Today the Government announced some shockingly awful growth numbers for the second quarter of 2019. They showed the economy shrinking at a 3.4% quarterly seasonally-adjusted annualized rate from the first quarter and growing by just 0.1% year on year. It is now highly likely that we will be in a recession (defined as two quarters of negative growth) by the third quarter of this year.

Law Minister Shanmugam was quick to respond on his master’s behalf. I do not know what qualifications he has to talk about economics but it has long been a trend for lawyers to appropriate roles that should properly be filled by qualified economists. Trump appointed Jerome Powell, a lawyer, to be head of the Federal Reserve (and has spent much of the time since criticising him with some justification) and it looks highly likely that the venal Christine Lagarde (who refused to answer my open letter about Tharman’s constitutional breach when he made the IMF loan commitment without Parliamentary approval) is a shoo-in for the role of head of the European Central Bank, even though she has what amounts to a criminal record, like Tharman who has an actual criminal record. Whenever Shanmugam pops up I am reminded of a T-shirt my brother had captioned “Silver-Tongued Litigator” showing a man in a suit but with a lizard’s head.

Shanmugam’s response to the bad GDP numbers was the usual PAP drivel about the need for Singaporeans to turn to the PAP in times of economic trouble as they were the only ones who could be trusted “to steer the city state through economic uncertainties when they go to the ballot boxes“

Does that make any kind of sense? Would you trust a fund manager who has lost you money to continue managing your money or would you take it away and give it to someone else to manage? Of course the PAP will tell you that it is only because of the genius of LKY and after him his son that Singapore is where it is today and that one quarter of bad performance is merely an aberration.

However, as I have frequently said, Singaporeans have allowed themselves, in the words of Nicholas Taleb, “to be fooled by randomness”. If one was to run a regression analysis of Singapore’s growth compared to the growth in world trade, I am confident you would find that 100% of Singapore’s growth since the 1960s can be “explained” by the growth in world trade.

After the Great Recession of 2008 the Holy Goh compared Singapore to a speedboat that suffered in choppy seas but was able to zoom ahead when there was clear water. To put it in economic jargon, Singapore’s GDP growth has an elasticity, or beta, of greater than 1 with respect to the growth in world trade with very little alpha. So like a long only fund manager when the market goes up the PAP and the Lee family congratulate themselves on their brilliance. They tell you they deserve to pay themselves whatever they like and not even tell you how much (in fact they make the PM’s wife’s remuneration a closely guarded state secret) but when the market goes down they blame losses on external circumstances beyond their control.

As I have long said on these pages, the PAP have a simple economic model which is cheap imported labour and no minimum wage coupled with low taxes to divert MNCs into artificially boosting GDP with little benefit to Singaporeans’ living standards. It all goes back to an article written by Arthur Lewis in the 1950s entitled “Economic Development with Unlimited Supplies of Labour”, one that Winsemius and Goh Keng Swee plagiarized in coming up with an economic development strategy for Singapore. Economists are unfortunately unable to conduct control experiments but I am sure Singapore would have grown just as fast given its strategic location without the PAP’s authoritarian rule or needless policies of austerity resulting in what should be huge reserves while denying the people a role in how they are spent. In an article on Brexit some months ago I showed that Singapore’s economic growth record had been no better than Ireland’s even though Ireland is a bit of backwater compared to Singapore (as demonstrated by its weak position if there is a no-deal Brexit).

The PAP’s economic model required a “buyer of last resort” in the form of the US prepared to suck in imports and allow the rest of the world to accumulate claims on it indefinitely. Even if Trump is only a one-term President it is likely that any new Democratic administration will continue to pursue a much more economic nationalist line.

The PAP’s over-reliance on manufacturing is coming home to roost as manufacturing shrank at 6% at an annualized rate, almost the same as in the first quarter. The Government has long relied on construction to boost the GDP numbers but Singapore has long reached saturation point in the number of shopping malls and MRT stations. This quarter it shrank at a nearly 8% annualized rate reversing the expansion in the previous quarter which had helped to prevent a recession.

Singaporeans seriously need to question how the PAP are going to dig Singapore out of this hole of their own making. They are fond of taunting the Opposition by asking what their plans are to improve Singaporeans’ lives even though that is quite easy to answer. Let’s hope people will write in and ask the PM what his plan is now and not be fobbed off with the usual glib answers. He can start by revealing how much he has paid his wife over the last fifteen years. Perhaps she can offer to pay it back to help ordinary Singaporeans impacted by the coming recession.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam