of large government cash handouts.
Even when a progressive management installs expensive new equipment to reduce cost by increasing productivity, trade unions obstruct this purpose by insisting that no workers should be declared redundant. Naturally, when this happens the industries concerned become uncompetitive.
According to Professor P.T. Bauer in a recent article in Fortune magazine, this is exactly what has been happening in Britain in the last decade or two. The desire to help the poor, the weak and the disadvantaged is a noble one, but when it becomes the prime object of government policy and is carried out without regard to the harsh realities of international business competition, the outcome is predictable. And in Britain today, F/z million workers are unemployed, the inflation rate runs at 15 per cent a year, economic growth is
negligible, and the pound sterling staggers from one crisis to another.
Let us not forget that Britain is technologically a very advanced country, endowed with abundant natural resources as well as a talented and creative people. If they can get into this kind of trouble because of wrong economic policies, how much more quickly will Singapore be ruined if we were foolish enough to emulate their example. Fortunately for Singapore the trade union movement under the leadership of the National Trades Union Congress is fully awake to the special position of Singapore, an overpopulated island with no natural resources and no indigenous technology worth speaking about. It is our unhappy lot to have to slog it the hard way, but so long as we understand this we shall continue to survive and even to prosper when times are good.
 Part Three 
Sociology
ASEAN and the Pacific Basin
May I say how honoured I feel by your invitation to address this Conference. Coming from one of the five developing states in the centre of the western rim of the Pacific Ocean, my perception of affairs must be from this perspective. As you know, the five nations—Indonesia, Malaysia, the Philippines, Singapore and Thailand—are associated in an organization called Association of Southeast Asian Nations or ASEAN, and much of what I have to say will relate to matters of common economic interests and political and security concern of this group of states.
First, some general observations. The configuration of noncommunist nations on the western rim of the Pacific Ocean has one notable feature. The northern anchor consists of an economic superpower, Japan, which has the third largest economy in the world. And at the southern extremity we find two technologically advanced, resource-endowed and wealthy nations—Australia and New Zealand. It is the soft centre consisting of the ASEAN states which is and will continue to be the problem area for decades to come. I need hardly stress the strategic importance of this area which lies astride vital shipping and air routes not only between the northern and southern anchors of the non-communist Pacific nations, but also between them and the Persian Gulf and through the Suez Canal to Western Europe.
Speech at the official luncheon on the opening day of the tenth meeting of the Pacific Basin Economic Council held at Townhall, Christchurch, New Zealand, on Monday, 9 May 1977.
As this is a gathering of businessmen and not of geo-political strategists, I will assume the strategic importance of the ASEAN region to be self-evident and will not pursue the subject further.
Apart from its strategic importance, the area is of considerable economic significance, offering many opportunities for profitable investment and rewarding cooperation between these countries and wealthier nations. In 1975, the five ASEAN states had a total population of 231 million. Their combined GNP was US$6.8 billion giving a per capita value of US$294 which is well above the third world average. The region is well endowed with resources. In 1974, it accounted for 83 per cent of the world’s national rubber exports, 80 per cent of palm oil, 68 per cent of tin, 67 per cent of copra and coconut oil and 47 per cent of pepper.
Its export performance—US$20.9 billion in 1975—gives it an average of nearly twice, in per capita terms, of the third world average. The foreign exchange reserve position is also good. Despite the consequences of the oil crisis of 1973-74, foreign exchange reserves rose substantially from 3.0 billion Special Drawing Rights to 7.0 billion between 1970 and 1975. This was not because two of the states, Indonesia and Malaysia, are oil producers. In fact the other three countries who do not produce oil registered an even better performance than the oil producers. In summary, we have here a group of thriving economies and not a collection of banana republics.
I would like to discuss the general problems of sustaining a fast rate of economic growth in the ASEAN states and relate this subject to the activities of multinational corporations in industrial countries, including those of the Pacific Basin countries. It would be more profitable to take a broad perspective of the subject rather than to deal with specific problems and situations of current interest. There are certain basic elements which will endure for a long time, over several decades.
The first fact of life about the region comes from external sources, namely big power rivalry for influence in the region. At present, the major contestants are the USA and the Soviet Union, with the Americans in the stronger position despite the reverses in Vietnam. But it should not be forgotten that twelve years ago the Soviet Union achieved a dominant position in Indonesia during the Sukarno regime, when it seemed inevitable that the Communist Party of Indonesia would achieve power through legitimate political processes. We can expect super-power rivalry to continue. The ASEAN states are in no position to stop super power rivalry in their area. Indeed the prospects are that in the not too distant future the People’s Republic of China and
the Socialist Republic of Vietnam could be active contestants for influence in the area.
There is no question as to the natural inclinations of the ASEAN states. These are determined not by sentiment or congruence of political systems but by hard economic reality. In 1974, ASEAN trade with communist countries—taking imports and exports together— amounted to US$1.5 billion, or 3.4 per cent of total ASEAN trade. Trade with industrialized countries amounted to US$27.1 billion, or 59.7 per cent. In their quest of rapid economic growth the ASEAN states will obviously place great importance on matters of trade and, more crucially, investment and technology.
I now turn to internal factors. The experts are agreed (and here I think they are right) that the most important single element that determines the progress or stagnation of a developing country is the nature of its government—the efficacy of the administration, particularly its ability to implement policies conducive to sustained economic growth. I want to discuss this subject at some length because of widespread misunderstanding of the matter in industrialized countries.
The vast proliferation of literature on the subject and the innumerable conferences on economic growth which started in the 1950s show no sign of abatement. But much of the literature and conference resolutions rests on one assumption, which seems to me to be totally false. This assumption is that governments of developing states are free to adopt policies most conducive to economic growth and to implement them without any constraints, other than those imposed by scarcity of resources. When governments do not manage their economic affairs in the same style as modern industrial states, it is thought that their leaders are ill-informed, misguided or incorrigibly wayward. So Western and even Eastern academics spend a great deal of time studying what their jargon grandly describes as “Power Elites” in third world countries. I suppose I can claim to belong to this fraternity, but I read with growing amazement what we are supposed to be and to do.
The academic who has come closest to understanding the constraints acting on governments in third world countries is Professor George Rosen of the University of Chicago, whose recent publication Peasant Society in a Changing Economy merits more attention than it has received. Professor Rosen was able to come nearer the truth than the others because, I suspect, of the years he spent in the Asian Development Bank, in the course of which experience he must have
discovered that the narrow economic approach to problems of economic development in third world countries gives an incomplete account of processes at work. To oversimplify a complex subject, I would summarize Professor Rosen’s thesis in the following terms. Relations between men in Southeast Asian countries with large peasant populations are totally different from those obtaining in modern industrial states. Ownership of land is a major source of status; so is employment in the Government, the prestige accorded to officials being derived from earlier times when kings and their courts were centres of power and patronage. These values survived the colonial interregnum. Societies structured in this way have two features of relevance to modern economic growth. First, there is widespread lack of understanding of modern business. Businessmen are understood largely in terms of the village trader, a despised class usually belonging to a cultural or ethnic minority. As a consequence, business virtues such as thrift, ability to calculate cost and benefit, cleverness in negotiations, efficiency in the conduct of affairs, far from being admired, are held to be unworthy of a true gentleman or an honest farmer because they carry connotations of avarice and craftiness.
The second feature of such societies is the importance of personal relationships and the obligations and rights that go with them. Landlords and government officials, generally the upper classes, are expected to protect their relatives and friends as well as persons of lower status with whom they have daily contact. In return, deference, though not necessarily obedience, is offered from low to high positions. Arrangements of this kind are not irrational in an agrarian setting. They provide a kind of private network of social security. It is clear that such a social system does not encourage innovation or entrepreneurship.
It should not be imagined that the values of traditional peasant societies are confined to the non-communist third world. Recent Chinese history shows how decisive are the complex ties of personal relationships in the leadership structure of the Chinese Communist Party. The late Chairman Mao mounted his Great Proletarian Cultural Revolution with the express object of ridding the party and government of undesirable elements—“capitalist-roaders” to use their jargon. He was frustrated in this effort by important party and military leaders; though they paid lip service to his revolutionary slogans they had to offer protection to associates with whom they had strong personal ties. Even before Mao’s death, an arch “capitalist-roader”, Mr Teng Hsiao-ping, was the virtual chief executive of his administration. And
today, seven months after Mao’s death, a rehabilitated Mr Teng poses a delicate leadership problem of a kind inconceivable in Occidental nations.
When social values of peasant societies permeate a society—as it does in four of the five ASEAN states, Singapore being the odd man out—government leadership cannot respond to situations in the way to which Western modern states are accustomed. Political leaders everywhere must remain sensitive to the feelings of the populace. Even when a country is governed by generals, the government must act in accordance with the customs and practices of the populace. Political power may come out of the barrel of a gun, but you cannot govern your own people at the point of the gun. When the government is an elected civilian government, the influence of these traditional values is even more pervasive.
The impact of such social attitudes on economic policies is usually predictable and generally adverse to economic growth. But it sometimes crops up in some strange ways. Here I have to be careful, for obvious reasons, in choosing specific examples. I will choose an innocuous subject, public housing.
Public housing is an area of pride in Singapore. Half the population is housed in urban housing estates and some 40 per cent of these are owner-occupied. We have been able to do this because of insistence that public housing should pay its way. This means that tenants must pay rents adequate to cover interest on capital, property taxes and depreciation as well as current administrative costs. When a tenant defaults on rent, the Housing Authority despatches a team of bailiffs to evict the family and remove the furniture and belongings onto the pavement. Invariably, there is an uproar in the Press and the Housing Authority is roundly condemned for heartlessness. Pictures of pathetic children squatting on the roadside, even of allegedly unemployed consumptive fathers, emphasize the pitiful condition the family is reduced to. However, such episodes invariably have a happy ending. Newspapers start a fund and readers’ contributions quickly add to between five and ten years’ rental. The money is handed over to the Housing Authority, and the status quo is restored amidst much rejoicing. So the Housing Authority can proceed to build more new homes untroubled by fears of funds drying up.
Public housing seems eminently suitable as a large-scale social and economic project in most third world cities. There is an overabundance of labour, idle and visible in big cities. A vast scale of public housing would absorb much of such idle labour and would also promote
useful industries in the production of construction material—cement, tiles, bricks, steel bars, etc. In January 1973,1 had occasion to discuss these matters with the then South Vietnamese Finance Minister, Mr Ha Xuan Trung, a Yale economics graduate. He said that they had embarked on a small public housing scheme and he regretted that money was advanced for this. I asked him why. “We cannot collect rents,” he said. “What was the reason?” He replied, “The generals parked their mistresses there. ’ ’
Since then, whenever the opportunity was offered, I gently probed our ambassadors in various third world capitals as to what the position was in their countries. The rental problem seems widespread, even when generals are completely innocent. In fact in one case, an ambassador reported, not only did tenants default on rent, they also did not pay for utilities.
You cannot run a large public housing programme under a soft approach of this kind simply because the money soon runs out. The hard line taken in Singapore is not because her leaders are more cruel and heartless or more discerning—you can take your choice of adjectives. It is simply because the population, being largely of migrant origin, have cast aside much of the traditional value systems of their peasant forefathers. There are no peasants in Singapore, the principal activities being manufacturing, commerce, shipping and banking. It is therefore not difficult for government leaders to convince the electorate that public enterprises—-utilities, housing, telephones, sea and airports—must be managed on sound business principles. Failing this, the continued existence of these services would require annual subsidies on an increasing scale which in turn would mean more and more taxes. Where, however, the population subscribes to the beliefs which Professor Rosen described, a government which acts in the way we do in Singapore runs the risk of getting short shrift from the electorate. Governments are expected to be the universal providers, the way the ancient kings were. Perhaps this is why socialism of one variety or another has proved so attractive in the third world.
Professor Gunnar Myrdal in his monumental work The Asian Drama calls the developing nations of Asia “soft states” because of their inability or unwillingness to take the stern measures required to modernize their economies and societies. There is no magic cure for this, nor is there much chance of a sudden transformation of soft states into hard states, as the basic causes go deep into the historical roots of these societies.
I now turn to the third basic fact about the region, and this is the
existence of communist insurgencies in three of the five ASEAN countries and the presence of underground communist organizations in the other two. In the three countries where insurgencies occur— Thailand, Malaysia and the Philippines—the level of violence is low, armed guerillas being small in number and scattered in small packets. While they do not pose a serious military threat, they are likely to remain a feature on the landscape for the foreseeable future in remote areas and in jungle terrain. It is well within the competence of the military and police forces of the three countries to contain the situation without any foreign military assistance.
The fear here is whether insurgent groups in these countries will receive assistance from sympathetic communist regimes in Asia, beyond the supply of weapons and ammunition. The consensus of expert opinion is that neither the People’s Republic of China nor the Socialist Republic of Vietnam will intervene militarily by an overt act of aggression. Not only are these two communist states preoccupied with their domestic problems, but overt aggression of this kind is contrary to their ideology. When they say that revolution is not for export, they are referring to basic Marxist tenets about inevitable revolution in capitalist societies arising from the workings of the dialectics of history.
However, should, by some mishap, these insurgencies progress from the present primary guerilla phase into liberated areas controlled by communist military main forces and thence on to the establishment of a liberation government with pretensions to legitimacy, the temptation to render some comradely assistance to deliver a quick knock-out blow could prove irresistible. The comrades can even defend their aggression on humanitarian grounds, arguing that the alternative, Mao Tse-tung’s protracted war, would have the same ending but would cause extensive and needless suffering.
It is therefore the primary aim of the three ASEAN states not to allow the level of insurgencies to escalate beyond their present low levels of violence. While this means continuing military and police action against communist insurgents, the governments understand that by over-relying on the military solution to the neglect of political and economic factors they would be playing into the hands of the communists. In a real sense, the first line of defence against communist insurgencies is economic development. Economic growth must not only take place but must be of such nature and magnitude as to permit the benefits to flow through all strata of society down to the poorest.
In recent years, there were disturbing signs of muddled-headed
thinking on the subject. One school of thought, which is regrettably commanding increasing support, has reasoned that it is better to have fairer distribution of wealth than its rapid accumulation. In other words, more equity in sharing the GNP is better than just increasing it. This assumes that there is a trade-off in third world countries between faster growth and fairer income distribution. Such a trade-off may well exist for rich countries, but for poor countries such a policy choice is available only in exceptional circumstances. In the general case, third world countries have no choice but to seize every opportunity to increase their GNPs.
In the first phase of the transformation from an agrarian economy to an industrial one, to aim at equity by, for instance, undue reliance on taxing business profits and distributing the proceeds to the poor through social service expenditure, could damage the one sure source of future capital accumulation, as well as diminish the immediate incentive to industrial expansion. In such a situation, insofar as a tradeoff between growth and equity exists, soft-headed policies would merely bring about stagnation and the equitable sharing of poverty rather than wealth. However, where avoidable poverty is due to neglect or malpractice—e.g. failure to establish a feasible irrigation system, or permitting landlords to use illegal methods of coercion on tenant-farmers—remedial government action will not only result in fairer income distribution but also in better economic performance. This is not the trade-off between faster GNP growth and its more equitable sharing that we are talking about.
Here, the confusion in thinking is derived from the failure to distinguish between business profits accruing the legitimate way, that is within the framework of a competitive system, and illegitimate business profits originating from special concessions or licences which confer monopoly privileges. The strange thing here is that such privileged situations most often occur in third world countries as a consequence of economic planning and controls requiring the issue of licences on an extensive scale. So when the equity school recommends that there should be more economic planning and control to ensure a fairer distribution of income they simply do not understand what they are talking about.
How do foreign investors in general, or multinational corporations in particular, fit into the picture? In recent years, multinational corporations (MNCs) have been the target of widespread criticism, much of it ill-informed and most of it by so-called radical intellectuals. It is, of course, true that in the heyday of Western imperialism, foreign in
vestment in certain parts of the world—notoriously, the banana republics of Latin America and Belgian Congo—was justly condemned for its predatory nature. But all this is past. Strangely, recent attacks originated not in third world countries where misdeeds of MNCs were alleged to have taken place, but in the homeland of the MNCs themselves, particularly the United States of America. I believe that the prejudice against MNCs had its origin in the general mood of intellectual alienation and dissidence arising from the Vietnam war and subsequently the Watergate scandals when many traditional institutions—government, universities, big business, but oddly not the mass media—were thought to be inherently wicked and dishonest.
All this is now over and the swing towards reason and sanity has been in progress for some time. During the period of the American trauma, there was criticism of the MNCs by the intelligentsia of third world countries. But they need not be taken seriously, since they were merely repeating in ritualistic form the shibboleths they had learnt from their mentors in Western universities.
So far as the governments of the ASEAN states are concerned, the official stance is quite clear. Foreign investment, especially by MNCs, are not only welcome but much sought after. Every government in the region maintains expensive investment promotion offices in the major cities of industrial nations, and they post some of the best talent to these offices. Governments would not do such things if they had any reservations over the value of foreign investment and the important role which MNCs can play in the development of their economies.
While large sums of money are spent in soliciting their participation in the economic effort, this does not mean participation on whatever terms foreign investors desire. Governments must think of their national interests and they naturally want to obtain the best terms in any specific negotiation. What should be noted is that the relationship between the two parties, the national government and the MNCs, is a bargaining or negotiating relationship, not an adversary one.
To achieve better understanding of the bargaining relationship of the two parties, it would be useful to distinguish three broad categories of enterprises. First, and probably the most important, are enterprises concerned with the extraction of natural resources: oil, minerals, forest products and so on. MNCs cannot expect the same free access to these resources as they enjoy in their home country. Any third world government that fails to get the best possible terms from MNCs would be remiss in its duty. This situation arises not from any natural law or human convention. It arises from the fact that the government can
choose which overseas enterprises should be granted rights to develop these resources. The bargaining can be tough, even acrimonious; sometimes mistakes are made and deals are called off. Even so, this does not turn their relationship from a bargaining to an adversary one, for bargaining will be resumed before long, with the same MNC if the mistake was made by the government, with another party if the MNC had misjudged its strength.
The second class of enterprises concerns products for the domestic market. Here again much of what applies to resource development holds true. The government has a considerable business advantage to offer, namely a domestic market protected by tariffs and it has the same option of shopping among potential partners and much the same room for bargaining and manoeuvre.
It is in the third category of products that multinationals and foreign investors hold the trump cards. This situation arises when products are destined for the export market. In the last decade, this has been an important item in the establishment of off-shore manufacturing facilities. The products could be components, such as semi-conductors and various types of electronic circuits, but they could also include finished products manufactured through labour-intensive processes. Here, it is the MNCs that go shopping between countries before deciding where to set up business. Governments have no option but to compete against others for the favours of MNCs. Singapore, because of its small domestic market and absence of natural resources, finds itself in this unenviable third category.
Let me now draw together the threads of argument in this long discourse. The ASEAN region, because it occupies an important strategic position across major sea and air lanes of world communication, is likely to be of continuing interest to super powers and big powers. The rivalry which now exists between the USA and the USSR could be further complicated in future years by the emergence of new contenders for influence. Three of the ASEAN states face domestic communist insurgencies with their origins going back two or three decades. They are containable without foreign military assistance, insurgent groups being small and scattered. Governments of the ASEAN states believe that the proper response to insurgencies does not lie principally in military and police actions, necessary though these are to keep violence to the present low levels. The challenge of communist insurgencies is best met by improving living standards and this can be achieved by a rapid rate of economic growth which enables the benefits to reach the grass-roots.
ASEAN states with large peasant populations do not and should not be expected to manage their public affairs in the style of modern industrial societies. Departures from such a standard should be viewed with understanding. Despite the disadvantage of the traditional value systems inherited from the past, the ASEAN states have achieved creditable economic performances in respect of growth of the GNP, growth of export earnings and levels of foreign exchange reserves. With continuing economic growth, expanding education and the enlargement of new groups brought up in a modern environment, a more businesslike way of conducting affairs will slowly but surely replace old attitudes derived from peasant societies.
In the development effort, the ASEAN countries welcome the participation of multinational and foreign investors. Though mistakes have been made in the past on both sides, future relationships will improve if allowance is made for the different bargaining situations between multinationals and governments. Three situations can be identified: namely development of natural resources, production for the domestic market and export-oriented manufactures. There is considerable room for mutually beneficial cooperation between foreign investors on the one hand and businessmen and governments of the ASEAN states on the other. Participation of MNCs in the development effort would contribute significantly to the progress and stability in that area and, by improving living standards, help to contain communist insurgencies where they exist.
I would like to end on a note of caution. We should not make the mistake of expecting too much in too short a time from foreign investments, however successful these enterprises could be in themselves. The transformation of an agrarian society to an industrial one is a long-haul historical process. The Japanese, the first Asian nation to make the grade, had some real advantages since the Meiji restoration: a strong and discerning leadership, a homogeneous and energetic people. But it took them three generations to complete the transformation.
In third world countries, successful industrialization, invariably sited in the cities, would at first sight only make matters worse. The first effect is to produce the squalor of industrial urban slums which are immediately visible, while rural poverty behind it lies hidden in remote areas. In a strange way, greater employment in the cities as a result of economic growth will merely result in greater urban unemployment, as peasants drift towards cities in increasing numbers in search of a better life. How long can this go on?
I doubt whether the large peasant societies in Asia can accomplish
this transformation within three generations. Apart from differences in innate human capacities, there is the impact of population growth. During the first three generations of the Japanese effort, the Malthusian checks on population growth were effective enough to limit growth to an annual rate of one per cent a year. But these checks on population growth have been loosened in contemporary third world countries by advances in medicine and public health administration so their populations are growing at more than twice the rate of the Japanese in the same stage of development.
As a result, the stream of peasants migrating to cities seems to be an infinite flow, swamping the benefits of industrial expansion. Unless the growth of peasant populations can be restricted to one per cent or less per year, the historical process of transformation, with economic growth rates that are feasible, cannot be accomplished within any sensible time span. The sad thing is . that nobody has yet found an effective method of population control in peasant societies.
The technical aspects, such as the supply of contraceptives, are simple enough. The problem is how to mount a massive and sustained effort in social organization to gain universal acceptance of family planning in peasant societies. The missing ingredient is political will.
Modernization in Singapore: Impact on the Individual
The organizers of this seminar are to be commended on their choice of subject, which is “Modernization in Singapore: Impact on the Individual”. The first point about the title is that we are not concerned with modernization in the world, modernization in Britain or the Caribbean or Latin America. We are concerned with modernization in Singapore. This distinction is worth noting because Singaporeans, particularly the intellectuals, are prone to regard other people’s troubles as their own. For instance, I read in the papers the other day that a local university group is trying to convince people that the Americans should leave Vietnam. Why anyone in Singapore should want to take on his shoulders the troubles tormenting President Nixon and the American people is beyond my comprehension.
It is not as if we do not have enough problems of our own. Though Singapore is a developing country, and a member of the third world, we differ from most of them in economic structure and level of social development. This makes our problems of modernization different from those facing the general run of third world countries.
Let me refer to an important anthropological study on social beliefs in one of the third world countries. Whereas we believe that wealth is acquired by hard work and astuteness, sometimes aided by good luck, the peasants studied by this anthropologist generally agree that people become rich through sorcery. One should own a spirit or rather a
Address at the opening of the seminar on ‘ ‘Modernization in Singapore: Impact on the Individual’ at the University of Singapore on 16 June 1972.
particular species of spirit known to them as ‘ ‘Tujul’
“Once one has a tujul, the money flows in. The tujuls are able to steal with no chance of detection; and all one needs to do for them in return is to give them a place to sleep and to put out for them each evening a little rice ... In town, the tujuls steal money . . . but in the villages they are more likely to steal rice. One quite common rice thief of this sort is called ‘gebleg’ because, though it is in the form of a chicken, it shuffles its feet heavily when it walks making the sound ‘bleg bleg bleg’. It stuffs the rice up under its wings and walks back to its owner; then it flaps its wings and the rice falls out into the owner’s granary.
As regards medicine, they believe that the native medicine man is in no way inferior to the Western-trained doctors. To quote the anthropologist again:
‘ ‘When a man is ill, he tries one medicine man after another until one cures him, never concerning himself about the reasons for their failure, and not necessarily holding it against them that they were unable to help him. It is just the same with Western-trained doctors. People would say endlessly to me, ‘Sometimes they cure you and sometimes they do not. The only difference is that you have to pay a doctor even if you die in his hands, while a good medicine man expects payment only if he succeeds’.
This country, which shall be unnamed, is not one of the backward countries of Africa. It is an Asian country with an ancient civilization of refinement. But, like most of the third world countries, its economy is based on peasant agriculture. You can see how difficult it will be to get these peasants to accept modern work habits and health practices. The impact of modernization in such a country would obviously differ very much from ours.
We do not have benighted peasants to modernize. This is a great advantage because, to the best of my knowledge, no country has devised a system whereby peasants can be modernized by deliberate planned effort within a short span of time.
On the other hand we are still a long distance from the advanced industrial West. The problems that they are experiencing are, again, not ours. For some reason, not clear to me at any rate, the last few years have seen in Western countries a new and disturbing development, especially among the young. The spread of drug addiction, loose living, loss of ambition, withdrawal from society, represents a complete
reversal of the ethical values on which the West built its industrial base. Sociologists refer to this as a decline in the work ethic and the rise of hedonism. Less pretentious people may say that they are just getting lazy and pleasure-loving. We hope for their sake as well as for ours that this is a temporary phase. Our concern in the short term is to see that the mindless young in our country are not misled to imitate such aberrations of conduct.
This is rather important for us because we have not built a secure foundation of scientific and technological competence. Without this, even a temporary setback can see us sliding down the slippery slope of rapid decline. We should not be tempted into believing that our present state of comparative well-being will remain with us for all time without care and effort on our part to safeguard what we have achieved.
Let me try to describe the process of modernization in very broad outline, in order that we can have a clearer picture of how we stand. This process of modernization is itself of recent historical origins. Even a hundred years ago, there were countries in Europe, say the Balkans or parts of Czarist Russia, where the peasants were no better than those we discussed. It was -the Industrial Revolution beginning about the middle of the eighteenth century which modernized European society, beginning in Britain and spreading to Western Europe. There are many facets to this unique experience of mankind. But the most fundamental development was the application of scientific method to production. This took the form of the invention of machines and the use of mechanized power in progressive stages of advancement. Concurrent with such advances the development of human knowledge took place, through the method of scientific inquiry, and made possible improvements in production technique.
The modernization process in the course of the next two centuries saw development taking place along these two parallel lines. On the one hand, there was the accumulation of the physical equipment in the production process—machinery, factories, transportation systems and so on; on the other hand, the growth of knowledge, that is, in science and technology, with universities and research institutions as the repositories of such knowledge.
It is this application of knowledge to production that has enabled the modern industrial states to be richer and more powerful than the third world countries. While these latter countries have absorbed modern technology and knowledge and applied them to their production systems, they have done so only imperfectly and in a limited way. The peasant subsistence sector in particular has remained largely outside
the influence of modernization. The result has been economic stagnation and a continuation of traditional cultures which, however charming when read in the accounts of anthropologists, serve as a hindrance to the absorption of new values which are necessary in the efficient management of a modem economy.
In Singapore we are not handicapped by problems of this kind. The impact of modernization on us is less painful because many of the values of the traditional societies have long been abandoned. Our forefathers were mainly migrants from countries in Asia and a good part of the values which they brought with them, nurtured in agrarian societies, have no place in a competitive trading outpost.
At the same time, however, when many of the old values have been or are being discarded, no new coherent set of beliefs which has received acceptance from all sections of our society has emerged. The result is a complicated mosaic which makes the understanding of how our society works a difficult task. Dennis Enright rightly said that it was easier to make valid generalizations about 100 million Japanese than about the 2 million inhabitants of our island.
It is with this caveat in mind that I proceed to make some observations on the impact of modernization on the individual in Singapore. Modern living and modern ideas reach and influence an individual through various means. The more important impact points are:
(i)	The effect the physical environment has on him.
(ii)	The educational system, from primary to university education.
(iii)	The mass media.
(iv)	The individual’s work experience.
(v)	The government.
It would take me far beyond the time at my disposal to discuss all these factors. I will exclude the first four, not because I think they are unimportant, but because the issues involved in each of them are known to you. I will consider the last item, government. The role of the government in the modernization process of developing countries is not well understood. This is partly because the governments themselves are often in a state of confusion. Another contributory factor is that visiting intellectuals from the modern industrial states almost invariably assume that the proper role of governments of developing nations is the same as in the countries from which they come.
I cannot speak for the governments of all developing nations, but so
far as Singapore is concerned, we see the modernization process in terms of creating increased material well-being for our citizens. This means more jobs, bigger incomes, better career prospects, better homes: in short a better life, materially. These things have to be worked for.
It means that we have to find the right economic strategy which will generate a fast enough rate of economic growth. But economic policies by themselves are sterile unless they are backed by an energetic implementation, and both policies and their implementation need a climate of confidence in order to yield results. Another requirement is the right motivation and attitude to work on the part of the population.
It is in this respect that the situation in developing countries differs so much from that in the industrial West. Where both the physical accumulation of capital equipment as well as the store of know-how have been firmly established, the economic role of the government is confined mainly to short-term policy, that is, dealing with such immediate matters as balance of payments imbalances, price inflation or whatever. In developing countries, the government has to be both planner and the mobilizer of the economic effort. The first results of such effort do not come immediately but after many years. Governments must therefore ensure not only that there is no letting up on the effort, but also that the climate of confidence remains favourable over an extended period.
In doing these things in Singapore, the Government exerts its influence on the individual in a number of ways. In at least three of the five impact points I have mentioned, the Government can make its influence felt. The physical environment can be changed in accordance with government policies and to the extent that resources are made available for such change. The education system is paid for almost entirely out of the government budget. As regards the mass media, the Government has at its disposal radio broadcasting, television and a range of publications. On matters of crucial public importance it exercises its influence on newspapers more effectively than is the case in modern industrial states and even in some developing countries.
You may ask, “Is all this necessary?” I believe that it is, even though mistakes might have been made on particular issues of lesser importance. Take, for instance, the new hedonist cult which appeared, some time ago, to attract devotees among the more thoughtless youths in Singapore. Even though the risk of widespread contagion was small, it seemed necessary for us to point out the dangers of this trend and to show our disapproval in clear terms. No doubt this has not deterred the
more foolish from ruining themselves, but it has exercised a restraining influence for the good.
Then again, take the case of the newspaper which deliberately and continuously publishes news, articles and pictures glorifying the achievements of Communist China. No one could take objection to an occasional write-up favourable to the communists, as indeed no one can deny the great achievements of their regime. But it is a completely different matter to run a sustained and systematic campaign. Given our internal situation and given the delicate nature of our relations with neighbouring countries, even the most obtuse person could see the damage that such activity must bring in its train. It was therefore necessary to put an end to it, freedom of the Press notwithstanding.
There is always a hullabaloo inside as well as outside Singapore when this sort of thing happens. However, the result of doing nothing would be even more painful in its final outcome, not only to the Government, but also to everybody in the Republic.
The question then arises, “To what extent should the government involve itself to help the individual to adjust himself to the impact of modernization in setting up norms of conduct, that is, standards of good behaviour, proper motivation and such matters?’’ In my view this is a ground on which a government should tread warily for a number of reasons. First, except for the prohibition of clearly antisocial conduct, such as littering, or more serious criminal activities, matters of personal behaviour do not lend themselves easily to legislation. Second, in a multiracial community, there are different criteria by which good conduct is assessed. Third, there is a practical difficulty in putting across such ideas.
Let me illustrate this last point by an example, not an imaginery one, but one which is documented in the files of the Ministry of Defence. It is a practice in the Army to run a course of lessons to newly inducted recruits on how they should behave as soldiers. They are taught the importance of discipline, personal hygiene, care of weapons, loyalty to the country and such matters. These are embodied in a small booklet called The Code of Conduct, drafted by a Jesuit priest. In one of the lessons held in a battalion camp, the instructor, a Captain, had prepared his lesson with care and delivered it with feeling. He grew more and more eloquent in the course of the lesson, pointing out to the young recruits the noble task they were privileged to bear, that is, to defend the integrity of the nation; he explained the meaning of patriotism, duty and honour, values which motivate the military profession.
At the end of the lesson he was pleased to note the favourable
impression created on the Mindef observer. The captain then asked for questions. Private Lim raised his hand. The Officer said, “As this is the first question, let it be a good one which could start a useful discussion. Is yours a good question, Private Lim?”
‘ ‘Yes, sir,” said Private Lim. “It is a good question.”
“Is it something,” asked the Captain, “that all the soldiers would want to know?”
“Yes, sir,” said Private Lim. “All the soldiers have been asking this question.”
‘ ‘Well, Private Lim, what is your question? What is it that all the soldiers want to know?’ ’
“Sir, what the soldiers want to know is this,” said Private Lim. ‘ ‘Why can’t we drink beer in the dining hall? ’ ’
Can we lay down some principles whereby the limits of government action may be more clearly defined? If we go back to what I said earlier regarding the Government’s perception of the modernization process in Singapore in terms of creating increased material well-being for our citizens, this could serve as a starting point. The first consequence is that matters in the realm of the spirit, religious beliefs for instance, are clearly off-limits. Then there is the whole wide range of a man’s personal life, within the domain of his home, whose right to privacy must be respected. Even regarding matters which have a direct bearing on the common effort to improve our livelihood, the need to tell people what to do is probably less here than, say, in a developing country with a large peasant population. The reason is that, as I said earlier, we have already shed a good deal of traditional beliefs (though some remain in more than vestigial form among the more conservative). The result is that most Singaporeans easily and naturally take to the open competitive system, or the rat race, as some people unkindly call it.
The average Singaporean has a robust psyche as he is troubled by few philosophical doubts. Yet there are some, intellectuals mostly, who think that the Government’s stress on material achievement has been overdone. I do not know what they expect us to do. I hope that they will not want this Government, or any government for that matter, to intrude into those realms of living and thinking which we regard as a man’s private domain. Life will be intolerable if this were to happen.
Some people who complain about the undue stress on material achievements, that is, economic growth, may want us to lessen the pace. I cannot see any good reason for doing this. One result of our effort is that there are now abundant opportunities for useful employment for young people as they leave our schools and universities.
But it has not always been like this. I remember that in the early sixties, while we were trying to solve what seemed to be a problem of endemic unemployment, nobody thought that a solution was possible.
Even today, the problem of unemployment, the most important unsolved issue in most developing countries, still remains. Recently, 1 came across two news items in the papers which reminded me of the tragic condition of the educated young in the third world. In one country there were twenty thousand applications for fifty vacant posts of graduate clerks in a government ministry. In another, the convocation ceremony of their largest university came to an abrupt and unexpected halt when the graduands loudly proclaimed that they wanted jobs, not degrees.
There is little risk that the Vice-Chancellor of this University will suffer this kind of humiliation at next year’s graduation ceremony. Let us conduct our affairs in a sensible way so that this will never happen in Singapore, for if it were to happen, all discussions on the impact of modernization would be nonsensical as those most qualified to talk about it would probably be busy formenting revolution. As things are it is my pleasant duty to declare this seminar open and wish you all success in your deliberations.
Labour in a
Technological Society
The theme of this symposium, “Labour in a Technological Society Today—an Action Programme for the Seventies”, suggests that the labour movement in Singapore is making a basic reassessment of its position. From this reassessment, it wants to chart a course for the rest of the decade. It seems a wise move on the part of the NTUC to reflect on fundamentals. Such has been the pace of change in Singapore over the last five or six years that an exercise of this kind is not only worthwhile but essential.
When we do this kind of heart-searching re appraisal, we should try to get our bearings, not merely in relation to the confines of our island Republic, but we must also take a view of the larger canvas of the experience of developing nations in Asia and Africa. For we are part of Afro-Asia. Since their independence, these new states have had to meet all kinds of new and strange problems—of building a viable political system, of trying to abolish widespread poverty through economic growth, of acquiring the means to defend the integrity of the state.
Each one of these is a complex and difficult task. Yet they have had to be tackled not one at a time, but all together, often with insufficient resources in money and experience. It is therefore small wonder that the high expectations raised when independence was achieved have not often been realized.
What lessons can we learn from the experience of the new Afro-
Paper delivered at the NTUC Symposium on “Labour in a Technological Society Today—An Action Programme for the Seventies”, 27 April-1 May 1973.
Asian states in the last twenty-five years? The first lesson is that the democratic system is not an easy one to manage, and that the end of colonial rule does not bring an end to poverty and economic stagnation. This is so obvious a conclusion that I need not say anymore about it.
The second lesson is that politicking does not produce economic growth. In many Afro-Asian countries, as troubles and difficulties mount, angry and discordant voices are raised. Opposition critics attack the government, and the government takes action against foreign interests or minority ethnic groups. All this undermines confidence in the country, and as a result the level of investment falls off, weakening the economy and creating more problems and difficulties. This phenomenon is again well-known, but it has not put an end to such practices in the countries concerned.
The third lesson is that conferences, symposiums, study papers and the like do not in themselves produce economic growth. A curious phenomenon of the third world is the emergence in recent years of the voluble intellectual. Educated in the best universities of the West, gifted with a quick wit and a facile tongue, he can spin out a prodigious flow of words on any topic under the sun. He is a spry performer at international conferences on third world problems. In fact, many of these types are professional conference-goers. Yet, I suspect, if they were given a simple task to perform, such as starting a cooperative society, they would fail. These people are not, as yet, a menace to us. But the communist united front, whom we engaged in a desperate fight during 1960-63, came to grief largely because they paid too much attention to the voluble intellectuals in their ranks. It is a strange mistake for communists to make.
The fourth lesson to be learnt from the experiences of the new Afro-Asian states is that the actions and policies of the government of a developing country form the most decisive factor affecting the fortunes of its people. To a greater extent than is the case with modern states, government leadership, or lack of it, plays a fateful role in the new states. But this is not to say that the government is omnipotent. Far from it. There are numerous instances where the government fails to secure the support of the majority of its citizens. When this happens, the schemes and projects they initiate to raise living standards fail. They cannot get the people to understand the need for these innovations, and they are unable to gear the energies of the people to support them. Without the support and participation of the people, official committees degenerate into debating societies.
The fifth lesson we can draw from the experience of the new states
relates to an important and sensitive subject, that of income distribution. Most of the Afro-Asian states contain both modern and traditional societies. On the one hand, in the countryside, peasants till the land in much the same primitive way their forefathers had done for centuries. In the capital cities and the seaports we see the modern exchange economy. It is here that growth has take place, both in colonial times and now, and it is here that wealth is accumulated.
The difference between the successful merchant or banker in the city and the primitive farmer or tribesman in the backwoods is a tremendous one. Where some of these merchants and bankers are foreigners or from ethnic minorities, it is easy to see that the situation gives rise both to a grievous social problem and to an inviting political temptation.
In such situations, many governments have succumbed to temptation. They mount a direct assault on the problem of inequality. They argue ‘ ‘Why not take money from the rich and transfer it to the poor? Why not place restrictions on the rich, in order that the poor may catch up with them?” All these methods have been tried and, without exception, they have failed. If, in Singapore, our experience has been more fortunate, it is because we understand that an indirect approach will yield better results in the end than the direct assault.
If we had tried to help the poor by taking money from the rich and giving it to them, we would have suffered the same fate as those countries whose governments have done it. In fact, our position would be worse. Other countries have large tracts of land where those without work can settle and grow food. In Singapore, this is not possible.
The PAP Government therefore decided that the way to help the poor was to provide more work and abolish unemployment which was such a major headache a few years ago. To do this we had to provide incentives to investors, rather-than punish them by heavy taxation.
You all know that in Singapore this policy has succeeded. Today, we have many new factories producing goods for export to the world, many new hotels attracting thousands of tourists, many new shopping complexes and office blocks.
With more money collected from taxes, we have been able to provide better social services. We have built large housing estates to help solve the housing problems of the lower income group. We have built new and better schools. We are going to rebuild the General Hospital at Outram Road into one of the best hospitals in the region.
While today our position looks healthy, it was only a few years ago, in 1968, when the British announced their intention to close down
their bases in Singapore, that we were in serious trouble. We had not solved unemployment then and the closure of bases would have thrown some 40,000 workers out of jobs.
In this critical situation, the labour movement and the Government decided to work together to overcome what seemed to be insurmountable difficulties. It was the courageous act on the part of the labour leaders to agree to what then appeared unpleasant and unpopular measures, and the willingness of the rank and file to accept them, which gave the big stimulus to Singapore’s economic growth.
Now, what about the future? It is not going to be a bed of roses. The position of workers in Singapore, as compared to other social strata, suffers from a built-in disadvantage. Let me explain this in detail.
Because we are so dependent on foreign investment for our economic growth, workers in Singapore are in direct competition with workers in other Asian countries which are competing to attract these investments. For a long time, industrial investment in Singapore was low, because wages in Singapore were higher than those in South Korea, Taiwan and even Hong Kong. Today, wages in Hong Kong are much higher than Singapore’s, while those in Taiwan and South Korea are rising rapidly and are today at comparable levels.
But there are other countries in Asia which are entering the competition for foreign investments and whose wages are much lower than ours. There is, therefore, a built-in constraint on wage increases. It acts like Newton’s law of gravity pulling things downwards. How can we get round this difficulty?
Before I answer this question, may I point out that the position of professional and technical people, and even, to some extent, that of the skilled worker in Singapore, is the exact opposite of the position of the general worker. A skilled engineer or doctor, if he does not like to work in Singapore, can migrate to America, Canada, Britain or even to some European countries, and probably get a decent job at a much higher pay than he gets here. This is the well-known ‘ ‘brain drain’ ’ which has not affected us much, so far. Of course, it is not easy to live in a foreign country. An Asian is likely to be a bad misfit in Western countries. The children will probably suffer most. But as far as the professionals are concerned, it is as if Newton’s law of gravity works in reverse. Apples fly upwards and do not drop to the ground.
But all this means that while wages of the general worker are held back to some degree by the lower wage level in countries competing for foreign investment, the pay of professional people is to some degree linked to the high levels of modern industrial states. There is therefore
a built-in mechanism in Singapore for an unequal distribution of income. How do we get round this difficulty?
Workers need to think out a new strategy. While collective action in wage bargaining and persuasive argument in the National Wages Council will get the labour movement somewhere, there are serious limitations to what can be achieved in this way. If you push too hard, you damage the investment climate, and in the end you are the people who will suffer.
To think out a way of getting out of this dilemma, we should trace the source of the trouble. This is the link with wage levels in Asian countries entering into competition for international investment. The hope for Singapore workers lies in the fact that a good deal of these new industries produced by international investors require large numbers of unskilled or semi-skilled assembly line workers. So long as this is the typical industry which we have and which we attract to Singapore, wage levels will remain depressed. The escape, therefore, from this law of wage-gravity is to try to establish a new link. Instead of being compared to cheap labour in Asian countries, why not create a link with high-paid labour in the West? In this way, the reverse law of gravity which applies to the salaries of professionals at high levels will also act on the wages of workers.
Let me explain this. What this means is that we in Singapore should produce complex products requiring labour skills in great amounts, not merely cheap labour. In other words, we want to increase the level of technology of industries in Singapore.
This, in fact, is exactly what the Singapore Government has been trying to do in the last few years. We have been discouraging investors who want to set up simple production processes in Singapore requiring large numbers of unskilled or semi-skilled workers. We are giving special attention to producing goods needing much skilled labour.
It is not easy to do this. Our markets are too small. For instance, if Rollei were to depend only on selling their cameras in Singapore, or even in Southeast Asia, they would never have got started in Singapore. But they have a world market and hence producing cameras in Singapore makes sense.
While we can leave this part of the work of selective industrial promotion to the Government, what is it that the labour movement can do to help in attracting high-technology industries to Singapore?
I believe one crucial field to which the labour movement can make a useful contribution is technical education in all aspects and fields. Since 1968, the Government has introduced a crash programme for
technical education. But because it was a crash programme, it is by no means certain that we did the right thing in the best way possible in all matters. Without being in any way denigrating of the efforts of my colleague, the Minister for Education, I think much improvement can still be effected. It is in the improvement to the system of technical education that the labour movement can play a valuable part.
After all, the products of technical education, whether this is achieved in schools, vocational institutes, apprenticeship training schemes, or whatever, eventually form part of the labour force. These workers would become members of affiliated unions of the NTUC. Proper feedback from the ground level, if done in a systematic way, will ensure an accurate assessment of results and a proper communication of information to the Technical Education Department or the Labour Ministry. This would be of great value.
Let me cut the argument short and tell you how you can escape from the gravity pull of the low wages in competing Asian countries. You can compete with workers in advanced industrial states, producing their products and doing it better, at lower cost and with more dependable quality. To do this, you should set up some targets or models. I suggest that the Singapore worker should compare his performance and skill with the best workers in the modern industrial states. To take a concrete example, I suggest that he models himself after a combination of the German and the Japanese worker.
The German worker is not only industrious but has normally to go through a complex and demanding system of training. The Singapore worker must therefore be trained to standards no less exacting than that of the German worker.
From the Japanese worker we can learn not only how to perform hard and sustained work, but also loyalty to the employer. The Japanese worker has shown an extraordinary talent and capacity for working in close cooperation with management for more efficient production. Let us learn from him.
When the Singapore worker has attained the level of this ideal type, the combined German-Japanese worker, he need not fear the pull of low-level wages in Asian countries. He will now be working in another league, the major league, in which he will enjoy the same inverse law of gravity, which our engineers, doctors and architects are enjoying today.
This is my message to you about the position of labour in a technological society. It promises great hope if the workers will make the effort.
The Asian Struggle
As you can see fot yourselves, we are an open society exposed to influences from all over the world, reaching us through the mass media, books and magazines, radio and television and through overseas visitors, now numbering around a million each year. Not only are we exposed to influences from abroad, but because we trade with virtually every nation in the world, our economy, and indeed our personal lives, are affected by developments in other countries. Since we are too small to influence the course of world events, we have constantly to adjust ourselves to them, for better or for worse. This makes it necessary for us to be well informed on what is happening in the world outside, both among the rich and powerful nations of the West as well as among the less advanced nations of Asia.
It is because we have studied these matters for many years, as a practical necessity and not as an academic exercise, that it is possible for a Government Minister to undertake what may appear to be a presumptuous task, that of addressing this distinguished gathering of Christians on the subject of the Asian Struggle.
Singapore is part of Asia and we have been engaged, and still are engaged, in this struggle. I am therefore speaking as a participant of the struggle, albeit as a member of a government of an Asian country. This has both advantages and disadvantages. The advantage is one of direct personal experience. You get an eye-witness account of the struggle, so
Address at the Fifth Assembly of the East Asia Christian Conference (EACC), at the Seaview Hotel on 6 June 1973.
to speak. The disadvantage applies to all participants of major events and the viewpoint tends to be a narrow and specialized one. I do not apologize for this, but I hope that you will bear in mind that what I have to say, and indeed what I can say which may be of value, relates to a limited though very important aspect of the struggle.
Let us first clear our thoughts about what the struggle in Asia is about. An excellent definition of this is given in the Thrust Paper published in the handbook of the conference, entitled “Justice and Service”. I can do no better than to quote from this paper: “Poverty and powerlessness are also overwhelming phenomena in Asia today, except in a few societies. Concentration of power in the hands of a few, ethnic and racial tensions, traditional and social structures and value systems that inhibit equal opportunity for self-development, as well as disasters, both natural and man-made, political and military conflicts, all contribute to the suffering of people in their daily life, often creating apathy and frustration. ’ ’
I am greatly encouraged by the general approach of this paper. It does not accept that poverty, social injustice and other afflictions of Asian societies should be accepted with resignation, much less condoned. On the contrary, it sees a vital need for action to end various forms of human suffering, much of which are avoidable and result from the inability or unwillingness of man to cope with his contemporary problems. The paper exhorts a search to undertake what it calls “mundane and tedious ministration”, the objective being “the restoration of dignity and hope in life, and beyond this to self-reliance and development ’ ’.
I am encouraged, as I said, by this positive attitude to secular affairs. This is partly because, in recent years, in Singapore at least, there has been a temptation to question the need for material progress. This attitude arises partly from seeing the troubles which affluent Western societies are experiencing.
People here are greatly concerned with the hippie culture, the widespread resort to drugs, and the rise of permissiveness in Western societies. They do not want their lives, particularly the lives of their children, to be affected by the so-called counter-culture of the West. The reasons for the rise of this counter-culture are not widely understood here, nor is it accurately known just to what extent it has penetrated Western societies. But there is a suspicion that this is the result of increasing affluence in Western countries, the absence of challenging opportunities, and the breakdown of family authority. There is therefore the fear that as standards of living go up here, too,
we might find it difficult to escape similar afflictions.
Then it is also known that the very rapid material progress which Western Europe, America and Japan have experienced in the last two decades has brought about serious problems in a decaying and polluted environment. So some people ask themselves: “If this is the endproduct of all the efforts, painful adjustments and sacrifices which we have to make, is it really worth it?”
This question cannot be lightly dismissed; indeed it is a good thing that people address their minds to the dangers of growing affluence for by doing this they may take precautions in advance. But, apart from this, 1 believe that Asian people, who get their information on these matters mostly through the mass media, magazines and books, should try to preserve a sense of proportion.
They must always remember that in Western democracies far greater attention is given—in the mass media, in national legislatures and even in learned journals—to problems and difficulties rather than to achievements and successes. It is part of the self-correcting process of the democratic system. Communists also try to introduce a selfcorrecting mechanism into their system—they call it self-criticism. But in communist countries much of this “self-criticism” is done in private and closed meetings, whereas in Western democracies it takes place in the full blaze of publicity and is probably more efficacious as a result. But outsiders like ourselves must be on our guard against rushing to the conclusion, from reading these accounts of the shortcomings of Western countries, that decay and decline have set in. To me, this is a wrong interpretation of recent events.
Western countries will find solutions to their problems in their own way, and in good time. The problems of Asia are, in general, quite different. The basic problem is one of poverty, poverty so widespread and abject that only those who have seen for themselves the human degradation which poverty brings have a true picture of the situation. But poverty in Asia, or in the poorer regions of Asian countries, is different from poverty as it is known in the West. For instance, I recently read in an American newspaper bitter complaints that, as a result of inflation, the poor in the United States could only afford hamburgers and not steaks. In Asia, the poor live permanently on the borderline of starvation.
However, even in the poorest of Asian countries, not everyone is poor. The rich in a poor Asian country are certainly far better off than the poor in rich countries. Often, it is this contrast between the huge majority of people living on the border of subsistence on the one hand
and the wealthy privileged minority on the other that people find difficult to accept. While there are very rich people in Europe and the United States, for instance, they are, at least, heavily taxed. Also welfare services have reached standards whereby the most needy of their citizens can receive a certain minimum level of living far beyond the starvation line.
In Asia, on the other hand, it is often believed, not without justification, that the rich evade taxes and even secretly stow away wealth in foreign countries. And this makes the contrast between them and the large majority of poor people even more reprehensible.
How did this state of affairs come about? How can the poverty of the masses be ended? Is enough being done now about this matter? Here I can only offer some tentative ideas for your consideration. As you know, there has been a vast output of literature on the subject. There have been many studies by experts from national governments, universities, the United Nations and its specialized agencies, independent research organizations and others. Conferences, seminars and commissions have studied the subject exhaustively from many angles and points of view.
Despite this vast mountain of labour, not only does the problem of poverty in Asia remain much the same as before the effort was mounted, but there is a decreasing confidence in the solutions proposed by experts, laymen, government officials, university professors, and others who have addressed their minds to the subject.
It was not like this ten or twelve years ago when the United Nations first proclaimed the 1960s as the Decade of Development. It was then thought that, with proper development planning by the governments and an adequate flow of foreign aid, progress towards the abolition of poverty would not only begin, but would gain momentum in the course of time. Very little of such optimism remains in Asia today, or for that matter in poor countries in other parts of the world.
Poverty in Asia results in such a measure of suffering and degradation that almost any method of ending it seems better than its indefinite continuation. Certainly it is absurd to regard some of the troubles of the contemporary West as adequate reasons for not trying to raise the living standards of the Asian poor.
The basic principle whereby poverty can be abolished is simple enough. It can be formulated as follows. Poverty is the result of low output of work in farms, in trade and in industry. Productivity can be increased by the application of modern science and technology to the production process. The knowledge to do this is freely available, not
only in the advanced countries but in Asian countries themselves. It is the result of centuries of development in scientific and technical learning, and there are no mysteries about it.
Yet, though the knowledge is there, and the means to apply it are often not too difficult to acquire, somehow the necessary effort has not been applied. Or when effort has been applied, it has often been on too small a scale to be effective, or it was applied in a technically wrong way.
The situation in Asian countries is, in a sense, a tantalizing one. While we know the technical means whereby poverty can be abolished within our lifetime, somehow difficulties stand in the way of their application. I want to discuss some of these difficulties. They are by no means trivial or transitory ones. If they were, most of the countries in Asia would have been well on the road to rapid development; as it is there are only a few who have found their way to this road.
When we talk of Asia, we must remember that it is a geographical term which covers many countries varying widely in their cultures, economic systems, social values and standards of living. To generalize about some 2,000 million people living in different kinds of societies is obviously a dangerous undertaking. Nevertheless, I believe there are certain common features about how these people work and live, and about how their governments are trying to tackle these problems, and the results of these efforts.
The first generalization which I am making is true of the larger Asian countries at any rate: it is that most people here are peasant farmers. They live in the countryside, growing food grains such as rice or wheat or some other agricultural produce. Something like 70 to 80 per cent of the population of large Asian countries are peasant farmers. It is among these peasant farmers that the problem of poverty, misery and suffering is most acute. The general situation can be described as follows: because modern public health measures have reduced or even eliminated epidemics and because, in the event of periodic famine, food supplies can be imported from the outside world, the historical checks to population increase have been blunted. As a result, population growth has been very rapid in the last century or so, and today much of the agricultural regions of Asia are densely populated.
This results in small farms. Not only are the farms small, but output is low because the peasant still works very much in the same way as his ancestors used to do. He is ignorant, and often subscribes to superstitious beliefs of one kind or another. This is because he is usually illiterate. He is illiterate because most of the schools are sited in the
cities and townships. Also, most educated people, including government employees, prefer to work in the city and not in the countryside.
Quite often, the peasant does not own the land he tills. When this is the case, he has to surrender a good proportion of his crops to the landlord, often a rich man living in a township or major city. A peasant is fortunate if he can keep half his harvest.
To add to his troubles, the water supply—absolutely vital to the growth of crops—is often unreliable. Unless a modern irrigation system has been developed, which is the case for a very small part of Asia’s farming regions, he is at the mercy of the elements. Either droughts or floods will ruin his crops and reduce him to penury, or even starvation.
Such is the plight of the typical Asian peasant. Studies of his nutritional intake show that in many instances he does not even receive an adequate supply of carbohydrates to give him enough energy to do effective work. As regards the protective foods, such as animal protein, vitamins and minerals, these are beyond his means.
In a situation such as this, an escape from poverty is virtually impossible without aid from outside the traditional village circle. Usually some government agency has to help out as the peasant is ignorant and illiterate and cannot discover for himself better means of production such as through using better seeds and fertilizers, which, because he is poor, he would be unable to buy anyway. In any event, since his fields are not irrigated, fertilizers would not help. And tractors and mechanized means of production are totally irrelevant in the small plot of land he cultivates.
Such is the grim picture of Asian poverty. Poverty in this sense is not an abnormal situation afflicting the unfortunate few. It is the general condition of 70 or 80 per cent of the 2,000 million people who live in Asia.
Let us now turn to the other portion, the 20 to 30 per cent who do not work on the land. For the sake of convenience I will call it the “modem” sector, in contrast to the peasantry, which we may term the ‘ ‘traditional’ ’ sector. This classification is only one of convenience. In the real world, there are gradations between the two. For instance, not all of the farms grow food grains: some may grow commercial crops such as cotton, jute, vegetables and sugar cane. Some agricultural workers may not be peasants but may be employees of modern plantations, working for a monthly or daily wage. Plantations may grow tea, rubber, oil palm and other products destined for export to the world markets. These latter agricultural workers are really part of the modem sector.
But the heart of the modern sector is located in the cities, the seaports, the townships along railways or major roads and in centres of government administration. We call them ‘ ‘modern” because here we find most of the amenities associated with living in the twentieth century—electricity, piped water, modern sanitation, banks, factories, schools, universities, shops, motorcars and business houses. Unlike the peasant who works on his own account even though he may have to deliver a part of his crops to his landlord, most people in the modern sector work as employees.
Here the picture looks more hopeful. Since they achieved their independence, many Asian countries have drawn up development plans whereby they can manufacture the products which they once imported, thus giving opportunities for employment as well as raising the standard of living, at least in the modern sector. Some countries, India for example, have made remarkable progress in this direction, producing not only the simpler consumer goods, such as textiles, shoes, crockery, and radio-sets, but also products requiring heavy capital investment and advanced technology, such as trucks, aircraft and aircraft engines, machine tools and the like.
Most other Asian countries have already made the beginnings of a programme of industrialization, with varying degrees of success. Some who are fortunately endowed with natural resources such as minerals, timber or oil, can earn foreign exchange, provide employment, and increase income more easily than those without these natural resources.
Yet, despite significant progress achieved in the modern sector, the overall situation is far from reassuring. There are several reasons for this.
First, while progress in the modern sector can be considered good, it has not been sufficiently fast in most countries to absorb the surplus population from the rural areas. Hence, in many of the larger Asian cities we see large numbers of people living in sub-standard shacks and huts made of packing cases, discarded galvanized iron sheets and the like. Second, as a result of technical mistakes or misguided policies, opportunities for faster growth have sometimes been missed. In many Asian countries, there has been too much centralization of authority and decision-making, as a result of an elaborate system of government controls and licensing. This not only inhibits expansion but also gives rise to serious problems of corruption.
A third weakness experienced in the modern sector of many Asian countries is the low efficiency of production. The reasons for this are
many and complex and vary from country to country. In part, it is the result of government control which creates monopolies, allowing inefficient high-cost firms, which should otherwise have gone bankrupt and been taken over by better management, to survive. The abundance of labour at low cost discourages the installation of efficient methods of production which require the use of more machinery and less labour. In some instances, as a result of the political influence of trade unions and labour leaders, work discipline deteriorates to a point where efficient production becomes impossible. The general position in Asian countries is that, while the modern sector has improved in many instances, expansion has not been anywhere near the level needed to make a significant impact on the traditional sector. Nor have efforts made to invigorate the agriculture in the traditional sector been crowned with outstanding success. Growth of the gross national product has barely kept ahead of the population growth, with the result that per capita incomes increase at a snail’s pace. Of course there are exceptions to this gloomy generalization, but they remain exceptions.
In countries such as Europe and North America, which have successfully been transformed into modem industrial states, the historical trend has been a move of population away from farming to the modern sector in the city. This has beneficial effects in two ways. First, by relieving pressure on the land, the size of farms increase with fewer people to work them. There are therefore opportunities for using improved modern techniques, thereby raising the income of farmers. The population which has moved to the city provides the additional labour force for growing industries. In the course of time, the number of people working on the land as farmers and producers goes down from the 70 to 80 per cent common in Asia to around 10 per cent. But because farmers use efficient modern methods and work on large farms, one farmer can produce enough food to feed ten people; in contrast, in most of Asia seven to eight farmers provide food for ten people, including themselves.
Despite much effort and some limited progress, it will be true to say that the basic problem of improving the livelihood of the peasant in the densely populated river valleys of Asia remains unsolved. It has proved to be extremely difficult to bring about changes. First, those who have some education and technical knowledge prefer to work in the cities and small towns rather than in the villages. Even in the People’s Republic of China, it has been necessary to dragoon educated people to work in the rural areas. Where such methods of compulsion are not available, as in non-communist countries, the transmission of
knowledge of new techniques, the establishment of schools in remote villages, and the provision of modern amenities to the peasant population all become intractable problems.
The difficulties of the new Asian states are compounded in many instances by variations of language, customs, religions and even of ethnic origins, found within the boundaries of many nation states. It would be easier to obtain agreement on basic issues if the population were a homogeneous one, as, for instance, the people of Japan are. It would be far easier in such a homogeneous society to win the acceptance of hard and difficult measures which are required to bring about rapid economic growth. But when the population is divided into linguistic, religious or even ethnic sub-groups, the task of obtaining a consensus becomes exceptionally difficult.
Instead, pressure groups develop in the political process and factions fighting over sectional interests receive more attention and energy than do basic national interests. In such a situation, it is extremely difficult to sustain a sense of direction and common purpose. This is more particularly so if graft and corruption take place at higher levels of the administration. The modern sector, which has to lead the whole country towards progress, then quickly degenerates into a sanctuary whereby privileged minorities in the business, political or professional fields ensure only that their sectional interests are advanced. The plight of the poor receives lip service and little else. In this kind of situation, demoralization sets in and, with it, the erosion of the moral authority of those in leadership positions. Unless the process is reversed—and this often requires drastic and radical measures—the system of government deteriorates in the course of time to a pathological condition. At that moment, the military takes over power.
This grim presentation of the Asian struggle is not, I think, an unfair one. To be sure, there are countries whose performance has been much better than that which I have described. But these are usually smaller countries with less pressure of population on the land. On the other hand, there are some countries which are worse off, and which have not even begun the fight against poverty.
I do not want to give the impression that, even in the general picture I have presented, no progress has been made or that the future is totally without hope. Assuredly, some progress has been made, even in the traditional sector. The beginnings of a literacy drive in that sector has commenced in many countries; the introduction of better seeds and, where water supply conditions permit, the use of fertilizers have begun. Yet, it is fair to say that the impact of such measures is small. Most
important, efforts to control population growth in the traditional sector, even in the few instances where they were made, have met with almost total failure.
Despite the discouraging results of some twenty-five years of effort, there is no reason to assume that all is lost. In the history of human civilization twenty-five years is a very short time. But we can accept this source of consolation only if we draw the correct lessons from past experience and past mistakes and try to get onto the proper course.
What then are the lessons of Asia’s struggle to overcome poverty in the last twenty-five years? The first lesson, I think, is that the basic cause of failure is one of social organization. The knowledge and the technical knowhow are there; the means to apply them effectively, while scarce in relation to total needs, can be acquired through one’s own effort and with help from friendly countries.
This failure in social organization takes many forms. We can better understand it by looking at the results of such failure. The obvious one is that the traditional sector remains largely unmoved. Despite the cheap and efficient means of mass communications available, radio, television, posters, tape recorders and loudspeaker systems, it has not been possible to introduce, in any significant way, new attitudes among the peasantry, or at least to change their traditional value systems, to enable them to be more receptive to the new technology and new opportunities available.
Another symptom of the failure in social organization can be seen in the insensitivity of a great part of the leadership in these countries to the problems of the poorer 80 per cent. Even when they express views on the subject, it has often been in sentimental and sanctimonious terms, with little by way of operational value. As I said earlier, because the political process has created pressure groups, more energy is devoted to preserving vested interests than to finding fundamental solutions to the general problem of poverty.
As a result, much of the activity and resources are directed towards wrong ends, or, where they are intended to improve the livelihood of the poor, they are utilized incorrectly.
A great danger in the present situation is the possibility of a loss of confidence, leading to a further erosion of the will to conquer the evil of poverty, and allowing the situation to drift. This would be a pity for, despite the enormous size of the problem, it is not an insoluble one, given the correct policies, proper social organization, and time.
If we realize that the great error of the past has been to place too much emphasis on economic and technical solutions and to give in
sufficient thought to social organization, it may still be possible to retrieve the situation. Throughout the last twenty-five years it has been the accepted wisdom among governments and economic planners that with what they call ‘ ‘appropriate inputs of capital in strategic sectors of the economy”, a transformation could be effected which will continuously raise low living standards to higher levels.
I will be the last person, being an economist by profession, to decry the importance of capital inputs. They are of course necessary, but the experience in the last two decades has shown that they are not sufficient.
Machinery and power stations, irrigation works, railway systems, etc., have to be worked by man. It is the manner in which man operates these material objects that has been disregarded in the literature on economic development. It has been thought that men could be motivated to work sufficiently hard by giving them wages or salaries appropriate to their occupations. The lesson of the Asian struggle is that this is just not true, save in exceptional situations, of which Singapore happens to be one. Where Asian societies have an ancient heritage of civilization, as is generally the case, the traditional value systems which go with such civilizations continue to motivate human conduct, not only in the traditional sector, but also in the modern sector.
There is much that is precious in Asia’s heritage of culture and civilization, and it will be nonsensical to suggest that they should be thrown overboard in order that more people can own more motorcars, washing machines and refrigerators. Having said this, I think it will be generally agreed that many of the customs, habits and modes of thinking are inimical to the efficient conduct of affairs in the twentieth century.
This is rather a delicate matter and I do not wish to offend sensitivities. I will therefore take some rather innocuous examples. For instance, in most Asian societies kinship obligations extend beyond the immediate family and sometimes these obligations are so strong that they justify conduct which in the modern world would be considered unethical. Again, certain standards of behaviour which are absolutely necessary for efficient business, such as punctuality and the ability to make accurate and precise arrangements, are not highly regarded in most Asian value systems. Yet, this lies at the core of efficiency, without which it will not be possible to undertake the task of abolishing poverty.
How is this new set of values to be introduced? I think it can be done
in two ways. First, some towering intellectual genius could write a magnum opus setting out an interpretation of the modern world in terms which can be generally understood and accepted in Asia. In this sense, Marx and Engels and their successors created a new philosophical system, explaining in their way the evolution of the industrial system and its impact on human society. It is the value system which emerged from their writings that has provided the strong motivating force in those societies and underpins their social organization.
It is doubtful whether an Asian Karl Marx would arise in the contemporary world to give the necessary intellectual insights into the modern process. What is more likely to happen is that the new value system will grow out of the experience of millions of peoples in many countries in Asia. The ingredients for success and the causes of failure, whilst debatable in many instances when they happen, will eventually be correctly assessed in the course of free intellectual inquiry. Indeed, there is already a great deal of discussion on this subject, although people are far from reaching any kind of consensus of opinion. We must remember that it takes a long time for truth to emerge and it takes a longer time for it to be generally accepted. Lord Keynes said in his ‘ ‘General Theory’ ’ that practical businessmen who claim that they have no time for theoretical nonsense are often slaves of the theories of some defunct economist.
Today, while the earlier promise of the post-independence years remains unfulfilled, sufficient progress has generally been made to justify hope for the future. At the same time sufficient mistakes have been made in the course of such progress, and these have led to a greater understanding of the subject.
This problem, the conquest of poverty, must surely be of great interest to the Christian Church, as the root of any fundamental solution lies in the re-orientation of value systems. It is a subject to which the Christian Church is as well equipped as any other human institution to contribute and to give guidance.
Education in Singapore and the “Teacher Image”
In 1971, teachers in Singapore held a seminar. The theme was rather grand: ‘ ‘The Teacher and the Dynamics of Nation Building’ ’. But the subjects discussed were down-to-earth. Among other things, the seminar tried to define the relationship of the teacher with his community, with his profession, with his trade union and, last but by no means least, with the Ministry of Education.
One of the papers submitted to the seminar discussed the status of teachers. The paper, by Miss Phua Swee Liang, was entitled “The Teacher Image”, and I want to quote from it.
Miss Phua said, “It is a well-known fact that the teaching profession in Singapore has sunk far into disrepute over the last ten years . . . The teaching profession suffers from a low economic and social status ... It is rather demoralizing to admit that teachers themselves feel they have lost their identity as individual teachers. ’ ’
That teaching as a profession does not occupy a high economic and social status must be accepted as a fact of life in Singapore today. I want to discuss how this sad state of affairs has come about and what can be done to remedy it.
Teachers have not always been in this sad plight. When I was a schoolboy myself, teachers occupied a high social status in Singapore. Of course, Singapore was then very different from what it is today. First, it was a British colony, not an independent republic. In 1934
Speech at the Inauguration and Convocation Ceremony of the Institute of Education on 17 October 1973.
when I was nearing the end of my school days the amount spent on education in Singapore was $1.3 million a year. Today, it is $235 million a year. There were only 62 government and government-aided schools, nearly half of which were Malay schools. Most of the remaining schools were Chinese vernacular schools, giving only a primary education, and not aided by government grants. There were some 33,000 pupils and 1,400 teachers. Today there are more than 521,000 pupils and some 18,000 teachers in more than 500 schools. Nearly all these are government or government-aided.
The Colonial Government did not feel any responsibility to provide universal education. Hence education was the privilege of a minority of families who could afford to send their children to school. Generally they belonged to the same social and economic class as the teachers and in those days teachers and parents got on well together. The trust which parents placed in teachers undoubtedly reinforced the esteem in which teachers held themselves.
The Singapore of those days was a trading centre. If you wanted to become rich, you went into business, principally the import and export business. There were a few professionals, such as engineers, architects, accountants; and most of those few were Englishmen. Even doctors made only a modest living in those days.
Today it is all different. The elected government in an independent country must provide for those social services which people want, and the most important of these is education. So you have seen in the last decade or so an enormous expansion in schools, in the number of teachers, in the number of pupils. Rapid growth of this magnitude produces problems to which I will refer later.
The elected government has not only to provide an education for the children of citizens; it has also to make sure that when these children leave school, there will be jobs for them. So we had to find ways and means to bring about rapid economic growth. We did this by fostering the expansion of the manufacturing industry.
As you all know, we have succeeded in producing a continuous and sustained growth of our economy. Unemployment is no longer the problem it was ten, or even five, years ago.
Economic expansion has not only been able to provide jobs for school leavers; it has increased substantially the demand for professional and management skills. This means that those with secondary or tertiary education have many opportunities for well-paid careers in business over a wide range of occupations in executive, engineering, sales or supervisory positions.
If this was all there is to it, then the position of teachers would not appear so bad by comparison with careers in the other professions. For instance, one expects incomes in business to be higher, partly because the pressure of work in a highly competitive environment is more intense, but mainly because the risks are higher. You may be earning a large income today in business and find yourself out of a job or bankrupt tomorrow.
There is however another consequence of fast economic growth which has contributed to this loss of self-confidence among teachers. It is a complicated subject, but I will give a simplified account of some basic issues.
To get a fast economic growth, one has to do two things. First, one has to create opportunities for profitable investment. Second, when such opportunities are seized by investors, one has to make it more certain for expected profits to be realized. Only under such circumstances will we get businesses, both locally and from overseas, starting new enterprises which will increase our economic growth.
In simplified outline, this is what we have been doing. One result has been to make people more aware of business opportunities. As a result, people begin to admire wealth, and make the effort to accumulate it. In an extreme form, it leads to the worship of money, or ‘ ‘moneytheism” as my colleague, Mr Rajaratnam, puts it.
These are unfortunate but unavoidable consequences of the economic policies we had to follow. This worship of money is bad, but no one in his right mind would want to stop our economic growth in order to do away with moneytheism. I have great sympathy for Mr Rajaratnam’s views on moneytheism. The scramble to get rich is seldom a pretty sight.
The behaviour of those who have suddenly become rich is not always admirable. In one district where a lot of newly rich live, there was competition to instal elaborate doorbells. A newly-made millionaire boasts that his house is lined with marble imported from all over the world. Their children waste money on sports cars and other forms of extravagance. Crudeness and vulgarity of this kind are behaviour traits of the newly rich, both in Singapore and elsewhere.
However much we may deplore conduct of this kind, it is not easy to take corrective action in a democratic society. How can you stop a man from plastering his house with imported marble? It is his money, not yours. While we can hope to ridicule excesses of this kind, and in this way prevent its spread, it is less easy to see how one can generally prevent foolish ostentation. It is largely a matter of raising cultural
standards, and this takes time.
Meanwhile the prevailing practice is to judge a man’s worth by his bank balance. Under such standards, the social and economic status of teachers cannot be very high, though I don’t think the position is as desperate as stated by Miss Phua.
I have referred to the problems created by the rapid expansion of education in the last ten or fifteen years. The effect of this unprecedented expansion must be harmful to the teaching profession in many ways. Crash programmes have to be mounted to train teachers in large numbers; often standards have to be diluted and teachers have to take on responsibilities or work loads far beyond what is normal.
In addition, rapid growth creates all kinds of problems and troubles at the ground level. Where these require attention or action by higher authorities, such action or attention often fails to materialize. This is not because the higher authorities are heartless or indifferent; they themselves are swamped by their own problems. They have willy-nilly to meet new targets each year, knowing that in the process they have to sacrifice quality for quantity, and leave many problems unresolved.
When this happens, teachers and even school principals often get the feeling that nobody cares for them. To quote Miss Phua again, “the views of teachers are never sought before any educational decision is made”.
All these are unavoidable teething troubles. We experienced this in the Army in recent years and I personally have had first-hand knowledge of how over-rapid expansion damages morale and efficiency. I suspect that the effects of rapid expansion on the morale of teachers have been underestimated; they seemed to have been overlooked in the 1971 seminar.
However, the frenetic pace of work of the earlier years has given way to a more steady effort. With emphasis on improvement and consolidation, many of the troubles which gave rise to problems of morale will slowly but surely be overcome. Even Miss Phua acknowledges that “Fortunately there is a glimmer of hope because recently more and more teachers are being involved in the revision of the curriculum. ’ ’
While troubles of this kind are temporary and will disappear before too long, the other kind of problem, that of income disparities, is not likely to go away. Something needs therefore to be done to restore to teachers their self-confidence and self-esteem. Let me examine a few possibilities.
One option, which should doubdess appeal to all of you, is to give teachers more pay. But there are two objections to this. First, there are
limits to what is possible. Second, what really counts is not the amount which teachers get, but the relation of teachers’ pay to the pay of, say, doctors, accountants, businessmen and others.
Relative pay rates are determined by economic forces of supply and demand, and these unfortunately operate against teachers everywhere, and not only in Singapore.
In the seminar of 1971, several solutions were suggested, including pay increase. One was to have a stronger trade union, another was to introduce new institutions such as the Teachers’ Cooperative or the Teachers’ Centre. The need to project a better image of teachers, to disseminate information about teaching, was also suggested. Teachers were also encouraged to participate in community work, providing much-needed leadership at the ground level.
In my view these are good suggestions and I hope they are being carried out. But while they are necessary, these measures are not in themselves sufficient. What is needed is for each one of you to believe that you belong to a profession of which you are proud. Until teachers as a body firmly believe in their worth, it is unlikely that the other measures will have effect. Indeed, it is unlikely that you will get a stronger trade union, establish a teachers’ cooperative and provide community leadership unless you believe that you are people of worth.
Just how does a teacher acquire this kind of mental attitude in a social environment which judges a person by his bank balance? Let me relate to you an incident, a real one, which occurred in a unit of a famous British infantry regiment and which is recorded in a recent history of the regiment.
The regiment is noted for its unconventional fighting methods. Partly as a consequence of this, it was able to score glorious victories by doing the unexpected, thereby surprising and overwhelming the enemy. But while its battlefield record is illustrious, its peacetime activities posed a problem to top military brass. Top-ranking military officers, other than those of the highest level of genius, often have conventional minds with little liking for unorthodox behaviour. So Generals in peace-time looked with disfavour upon what they regarded as the wayward habits of this regiment.
It happened that when a General visited one of the units of the regiment, he drew attention to various shortcomings which he had observed. The unit’s commanding officer was left in no doubt as to the poor impression he had made on the General. After the General’s departure, the Colonel gathered his officers and men together and addressed them as follows. ‘ ‘Men, I am afraid the General does not like
us. But that doesn’t matter so long as we like ourselves. ’ ’
The men cheered their Colonel to the echo. And so, an episode that could have proved harmful to their morale was instead turned into something that boosted morale. The soldiers in this regiment were able to do this because they knew they were good soldiers. And that is the secret which teachers in Singapore would do well to understand.
Put in simple terms, it means this. If you want to hold yourself in esteem when you believe that many people do not, you must believe that you are proficient in your work. And the best way to cultivate this belief in your proficiency is to be proficient.
I am not a professional teacher and I will therefore not presume to tell you how to be proficient at teaching. But certain principles apply in the acquisition of skills in any profession.
To be skilful in any human activity, two things are necessary. First, mastery over techniques. Second, a right attitude of mind. As regards techniques, you have spent much time and effort at this Institute to acquire a knowledge of the principles of teaching and you will soon be applying them professionally. You are adequately equipped to start on your profession, and your skill will increase with the accumulation of experience.
It is in this respect that a right mental attitude is important. If you dislike your work, or if you believe that it is unimportant whether you work well or not, then it is unlikely that your skills will improve with experience. It is therefore necessary that you believe your work is important, as indeed it is; for the new generation of Singaporeans will be collectively in your hands to mould. If there is more important work to be done in Singapore, I for one do not know what it is.
Liking your work is as essential as knowing that it is important. Not being a teacher myself, I cannot tell you how you should like your work. I can only say that if you don’t, you should leave the profession and do something else. Most of you, I imagine, like teaching as a career and this is why you are here today. I expect in the years ahead, as working conditions in schools improve, and as the Ministry of Education finds more effective solutions to past problems, you will have ample scope to increase your skill as teachers, and, in doing so, get a lot of satisfaction from your work. And with this, your self-esteem and self-confidence will grow. You will become like the soldiers of the famous regiment referred to earlier.
I would like to conclude with a few words of advice on some general matters. As you are young and about to commence your working career, a few tips from someone who has gone through the mill may be
of use.
My first word of advice to you is to live within your means. Looking at your salary scales, I get the impression that while no one would proclaim these scales to be dazzling, at the same time they are not meagre. You will be able to live adequately, even in comfort in the years to come, as you earn your increments and, I hope, your promotion.
If you spend carefully, and do not try to keep up with the Joneses, you will be able to save. I do not recommend that you stint to the bone in order to accumulate a large bank balance by the time you are about to die. Since you will have pensions or the provident fund to go by, you need not be unduly worried with problems of old age security.
You can make use of your savings in many useful ways, for instance to travel abroad. Air travel is becoming cheaper and there are many interesting places to visit. I would suggest that while you are young, and can rough it out, you should visit neighbouring countries in Southeast Asia before you try organized group tours to Europe or Japan.
I mention foreign travel in order to emphasize the importance of enlarging your horizon and keeping alive an interest in new and novel things. There are other ways of sustaining intellectual curiosity of this kind; reading books is one of them. Cultivating an interesting hobby is another. The point about doing these things is to sustain a zest for living without which you will feel bored and useless.
You should be alive to events around you. A sad mistake which many of the older generation have made is to be so preoccupied with their humdrum little circle that they are unaware of the larger issues. I hope that you will never fall into this error.
Aspects of the Drug Problem in Singapore
Interest in the drug problem in Singapore has been growing over the last few years. For this reason, many people believe that the drug problem is a new one. Actually, it is a very old one and we can trace its origins to the time of the First Opium War waged by the British on the then Imperial Government of China in 1839-42. The British Government insisted that there should be free trade of opium and this was naturally resisted by the Chinese authorities. Since Singapore and the then Straits Settlements and British Malaya received large numbers of migrants from South China, these arrivals brought with them the habit of opium smoking.
The opium trade was quite legal in those days; the rights to sell opium and run opium dens were licensed to people much in the same way as bars and restaurants are licensed today. But after the turn of the century there was a public outcry for the prohibition of opium. The Colonial Government reacted in typical fashion. It set up a commission of inquiry into the opium problem when the outcry became uncomfortable. There were two such commissions of inquiry, the first reporting in 1908, and producing a voluminous report in three volumes. In 1924 the British Malaya Opium Committee made the second report on the same subject. The 1908 report noted that a substantial proportion of the revenue of the Straits Settlements— comprising Singapore, Penang and Malacca—came from the sale of
Speech at the launching of the National Anti-Drug Abuse Campaign (NADAC) month at the National Theatre on 4 August 1976.
opium. In 1904, 59.1 per cent of the revenue of the Straits Settlements came from the sale of opium. As late as 1934 the percentage remained as high as 40 per cent. The prohibition of opium smoking was assessed to “have suicidal effects on the prosperity of the colony’’. Some beneficial side-effects of opium addiction were also mentioned: in those days the jungle had to be cleared for road and railway construction as well as for establishing rubber plantations; labourers lived in what were called ‘‘coolie lines”, and opium smoking after dusk set up such dense malodorous clouds of smoke that mosquitoes were repelled and workers were saved from malaria.
Apart from the high revenue obtained from the sale of opium another reason against prohibition was the free port status of Singapore. In the report on opium the petition of the East India Company to the Colonial Office was quoted: “The settlement of Singapore was established as an outlet for British commerce and the preservation of its integrity as a free port has always been recognized by statesmen as essential to its prosperity and the full development of the objects contemplated in its formation. ’ ’
In the nineteenth century the principle of free trade had been elevated to the status of divine will. For instance, in the report of the first great Bengal famine, strong opposition was registered against the organization by the Government and charitable institutions of relief supplies to famine victims, on the grounds that this was an interference with free trade. It was far better and more in keeping with the divine will that high food prices in famine areas would cause an increase of supplies through normal trade channels.
However, the opium commission of 1908 was not totally bereft of social conscience. It recommended that the Government should suppress the use of opium in brothels.
By 1924, however, the public outcry against opium smoking had reached such proportions that the commission recommended measures whereby consumption of opium could be reduced and the way be prepared for the eventual registration of opium smokers and the rationing of supplies.
The opium monopoly continued right up to the outbreak of the Pacific war, and it was managed by the Customs Department. The opium packing plant in Singapore was sited in Pasir Panjang. Opium smoking was prohibited on 1 February 1946, the plant was closed, and its premises were used for storing rice. However, a thriving business of opium smuggling developed. But with the registration of addicts and the rationing of supplies introduced in 1929, the number of addicts
gradually diminished as addicts died, since replacements by new addicts were much less than those who had died.
The current campaign against drug abuse in Singapore deals with a different situation. Unlike the old problem of opium smoking which mainly concerned old people, the problem now centres around the young. Consider the figures of young people arrested in the 14-25 age group. In 1973, the total number of such young drug takers arrested was 1,011 (or 16.7 per 10,000 young people of the age group concerned); in 1974, the number increased to 1,329 (or 21.3 per 10,000) and in 1975 it went up further to 2,550 (or 40.1 per 10,000).
Let us look at the 1975 figures. In that year a total of 4,201 drug abusers were arrested; so the 2,550 young drug takers between 14 and 25 years of age constituted 61 per cent of addicts arrested. And for the first half of this year, the number of young persons arrested stands at 2,166. This means that the incidence of drug taking has nearly doubled as compared with last year.
Why this increase? Perhaps more effective raids by the Central Narcotics Bureau may account partly for the rising rates; but given the large increases, we must believe that more and more youths are succumbing to drugs. In the late 1960s and even up to 1974, the typical drugs resorted to were ganja and MX pills; but since the beginning of 1975 hard drugs, the most popular of which is heroin, have taken over.
In 1975, 1,725 out of 2,550, or 68 per cent of the young drug takers arrested, used heroin. There are of course drug takers unknown to us, because they have escaped arrest and are unwilling to come out to seek treatment. How many of these there are we do not know. But the picture emerging from the known cases is a disturbing one—drug abuse appears to continue unabated, enslaving growing numbers of our nation’s youth.
We know that people who take hard drugs such as heroin are certain to become addicted. Unless cured of their habit, they will eventually ruin their lives. We know also that in most instances the craving for drugs becomes an obsession and addicts will do anything to get regular supplies.
I will illustrate problems of drug addiction from case studies of soldiers in the SAF who have been caught taking drugs or who have volunteered for remedial treatment. This is not because soldiers are more prone to drugs than the rest of the population. In fact, the rate of drug addiction in the SAF is much less than that among people outside the Armed Forces. This again is not because soldiers are more virtuous
than others; it is because those who are known to have a history of drug abuse are not enlisted for full-time national service. However, as these records are not 100 per cent complete, some escape notice and get enlisted. In the SAF, since a soldier remains with us for two to two and a half years, plus whatever period he spends under detention, we are able to maintain proper records of drug takers over a long period. We have established a counselling service manned by both professional and voluntary workers. We have also made studies of their personality structure and family and social backgrounds.
The easiest way out for the Army is to discharge addicts after they have served their term of detention as they are unlikely to make good soldiers. However, in an effort to help in solving this problem for society as a whole, we try to rehabilitate them. The intention is not only to reform them while they are in the Army but also to help them to get secure jobs after they leave so that they can stand on their own feet, earn a secure living and become normal responsible citizens. As this scheme started only a year ago, it is too early to say whether we shall succeed.
Some addicted soldiers spend as much as $900 a month on drugs. Not infrequently, because of a compulsive craving for drugs, addicts take to theft, robbery and other forms of crime. There is a soldier who earns extra money to maintain his drug habit by working during his off days in an opium den. A recent sample study of 48 hard drug abusers in the SAF shows that about half of them had committed military offences of one type or another ranging from going AWOL, sleeping on duty, to gambling and theft. The majority performed poorly in training and work. Other countries provide similar evidence of this kind. The American National Commission on Marijuana and Drug Abuse pointed out in its second report that the use of opiates in the United States, particularly heroin, makes it likely that the addict will resort to crimes such as theft and robbery to get money to buy drugs. Women resort to prostitution.
The individual and social ills resulting from drug abuse are therefore real and costly, and are known to be so. Why then do so many young people ignore these dangers? Why do they act as if oblivious to the perils?
Investigators in this area have thrown up a variety of theories. But the crucial points centre on two questions. First, what factors prompt or initiate youths into drug taking? Second, what makes them continue drug taking till it becomes a habit?
How easily a youth can be induced to drug consumption depends on
the ethos of his society. In the affluent, permissive communities of the West, indulgence in marijuana and other drugs stirs no ripple of concern: on the contrary, many people who should know better extol it as life-enhancing. This is one result when people give themselves up to pursuits that are self-centred and sensation-seeking, hungering after new forms of stimulation and experience. If a people believe that the only purpose of life is pleasure and enjoyment, they will be more prone to taking drugs as these provide enjoyable experiences.
Happily for us, this ethos has not taken root in Singapore in a big way. But it has won the allegiance of a small group of youngsters from fairly well-to-do, Western-oriented homes. They foolishly believe that everything Western is good. So they eagerly submit themselves to being initiated into drugs for the sake of a novel experience, of experimenting with living.
Peer influence is a strong factor here. People’s behaviour tends to follow that of the group they usually associate with. If a person’s best friends are taking drugs he is likely, when persuaded, to follow suit. Case studies of hard drug addicts in the SAF provide supporting evidence for this. The majority of drug takers in the Army had been on drugs for an average of two years before enlistment into national service, many of them picking up their habits while in primary or lower secondary schools, at work sites or while unemployed. Almost always, their introduction to drugs was made through classmates and friends.
There were a few exceptions. In one case a soldier who was a morphine addict confessed that he had started on marijuana when he was 15—and by accident. He lived in an attap house in a lane off Thomson Road. Being an introvert, he had a habit of going to a nearby Jewish cemetery whenever he was moody or upset. One evening, during his Hamlet-like visit to the cemetery, he chanced upon a huddled group of youths who were taking turns in inhaling marijuana fumes from a bottle. The group invited him to join in and though they were total strangers he accepted, partly out of curiosity, partly because of the lure of togetherness. So under such bizarre and macabre circumstances, another drug addict was bred.
There are of course other external influences that cause people to start on drugs. These, however, do not appear to constitute the central motivation of the drug addict. Studies show that more important than external factors is the addict’s psychological make-up—his personality attributes, his disposition, his way of looking at himself and the society at large. For here we may find a clue as to why some youths opt out of society’s mainstream and take to drugs while the majority stay within
it and do not.
There exists a substantial accumulation of clinical evidence to indicate that the bulk of drug addicts possess weak personalities. They can be described as being unsure of themselves, possessing feelings of inadequacy, and being subject to persistent attacks of undue anxiety. They are incapable of coping with whatever work they have to do, either as students or workers. They are unsure of their position in relation to other people, including members of their family.
Such character defects or weaknesses are likely to get worse if the people concerned cannot get out of their rut. Because they are nervous and anxious, they perform poorly at work or school. This increases their anxiety and uncertainty, leading them to dislike study or work. They develop feelings of animosity towards society. For such people, drugs afford an escape from unpleasant reality. Narcotics such as heroin generate euphoria and a sense of well-being while the effects last. Since drug taking is illegal, it has an added attraction for such people as it represents a gesture of defiance towards the society which they feel has rejected them.
A recent study of 120 hard-drug abusers in the SAF confirms this general picture. Most of them are school dropouts, significantly from the English stream. Apart from their drug behaviour, they are found to be more neurotic and emotionally unstable than the average soldier. Before national service, those who worked could not get secure employment—they hopped from job to job. Those who had held only one job before joining the Army stayed on that job for less than a year. Drug taking merely makes them even less effective and compounds their problems.
The SAF study further revealed that as much as one-quarter of its sample had.lost at least one parent; and that a smaller group had parents who were either divorced or separated. These are physical facts, easily ascertainable, about a drug taker’s family. Without doubt they have as much a bearing on the formation of the drug taker’s personality characteristics as on his motivation in drug taking. No less important is the quality of family life. Is there sympathy and understanding between parents and children? Do members of the family rally to help a member who is in trouble? Do parents show an interest in the growing up and education of their teenagers? Our studies show that the family life of addicts lack these relationships of warmth and friendship which are normal in secure and happy families.
SANA is trying to go beyond symptomatic treatment to rehabilitation. The goal is to transform an addict into a responsible,
useful citizen. To achieve this, to change the personality traits and outlook of an addict, counselling and other forms of aftercare are necessary.
Ultimately, our best hope is still prevention. No doubt, the incidence of drug taking is related to availability, and if we could stop drugs from circulating within our society, the problem would be solved. This is not easy to achieve. The severe punitive measures recently introduced against drug trafficking will help to reduce supplies, but whether supplies will be totally stopped remains to be seen.
Efforts towards drug prevention must therefore be supplemented in other ways. Parents have a big role to play here. They require assistance. Education in the form of moral injunctions against the evils of drug abuse will in itself help little. What is needed is practical advice—on what parents can do to prevent their children from resorting to drugs, how they can find out if their children are on drugs, and if their children are confirmed to be on drugs, what they should do.
In a sense, we can say that drug addicts are social casualties. One would have to exclude the foolish youths from well-to-do families who deliberately experiment with drugs because they believe that this is the fashionable thing to do. Parents in such families who over-indulge their children have only themselves to blame if their children take to mischievous ways because they are given more money than they have the common-sense to handle. This is particularly true of children who are sent overseas for education. There is no parental control, there is also plenty of money supplied because doting parents want their children to live well. Then there is the permissive environment in some Western countries. A combination of these three factors has often had tragic consequences.
Children from poor families suffer from the opposite handicap. Parents drive their children hard in the hope that they will succeed in life. Many send their children for education in the English language in the belief that this will open up avenues to higher professional education—that their children will thus become doctors, engineers, economists and scientists. These are admirable attitudes but where these aspirations bear no relation to the capacity of the child the result can only be harmful.
It is worthy of note that a great majority of drug addicts among SAF soldiers are dropouts from the English stream. Nearly all of these are from dialect-speaking families. I suspect that the feeling of inadequacy, insecurity, over-anxiety and other personality defects arise in school when the child is educated in a language which is not spoken at home.
Constant parental censure merely increases his anxiety, enhances his feeling of inadequacy and makes him perform even worse in school. Eventually he gives up and becomes a wrecked personality.
Parents should understand that not everyone can get four distinctions in the HSC examinations. These results are possible only for a gifted few. The rest should settle for something within their reach and there is a wide variety of occupations and careers, which our economic system provides, which will ensure adequate incomes and a decent living for all who are willing to make the effort.
Two final observations. First, when I said that many drug addicts are social casualties, please do not infer from this that I am in favour of a lenient and sympathetic treatment of offenders. Such a view is fashionable among so-called radical or liberal thinkers. Needless to say, I do not subscribe to their thinking, because I believe they are wrong. So-called progressive views applied to the treatment of criminals has led to a dangerous upsurge of crime rates, especially crimes of violence, in societies whose leaders have been foolish enough to be beguiled by these soft-headed ideas. As a result innocent citizens get robbed, raped or killed by criminals who should have been in jail.
However much we pity our addicts, they must be dealt with sternly, as an example to others. Soft treatment of addicts is likely to encourage the belief among our weak-minded youths that they can commit drug offences with virtual impunity. In the SAF, drug offenders are tried by court martial and sentences vary between six months to two years. When we have more professionally trained counsellors, we intend to release offenders on conditional probation before the expiry of their sentence as a method of rehabilitation. If rehabilitation fails, they return to detention. On the second point, I will venture the suggestion that as more and more people live in the city and in apartment blocks, the problems of psychological stresses which I have discussed are likely to be more acute and more widespread. Studies of soldiers who are school dropouts and who live in the countryside show none of the character weaknesses seen in the sample of drug addicts in the SAF. In their childhood, these soldiers displayed no aptitude for study, spending their time roaming the countryside in search of spiders, crickets, butterflies and other insects, birds, fish, lizards and so on. All claimed to have thoroughly enjoyed their childhood. Parents were sympathetic, even indulgent. Their schools were Chinese village schools, not particularly well-run.
When asked whether they would not have done better if they had played less and studied more, they admitted that if they had passed their
school examinations, and were able to get a university education, undoubtedly life would have been better for them. But they said that they were not made for study and that a university or professional education was not a realistic objective. None regretted what many would consider a mis-spent childhood. They are all good soldiers, present no disciplinary problems, subscribe to most of the traditional ethos, including the belief in the virtues of hard work, and, surprisingly, also believe that they have a bright future after they leave the Army. Possibly this is because they have geared their expectations to a realistic assessment of their capabilities.
Whatever the explanation, there is little doubt that these country-bred youths have a robust psychological make-up. In part this is due to their close contact with nature during childhood. City-bred children do not have these advantages; quite the contrary, they grow up in a crowded, noisy, artificial environment. This subject needs to be kept under close study, particularly the mental health of children raised under these conditions. There is no need for alarm, for other urban centres also have these problems and they have not been overwhelmed by disaster. But this is not good enough, for nothing but the best is good for our children.
 Part Four 
Miscellaneous
Qualities of a Strong Military Organization
Because the role and functions of the Army differ fundamentally from those of civilian organizations, its working methods are different, and indeed the mental approach to work is different. This is true not only of our Army, but of armies the world over, and indeed of all armies known in man’s history.
Because armies are raised and trained to fight wars, the values which are respected differ from civilian values. There is, in successful armies, a high regard for physical courage and daring, for ability to endure hardship, for loyalty and patriotism. These are the traditional military virtues which are respected and assiduously cultivated by armies with a tradition of victory and glory.
With regard to the approach to work, the great difference between civilian life and the military is the importance which the military attaches to two factors: first, discipline and second, morale.
Good armies inculcate a high standard of discipline among their officers and men. The reason is obvious. Disciplined soldiers will carry out their duties under the stress of battle and under conditions of extreme fatigue when their normal human instincts would urge them to flee to safety or to shirk work.
You all know that in combat the individual soldier can be no safer than the group, and the group, by fighting well, ensures the survival of its members with minimum casualties. A group that loses discipline and flees usually gets shot to pieces. Cowardice on the battlefield
Speech at the SAF Promotion Ceremony held at the Istana on 30 November 1973.
usually brings its own swift retribution.
A high state of morale is desired by army personnel at all times. High morale means better teamwork, higher performance, sharper fighting spirit—in short, greater combat efficiency.
Armies maintain discipline and morale in various ways. The negative method is by the application of sanctions through various forms of punishment for breaches of discipline. A positive way is by the exercise of leadership by commanders at all levels.
Armies with ideological persuasions such as the religious armies of medieval Europe, Cromwell’s army, Mohamed’s armies, as well as contemporary armies of communist countries, resort to systematic ideological indoctrination as a means of motivating their soldiers.
All armies resort to military rituals and ceremonials of one kind or another to sustain discipline and to raise morale. These rituals range from simple affairs, like the inspection of a camp quarter-guard, to elaborate ceremonials such as beating the retreat, trooping the colours, commissioning parades, and the like. A high standard of drill is expected on these occasions, and the spectacle and colour of ceremonials foster pride among soldiers in their profession and create a favourable impression on spectators and observers.
In the past, when flat trajectory weapons had such limited range that concealment and camouflage were not necessary, uniforms of soldiers were of resplendent colour and design. No doubt this was intended as a morale raiser. Rituals and ceremonials are good and necessary. So too are the tidiness and order which one associates with military arrangements such as the well laid-out bed in the barrack room, the spit and polish of a soldier’s uniform and the trim lawns and clean compounds one expects to see in a battalion camp.
All these, as I said, are good and necessary. But these and associated measures together produce in a military organization a built-in mechanism for self-deception for the unwary. One equates smartness with efficiency, tidiness and order with effective work and, up to a point, this is so.
But to regard these external manifestations as the essence of efficiency is unfortunately a common mistake which many armies have committed. While at lower levels no great harm is done, self-deception of this kind at the top command level inevitably results in calamitous defeat in war. There have been so many instances in recorded history of experienced, high-ranking military officers mistaking the illusion for the reality, the show for the substance.
But experience is a harsh taskmaster and those who cling to their
illusions meet their shattering moment of truth at the outbreak of war. And so it was with the French Army in May 1940. There were many people, including members of the French General Staff, who thought that the French Army was the best in the world, yet within two short weeks it was torn to pieces by the Panzer divisions of Nazi Germany. So too with the British Army in Malaya in December 1941. British officers seriously believed that the Japanese could not fly aircraft because they had poor eyesight. When the Prince of Wales and the Repulse were sunk by Japanese aircraft in December 1941 the rumour went around that the attacking aircraft were flown by Germans.
Why are people so easily deceived? The answer is that they allow themselves to be deceived. And there are three reasons for this. First, it is a common human failing to believe what is comforting, and this usually means a'belief that everything is alright. You have heard of the term “wishful thinking’’. This means that people will believe what they wish to be true. It is a common human frailty. Tell a battalion commander how fine his soldiers are and he will not only believe you, but will judge you to be a singularly perceptive man. But tell him his unit is lousy and he will demand evidence and proof, which it never occurs to him to call for in the other instance.
Second, most people are inclined to be lazy. They want to believe that everything is alright, at least with them and their work, because if they were to believe otherwise, they would feel some obligation to do extra work to set things right. In an organization where such mental attitudes prevail, everybody reports upwards that everything is just fine. So everyone can sit back and have a grand time, instead of picking faults, stirring trouble and being nasty to everybody. So, as I said, everything goes on fine until the awful moment of truth arrives.
The third reason why people allow themselves to be deceived is that they are incompetent in their work, either because they are ignorant, unskilled or inexperienced, and most likely because of all three reasons. The remedy for this is simple, if unpleasant—remove the incumbents. But when the incumbents are right at the top, as happened with the French General Staff in the in ter-war years, removal takes place only as a result of defeat in war.
Should we have to go to war, none of us would want to suffer the disastrous and humiliating defeats of the kind I described earlier. It is therefore mandatory that we do not allow ourselves to be victims of self-deception, a weakness to which military organizations are prone.
I regard this as a matter of immediate and direct concern of all senior commanders and staff officers, in the field as well as in MINDEF. I have
seen far too many signs of laxity and complacency in the SAF and in MINDEF, resulting from the weaknesses which I earlier described. It is therefore necessary to take effective measures to stamp out these harmful mental habits.
May I suggest that you follow the following three rules to avoid the trap of self-deception, which, and I repeat this again, military organizations are prone to fall into.
The first rule is “Be self-critical’’. This is an elementary precept, yet how often it is forgotten. I have come across many staff papers and field reports in MINDEF which give a superficial, optimistic but misleading assessment of what goes on. The conclusion is that everything is just fine. My reaction to staff papers and reports of this kind is to conclude that the writer is unfit to hold his appointment. The object of an assessment report is to probe into weaknesses and to suggest ways of overcoming them so as to achieve improved performance.
I am not upset to learn that mistakes are made or that weaknesses exist in the SAF. It would be astonishing in an organization which is so young and which has expanded so fast if weaknesses and mistakes do not occur. I know they do, and I do not blame those responsible for the shortcomings, provided that officers are aware of these shortcomings and that they are not the result of an indifferent attitude to work or to the task of commanding responsibility.
The second rule is to observe a high standard of personal integrity. Where defects are known to an officer, it is his duty to bring these to the attention of his superiors. When the subject falls within his sphere of responsibility, he should exert the utmost effort to remedy the defects, even at the cost of incurring the displeasure of his superior officers.
It is a serious offence to engage in cover-up activities. In this respect, when your subordinate officer is found to be inadequate, you should not hesitate to give him an unfavourable assessment in your annual confidential report. Procedure requires that you will inform him of the nature of your adverse report so that he can either make a defence, if he disagrees with you, or else make an effort to improve himself.
As matters stand, virtually all commanders in the SAF are reluctant to give a frank report on weak officers under their command. The result is that the annual confidential reporting system is virtually useless.
The third rule I commend to you is to have some steel in your soul. This is a quality which I admire in people. It is particularly necessary in
the military service. So far as I am concerned, if this quality is lacking in any commander, he is not destined to rise to a high command. In this promotion exercise, the Promotions Board has assessed battalion commanders closely for this particular quality.
Yours is a hard profession. In war you have to make hard decisions, which could mean the life or death of men under your command. Without steel in your soul, you might try to seek an easy way out which is just not there. When you fail, you endanger not only the lives of your men but the safety of the entire Army, indeed of the Republic itself.
All those who perform well in war know that in peace-time they will have to train their men hard, and that they will demand the utmost of their subordinate commanders. If need be, they will be willing to inflict harsh punishment to maintain a high level of discipline.
The opposite is the officer who wants to be popular with his subordinate commanders. The desire to be popular and to be liked by people is a natural human feeling. It is also natural to want to avoid causing to others the pain and suffering which punishment involves. If we bring up the Army guided entirely by these decent human feelings, what we will get is what Tsun Tze called ‘ ‘a collection of spoilt children utterly useless for war”.
Recently two officers have been removed from their command, one by his Formation Commander and the other by me. The technicalities of their offence are not important. What is important is that they belong to this category of weak and soft officers who have no place in the SAF.
These then are the attitudes of mind which I commend you to cultivate in yourselves and among your officers. To repeat, they are:
(i)	Be self-critical.
(ii)	Be honest.
(iii)	Be tough.
These qualities are found in abundance in armies that win victories. In the SAF, for reasons which I need not discuss here, these qualities are not found in sufficient degree. In fact, the military has taken over some of the soft values of our civilian society, a society which has many bad traits because of its migrant and parvenu trading origins. These soft values need to be eradicated in our Army.
Of course there is more to a successful commander than correct attitudes of mind. I have no time to go into this subject here, but will satisfy myself with a quotation from a recent article in the Army, published by the Association of the US Army, dated June 1972. The
article is named “Patton and Montgomery—alike or different?”. I read this extract to you:
“Despite the surface differences in mannerisms, both men were very much alike in their military qualities. They were life-long students of the art of war. Their knowledge of military history was enormous. They were voracious readers, and each aspired to acquire a thorough-going professionalism. They were technically experts in the various manifestations of their craft: in logistics, tactics, operations. They have mastered weapons and weapons systems. They were proficient in methods of doctrine and alert to innovations and methodology. ’ ’
You know some of the things it takes to make a good General. I hope you will apply yourselves diligently towards improving your capabilities, and build up an army which is second to none in our part of the world.
The Role of Civilians in National Defence
I want to take this opportunity, the commissioning ceremony of the Seventeenth Infantry Officer Cadet Course, to say a few words about the relationship between the Armed Forces and the people, for in any emergency in which arms are resorted to, the Armed Forces are effective to the extent that they receive civilian material and moral support. There have been instances in history in which wars have been lost because civilian morale cracked when the fighting troops were still in good shape.
People in Singapore understand the need for a credible defence force which, in our circumstances, can only be created on the basis of full-time national service. For instance, in the last elections, several opposition parties stated that they would abolish national service if elected. These opposition politicians quickly dropped this idea as soon as they discovered that the ordinary voter was more intelligent than they themselves were.
So far, so good. But recently there was evidence of a weakness in the collective psychology of the Singaporean. At the commissioning ceremony held here on 20 September 1973, I referred to swings in prevailing group attitudes—complacency, even euphoria, when things go well, and defeatism when they do not. At that time, the prevailing mood in Singapore was complacency, against which my colleagues and I issued repeated warnings. In recent months, as the world business
Speech at the Commissioning Ceremony of SAF officers at the Istana on 26 August 1974.
cycle takes a turn for the worse, the prevailing mood has changed again. It will be an exaggeration to say that the average Singaporean is rattled; he is certainly no longer complacent, and he is unsure of what is going to happen next. In this kind of situation a society that has deep historic roots, one that has endured hardships and overcome adversity together, knows how to keep calm and composed and take the rough with the smooth.
Singapore, however, is not such a society. It is a rootless, migrant, parvenu society. Its roots are not deep enough. Hence, minor success brings about overconfidence and the belief that good times last forever; minor setbacks send people into a state of nervousness. In this situation, the Singaporean lends his ears to rumours of all kinds. Nothing is too absurd for him to listen to and pass on to others.
This is exactly what has been happening. A Hong Kong journal reported that I am leading a Cabinet faction against the Prime Minister to seek re-merger with Malaysia. A condition of this re-merger is that he must go. In fact, according to this journal Mr Lee was supposed to have announced his resignation on National Day!
The Malaysian Government is about as keen as we are about remerger. Having got rid of us and the problems we brought with us in 1965, what reason do they have for wanting us back when their communal position is in such a state of sensitive balance? On our side, what reason is there for us to want a re-merger?
I was told that some foolish academics in the University of Singapore believe that re-merger will bring about economic prosperity. These academics cannot belong to the Economics Department, otherwise they would have known that our GNP growth rate was lowest when we were in Malaysia in 1963-65, which was the only time our overseas assets actually declined. They are entitled to their own eccentric ideas, even though their salaries are paid by the tax payer. But why I have been held to share the views of these crackpots passes my comprehension. My opinion on the subject is on record, in my Budget Speech in Parliament on 9 March 1970, the text of which has been published by the Ministry of Culture in a pamphlet entitled ‘ ‘Decade of Achievement”. I stated there that the economic solution we had sought in Malaysia turned out to be a dead end, and I see no reason to change my mind.
I am not surprised that this particular foreign journal should put in print rumours that I am at odds with Mr Lee, one of my closest colleagues in the Government. What concerns me is not the content of the rumours, but that they could have been purveyed over such a
sustained period despite their patent absurdity.
This leads me to conclude that a clandestine organization is operating in Singapore whose mission is to generate and sustain rumours about political changes. The technique of rumour-mongering is well-known, and occasionally practised in intelligence circles. But in this instance, apart from shaking confidence, it is not clear what the sponsors hope to gain. Their clumsy fabrications are easily disproved, thereby damaging their future credibility.
But whatever were their objectives, there can be no doubt about their hostile intent. Singapore has been the target of more dangerous clandestine operations in the past. For instance, some years ago, obscure foreign groups were exercising a baleful influence upon some local newspapers and we had to resort to surgery to excise this influence.
It is necessary for our people to be more discerning. Gullibility does not go with a hardheaded society, which Singapore must be in order to prosper.
What are the safeguards which the citizens have against assaults of this kind which foreigners mount on their minds? There must be a clear understanding that we have collective interests in certain matters and that these must be collectively defended. Strengthening our consciousness of a national identity will provide the firm base from which we can fend off these assaults.
I return to what I said at the beginning. The defence build-up has to be supplemented by a parallel increase in robustness of the civilian population, if we are not to throw away the enormous effort and money we have put into it. We must discard the migrant parvenu values I mentioned earlier. We must sharpen our awareness of our collective or national interests. In this way, we are not likely to be tossed about in any turbulence that may descend upon our part of the world in the years to come.
This episode, which is not without its touch of the bizarre, should also serve as an object lesson to the military. Not everybody is well disposed towards the Republic; indeed, from time to time we have come across clear evidence of malice and hostility. And so, as the saying goes, the price of freedom is eternal vigilance.
Adam Smith on Defence
This year we witness not only the second bicentenary of the Declaration of American Independence but also that of the publication of an important book—Adam Smith’s The Wealth of Nations. Adam Smith took a broad and wide-ranging vision of economics, unlike the breed today, some of whom seem to develop a myopic vision as they become more and more learned about less and less.
I would like to say a few words on Adam Smith’s views on defence. He notes that as mankind progresses from the differing stages of barbarism to civilized societies, this influences the type of war in which he engages.
In the most primitive of societies, the hunting society, war is a cost-free activity as it is merely an extension of peace-time activity, directed against human beings instead of animals. However, such wars are small-scale conflicts limited by the size of hunting tribes.
At a higher stage of human development, when animals are domesticated and kept in large flocks instead of being hunted, war again comes naturally. Tribes of herdsmen have to move in search of pastures, and conflicts over rights of pastures are endemic, so that warlike training, shooting, and horsemanship are normal peace-time activities. Further, such societies have much leisure to develop their martial skills, thereby making them good warriors.
These herdsmen-warriors are invariably victorious if their dispersed
Speech at the Commissioning Ceremony for Naval and Medical Officers held at the Istana on 3 November 1976.
tribal societies could be united under a single command. Then they become conquering hordes, such as the Mongols, the Huns, and, in classical times, the Sythians.
At the next stage of human society when people settled in farming communities, there is also an ample opportunity for war because there is not much work to do outside the planting and harvesting seasons. Adult males could be withdrawn from farms which could be left to old men, women and children to look after. The opportunity cost of war is close to zero if campaigns are confined to the off-seasons.
However, as societies progressed and built up production capabilities around towns and cities, and as better weapons are invented, war becomes a specialized business, requiring a levy on the rest of the population to upkeep a standing army. But Smith was very clear in his mind that the mere existence of armed forces by itself would not provide security for the country. It is even more important that a people should want to defend themselves, that is to say that they should be patriotic and brave.
Let me quote Smith directly:
“That in the progress of improvement the practice of military exercises, unless government takes proper pains to support it, goes gradually to decay, and, together with it, the martial spirit of the great body of the people, as the example of modern Europe sufficiently demonstrates. But the security of every society must always depend, more or less, upon the martial spirit of the great body of the people. In the present times, indeed, the martial spirit alone, and unsupported by the well-disciplined standing army, would not, perhaps, be sufficient for the defence and security of any society. But where every citizen had a spirit of a soldier, a smaller standing army will surely be requisite. That spirit, besides, would necessarily diminish very much the dangers to liberty, whether real or imaginery, which are commonly apprehended from a standing army. It would very much facilitate the operations of that army against a foreign invader, so it would obstruct them as much if unfortunately they should ever be directed against the constitution of the State. ’ ’
How wise these words are and how often they are forgotten in governments of today, particularly their Ministries of Defence. So when SAF officers complain of the lack of motivation of NSF soldiers, let them ponder over what Adam Smith said two hundred years ago.
What is the remedy? Here the views of Adam Smith are pretty radical. He says that it is the duty of a government to prevent the growth of cowardice. Cowardice is the mutilation and deformation of the mind as bad as the mutilation of the body. In fact it is worse, the coward being the more wretched and miserable of the two. Prevention of cowardice deserves the most serious attention of the government in the same manner as prevention of leprosy or any other loathsome or offensive disease, because cowardice is contagious.
Adam Smith believed that the ancient city states of Greece provided a good solution. Gymnastics, sports and exercises were made mandatory for young citizens. These were intended to harden the body, sharpen courage and prepare the young for the hardships and dangers of war. The Olympic Games were a Greek innovation, and victory in events brought a great esteem to the winners. The great honour bestowed on champions of athletics and sports in ancient Greece contrasts strikingly with our own attitudes in Singapore. In particular, schools give little encouragement to the manly games but devote much attention to passing examinations. Of course passing examinations is important, but we neglect the other aspect literally at our own peril.
Town and Gown
Although I have written about modernization, I believe that much wisdom can be found in the teachings of antiquity. Take this business of running a government, which is studied in universities under the discipline known as ‘ ‘Political Science”. So far as third world countries are concerned, I believe that they can learn a lot from the ancients.
For instance, Confucius was greatly concerned over the abuse of absolute power and he sought remedies in the establishment of a moral order. His contemporary, Plato, was disenchanted by the diffusion of power through the Athenian city-state type of democracy, sensing that such a system tends to be corrupted by frivolity. To the emerging states striving to develop a viable political system, much of what these two men taught are of relevance.
On economics, too, the third world can learn a lot from ancient teachings. I have said on several occasions that developing nations need not go beyond Adam Smith for guidance on their economic policies. Countries which have advanced somewhat, such as Singapore, can be more daring and adopt David Ricardo as their mentor. Anything later than Ricardo is of doubtful value.
I am not saying, of course, that the university should not teach more up-to-date matter. By all means do so, as we must keep up with the Joneses, but remember that, when it comes to application, you should
Speech at the Annual Dinner of the Kesatuan Akademis Universiti Singapura (Academic Association, University of Singapore), at the Mandarin Hotel on 9 September 1972.
be on your guard.
These words of introduction about the value of ancient teachings are intended to prepare you for what may otherwise seem to be an eccentric decision which I made when I received the invitation of your President to address you tonight. I decided to make a study of the medieval universities of Europe to see whether we could learn something from their experience.
It is a decision I have never regretted, for the subject is one of great fascination, despite the paucity of literature in our libraries. Happily, the study was not seriously interrupted by the recent general elections.
By the twelfth century, Europe was emerging from the barbarism into which it had sunk following the collapse of Roman law and order five or six centuries earlier. By that time, sufficient progress had been made whereby the services of educated and literate men were required in the civil as well as in the ecclesiastical administration of many countries.
At first the education of men, beyond what was taught in monastery schools, was conducted on an informal basis with students attaching themselves to teachers who had achieved some kind of international reputation. The subjects taught were strictly utilitarian—law and medicine. It was around these great teachers of law and medicine that the medieval universities eventually emerged.
Bologna became the first great university of medieval Europe for the simple reason that the greatest law teachers happened to live there. For the same reason, Salerno emerged as the greatest medical school of that time. An account of the emergence of the university at Bologna may be instructive for that university was to spawn several universities in Italy and it became a model for many universities in other European countries. Also, students from many European countries flocked to Bologna and some of these established their own centres of learning when they returned.
In fact, it was these foreign students living and studying at Bologna who formed the first corporate bodies which eventually became known by the term “university”. Initially, these student corporations or guilds were welfare associations—to ensure that foreign students were not cheated by landlords, that they were given a decent burial if they died, etc. Once these welfare matters were satisfactorily settled, the students turned their attention to their professors.
As I said earlier, teaching began in informal groups. The medieval professor lived on the fees the students paid him. Usually, at the commencement of a term, he engaged two of the students to negotiate
fees with his class.
It was through this power of the purse that the student guild or student university exercized their authority. Because there were many students to look after, it was necessary to appoint a full-time executive. College and university executives were known by various titles: Chancellors, Rectors, Proctors and so on. I will use the term ‘ ‘Vice-Chancellor” to describe the chief resident executive of a university, though this office came to be established long after the close of the Middle Ages.
The Vice-Chancellor of the early universities was elected by the students and was a student himself. After some experience, it was found necessary to lay a minimum age for the Vice-Chancellor; in Bologna, this was set at 24 years. The Vice-Chancellor, like the professors, initially received no fixed salary. However, he could retain for himself the miscellaneous fines he was authorized to impose on professors and students for various misdemeanours. These proved inadequate to maintain the Vice-Chancellor in state, in keeping with the dignity of his office. The Vice-Chancellor of Bologna was required by statute to maintain at least two liveried servants. Custom also required him to give feasts to students and faculty on festive occasions, on convocations and other ceremonies. In Padua, on his election to office, he had to pay for a tournament and supply two hundred spears and two hundred pairs of gloves for the combatants.
In course of time, it became increasingly difficult to find students who were willing to hold this high office. When the practice of elected student Vice-Chancellors spread to universities of northern Europe, princes and aristocrats especially were welcomed to the universities. But the situation became so acute in some countries that special legislation had to be enacted to make compulsory the acceptance of office by wealthy students and to prevent the incumbents from absconding; if he left the city, he had to leave sufficient money as surety that he would return.
The Vice-Chancellor’s duty was not merely to look after the welfare of the students, but also to ensure that proper instruction was given by the professors. The students imposed a stern discipline on their teachers. For instance, at the beginning of each academic year, professors had to produce a timetable of lessons. He also had to offer sufficient bank guarantee that this timetable would be kept; a fine was imposed for every day he was behind schedule. In the conduct of his lectures, the professor was regulated with the precision of a soldier on parade.
Before a professor could leave the city, he had to get the students’ approval. Even then, he had to place an adequate sum as surety that he would not abscond. A professor was expressly forbidden “to create holidays at his pleasure”. Professors were also required to commence and end their lectures punctually. If they failed to do so, they were reported by the university bedels to the Vice-Chancellor and fines were imposed. Any professor who failed to attract more than five students to a lecture was deemed to have been absent and was fined accordingly.
The powers which the students arrogated for themselves were hotly disputed by the guild of law teachers. They claimed that the students were no better than apprentice smithies or apprentice bakers. They were not entitled therefore to form a guild. Notwithstanding the legal niceties, since the students paid the money and had an organization, their views prevailed. Professors whom the student leaders disliked were placed on a ban, thereby suffering a loss of livelihood.
The bargaining strength of the student universities was reinforced by another peculiarity of medieval Italy. There was absence of effective central government, the Lombard cities having won their freedom from the German empire. Cities saw the economic advantage of hosting universities and tried to attract students in the same way as we try to attract tourists today.
But cities found the medieval students hard customers to deal with. When they were dissatisfied with the administration in one city, they would secretly send a delegation to negotiate terms with another. The students of the university owned no property; they lived in rented houses and attended lectures in rented premises. On ceremonial occasions, they hired the local cathedral. This advantage in mobility they turned to good account when dealing with city administrations. From time to time, movements of students, followed by their teachers, took place. In this way, Bologna spawned a number of universities which decamped wholesale to other towns. Eventually, most of them returned to Bologna but a residue remained to form new centres of learning. Thus new universities were established in Vicenza in 1204, Padua in 1222 and Sienna in 1321. This last migration resulted when the city authorities executed a scholar who had abducted the daughter of a rich and powerful citizen.
If professors were oppressed by the students through economic power, economics eventually came to their rescue. As cities, covetous of Bologna’s pre-eminence, began to offer better and more stable conditions of service, the institution of fixed salaries began. Eventually, the city fathers of Bologna were compelled by the forces of market
competition to treat their academics with less contumely. The professors, sensing a natural ally in the city administration, worked through the city fathers to entrench their positions. Matters reached such a stage that professorships even became hereditary for a time at Bologna. City laws prohibiting this practice did not seem to be entirely effective.
Competition to secure the services of well known professors became quite fierce. Policy moved along two lines: first, good terms of service (salaries, quarters, tax exemptions and even annual bonuses); second, professors were required to take an oath never to teach in other cities. Some cities even passed laws imposing the death penalty on professors over the age of fifty who left to teach in another university. Those below fifty were let off with a fine. But neither medieval oath nor city statutes could prevail against the free market mechanism of economics.
As the professors’ livelihood became more and more dependent on the city administration, and less on students’ fees, the influence of the city in university affairs increased correspondingly. By the sixteenth century, the students had lost all control in university affairs.
In England, the relationship between town and gown took a completely different course from that of the Lombard cities. A good starting point in tracing the relationship between the city and the university in England would be the tavern brawl involving Oxford University students which broke out in February 1354. Tavern brawls were often turning points in the history of medieval universities. In fact, several European universities had their origins in tavern brawls which led to the migration of teachers and scholars to what they believed would be more hospitable towns.
On that day at Oxford, Tuesday, 10 February 1354, a party of scholars were dissatisfied with the wine they were served at a local tavern. The vintner confirmed the wine to be good and, to quote a contemporary account, “Several snappish words passed between them . . . At length, the vintner giving them stubborn and saucy language, they threw the wine and vessel at his head. The vintner, therefore, receding with great passion, and aggravating the abuse to those of his family and neighbourhood, people came in, encouraged him not to put up with the abuse and withal told him they would faithfully stand by him.” (Rashdall, Vol. Ill, p. 96.)
The vintner’s friends rang the bell of the town church and the townsmen were instantly up in arms, some with bows and arrows, others with diverse swords and weapons. The scholars were shot at. The Vice-Chancellor appeared upon the scene to quell the tumult but
he too was shot at and had to flee for his life. The Vice-Chancellor was a man no less resolute than your own. By his orders, the bells of St. Mary were rung, a signal for the academic community to assemble. Before long, he appeared at the head of an army of archers. (I may mention here that the academic community were expressly forbidden to carry dangerous weapons and one of the duties of the Vice-Chancellor was to enforce this law.)
A fierce exchange of fire ensued, but miraculously nobody was killed. Rashdall attributed this to a decline in the standard of marksmanship since the English victory at Cressy. At nightfall, hostilities ceased as it was not possible to distinguish between friend and foe.
The following day, the honour of the university being assuaged, the students and professors resumed their studies. However, it was easier to initiate violence than to control its escalation. For the townsmen decided to enlist the help of country yokels. Apparently, these had little love of the clergy and were only too eager to settle old scores. Some two thousand of them invaded the university, pillaging the colleges and churches and killing a good number of the university community.
The Vice-Chancellor proved no less intrepid than your own in dealing with nasty situations. He saw the King and demanded that instant and condign retribution be visited upon the townsmen. The mayor and bailiffs were imprisoned, the sheriff sacked. Not satisfied with this, the Vice-Chancellor demanded fresh privileges for the university and further humiliations for the town, backing his demand with a strike, delicately called a ‘ ‘cessation’ ’.
A stiff collective fine was imposed on the citizens. Further, every year, on the anniversary of the incident, the mayor, bailiffs and sixty townsmen were required to do public penance. They had to appear at St. Mary’s Church to pray for the souls of the slaughtered scholars and pay a substantial sum to the church collection. This practice continued until the year 1825, when, upon a humble petition of the town, the university graciously agreed to forgo its rights.
Not only had the citizens been punished, but a great deal of the city’s jurisdiction, including the right of taxation of privileged persons, was transferred to the intrepid Vice-Chancellor. His successors sought and obtained from the Government further rights over the townsmen. Rashdall stated that by the middle of the fifteenth century the town had been crushed. The townsfolk had been reduced to the status of helots and virtually lived as subjects of the conquerors.
The university even acquired the right to institute a general
inquisition into the morals of the townsmen. For this purpose, the town was divided into districts, each around a church to which the townsfolk were summoned to be examined by a board consisting of a Theological Doctor and two Masters of the Arts Faculty. Their reports were submitted to the Vice-Chancellor who summoned the offenders and imposed such punishment as he thought fit.
The inference we can safely draw from these conflicts between town and gown is that the university would invariably win because they enjoyed the support of the higher authorities. The question then arises: “What happens when the university clashes with high authority itself?’’ I will relate two episodes, very dissimilar in nature as well as in outcome.
In 1260, as a result of a fight with the townsmen, practically the whole of Oxford University migrated to Northampton. The King supported the university, as he invariably did. But the barons’ war was in progress and Northampton came to be occupied by the King’s enemies. The King laid seige to the city, and found to his consternation that the ungrateful scholars had rallied to the defence of the beleaguered town. Academics, who had always insisted, as men of God, on their immunity from military service of any kind, seized their cross-bows and inflicted heavy casualties on the King’s men. When the town was finally captured, it was with the greatest difficulty that the enraged monarch was dissuaded from hanging the entire university. In the end, the only penalty the scholars suffered was an order to return to Oxford.
The other conflict with high authority involved the basic question of academic freedom and university autonomy. A Doctor of Theology, John Wycliff, attacked the corruption of the church, the primacy of the Pope, the privilege and immense wealth of the church. He even taught that the property of habitually delinquent priests might be seized.
The doctrines of Wycliff enjoyed wide support at Oxford. Needless to say, the church had other views. In 1377, Wycliff was summoned to appear before a convocation at St. Paul’s in London to answer charges of heresy. The Vice-Chancellor of Oxford was required by the Archbishop of Canterbury to publish a condemnation of Wycliff’s thesis. This he stoutly refused to do.
At the trial, Wycliff had powerful supporters among the nobility, among them John of Gaunt, Henry Percy and the Duke of Lancaster. The last dignitary openly threatened violence on the person of the Bishop should he pronounce Wycliff guilty. Probably as a result of this, the proceedings ended inconclusively and Wycliff was not punished.
It would be pleasant to record that these noblemen, among the most
powerful in the King’s realm, were moved by high principles of academic freedom and university autonomy. Actually, they had more practical considerations in mind; they had seen opportunities under Wyclifi’s doctrines to appropriate for themselves valuable church properties in their domains.
In the struggle between university and church, the state supported the church, and some nobles the university, not altogether for altruistic reasons as we have seen. The struggle went on inconclusively for some years. However, it was not possible for men of eminence to preach the expropriation of other people’s properties without somebody taking the matter seriously. So, in 1381, a peasant revolt took place under the leadership of Watt Tyler with the object of putting Wycliff’s doctrines into practice. The revolt was quickly and brutally suppressed. The whole establishment, including the nobles, landed gentry and merchants, some of whom had previously supported or respected Wycliff, switched their support to the church. It was one thing to toy with radical ideas, quite another to see the lower orders taking the law into their own hands to implement these ideas.
Although the university continued its stout-hearted resistance for nearly two decades, the combined weight of civil and ecclesiastical authority ultimately prevailed. In 1411, as a last gesture of defiance, the university barred the streets of Oxford against the coming of the Archbishop, and armed students patrolled the streets and gates to resist his entrance. The King, and later the Pope, threw their weight behind th& church and the university had to submit. Teachers were compelled publicly and formally to renounce their heresy, those unwilling to do so being dismissed from the university or even banished from the realm. The Archbishop established a tight grip on the university which was to last for more than a century. Free speech and thought which Oxford had enjoyed for two centuries came to an end, not to be revived until the Renaissance.
Let me say a few words about the University of Paris, which at that time occupied an even more illustrious position than Oxford. In fact the Paris University became the model for universities in northern Europe—a university in which masters and not students wielded authority. Paris differed from the Lombard universities in this respect principally because their students were younger. Whereas the law students in Bologna were mostly working professionals, clerics, merchants or landed gentry, past their youth, students of the Faculty of Arts in Paris were boys, some no more than 14 years of age. The Faculty of Arts prepared them for professional studies in the senior
faculties of the university—Theology, Canon Law and Medicine.
The relations between town and gown in Paris took a more tortuous course than at Oxford for a number of reasons. First, though both universities were under the jurisdiction of the church, the bishop nominally in charge of Oxford was resident in Lincoln, some hundred and twenty miles away. There was a resident bishop in Paris and he took his rights seriously. Second, Paris was a capital city, unlike Oxford. Third, whereas England had had a strong central government most of the time, that was not the case with France for much of the Middle Ages. Fourth, the influence of the Pope was stronger and more direct in France than it was in England.
These differences could clearly be seen in the sequence of events following a tavern brawl in 1228. The dispute was not over the quality of the wine, which was acknowledged to be excellent, but over the bill. Events took their accustomed course, and the innkeeper, after an initial reverse, called his neighbours to beat up the students. The latter fled the scene to return with reinforcements to wreak vengeance. While they were merrily helping themselves to the innkeeper’s wine, and thereafter amusing themselves in the streets at the expense of peaceable citizens, men and women alike, the city police turned out, reinforced by the Queen’s Guards. The guards were a singularly barbarous lot and set upon some students—innocent passers-by according to the university account—and killed a number of them.
In the contest between town and gown, the Church of Paris supported the townsmen as did the Royal Court which was greatly under its influence. In fact, there was bad blood between the university on the one hand, and the Bishop of Paris, the Papal Legate, on the other. A few years previously, this dignitary had to flee for his life with some sixty Masters of the Arts Faculty in hot pursuit. The university declared a strike but even this proved ineffective. Finally they migrated, some to England, others to various cities of France, reinforcing or establishing universities at these places. Such was the prestige of the Paris University that the King of England, Henry III, wrote to the scholars offering them a choice of any borough, town or village, if they would migrate to England.
It was not until Pope Gregory IX personally intervened some two years later that the university emerged victorious over town, church and King. The Pope peremptorily ordered the King to punish the offenders and issued a series of Papal Bulls adding new privileges to the university, limiting the authority of the Bishop of Paris and his representative at the university. The right of the university to declare a
cessation was confirmed. This was a weapon of great potency for the strike applied not only to students and staff of the university but also to its graduates—the superior clergy and, later, most of the senior civil administration as well as professionals such as lawyers and doctors. The Papal Legate at Paris who had shown hostility to the university was recalled in disgrace.
The professors at Paris had long experience in the art of playing one part of the establishment against another—city against church, church against crown, dukes against kings and the Pope against all comers.
The University of Paris came to enjoy the position of political importance which no other medieval university had ever attained before or since. As a result of accumulated privileges, it virtually became an independent republic. Its members, including graduates, were exempt from taxation, a privilege that was to be a bone of contention later between the university and the government. Professors were present at important gatherings of notables summoned by the French kings from time to time, the Vice-Chancellor taking precedence over bishops and even cardinals. Considering that the office began as a mere factotum of the local bishop, this was progress indeed. By the time of Charles V, the university was regarded as “the eldest daughter of the king’ ’. People in trouble pleaded with the university to intercede on their behalf. Power factions canvassed academic support for their policies. At one time, the university even sent envoys to foreign capitals, where their views were received with great respect.
But it was an unnatural situation for a centre of learning and it could not last. With the decline in the power of the papacy, and an increase in the central power of the state, the academics found themselves in constant friction with the government. In the latter half of the fifteenth century, the university was reduced to querulous defence of ancient and anachronistic privileges. Louis XI continuously interfered with university administration. The final blow was delivered by Louis XII who revoked the university’s right to strike. When he learnt that the university had displayed caricatures of himself, he invaded the campus at the head of an army, properly armed and accoutred for battle. Thereafter he had no more trouble from the university.
You may think me perverse in giving so much attention to violence and rioting in this account of medieval universities. This was partly unavoidable as my subject deals with the conflicts between city and university which were pursued with a vigour we would consider unnecessary today. But, apart from this, violence and lawlessness played a pivotal role in the history of the early universities.
Let me quote an authority: “The most spectacular features of student life of the Middle Ages were the bloody affrays, the pitch battles, the mayhems, the rapes and homicides which filled the records of the times with monotonous regularity. Indeed, by the frequency of riots one may trace the rise of the university to power and privilege. The more frequent the rioting, the greater the bloodshed, the more powerful the university when it emerged from the struggle. ’ ’ (Schachner, p. 340.)
Rashdall, commenting on the sequel to the 1354 riots, said: “Oxford thrived on its misfortunes.” He further stated: “It must be remembered that in the Middle Ages it was not merely freshmen or young noblemen who were involved in street brawls and assaults, but masters of arts, friars, beneficed clergymen, principals of halls, even heads of colleges.” (Rashdall, Vol. Ill, p. 109.) And, as we saw in the troubles of 1354, even the Vice-Chancellor was not above indulging in a vigorous if unskilled exercise of archery against the townsmen.
What was the reason for this propensity to violence by the academic community of the time? Perhaps the reason was partly the spirit of the age; or perhaps it was due to the special privileges which scholars enjoyed in the matter of criminal jurisdiction.
The universities then enjoyed what we now call extra-territorial rights. These had their origins in the medieval practice of regarding the academic community as members of the church. As men of God, they were not subject to civil law but came under the jurisdiction of the bishop. The Vice-Chancellor, as the bishop’s representative, exercised these rights except for major crimes, such as murder. As a result of trouble with townsmen in 1209, following the killing of a woman in Oxford by a scholar (accidentally, according to the official records of the university), the Vice-Chancellor’s jurisdiction even extended to townsmen when they had disputes with scholars. After the new privileges were granted to the university following the 1354 massacre, the Vice-Chancellor had total jurisdiction over the townsmen. He wielded this power with an iron hand.
To quote Schachner: “In a dispute with a scholar a townsman had not a chance. The scholar’s word was always better than his; a student accused of the gravest crime was viewed with a fatherly and lenient eye; but the laymen, for the pettiest offence, was cast into jail . . .” (Schachner, p. 202.)
When charged of very serious crimes, such as murder, the academic came within the bishop’s jurisdiction. Usually he was allowed a defence called “compurgation”. “This was a ceremony very agreeable to
ecclesiastics. The accused, even though there were a hundred eyewitnesses to the crime, could gather together a few ecclesiastical companions, to whom in time of need he would render a similar service. They could join him in swearing blithely that he had not committed the crime. Thereupon the testimony of the eye-witnesses was disregarded, and the happy scoundrel was liberated, to join his fellow perjurors with a botde of wine at the nearest tavern. ’ ’
As a result, the reports of coroners’ courts and jail deliveries showed that the scholars and masters of Oxford were responsible “for an appalling number of crimes of arson, highway robbery, rape and murder”. (Schachner, p. 203.) The moral of this seems to be that the older dictum about the sparing of the rod applies not only to children but also to men of holy repute and men of learning.
Let me briefly summarize the essential points about the medieval universities. First, it is clear that they enjoyed the favour and support of Popes, emperors, kings—indeed what we might call the upper establishment of the time. As a result of this, they grew in prestige and power for nearly two centuries after their founding.
The medieval universities formed a truly international community. Apart from the fact of footloose and migrating scholars, they spoke, wrote and taught in one common language, Latin. Successive generations of benevolent Popes were the final safeguard against the encroaches of national power. Yet, at the same time, apart from the free-enterprise Lombard universities, they were in a real sense part of the establishment of the country in which they were sited. Even Paris, the most international and cosmopolitan of medieval universities, exerted great influence in national affairs.
Why these universities grew to such heights of eminence, unequalled before or since, are matters which I do not have time to go into. I said earlier I embarked on the study to see whether we could get some guidance. After so brief an acquaintance with the subject, I hesitate to offer anything other than some tentative conclusions.
Perhaps we can discuss the subject of your university under two headings, first as a member of the international community of academics, and next as a teaching institution of high importance in the Republic.
Some years ago, some expatriate teachers, Asian expatriates mostly, set out the doctrine at the university that its members, both staff and students, really belonged to the international community of scholars, and as such owed no loyalty to Singapore. This seems to me a manifestly absurd proposition.
The academics of today do not form an international community in any way resembling that of the Middle Ages. A trivial but telling example will prove the point. Take the example of Dr Pucetti, a former aggrieved member of the university staff. In the thirteenth century, the learned doctor would have tried to secure a Papal Bull giving the Singapore Government a peremptory order to mend its ways. Instead, he is reduced to writing anecdotes in a university journal. (The one I like best is about your Vice-Chancellor engaging a gunman to guard the approaches to his office.)
As regards the internal role of the university, the situation is quite complex. There are individual members of the university who have served or are serving as Members of Parliament, Cabinet Ministers, ambassadors, or members of statutory boards. Your Vice-Chancellor himself is a senior Cabinet Minister. We can say that these academics belong to the establishment. Yet it cannot be said that the university, as a corporate body, is today part of the establishment in the way that the Oxbridge Universities are in Britain. The reasons for this are complex. One is the influence of some expatriate teachers, who have brought with them the anti-establishment attitudes fashionable in their own countries. Another is that some local academics genuinely feel that we, that is, the PAP Government, are doing the wrong things.
I feel that these local academics are misguided, though, of course, they are entitled to their own opinions as I am to mine. But their understanding of the social situation and the political process is seriously defective.
For instance, somebody did a study of tenants of Housing Board estates and came to the conclusion that the volume of discontent was so large and so widespread that these constituencies were the best choices for opposition parties. This view was echoed by a number of foreign journalists. Happily for the PAP, opposition parties accepted the findings as gospel truth and sent their top men to Housing Board constituencies where they were well and truly slaughtered.
And then there was constant harping on individual liberties. In one party political broadcast during the general elections, an opposition leader even referred to the “garrison state mentality”, a phrase used by a geographer from a minor British university who wrote about the most fatuous book on Singapore that I have read for a long time.
The ghost writer of that occasion as well as others who convinced the Workers Party that individual freedom was a momentous issue greatly agitating the minds of the electorate—these academics have rendered the PAP yeomen service. I hope they will remain totally
unconvinced by what I say for at least another five years, when, with luck, they may ensnare yet another opposition party into a false position.
Those of less eccentric political persuasions, as no doubt most members of your association are, would be as anxious as we on the government side are to see a more normal working relationship between the Government and the university. It is not the usual arrangement for a senior Cabinet Minister to be the chief executive of the university. But faced with the extraordinary situation of that time, and with the desire that we have to develop the university into a first-rate institution, it was the only practical solution. And, Dr Pucetti’s anecdotes notwithstanding, it is working and the university grows from strength to strength.
We should not be unduly worried that we have not hit off as well as we could. After all, the university as well as the Government are very young in terms of historical time. We have time enough to make the adjustments. That we shall one day arrive, I have no doubt. But whether the university will then achieve the status of an elder daughter or end up in a less illustrious position are not matters which we need worry too much about. The great thing is to try, and both sides have a duty to do this.
Zero Growth Rate for Private Motor Vehicles
The scheme proposed below in this paper covers only privately-owned vehicles. It does not apply to trucks, taxis, vans, buses and other vehicles owned for business purposes. Commercial transport vehicles should be allowed to expand in line with business needs as artificial limitation may raise costs, and reduce our competitive efficiency. The scheme will, however, cover motorcars owned by business firms for the use of their personnel. It will cover SZ cars.
Under this scheme, nobody can acquire and register a new motorcar without first surrendering an old car to the Registrar of Vehicles.
The purchase of second-hand motorcars will not require the surrender of the buyer’s car to anyone. Nor is it desirable to introduce changes in the existing distribution system. Motorcar assemblers, importers, and second-hand dealers should be allowed to function as they do now. It may, however, be necessary to license them for control purposes, that is, to require them to make a return of stocks, sales and purchases.
There are two variations of the scheme. Under the first, no payment is made for old cars surrendered to the ROV. This introduces a simplicity to the operation, but it has disadvantages which will be
This paper, circulated privately to my colleagues on 26 September 1972, outlines a plan to prevent traffic strangulation in the city. The second note, beginning on page 260, tries to meet some of their objections. The main elements of the scheme were eventually incorporated on 31 December 1975 in a policy mix designed to discourage car ownership.
examined later. Despite difficulties and problems of valuation of secondhand cars, a second variation is recommended under which payment is made for surrendered second-hand cars.
Under this scheme, since no new car would appear on the road without the surrender of an old one, the total stock of privately-owned motorcars remains constant unless the Government decides otherwise.
Before examining the scheme in detail, it may be necessary to explain why such schemes have not been applied in other countries, possibly not even thought of. The reason is that most of the countries where road traffic and air pollution through exhaust emissions have become a vexatious problem are developed countries with a large motorcar manufacturing industry. Even where the industry is not important, as for instance in Switzerland, Norway and some European states, it may be politically difficult to introduce a scheme of this kind as congestion is found only in, a few towns and the motorcar is a necessity in the rest of the country.
Both these arguments do not apply to Singapore. Further, it is unlikely that a policy of trying to limit the car population by taxation has much chance of achieving success. Tax increases will have to be severe to be effective. Further, as the GNP goes up, so will tax rates have to be increased at frequent intervals. Since car ownership is widespread in Singapore, the political consequences from each tax hike will be adverse. It is unlikely that a policy of tax increases every year or every other year can be sustained for long.
By contrast, the proposed scheme does not involve anyone in actual loss. On the contrary, car owners enjoy a windfall increment in the value of their cars. Intending car owners will have to pay more for new or second-hand cars than what they otherwise would have to pay. But their number each year is small compared to the number of car owners, and a minute fraction of the population.
Let us consider some effects of the scheme. The first and most important consequence will be the creation of a scarcity value (SV) for every privately-owned motorcar. It is therefore necessary to understand in depth what happens to this scarcity value. Who receives the SV? Who has to pay it? How will it affect the motor trade?
The outcome is extremely complicated, but the effect depends on which of the two types of schemes is adopted, whether no payment is made for surrendered cars or whether some payment is made, and, if the latter, on what basis payment is to be made.
In the scheme of zero price for surrendered cars, it is unlikely that many cars will be surrendered to the ROV other than old crocks fit
only for the scrapyard. Motorcar dealers will hunt high and low for these old crocks and pay the scarcity value to their lucky owners. (Dealers of new cars cannot do business unless they have a stock of old crocks they buy on behalf of new customers.)
The result of the scheme would be that people will hold on to their present cars as long as possible; the SV is likely to be high, few people will buy new cars, and in the course of time we will get a population erf aged motorcars. The motor trade will decline rather badly, motorcar assembly plants may have to close down. On the other hand, the motorcar repair business will enjoy a long period of steady expansion.
Because of the disadvantages of the zero price policy, it is better to pay for surrendered motorcars. The question then arises as to what the basis of valuation is. Since the object of receiving surrendered cars is to take them out of circulation, only two things can be done to these cars. First, sell them to the National Iron and Steel Mills as scrap. Second, export them.
For cars in good running condition, the basis of valuation will then be the export price for surrendered cars. The markets for these cars will be Malaysia, Thailand and possibly Indonesia. If the number of surrendered cars is large enough, prices will drop low enough to make it worthwhile to sell to other countries, e.g. Hong Kong, Vietnam, etc.
While in principle the valuation of surrendered cars on the basis of export price is clear enough, in practice the Government will have to set up some proper mechanism, not only for valuation but also for payment and disposal. We may license a number of firms to have the right to bid for surrendered cars on the condition that they should export them within a given period. Two precautions need to be taken. First, there must be enough licenses to make cartel arrangements difficult. Second, secure storage arrangements must be made to ensure that these cars are actually exported.
We can now return to the subject of SV and examine it under the scheme where surrendered cars are paid for on the basis of export price.
The SV is paid by the buyer of a new car who has not owned the car before. It is also paid by the buyer of a second-hand car, since the price of these cars contains two elements—the SV premium which attaches to all cars and the potential export price.
Who receives the SV? How is it likely to vary over time? Could special groups, e.g. car dealers, car assemblers and the Government, exploit the SV for their own advantage?
The subject needs more thorough study than is possible here. Briefly, the likely outcome is that present car owners will enjoy the SV
and may realize it by ceasing to be car owners. This, indeed, is likely to happen to poorer people owning rather ancient cars, as the SV increases year by year with the increase in Singapore’s GNP. However, most car owners will surrender their cars in order to buy new cars. They will not therefore realize the cash value of the SV.
There is likely to be an immediate bonanza for second-hand car dealers. This is the luck of the draw and the situation could be accepted unless there is a simple way to cream off their SVs.
Could car dealers of new and second-hand cars manipulate the SV to their advantage? While the unwary buyer may well be swindled by the sharp dealer, it is likely that if we allow free competition to prevail, the whole or most of SV should accrue to the car owner. Most purchases of new cars will be made by car owners surrendering their old cars and the value of SV does not then arise. Nevertheless the situation should be closely watched.
Can Singapore’s car assembly industry benefit from this scheme? The answer is yes, if the Government is so disposed to allow it. The number of new cars purchased is likely to be less than before, because of the increase in purchase price resulting from the additional SV. Also trading-in terms for car owners are likely to be worse than now because the export price is likely to be lower than current prices for secondhand cars. A restriction of choice of new cars will be more acceptable to the buying public under these conditions. In any event, control of the situation to provide greater attraction for locally assembled motorcars is probably necessary as they will need to have a larger share of a smaller market to avoid contraction. This can be done by steeply increasing import duties on imported completely built-up motorcars, but not on vans, trucks, etc. It is unlikely that the motoring public will raise a hue and cry over this. The really wealthy man who wants fancy cars can still get them. It is only proper that the Treasury benefits when he indulges in expensive tastes.
While the SVs are likely to increase over time under zero growth conditions, the Government can influence the SV in any way it likes. It can even reduce the car population by buying up second-hand cars at the going price and SVs will increase. Or it can allow privileged purchases of motorcars for categories of persons it wants to favour, e.g. meritorious members of professions such as teachers, policemen, army officers whom it wants to reward for steadfast service. When the SVs have reached a very high level, possibly after many years, the Government may exploit it for recruitment purposes in, for instance, the medical services or the administrative service and thus gain an
advantage over private enterprise. However, the right to car ownership runs concurrently with employment in the public sector. As cars become a status symbol of increasing importance with the passage of time, the Government enjoys a real advantage.
What are the likely effects of the scheme? First, there will be attempts to evade it. Malaysian-registered cars are an obvious loophole which needs to be plugged. Tough enforcement with deterrent punishment should solve this difficulty. Another form of evasion would be the use of vans for private purposes. If a shopkeeper wants to take his family out for an evening drive in a grocery van, there is no reason why anyone should object to this. But eventually many car owners may find it more profitable to lease their vehicles, rather than use them themselves. It should be made easy for such people to take out an SZ license as they may be meeting a genuine demand. A restrictive policy may lead to an extensive and difficult to control black market, similar to the private taxi problem.
A major decision will have to be made on motor-cycles. Many firsttime car owners will be young, and some who are unable to buy new or second-hand cars because of increased costs may decide to buy motorcycles. The demand for motor-cycles and scooters is likely to increase substantially. The question arises as to whether these should be placed under some form of control or whether these could be allowed as a safety valve for frustrated car owners. There are pros and cons and no recommendation is made in this paper.
The effect on revenue will depend on government policy. Here the room for manoeuvre is likely to be greater than is now the case. Since car owners will represent a privileged class, albeit a large one, they may be taxed more severely than what prudence now would dictate. The theoretical limit of taxation is for the Government, through vehicle and petrol taxes, to appropriate for itself the whole of the SV accruing each year. It is unlikely, however, that matters can be pressed to this theoretical limit.
But it will be possible to increase petrol duties and motorcar registration fees with greater ease than is now the case. It will certainly be necessary to do so since revenue growth is likely to cease without increase in rates.
The scheme should be kept as simple as possible. A man surrendering any make of car of any age and in any condition should have the right to buy any new car of his choice so long as he has the money to pay the price. Any proposal to complicate the scheme should be resisted. The man surrendering a Volkswagen to buy a Rolls Royce
excites grave suspicion in bureaucrats equal only to the man who turns in a Rolls Royce to buy a Volkswagen. But we should not group vehicles into categories and require that an exchange of new for old can only be permitted within a category. If it is intended to discourage big cars, the proper method is to increase initial and annual registration fees for such cars.
One windfall effect which Singapore will enjoy would be when antipollution devices are successfully introduced, either built into new models or manufactured as attachments. It will be easier to get these measures accepted, even though the costs may be high. For, in relation to the cost of the car and its SV, these will form a small proportion. Further, car owners belong to a select circle and the car becomes a jealously guarded status-symbol.
A zero rate of growth must be regarded as a special case, one of several possibilities under a regime of controlled growth. If it is envisaged that such a policy is too drastic, and that it would be wise to allow a modest annual increase in the motorcar population, how can this be brought about?
There are three ways in which we can allow people to buy motorcars without surrendering old cars:
(i)	Issue a permit to authorize such a purchase, permits being granted on the merits of individual applications.
(ii)	Draw lots among applicants.
(iii)	Require applicants to tender for such permits.
Which of these alternatives is to be recommended? First it must be made clear that if an applicant is not granted this permit, it does not mean that he is being deprived of the possibility of buying a new car. All the permit entitles him to is to buy the new car without having to surrender his old car at the export price, or if he has no old car, to pay the car dealer the equivalent of the SV.
In other words, the permit in effect confers on the recipient a cash value. Its actual value would of course depend on the current market rating of the SV. The granting of the permit is therefore equivalent in all respects to the issue of shares of a new company at par value, when it is known that the market price will be substantially higher.
Under such circumstances, it is not easy to suggest what criteria should apply in the granting for free of such permits. The necessity to own a car enters only at second remove, since the applicant is not
denied car ownership if he is not granted a permit. Therefore the first alternative of trying to adjudicate which of the thousands of applications merit a permit will probably break down amidst a public outcry over alleged favouritism, corruption, etc.
Similarly, allocation of permits by drawing of lots is likely to lead to the same situation as allocation of new shares at par. People merely fill in dozens of application forms, even if required to enclose money orders or cheques.
This leaves the third option, that is to require applicants to bid for such permits. The question then arises: Why should people be willing to pay the Government for such permits, when they might as well pay the additional sum to the car dealer or suffer a putative loss in trading in their old cars? The answer is that the Government may feel that the SV has gone up too high, or that for various reasons it is desirable to allow more purchases of new cars. People may be getting restive or it may be necessary to help local car assembly plants. The tender price is likely to be slightly less than the SV. Bids can be called for in two ways:
(i) By tender.
(ii) Issue on tap at a stated price.
Disposal of treasury bills offers a good analogy. It is probable that the tap issue would work more smoothly. Under this method, the Government will offer, each month, permits to buy new cars without exchanging old ones to such and such a figure and at a stated price. Under equilibrium conditions, applicants will just clear the stated number.
Should there be shortfalls or excesses, the price can be adjusted from time to time, or the number of permits may be varied. Conversely, we can offer so many permits per month and state that the highest bidders up to that number be issued with permits. Tender operations under the scheme are not inconsistent with the rest of the system. It is a direct way whereby the Government helps itself to the SV while keeping it from rising too fast. But the price to be paid is more traffic congestion.
The issue of permits to special groups which the Government wishes to favour, e.g. teachers, police officers, CCC members, etc., forms a separate subject and is dealt with in the main text.
 Index 
Academic freedom, 20
Afro-Asia, 45, 195-7
Agriculture, 74-85, 170, 205-6
American industries, 27
Armed forces, 217-18, 229-31
Asian countries, 201-12
Asian Dollar Market, 102
Association of Southeast Asian Nations (ASEAN), 32-43, 51-62, 111-12, 175-86
Balance of payments, 11-12
Birth control, 6, 105-6, 186
Borneo, 97
Brain drain, 198
Britain, 65,74, 173-4
British, administration of Singapore, 1-6, 16-17, 214, 220-1, Army, 231, GDP, 21-2, industries, 27, labour, 157-9, Labour Government, 141, 167, military withdrawal, 9, 26, 98, 121-2, 173, 198, trade unions, 141, 158, Trade Union Congress, 27
Buchanan, Iain, 2
Capital, 12,23,211
Central Provident Fund, 10-11,49
Chinese (overseas), 6
Chinese Chamber of Commerce, 4
Chinese schools, 7
Churches, 44, 46, 212, Methodist, 44
Cities, 39-40, 43, 79-82, 179-80, 207
Civil service, 150-1
Clark, David, 120, 127
Colonial govemment(s), 100, 214, 220-1
Common market, 31-3, 97-8
Communism, 95-7
Communist insurgency, 181
Communist Party of Indonesia (PKI), 62, 176
Communist united front, 7-8, 94-6
Communists, 160, 203
Compensation Board (for tourists), 91
Confrontation (Indonesian), 97-8
Construction industry, 39-42
Consumer price index, 13, 94
Decade of Development, 108
Defence, 6, 98, 181, 235-40
Development Bank of Singapore, 104
Domar, E., 67
Drugs, 220-8
Dutch, 3-4, Labour Government, 167
Economic Development Board (EDB), 102-3, 123, 162
Economic growth, 16, 21-4, 67-8, 104-6, 173
Economic Research Centre (ERC), 119-20, 126-7
Economists, 27-8, 45, 135
Education, 7, 10, 100-1, 118, 213-19, 241-54, technical, 10, 121-6, 200
Employment, 7, 10, 38, 60, 64-5, 96, 100
Employment Act, 9
Engineering Industry Development
Agency, 122-4
Engineers, 27, 118, 128, 148-51
Entrepreneurs, 22, 26
Foreign aid, 42, 107-12
Free enterprise system, 47-8, 112
Free Trade Area, 32, 37
French Army, 231
German(s), 27, 200
Great Cultural Revolution, 99
Great Depression, 6, 23, 67, 110
Green Revolution, 83-5
Gross domestic fixed capital formation, 39
Gross domestic product (GDP), 21-6, 30
Gross investment, 14-15
Gross national product (GNP), 9-14, 25-6, 30, 51-4, 71-8, 94, 105, 176, 182
Harrod, Roy, 67
Harrod-Domar growth model, 67-8, 76-7
Hong Kong, 22, 29, 160, 162, 198
Housing, 8, 38-43, 100, 105, 179, 253
Housing and Development Board, 8, 40, 179
Imperialism, 94, 182
Import substitution, 8
Income(s), 25, 49, 64-5, 75-8, 216-17, distribution, 25, 28, 56-7
Independence, 5, 98
Indians (overseas), 6
Indonesia, 39, 52-3, 162
Industrial estates, 1, 8, 101
Industrial Relations (Amendment)
Act, 9
Industrial Revolution, 70, 189
Industrialization, 8-9, 22, 35-6, 99-105,185, 189, 207
Industries, 7-8, 17-18, 23-8, 71-3, 160-3
Inflation, 14, 21, 64-7, 73-4, 134-9
Infrastructure, 8, 29, 103
Innovations), 69-73
Institutions, 103
International Metalworkers Federation (IMF), 143
Japan, 80-4
Japanese, 27-8, 72-3, 185, 231, labour, 154-9, 200, management, 155-6
Jurong industrial estate, 1, 8
Jurong Town Corporation, 8
Keynesian theory, 63-4, 67, 77, 170
Kondratieff, 70-2
Korea (see South Korea)
Labour, 7-10, 23-4, 28-9, 40, 64-5, 76-7, 116-32, 154-63, 170-4, 195-200
Latin American Free Trade Area (LAFTA), 32-7
Lee Kuan Yew, 236
Lewis, Arthur, 75-6
Light Industries Services (LIS), 161
Machiavelli, 55
Malaya, 97
Malaysia, 13, 28-9, 39, 41-2, 49, 55-6, 97, 181, 236
Malaysian, Second Development Plan, 30, workers, 28-9
Malthus, 76
Malthusian Trap, 77
Management, 120-1, 142, 152-3
Manpower planning, 114-32
Manpower Planning Unit, 119
Manufactures, domestic, 7-8
Manufacturing Association, 161
Manufacturing sector, 7, 14-16, 23-6, 105
Mao Tse-tung, 160, 178-9
Marcos, 53
Middle East oil states, 107
Monopolies, 49, 58-9
Moral standards, 45-6
Motor vehicles, 255-61
Multinational corporations (MNCs), 23, 25-30, 57-60, 102, 176, 182-4
Myrdal, Gunnar, 180
Nanyang University, 127
National servicemen, 223-5, 239
National Trades Union Congress (NTUC), 104, 136-9, 162-3, 167-8, 174
NTUC Cooperatives, 138-9
National Wages Council (NWC), 29,. 136,167, 199
OPEC, 64, 109-10
Opium trade, 220-2
Organization of American States, 35-6
Pang Eng Fong, 118, 120
People’s Action Party (PAP), 94, 253, Government, 94, 147, 150’, 191-3
Peasant(s), 54, 60, 74-7, 178-90, 206
People’s Republic of China, 22, 107, 178-9, 181, 192, 208
Philippines, 39, 42, 52-3, 181
Phillips, A.W., 64-7
Population, 5-6, 23, 68, 76, 148
Port of Singapore Authority (PSA), 153
Private Investment Corporation of Asia (PICA), 47
Productivity, 152-3, 169-74
Professionals, 198-9
Profiteering, 137
Race riots, 95, 97
Raffles, Stamford, 3-4
Ransome, 113
Renaissance, 128
Ricardian Bind, 77-8
Ricardo, 76
Rosen, George, 177-8, 180
Rubber estates, 5
Russia (see Soviet Union)
Savings, 8, 49, 68, 76, 78
Schumpeter, Joseph, 69-73
Shipbuilding, ship-repairing, 7, 146-7
Shipping, 3-4, 8, 153
Singapore, economic development, 1-18, 20-30, intelligentsia, 187, labour, 7-10, 23-4, 28-9, 40, 160, socialism in, 94-106
Singapore Anti-Narcotics Association (SANA), 225
Singapore Armed Forces, 192, 232-3, drug addiction in, 222-8
Singapore Chamber of Commerce, 2
Singapore Polytechnic, 7, 127
Singapore University, 118-19, 127, 252-3
Smith, Adam, 50, 169-71, 238-40
Social services, 6
South Korea, 22, 29, 160, 173
Soviet Union, 107, 176, 184
Sri Lanka, 52
Suharto, 53
Sukarno, 53, 97
Switzerland, 108
Taiwan, 22, 29, 81, 160, 162, 173
Tax(es), 56, 58-9
Technical training centres, 123
Technology, Western, 45, 144-7, of underdeveloped countries, 75
Teng Hsiao-ping, 178-9
Thailand, 39, 42, 54-5, 162, 181
Tourism, 90-3
Tourist(s) Singapore, 91-2
Tourist Promotion Board, 90
Trade, 2-5, 11-12, world, 25, discrimination, 3, 144-7
Trade unions, 7-8, 27, 166-8
Travel Agents Act 1975, 91
Travel Agents Regulations 1976, 91
Treaty of Montevideo, 33-5
Tsun Tze, 233
UNCTAD, 109, 166
Underdeveloped countries, 22, 31-2,51-62,74-85, 144-7, 180, 191, private enterprise system of, 47-8
United Nations, 32, 108, 204
United States, 66, 74, 117, 166, 176, 183-4
Universities, 171, 252-3, medieval, 242-52, disturbances in, 54-6
University of Singapore (see Singapore University)
Vietnam, 151, 176-7, 180-1, 187
Vocational institutes, 10, 122
Welfare state, 166
Western, intellectuals, 164-8, technology, 45, 144-7
Winsemius, Albert, 23
Workers, 16, 23-4, 28-9, 99, 104-5, 144, 198-200
World Bank, 109
You Poh Seng, 127