Saturday, February 28, 2009

It's the middle class, stupid

Feb 28, 2009

Obama's socio-economic experiment bears watching by Asia

By Chua Chin Hon

WASHINGTON: WATCHING from afar, readers in Asia would naturally be drawn to all the eye-popping figures in US President Barack Obama's US$3.55 trillion (S$5.49 trillion) budget proposal.

There is the US$634 billion to be set aside for a decade of health-care reforms, US$205 billion for combat operations in Afghanistan and Iraq up to 2010, US$6 billion for cancer research, and a US$250 billion 'contingent reserve' in case the US$700 billion effort to rescue the banks is insufficient.

Take a step back, however, and one might see in the document the genesis of a bold socio-economic experiment with potentially interesting lessons for Asia.

The 140-page proposal lays out clearly the underpinnings of the Obama administration's thinking behind the budget.

It argues forcefully for an activist government to use all the big guns at its disposal - tax policy, fiscal spending, and regulation - to ameliorate one of the most worrying mega-trends of our time: the unrelenting squeeze on the middle class.

'There is nothing wrong with people succeeding and making money. But there is something wrong when the opportunity for all Americans to get ahead, to enter the middle class, and to create a better life for their children becomes more and more elusive,' the report said.

'The ladder into the middle class and beyond has become harder and harder to climb.'

This lament is one that is likely to resonate with many lower- and middle-income families in Hong Kong, Taipei and Singapore.

Like their counterparts in the United States, they have seen their real wages stagnate or even fall despite the boom of recent years. The cost of living keeps going up. New jobs seem harder to come by, while those that were lost to low-cost manufacturing centres like China never returned.

Meanwhile, those riding high on the frontiers of the globalised economy, be it in financial services or information technology, have seen their fortunes shoot through the roof.

According to the Obama Budget, the median income for US households headed by those under 65 years old fell by US$1,951 between 2000 and 2007. But by 2004, the combined net worth of the top 1 per cent of US households was already bigger than that of the bottom 90 per cent.

Experts and policymakers alike agree that these are all the downsides of globalisation. But there is no consensus on how best governments should respond to these trends.

In much of Asia, even in nominally communist China, the implicit policy preference is to grow the economy sufficiently big and fast so that the rising tide of prosperity would lift all, or at least enough, boats.

The Obama Budget, however, weighs in unequivocally against this 'trickle down' approach.

'The past eight years have discredited once and for all the philosophy of trickle-down economics - that tax breaks, income gains and wealth creation among the wealthy eventually will work their way down the middle class,' it argued.

'In its place, we need economic opportunity to trickle up. We need policies that will strengthen the middle class.'

To this end, the US President wants those benefiting most from globalisation - high-income earners and multinationals - to pay more taxes in order to lessen the burden on the middle class, and help fund policies that would make the workforce more competitive overall.

It is estimated that in a decade, the US government can reap US$656 billion in additional taxes from couples earning more than US$250,000 a year and singles earning US$200,000 or more.

In the same period, multinationals may have to pay US$210 billion more in taxes after the government steps in to limit their ability to shield overseas profits from taxation, the Wall Street Journal estimated.

These additional revenues would help finance tax cuts for the middle class, and pay for much-needed health-care and education reforms.

'There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favour of so few,' said the Obama Budget blueprint.

'It's a legacy of irresponsibility, and it is our duty to change it.'

But will this work, even assuming that Mr Obama passes this budget despite the gathering political opposition?

There are reasonable doubts as to whether such tax policies will backfire by choking off entrepreneurial drive and further slow economic activity. So it is probably fair to say that no Asian country would be rushing out to emulate this plan.

But these bold budgetary prescriptions do raise pertinent questions for Asian policymakers trying hard to address the Achilles' heel of their economies - weak domestic consumption.

The region's experience in recent years, particularly in China, is that heady gross domestic product (GDP) growth alone is not enough to generate a consumer boom. For that to happen, real household incomes must go up.

Can this happen with policymakers sticking to the existing growth model and playing defence, instead of offence, against the mega trends brought on by globalisation?

Mr Obama seems to have made up his mind, declaring in his budget blueprint: 'There are the years that come along once in a generation, when we look at where the country has been and recognise that we need a break from the troubled past, that the problems we face demand that we begin charting a new path.'

Asia will be watching.

chinhon@sph.com.sg

[One comment on why consumption is low in many Asian countries is because of the lack of social safety nets. When there is no universal healthcare so when a medical calamity befalls the member of the household, it will take household savings to fund the medical costs and so on. So one argument for spurring consumption is for the govt to take on the role of saving for healthcare? One billion people saving for medical emergencies that will fall on 100 million people is inefficient? Better for the govt to do the saving? Or to sponsor a medical insurance programme? Same for other social safety nets like unemployment or unemployment insurance at least? Welfare is not a bad word. It can help the economy?]


Friday, February 27, 2009

Keep it clear, keep it simple

Feb 27, 2009
WRITTEN ENGLISH

Thirty years ago today, on Feb 27, 1979, then Prime Minister Lee Kuan Yew called a meeting of ministers, ministers of state and senior civil servants to discuss how government papers and minutes can be written in clear, clean prose. Singapore's GDP has grown almost sevenfold since 1979. Marina Bay didn't exist then. Changi Airport was still two years away from completion. Singapore has been transformed beyond recognition in the last 30 years. But the same, alas, cannot be said of the quality of written English, which remains recognisably the same now as it did in 1979. We reprint excerpts of Mr Lee's address to mark a melancholy anniversary.

I WANT to discuss the importance of simple, clear, written English. This is not simple. Dr Goh Keng Swee gives every officer whom he thinks is promising and whose minutes or papers are deficient in clarity, a paperback edition of Sir Ernest Gowers' The Complete Plain Words.

It presupposes that the man who attempts to read the book has reached a certain level of literary competence. The book, written words, cannot convey to you the emphasis, the importance, the urgency of things, unless the receiver is a trained reader. And in any case, human beings are never moved by written words. It is the spoken word that arouses them to action. Arthur Koestler rightly pointed out that if Adolf Hitler's speeches had been written, not spoken, the Germans would never have gone to war. Similarly, Sukarno in print did not make great sense.

The spoken language is better learnt early; then you will have fluency. However, my thesis is that the written language can be mastered at any age without much disadvantage. It is learnt fastest when your written mistakes are pointed out to you by a teacher, friend, or senior officer. That was the way I learnt.

When I was in school my compositions were marked. When my children were in school they simply got grades for their written work. Their teachers had so many essays that they never attempted to correct the compositions. This has contributed to our present deplorable situation.

I want to convince you, first, of the importance of clear, written communication; second, that you can master it, if you apply yourself.

The use of words, the choice and arrangement of words in accordance with generally accepted rules of grammar, syntax and usage, can accurately convey ideas from one mind to another. It can be mastered.

When I was a law student I learnt that every word, every sentence has three possible meanings: what the speaker intends it to mean, what the hearer understands it to mean, and what it is commonly understood to mean. So when a coded message is sent in a telegram, the sender knows what he means, the receiver knows exactly what is meant, the ordinary person reading it can make no sense of it at all.

When you write minutes or memoranda, do not write in code, so that only those privy to your thoughts can understand. Write simply so that any other officer who knows nothing of the subject can understand you. To do this, avoid confusion and give words their ordinary meanings.

Our biggest obstacle to better English is shyness. It is a psychological barrier. Nobody likes to stop and ask, 'Please, what does that mean?' or 'Please tell me, where have I gone wrong?' To pretend you know when you don't know is abysmal folly. Then we begin to take in each other's mistakes and repeat them, compounding our problems.

The facility to express yourself in a written language is yet another facet or manifestation of your ability, plus application and discipline. It is a fallacy to believe that because it is the English language, the Englishman has a natural advantage in writing it. That is not so. He has a natural advantage in speaking the language because he spoke it as a child, but not in writing it. It has nothing to do with race. You are not born with a language. You learn it.

Without effective written communication within the government, there will be misunderstanding and confusion. Let me give a few recent illustrations of writing so sloppy that I had to seek clarification of their meanings:

'With increasing urbanisation and industrialisation, we will require continued assistance particularly in the technological and managerial fields.'

I asked myself: What have I missed in this? What has the first part about urbanisation and industrialisation to do with the second part about continued assistance? Why do we need more assistance, particularly in technological and managerial skills, because of increasing urbanisation and industrialisation?

It is non sequitur. We need technological and managerial assistance anyway. The first part does not lead to the second part.

'It is necessary to study the correlation between language aptitude, intelligence and values and attitudes to ensure that the various echelons of leaders are not only effectively bilingual but also of the desirable calibre.'

I read it over and over again. It made no sense. This is gibberish! I enquired and I was told, well, they were trying to find out how language ability and intelligence should influence the methods for instilling good social values and attitudes.

Well, then say so. But somebody wanted to impress me by dressing up his ideas in big words. Next time impress me with the simple way you get your ideas across.

'France is the fourth major industrial country in Europe after West Germany, Britain and Italy.'

Calculating backwards and forwards, I decided France cannot be the fourth. I queried. The reply was that France was fourth in terms of number of industrial workers. Now, China probably has the largest number of industrial workers in the world. In some factories they may have 14,000 workers when a similar factory in America would have 4,000. Does that make China the first industrial country in the world?

'The Third World has the stamina to sustain pressure for the Common fund. Progress will probably be incremental with acceleration possible if moderation prevails.'

Now what does this mean? By 'incremental' the officer meant 'slow'. 'Slow', I understand; but 'acceleration possible', I do not.

If we do not make a determined effort to change, the process of government will slow down. It will snarl up. I have noted this steady deterioration over the last 20 years. I want to reverse it. If we start with those at the top, we can achieve a dramatic improvement in two years, provided the effort is made.

Now I want to discuss how we can do this:

To begin with, before you can put ideas into words, you must have ideas. Otherwise, you are attempting the impossible.

The written English we want is clean, clear prose - not elegant, not stylish, just clean, clear prose. It means simplifying, polishing and tightening.

Remember: That which is written without much effort is seldom read with much pleasure. The more the pleasure, you can assume, as a rule of thumb, the greater the effort.

When you send me or your minister a minute or a memo - or a draft that has to be published like the President's Address - do not try to impress by using big words; impress by the clarity of your ideas.

I speak as a practitioner. If I had not been able to reduce complex ideas into simple words and project them vividly for mass understanding, I would not be here.

The communists simplified ideas into slogans to sway the people's feelings - to get them to move in directions which would have done us harm. I had to counter them. I learnt fast. The first thing I had to do was to express ideas in simple words.

My experience is that attending courses helps but not as much as lessons tailored for you. You have written a memo. Somebody runs through it and points out your errors: 'You could have said it this way'; 'this is an error'; 'this can be broken into two sentences' and so on.

In other words, superiors and peers and even subordinates who spot errors should be encouraged to point them out. My personal assistants point out my mistakes; I tell them to.

Some final examples on how urgent the problem is, from two papers coming before Cabinet: The first, a very well-written paper; the other badly written. But even the well-written paper contained a repetitious phrase which confused me. Because it was well-written, I thought the repeated words must be there to convey a special meaning:

'If the basis for valuation is to be on a basis other than open market value as evidenced by sales, arbitrariness and protracted litigation would occur, thus tarnishing the credibility of government machinery.'

I ran my eye back to the opening words. I queried: 'Do we lose anything if we dropped the words 'to be on a basis' before 'other'.' Answer came back: 'No meaning is lost.' And this was in a well-written paper.

Let me read from the second paper, which tried to explain why we must set up an institute:

'The need for such services is made more acute as at present, there is no technical agency offering consultancy services in occupational safety and health.'

I asked: 'What's happening 'as at present'? Why 'as at present'?'

What the officer meant was: 'There is acute need because there is no department which offers advice on occupational safety and health.'

We have taken each other's mistakes. He had constantly read 'as at present', 'as of yesterday', 'as of tomorrow', so he just stuffed in three unnecessary words - 'as at present' - into his paper.

There is such a thing as a language environment. Ours is a bad one. Those of you who have come back from a long stay in a good English-speaking environment would have felt the shock when reading The Straits Times on returning.

I spent a month in Vancouver in October 1968. Then I went on to Harvard University in Boston. For one month, I read the papers in Vancouver. They were not much better than The Straits Times. They had one million people, English-speaking. But there was no sparkle in their pages.

The contrast in Harvard was dazzling. From the undergraduate paper, The Harvard Crimson, to the Boston Globe, from the New York Times to the Washington Post, every page crackled with novel ideas, smartly presented. Powerful minds had ordered those words. Ideas had been thought out and dressed in clean, clear prose. They were from the best trained minds of an English-speaking population.

Let us try to do better. We are not doing justice to ourselves. I know the ability is there; it has just not been trained to use the written word correctly and concisely. And it is not too late to start.

It is not possible to conduct the business of government by talking to each other with the help of gesticulation. You have to write it down. And it must be complete, clear and unambiguous.

Thursday, February 26, 2009

The lasting legacy of Brunei's late ruler

Feb 26, 2009

Minister Mentor Lee Kuan Yew delivered the first Sultan Sir Haji Omar Ali Saifuddien Memorial Lecture in Bandar Seri Begawan yesterday. Here is an excerpt of the lecture.

I AM honoured that, with the consent of His Majesty Sultan Hassanal Bolkiah of Brunei Darussalam, the Sultan Haji Hassanal Bolkiah Foundation has invited me to deliver the first of these memorial lectures.

It is fitting and proper that the Seri Begawan should be commemorated. At a turning point in its history, the Brunei sultanate would have ceased to exist as an independent state without him.

It was a time of great peril when Sultan Sir Omar Ali decided not to join the proposed Federation of Malaysia in September 1963. Singapore went ahead and joined the Federation. The Sultan was under great pressure from the British, who had hinted that they would be leaving the region soon. But he stood firm. He put his position as Sultan and the fate of his people on the line. His judgment was that the British would be responsible enough to give him some time to get his country in better shape before they left.

I first met the Sultan in September 1960 when he had invited the Yang Di-Pertuan Negara of Singapore, Yusof bin Ishak, me as the new Prime Minister and our wives to Bandar Brunei for his 46th birthday celebrations. He had gathered some Malay literary figures from the Dewan Bahasa Dan Pustaka in Kuala Lumpur. He spent time the next few days discussing Malay literary works.

He was a modest man. He was soft-spoken, with a frequent smile when speaking to his friends. He lived a simple and frugal life. For his birthday, he had built an annexe to the old Istana. It was not air-conditioned. He did not like air-conditioning. The room that my wife and I stayed in within this newly built annexe was very hot, like an oven even at night. The sun would shine on the building in the afternoon and there was not enough ventilation.

So I quietly moved out to stay at the rest house in a room with a window-model air-conditioner. It was during this visit that we struck up a friendship that was to grow and endure the rest of Sultan Omar Ali's life.

On May 27, 1961, Tunku Abdul Rahman, the Malayan Prime Minister, mooted the formation of Malaysia, to include Brunei, Sarawak, North Borneo (now Sabah), Singapore and Malaya. Sultan Omar Ali described the Malaysia proposal as very attractive. He accepted the Malaysia proposal in principle, but that did not necessarily mean it was final. If agreement could not be reached on important conditions affecting benefits to the people and the state, Brunei would not participate in the Malaysia plan.

In August 1962, the Partai Rakyat Brunei (PRB) won landslide victories in four District Councils which in turn would choose 16 members for the Legislative Council (Legco). The PRB won 54 seats and had all the 16 members required for the Legco. But they could not form the government. The 17 government nominees outnumbered the PRB in the 33-member Council.

The PRB leader, Sheikh Azahari, rejected the proposal that Brunei join Malaysia. He put forward three motions in the Legco: first, to reject the proposal of a Malaysian Federation; second, to request the restoration of Brunei's sovereignty over Sarawak and North Borneo and the installation of the Sultan as constitutional monarch of the North Borneo Federation; and, third, a request to the British to grant independence to Brunei not later than 1963.

The Speaker of the Legco disallowed the motions because the issues fell within the purview of the British government under the 1959 British-Brunei Agreement. Sheikh Azahari decided to resort to a military solution and staged a rebellion led by its military wing, Tentera Nasional Kalimantan Utara. The revolt began on Dec 8. It was put down in short order by British forces from Singapore.

Negotiations on Malaysia were resumed in earnest following the end of the rebellion. The Sultan did not accept the terms that Malaya offered him. When the Malaysia Agreement was signed on July 9, 1963 in London, Singapore, Sabah and Sarawak signed on. Brunei did not.

I had been in frequent touch with the Sultan in London, then staying at Grosvenor House. He was very firm in his decision not to join.

As a result, after Malaysia was formed on Sept 16, 1963, Tunku Abdul Rahman recalled hundreds of Malaysian teachers and government officers who had been seconded to serve in the Brunei administration. Their departure caused a temporary dislocation in Brunei.

Several accounts were given to explain the reasons for Brunei's decision not to join Malaysia. One account cited disagreement over oil revenues as the primary cause. Kuala Lumpur wanted Brunei to hand over control of its oil to the federal government after 10 years. Kuala Lumpur also wanted to immediately tax any new oil and mineral finds discovered after Brunei joined Malaysia and to make the Sultan's contribution of $40 million to federal revenues compulsory rather than voluntary. The Sultan was said to have found these terms unacceptable.

Another account from Kuala Lumpur alluded to the Sultan's unhappiness over the issue of royal precedence. However, I believe Sir Omar was neither willing to compromise Brunei's control over its oil revenues nor ready to have his privileges as the ruler of Brunei curtailed.

More to the point, the vibes that he felt during the negotiations were that he would become subordinate to Kuala Lumpur's leaders and he would rank behind Malaya's nine Sultans in seniority, besides giving up a chunk of Brunei's oil wealth to KL.

When we met soon after Singapore was asked to leave Malaysia in August 1965, he smiled and nodded with satisfaction that his decision not to join was wiser than Singapore's acceptance of Malaysia.

On Oct 4, 1967, Sultan Omar Ali, then aged only 53, abdicated in favour of his 21-year-old eldest son, Hassanal Bolkiah, born on July 15, 1946. It was a strategic move Sultan Omar Ali made to buy time before a British withdrawal. I was invited to the coronation of his son in 1968.

Protracted negotiations with the British on Brunei's future continued following the abdication. The Sultan, now the Seri Begawan, dragged out the discussions. He wanted his son to get familiar with the administration. He deflected pressure to adopt the British adversarial parliamentary system.

He argued with the British that he needed a few years for the young Sultan to learn the ropes and strengthen the domestic situation ahead of any constitutional changes. He bought time from 1963 to 1983, over 20 years, when the British finally withdrew, and Brunei became an independent state.

Sultan Omar Ali saved the dynasty, delayed majority rule before Brunei was ready, and secured Brunei's continued defence by an agreement to pay for one British Gurkha battalion that would stay in Brunei under British control. A discreet British presence remained.

The Seri Begawan had preserved Brunei's oil wealth. He left the bulk of his country's reserves with the Crown Agents to manage. He was fortunate that Britain acted with responsibility. Most of all, the Seri Begawan played his hand with considerable skill. He pleaded for time to educate enough local Bruneians who could manage the administration of the country.

Way back in the 1960s, he and I had become close friends. He trusted me because I never took advantage of his friendship to ask for favours. On one occasion, he asked his sons to sit in when I met him and he told them that I was a friend who could be relied upon. He wanted the friendship between us to continue with his sons. It has. The close ties continue between the Sultan and his brothers with the present Prime Minister and other leaders of Singapore.

Less than three years after independence, on Sept 7, 1986, Sultan Omar Ali passed away. He was deeply mourned by the people of Brunei. They knew that he had saved their independence. They are able to live as they wish, keeping their oil wealth, because of Sir Omar's statecraft. He built the infrastructure of state. By the 1980s, he had given the sultanate's 200,000 people a high per capita income of US$20,000 (S$30,428 at the current exchange rate), among the world's most privileged. He strengthened Brunei's Islamic institutions.

Sultan Omar Ali took calculated risks with courage. He had a keen sense of what was politically possible. He built a strong foundation before passing the mantle to his eldest son. His Majesty Sultan Hassanal Bolkiah has guided Brunei since independence in 1984, a 25-year period, during which Brunei has progressed in material and social terms. The old Sultan would have been happy to know that an independent sultanate in Brunei has progressed in the quarter-century after independence. His son, Sultan Hassanal Bolkiah, has preserved his heritage.

It was good for Brunei that at the time it became independent, the leader of Asean was President Suharto of Indonesia. He knew that I was a good friend of the Seri Begawan. So he asked me to invite Brunei to join Asean. Brunei did join and become a member of the family of Asean states. This consolidated Brunei's sovereign status, especially when it was recognised by its neighbours. Joining Asean also reduced the dangers of conflict between Brunei and its neighbours.

Brunei and Singapore have a special relationship. They are the two smallest countries in Asean. One natural area of cooperation is defence, where our two countries have a longstanding, deep and extensive relationship that goes back to 1976.

All of Singapore's prime ministers and ministers have scrupulously followed my policy of never taking advantage of our close friendships with the Brunei royal family, their ministers and officials.

The history of Brunei has been a most unlikely story of a sultanate that has survived into the 21st century as an independent, oil-rich state in a turbulent part of the world.

I remember during one of the Seri Begawan's visits to Singapore after our independence, he had smiled broadly and, with his eyes twinkling and his moustache twitching, said: 'You are now like Brunei. It is better for you.'

As small states surrounded by bigger neighbours, we share similar aspirations and concerns. We can complement our respective strengths to enhance our development and growth. Both bilaterally and multilaterally in Asean, we can help Asean become an integrated, stable and thriving regional association at peace with one another and with our larger neighbours, including China and India.

The full text of the Minister Mentor's lecture is available at www.straitstimes.com

[I am moved by this tribute to the Old Sultan. Anyone who is respected by Lee Kuan Yew deserves respect. ]


Music linked to teen sex habits

Feb 24, 2009

PITTSBURGH (US) - A UNITED States study has linked listening to music with sexual lyrics to teenagers having sex at an earlier age.

According to a report on BBC, researchers from Pittsburgh University questioned 711 teens about their music choices and habits and their sex lives.

Those who regularly listen to music with explicit and aggressive sexual phrases were found to be twice as likely to be sexually active. Degrading sexual lyrics were those that descripted sex as a physical act and/or were link to power reported the American Journal of Preventative Medicine.

The teenagers were split into three groups depending on the amount of time spent listening to music and ranged in age from 13 to 18 years.

Regular listeners spent 17.6 hours a week on music and 'not often' spent under 2.7 hours listening to music. The research found that 45 per cent of regular listeners had had sex, compared to just 21 per cent of infrequent listeners.

"There certainly seems to be a link, but it is hard to say whether listening to music is directly contributing to having sex earlier,' said lead researcher Dr Brian Primack. "However, I think parents should consider this. It is tempting to say music is just 'teenage stuff'.

"I am not saying parents should try to ban such music, that is unlikely to help. But they should be talking to their children about sex and putting these sorts of lyrics in context."

However experts in the United Kingdom were sceptical about the results.

"Obviously the cultural environment plays a part, but that is not to say there is a causal link,' said a spokesman for Brook, the sexual health charity for young people. "It is far too simplistic to say just because someone listens to this music they have sex. There are a variety of factors that influence decisions."

[Eternal question of correlation or causation. But certainly cause for concern.]

Wednesday, February 25, 2009

99,000 jobs may go

Feb 25, 2009
Job losses in Singapore

By Fiona Chan

UNEMPLOYMENT could surge beyond the levels of recent recessions to hit a 20-year high of 5 per cent next year, according to a new report by DBS.

Its Singapore economist, Irvin Seah, estimates that the economy will contract 4.8 per cent this year, bringing about a total of 99,000 net job losses in the current recession. Manufacturing would be the worst hit with about 58,000 jobs lost, he added.

Mr Seah expects the unemployment rate to 'rise steadily' to 4.8 per cent by the end of the year and peak at about 5 per cent by the midde of next year. This would be the highest level of unemployment since the manufacturing recession in 1985 and 1986, when the rate hit 6.5 per cent, he said.

While the unemployment rate briefly touched 4.8 per cent in 2003 due to Sars, for the most part it stayed below 4 per cent in 2003 and 2004. But in the current downturn, Mr Seah expects unemployment to surpass 4 per cent in the second half of this year right through next year.

Said Mr Seah in the DBS report: 'Singapore is likely to experience its worst ever growth this year with a GDP contraction of 4.8 per cent. Labour markets are expected to deteriorate further.

'The unemployment rate will likely hit 5 per cent with cumulative job losses expected to reach 99,000 by 2010. Policy measures that have been put forth so far will help to cushion the blows but the worst of the labour market cycle is yet to come.'

The Singapore economy shrank by 3.7 per cent in the fourth quarter of 2008, compared to a year ago. Non-oil domestic exports plunged by 17.7 per cent in the same quarter, down significantly from an average negatove 4.2 per cent for the first three quarters of last year.

NODX growth in January plummeted by 34.8 per cent - the sharpest single month decline ever and a clear reflection of the collapse in global demand. Singapore's unemployment rate has risen in the previous two quarters as the labour market continued to feel the heat of the global recession.

About 73,100 Singapore residents were jobless in December last year, an increase of about 58 per cent over a year ago. Job growth also slowed significantly, with just 26,900 jobs created in the fourth quarter, which is less than half the total gain of 55,700 in the previous quarter.

'Against the backdrop of the dire economic conditions, this is probably just the initial stage of a protracted down-cycle in the employment market. Job losses and unemployment rate will continue to rise as companies struggle to cope with the impact of the global downturn,' said Mr Seah.

[I noticed the papers did not round the figure to 100,000. And the number below is remarkably precise.]


Feb 25, 2009

666 sick with salmonella in US


WASHINGTON - AN outbreak of salmonella food poisoning traced to peanut products has sickened 666 people and is continuing despite one of the biggest food recalls in US history, health officials said on Tuesday.

But the outbreak of salmonella is still only linked to nine deaths, the US Centres for Disease Control and Prevention said in a statement.

'To date, 19 clusters of infections in five states have been reported in schools and other institutions, such as long-term care facilities and hospitals. King Nut brand peanut butter was present in all facilities,' the CDC said in a statement.

King Nut is produced by Peanut Corporation of America, which has gone into bankruptcy and closed two plants in Georgia and Texas after inspectors traced the salmonella outbreaks to them.

Its peanuts were not used in name brands of peanut butter but were ingredients in a wide range of products from peanut butter crackers to dog treats and bird seed.

'To date, more than 2,100 products in 17 categories have been voluntarily recalled by more than 200 companies, and the list continues to grow,' the US Food and Drug Administration said in a statement.

FBI officials in Atlanta and Virginia said earlier this week they had joined the FDA in a criminal investigation of the company.

Members of Congress have pledged to reform the FDA's food inspection programme. -- REUTERS


Tuesday, February 24, 2009

US tipping towards nationalising banks? Citi asks Govt to up stakes

Feb 24, 2009

Time's running out for Obama; he has to decide soon to get credit flowing

By Chua Chin Hon

WITHIN weeks of assuming office, US President Barack Obama has successfully passed a US$787 billion (S$1.2 trillion) economic stimulus package, unveiled broad plans to fix the banking sector, and promised another US$275 billion to help troubled home owners.

But instead of feeling confident and assured, the stock markets have instead fallen to their lowest in months. The Dow Jones Industrial Average fell 6.2 per cent last week, its worst performance since last October's massive sell-off.

What has gone wrong? In a word: banks.

Analysts said the uncertainties in the markets would persist until the US government bites the bullet and decides once and for all whether to nationalise ailing banks like Bank of America and Citigroup, or adopt alternative remedies.

Treasury Secretary Timothy Geithner avoided this central question when he presented a vague rescue plan for the financial sector earlier this month.

Though the banks have received tens of billions of dollars in fresh capital injections under an earlier rescue plan, the credit system remains frozen as these institutions are hoarding the bailout money out of fears about the toxic assets on their balance sheets.

No one knows how to value these bad assets, or how their value will change once the government steps in, making the banks ultra-cautious.

'I see policy at the moment as scattershot,' said Professor Eugene White, an economist with Rutgers University in New Jersey.

'And until the government directly deals with the underlying problem of the financial sector and large 'zombie' banks, there is going to be great uncertainty about when credit is going to be restarted, and that means confidence in the US economy would decline, spending would decline, and imports from Asia would decline.'

Economists and investors alike say the Obama administration has to act fast to fix the financial sector, but there is no consensus on what the best solution might be.

One of the most talked about options in past months is that of setting up a 'bad bank' that would buy up the toxic assets from existing banks. But given the difficulties of valuing these dud loans and uncertainties about the true extent of the problem, the government could potentially be throwing billions of dollars in taxpayer money down a bottomless pit.

Other experts propose that the US government should instead use the bailout funds to set up a new lender, a 'good bank' so to speak. Tough questions remain, however, as to whether a sufficiently large bank can be set up soon enough, and who can run it successfully.

Last week, the one option that the Obama administration has been most reluctant to discuss in public - nationalisation of the ailing banks - began gathering steam, thanks to support from the unlikeliest quarters.

Mr Alan Greenspan, the former Federal Reserve chairman and so-called high priest of laissez-faire capitalism, told the Financial Times that temporary nationalisation 'may be necessary', adding: 'I understand that once in a hundred years this is what you do.'

Conservative Republican Senator Lindsey Graham also lent his unlikely support to the idea, saying: 'If nationalisation is what works, then we should do it.'

The successful example of Sweden, which undertook a temporary nationalisation of its banks in the early 1990s to deal with problems not unlike those faced by the US right now, is the one most talked about.

But a hesitant Mr Obama pointed out: '(Sweden) only had a handful of banks. We've got thousands of banks. The scale, the magnitude of what we're dealing with is much bigger.'

Indeed, nationalisation of the US banks could mean the federal government taking a majority stake in dozens, if not hundreds of lenders. And with the government already committing over a trillion dollars to the stimulus package and the housing crisis, the backlash against yet another expensive initiative could prove politically damaging for Mr Obama.

The President already got a taste last week of how quickly populist anger can be whipped up. CNBC reporter Rick Santelli slammed the government's housing rescue plan for rewarding 'bad behaviour', and demanded that an online vote be held to see if Americans 'really want to subsidise the losers' mortgages'.

'President Obama! Are you listening?' Mr Santelli railed from the floors of the Chicago Mercantile Exchange. His rant became an instant Internet and talk-show sensation, drawing support from many similarly unhappy home owners, though other viewers decried his lack of professionalism.

More significantly, the incident marked perhaps the first instance where public criticism of the popular President had taken on a real edge. Is he prepared for more attacks like this which could shift public opinion of his fledgling administration?

The President, unfortunately, will not have the luxury of postponing a decision indefinitely.

'Without credible measures to restart the credit mechanism, the fiscal stimulus and housing support measures will be ineffective,' said Mr Manu Bhaskaran, chief executive of economic consulting firm Centennial Asia Advisors.

Standard Chartered Bank added in a recent research note: 'This caution (over the decision to nationalise or not) will delay, or at least slow, the economic recovery.

'The economy can pick up some while the banking system is still weak, but a robust recovery will need the financial system back in health.'

chinhon@sph.com.sg
------------------------

Feb 24, 2009
Citi asking US govt, GIC to up direct stakes

American government could end up owning up to 40% of the bank

By Fiona Chan

THE United States government is on the brink of taking a huge stake in ailing Citigroup as the global financial crisis tightens its grip on the banking giant.

The dramatic step could involve the government taking a 40 per cent holding in Citi, a controversial move that will raise the spectre of nationalisation in America's beleaguered financial sector.

Citi is driving the move. It approached regulators yesterday with a plan for the government to convert some of its US$45 billion (S$69 billion) in preferred shares into up to 40 per cent of common equity, according to news reports.

But the Wall Street Journal said Citi executives hope to limit the stake closer to 25 per cent, which will allow it more independence.

The news helped Asian share markets and gave financial shares a boost in early trading on Wall Street last night as it may be seen to have taken out some of the uncertainty surrounding Citi.

But the bank is in an almost impossible position. Its shares have been in freefall, plunging 44 per cent just last week alone to end at an 18-year low of US$1.61 on Friday. The selloff has wiped away more than 90 per cent off its value in a year.

Once the world's largest bank, Citi is now only No. 5 in the US and its market value of US$10 billion last week is even below DBS' $18 billion. It has lost almost US$30 billion in the last 15 months and is running out of options.

Its spiral into crisis has been escalating for months. The shares crashed in November, forcing the US government to shovel in US$20 billion in cash to keep it afloat but the bleeding has continued.

It is now scrambling to stitch together a life-saving deal by asking holders of preferred shares - including the Government of Singapore Investment Corporation (GIC) - to take more direct stakes.

GIC holds convertible preferred shares in Citi that it bought for US$6.88 billion in January last year.

It can convert these into ordinary stock, but at a price likely to be more than 10 times Citi's current price. Until then, the preferred shares pay dividends every quarter at a rate of 7 per cent a year for as long as GIC wants to hold them.

Citi hopes to persuade GIC and other preferred stock holders, such as the Abu Dhabi Investment Authority and the Kuwait Investment Authority, to convert some of their stakes into common equity, according to news reports yesterday.

This would give the bank more capital and help it avoid drawing on another government lifeline, a move that would revive fears of nationalisation. If the government nationalises a bank, its common shares become virtually worthless.

GIC declined to comment yesterday on whether it had been approached by Citi and whether it was planning to convert its preferred shares to common stock.

Market watchers said it is not clear what the state-owned investment company would do at this point.

'It's a very unenviable position to be in,' said one local banking analyst, who declined to be named. At the point when GIC bought the preferred stock, Citi shares were hovering at about US$29.

The conversion price, an estimated average of the trading price of Citi shares in the few days after GIC's deal plus a conversion premium, is likely above US$30.

'I suppose if GIC is really long term, and if they believe in the long-term viability of the recapitalised Citigroup, I think there's no reason not to convert their shares,' said the analyst.

'But at some point, if they don't have that view any longer, there's no point throwing good money after bad.'

One concern is that if Citi strikes a deal with the government, GIC's shareholding would be diluted because Citi would have to issue more new shares. A larger pool of shares means each existing shareholder has less overall ownership and may see his stock and dividend payments drop in value.

If GIC had converted its preferred shares right after the purchase in January last year, it would have owned a 4 per cent stake in Citi.

Any eventual Citi deal would be under intense scrutiny by other battered US banks, such as Bank of America, that might be interested in a similar arrangement with the government.

fiochan@sph.com.sg

[Based on the analysis in a previous article (see below), Nationalisation may be inevitable. If so, GIC should cut its losses. It is not just a matter of long term viability. Nationalisation may well be a unilateral approach that would most likely render GIC stakes valueless.]



http://heresthenews.blogspot.com/2009/02/time-to-nationalise-insolvent-banks.html

Obama's Gitmo policies disappoint rights advocates

Feb 23, 2009

WASHINGTON: Despite United States President Barack Obama's moves to ban torture and close Guantanamo Bay, human rights advocates say policies towards 'terror' detainees do not depart enough from that of the Bush administration.

Announcements on Friday had rights advocates and lawyers questioning if the Obama administration was continuing the policies of former president George W. Bush, which provoked outrage around the world.

A Pentagon report on the Guantanamo detention camp, ordered by Mr Obama, drew a hail of fire for claiming that conditions for inmates are in line with Geneva Conventions and other legal obligations.

The report's conclusion contrasted sharply with claims by lawyers who regularly visit detainees at the remote prison at a US naval base in Cuba.

In another policy declaration on Friday that one detainee advocate described as 'deeply disappointing', Mr Obama backed Bush positions on prisoner rights at Bagram - an Afghan detention facility.

The ruling followed a hearing for four Bagram inmates by a US District Court in Washington last month, seeking the same rights accorded to prisoners at Guantanamo, which led to a flood of appeals in Washington courts from Guantanamo inmates challenging their detentions.

But in a two-sentence statement from the Justice Department, Mr Obama's administration said 'the government adheres to its previously articulated position', ensuring the facility's estimated 600 prisoners would not be able to challenge their detention in US courts.

Attorneys representing the detainees reacted with dismay at the news.

Ms Barbara Olshansky, lead counsel for three of the four detainees, said: 'The decision by the Obama administration to adhere to a position that has contributed to making our country a pariah around the world for its flagrant disregard of people's human rights is deeply disappointing.'

AGENCE FRANCE-PRESSE

[I want to believe Obama when he says to the effect that we do not need to mortgage principles to secure peace or to fight terrorism. I hope that this is only temporary until some way out can be found. But pragmatically, perhaps idealism has to step aside in this case?]

Umno's pro-royalty stance in question

Feb 21, 2009
PERAK POLITICAL TURMOIL

It's seen as issue of political expediency as party had taken opposite side in '93
By Elizabeth Looi
KUALA LUMPUR: Umno has rushed to the defence of the monarchy that is being blamed for the Perak political turmoil, but the concept of blind loyalty to the rulers is not washing well on the ground.

In the name of the ruling Barisan Nasional (BN) coalition, Umno organised a rally on Thursday night to demonstrate the 'people's anger'.

But cynicism abounds as it was the Malay political party that had, in the 1993 constitutional crisis, campaigned against the rulers' alleged excesses and wrongdoings, analysts say.

'The monarchy is the backbone of the nation, and we will defend it through and through. If we let things continue as they are, innocent people will suffer and it will be chaos,' Umno Youth chief Hishammuddin Hussein said at the rally.

He was cheered by about 3,000 people, most of them dressed in yellow - the colour of royalty - and wearing headbands with the words Daulat Tuanku (Long live the King).

The political turmoil in Perak started when opposition alliance Pakatan Rakyat (PR) lost the support of four lawmakers to BN.

But PR refused to admit defeat when Perak ruler, Sultan Azlan Shah, did not call for fresh state polls, and instead gave his consent to BN to form the state government.

The fight for Perak is continuing with state assembly Speaker V. Sivakumar, who belongs to the opposition, suspending the BN-appointed Menteri Besar and his six new state Cabinet members.

Emotions ran so high that opposition party chief Karpal Singh received bullets in the mail yesterday. An accompanying letter warned him not to challenge the Malays and the royalty. He had said the Sultan could be taken to court for not acting in accordance with the Perak Constitution.

But there seems to be many who also think that Umno's current pro-royalty stance is a matter of political expediency.

'Everything has been politicised but to the people of Perak, there is nothing wrong actually. We, of course, would like to have fresh polls but since the Sultan has made his decision, we have to abide by it whether we like it or not,' said contract worker Mohd Aswani Arshad, 41.

Independent pollster Merdeka Centre revealed that 74 per cent of those surveyed in Perak wanted fresh polls.

Many Malaysians have not forgotten that in 1993, Umno took the exact opposite position regarding the monarchy.

Among the changes Umno pushed for then were to lift Malay rulers' immunity from being tried in a special court, and to withdraw unscheduled and unbudgeted allocations and perks to the nine royal houses.

The Mahathir administration had revealed in Parliament a long list of alleged criminal acts by the Sultan of Johor between March 1972 and November 1992.

This has coloured public perception of the monarchy.

Fast forward to today, and there are some Malaysians who have pushed the limits in their anger against the Perak ruler over the political turmoil, but most take a temperate line. They merely want their democratic rights.

Mr Haris Ibrahim, who runs The People's Parliament blog, wrote: 'Had His Royal Highness decreed the current (Perak) assembly be dissolved, paving the way for fresh elections, he would have...left it to the only authority there is to resolve the question of who should administer the state - the people.'

But Datuk Seri Hishammuddin has vowed to continue attacking the opposition for 'betraying the rulers'. Meanwhile, opposition leaders have written to the Perak ruler to seek an audience.

The turmoil is set to continue.

elizlooi@sph.com.sg

[Malaysian politics have shown itself to be a politics of expedience. They blow with the wind and all alliances are temporary and subject to expedience and convenience. They show that they have neither principles nor values. Or rather their principles can be valued... at prevailing market rates. Even the opposition so-called "alliance" is a farce with the fundamentalist PAS in the same bed as the DAP? It is temporary at best and expedient at worse.]


Saturday, February 21, 2009

Tests suffocating learning

Feb 20, 2009

Targets and tests 'suffocating learning'

LONDON - YOUNG children's education in England is suffering because the curriculum focuses excessively on numeracy, literacy and rigid testing, according to the biggest review into primary school education for 40 years.

The Cambridge University review says history, geography, science and even the arts are being squeezed out.

It accuses the government of over-prescription and micromanagement which it says is suffocating children's learning at the primary school stage and stifling teaching.

'Our argument is that their education and to some degree their lives, are impoverished if they have received an education that is fundamentally deficient,' said the director of the Cambridge Primary Review, Robin Alexander.

The report says schools should be freed of standard assessment tests (SATs) and league tables to allow them to make better decisions of what and how to teach.

Children's Minister Delyth Morgan defended the government's education policy, saying lots of consultation was taking place with teachers and parents.

'I do not think it's wrong that we should put an emphasis on the 'three Rs' and actually science is very much in there as well,' she told BBC radio.

'We are seeing great improvements in the number of children who leave primary school achieving what we expect of them at 11.

But we also have to support primary teachers to have that flexibility.' On tests, she said: 'We can't go back to a time when there wasn't an assessment at the end of primary school.' An independent review into primary education being carried for the government later this year will examine many of the issues raised, she added.

The Cambridge study accuses the government of trying to control what happens in every classroom in England in an overt politicisation of children's lives.

It says the introduction of national strategies in literacy and numeracy places an increasing strain on the curriculum.

'Our report steps back and says: 'what is primary education for and what are the aims,'' Mr Alexander added. -- REUTERS

[Meanwhile in Singapore, we are doing away with tests at primary 1 and 2.]


Friday, February 20, 2009

No tears for fake martyrs

Feb 20, 2009
MUMBAI'S MUSLIMS

By Thomas Friedman

THERE are nine bodies - all of them young men - that have been lying in a Mumbai hospital morgue since Nov 29 last year. They may be stranded there for a while because no local Muslim charity is willing to bury them in its cemetery. This is good news.

The nine are the Pakistani Muslim terrorists who went on an utterly senseless killing rampage in Mumbai on Nov 26 - India's Sept 11 - gunning down more than 170 people, including 33 Muslims, scores of Hindus, as well as Christians and Jews. It was killing for killing's sake. They didn't even bother to leave a note.

All nine are still in the morgue because the leadership of India's Muslim community has called them by their real name - 'murderers', not 'martyrs' - and is refusing to allow them to be buried in the main Muslim cemetery of Mumbai, the 3ha Bada Kabrastan graveyard run by the Muslim Jama Masjid Trust.

'People who committed this heinous crime cannot be called Muslim,' Mr Hanif Nalkhande, a spokesman for the trust, told The Times of London. Eventually, one assumes, they will have to be buried, but the Mumbai Muslims remain defiant.

'Indian Muslims are proud of being both Indian and Muslim, and the Mumbai terrorism was a war against both India and Islam,' explained Mr M.J. Akbar, the Indian-Muslim editor of Covert, an Indian investigative journal.

'Terrorism has no place in Islamic doctrine. The Quranic term for the killing of innocents is fasad. Terrorists are fasadis, not jihadis. In a beautiful verse, the Quran says that the killing of an innocent is akin to slaying the whole community. Since the ...terrorists were neither Indian nor true Muslims, they had no right to an Islamic burial in an Indian Muslim cemetery.'

To be sure, Mumbai's Muslims are a vulnerable minority in a predominantly Hindu country. Nevertheless, their in-your-face defiance of the Islamist terrorists stands out. It stands out against a dismal landscape of predominantly Sunni Muslim suicide murderers who have attacked civilians in mosques and markets - from Iraq to Pakistan to Afghanistan - but who have been treated by mainstream Arab media, like Al-Jazeera, or by extremist Islamist spiritual leaders and websites as 'martyrs' whose actions deserve praise.

Extolling or excusing suicide militants as 'martyrs' has only led to this awful phenomenon - where young Muslim men and women are recruited to kill themselves and others - spreading wider and wider. What began in a targeted way in Lebanon and Israel has now proliferated to become an almost weekly occurrence in Iraq, Afghanistan and Pakistan.

It is a threat to any open society because when people make up their minds to turn themselves into bombs, they can't be deterred, and the measures needed to interdict them require suspecting and searching everyone at any public event. And they are a particular threat to Muslim communities. You can't build a healthy society on the back of suicide bombers, whose sole objective is to wreak havoc by exclusively and indiscriminately killing as many civilians as possible.

If suicide-murder is deemed legitimate by a community when attacking its 'enemies' abroad, it will eventually be used as a tactic against 'enemies' at home, and that is exactly what has happened in Iraq, Afghanistan and Pakistan.

The only effective way to stop this trend is for 'the village' - the Muslim community itself - to say 'no more'. When a culture and a faith community delegitimise this kind of behaviour openly, loudly and consistently, it is more important than metal detectors or extra police. Religion and culture are the most important sources of restraint in a society.

That's why India's Muslims, who are the second-largest Muslim community in the world after Indonesia's, and the one with the deepest democratic tradition, do a great service to Islam by delegitimising suicide-murderers by refusing to bury their bodies. It won't stop this trend overnight, but it can help over time.

'The Muslims of Bombay deserve to be congratulated on taking this important decision,' Mr Raashid Alvi, a Muslim member of India's Parliament from the Congress Party, said to me. 'Islam says that if you commit suicide, then even after death you will be punished.'

The fact that Indian Muslims have stood up in this way is surely due, in part, to the fact that they live in, are the product of and feel empowered by a democratic and pluralistic society. They are not intimidated by extremist religious leaders and are not afraid to speak out against religious extremism in their midst.

It is why so few, if any, Indian Muslims are known to have joined Al-Qaeda. And it is why, as outrageously expensive and as uncertain the outcome, trying to build decent, pluralistic societies in places like Iraq is not as crazy as it seems.

It takes a village, and without Arab-Muslim societies where the villagers feel ownership over their lives and empowered to take on their own extremists - militarily and ideologically - this trend will not go away.

NEW YORK TIMES

Lower bus, train fares

Feb 19, 2009

By Yeo Ghim Lay

BUS and train fares will be reduced by two cents from April 1, announced the Public Transport Council on Thursday.

Commuters who make transfers on their journeys will save more - starting from 14 cents for one transfer, and more for two transfers.

The fare changes are due to two reasons: The public transport operators' decision to pass on their savings from this year's Budget to commuters, and the second phase of the move towards distance-based fares.

Overall, fares will be reduced by 4.6 per cent. They will not be changed until the next fare revision next July.

The PTC, which usually revises fares every October, said it is bringing forward the annual exercise to July in view of rapidly changing economic conditions.

However, the move to distance-based fares, due to be completed this year, will only be done next year.

Currently, commuters who make transfers during their journey pay more than those who take a direct trip to their destination.

The PTC made the move last year to narrow the difference between fares paid by the two groups of commuters, by increasing the transfer rebate from 25 cents to 40 cents.

From April 1, this will be increased to 50 cents. To even out the fares paid by direct and transfer commuters, the transfer rebate needs to go up to about 60 cents.

In view of the poor economic conditions, the PTC said it will do this only next year, to reduce the burden on commuters and operators.

The fare changes will cost the operators about $80 million over a 15 month period from April 1 to June 30, 2010.

Out of this, $37 million are savings from the Budget that the operators are passing on to commuters.

Besides lower fares, prices of student and full-time national servicemen concession passes will come down by $1 to $4.

Cash fares remain unchanged.

[Incredible. Who would have expected that bus/train fares would ever come down. They only go up don't they? History. Unprecedented. Not likely to be repeated.]

Thursday, February 19, 2009

Iskandar project offers immense potential

Feb 2, 2009

THE annual Institute of Policy Studies conference is always a good occasion for thinkers and decision-makers to take stock of our country's status and position in an ever-changing world. This year is no different except that, unlike in previous years, the world has changed somewhat and conventional wisdoms have mostly been blown away.

I attended this year's conference after an absence of four years, during which time I was in China, and found the discussion on rootedness interesting.

One of the big issues debated was Singapore's status as a worldwide hub for commerce. With Taipei and Bangkok joining Hong Kong, Shanghai, Beijing and Mumbai as our competitors as global cities of the future, what are our options given our limited resources?

Mr Philip Jeyaretnam commented that we should think big and think of partnerships. Mr Manu Bhaskaran suggested that the Iskandar development in Johor was a historic opportunity for Singapore to create a hinterland. While there is scepticism over whether Singapore can ever partner Malaysia in such an undertaking, these extraordinary times do call for an Obama-inspired 'audacity of vision'. We have transformed Jurong with Dr Goh Keng Swee's vision, and our timidity might have led us to miss out on Pudong in the 1990s.

Even though I was earlier sceptical about the Iskandar project, I am much more persuaded now that it might be the right deal for us and our future generation.

Chong Huai Seng

[I agree that Iskandar offers immense potential. Heck, Malaysia itself has immense potential. But the problem is not our shortness of vision, or aversion to risks, or inability to dream. There will be Singaporeans who will invest in and take a chance with the Iskandar project.

The uncertainty comes from unstable, and unpredictable Malaysian government or more precisely, their political leaders.

Witness the recent flip-flop on the AirAsia private airstrip. One moment Tony Fernandez was all ready to go. Next thing you know the govt yank the rug from under his feet.

Then there are the numerous "one step forward, two steps back" tango that the M'sian govt dances. Like ban on selling petrol to Singapore-registered cars in Johor, the need for the white immigration card and many other minor instances.

There is no single cause for this tango. The reasons are varied. Irrational pride or ego is one. This is the reason for the "crooked bridge". Political maneuverings and one-upmanship over other politicians is another.

Their own socio-political environment is another.

Without stability, predictability, and dependability, any decision made today can be reverse tomorrow. In the light of such uncertainty, growth will be unpredictable. Potential may well be wasted, or at best, untapped.]

There's method in some messes

Feb 19, 2009

By Andy Ho

SINGAPORE is a dull city, says Mr William Lim. The architectural theorist says we disvalue our Geylangs and Little Indias. So we tear down the old to build new edifices without recognising the charm of these 'spaces of indeterminacy'. Despite their seeming messiness, 'there is a very unstructured order' about these places, he argues.

Spoken like a fan of complexity theory - the subject of a conference that the Nanyang Technological University co-organised last week. The idea is that in systems made up of interacting parts that can adapt to the results of their interactions - complex adaptive systems, they are called - lower-order interactions following simple rules can result in structured, higher-order patterns.

Like cells, tissues and organs that combine to form life, say. Or the millions who make up cities. Or Balinese rice terraces, which have been flourishing for 1,000 years.

At the conference, University of Arizona anthropologist Stephen Lansing sketched a case study of how self-organising, self-repairing order emerged from unplanned interactions among Balinese rice farmers.

Bali slopes down from several volcanoes in the island's centre. The slopes are dissected by rivers along which, for a millennium, small groups of farmers have held regular meetings in 'water temples' to manage their irrigation systems.

These temples serve to link places and social groups. Water management groups called subaks hold regular meetings in them to integrate irrigation decisions.

Networks of subaks form the 'congregations' of higher level water temples, which together add up to a top level water temple at the watershed level. Every year, representatives make a pilgrimage to the top to bring down holy water to mix into their subak level water sources.

For a millennium, subaks have made decisions collectively, consensually and democratically, with no one asserting top- down oversight. This is amazing considering that Balinese social life is otherwise dominated by a caste structure evident even in the way they speak today.

Contiguous subaks weigh how much water each gets, when to plant, when to flood the fields, and so on. The rituals at these water temples remind everyone of the totality of the whole system.

While each subak cares only about its own farming problems, an overall solution emerges that optimises irrigation flows for all parties. In this way, labour-intensive, complexly connected, irrigated rice cultivation has been sustained in this mountainous island of deep valleys. With little flat arable land, Bali should see dispersed, small scale, highland dry farming instead.

This hydraulic system brings water from the mountain tops down to the padi terraces along the slopes quite equitably, with no overall administrator. How did the subaks self-organise into a yield-enhancing complex adaptive system?

After all, upstream folks have their hands on the spigot. So why be nice to downstreamers? The answer: pest control. If everyone planted at the same time, there would be only one brief window of opportunity for their specific species of pests. Pests were thus starved the rest of the time. If upstreamers refused to open the spigot enough, downstreamers could refuse to synchronise their planting. Then, pests would move upstream to devour their rice crops. Thus the 'generosity'.

Still, how did such order get started if no king had set down the rules aeons ago? Working with complexity scientists at the Santa Fe Institute which co-organised the NTU conference, Prof Lansing built an agent-based model of 172 subaks planting at random times while observing and imitating successful neighbours.

The computer model was run to see if such an approach would increase crop yields. Lo and behold, it self-organised within 10 years into a system that mapped onto the actual one in Bali. In the model, yields were optimised when subaks synchronised what they did with their successful neighbours.

What if there were top-down irrigation management instead? In the 1960s, Western experts recommended five-year development plans for the Third World. The subak system conflicted with such plans. In 1971, the Indonesian government - egged on by Western experts during the Green Revolution - dictated the use of high-yield strains, fertilisers and pesticides as well as planting as often as possible. Within two years, pests had drastically reduced crop yield. Predictably, pesticide use escalated but to no avail.

By the 1980s, the government had ended the 'plant often' idea and reverted to synchronised planting. Pesticides were no longer needed while the traditional approach provided enough nutrients as rain water leached minerals from the rich volcanic soil into rivers and springs. Yields increased again.

A simple rule - 'synchronise your planting' - led to pest control and equitable resource sharing. This indicates that simple rules can lead to the bottom-up emergence of complex adaptive systems. By contrast, the 1971 decision to dictate strains and so on, showed what can happen when self-organising principles are ripped out.

So Mr Lim may well have a point. If we left the seemingly 'messy' parts of Singapore alone, the system could take just 10 years to self-organise into creative ordered disorder.

andyho@sph.com.sg

Wednesday, February 18, 2009

The yin and yang of development

Feb 18, 2009
THINK-TANK

By Kishore Mahbubani

I HAD a harrowing experience in Washington DC recently. On an extremely cold day - Jan 16, when the temperature was 20 deg F (-6.7 deg C) - I went to the DC railway station to catch the 4.05pm train for Newark airport. It was scheduled to arrive at 6.45pm, giving me enough time to catch the non-stop SQ flight home at 11pm. I felt relaxed when I arrived at the train station at 3.30pm.

The first hint of trouble came when the monitor announced that the train was 'delayed'. I made several efforts to find out how long the delay would be. No one in Amtrak could give me an answer. At 4.30pm, I felt a burst of hope. The business class passengers were told that they could move to the unheated platform. Despite the cold, I was happy to do so. But the train didn't leave. While we were waiting, the chief engineer sauntered by slowly and told us nothing.

At 4.40pm, one Amtrak official told us that the 5.05pm train was departing on time. I rushed to the ticket counter to change my ticket to 5.05pm. The lady at the counter brushed me aside and said 'Nah! All trains are 45 minutes late'. But she was wrong. When I got back to the platform, the 5.05 train passengers were boarding the train. The 4.05 passengers were not allowed to join them.

After I explained my predicament, one conductor allowed me to board the 5.05 train. I was truly relieved when the train pulled out. However, when another conductor came and saw my 4.05 ticket, she asked me to get off the train at the next station. My pleas that I would miss my flight to Singapore fell on deaf ears. Fortunately, at the next train station, I explained my plight to three African-American conductors who kindly let me back on the train. Hence I made the flight home.

(Ironically I was rushing home to host the Indian Minister of Railways, Mr Lalu Prasad Yadav, for tea at my home on Sunday. His success with the Indian Railways has become a Harvard Business School case study.)

What is the moral of this story? In Singapore, we have come to expect a certain level of service from public service officials. They are encouraged to be courteous, informative and responsive. By contrast, the level of public service in the United States has deteriorated progressively over the years. In Singapore, many of the best brains go into the civil service. In the US, few do.

The strengths and weaknesses of American and Singaporean societies are complementary. Singapore is strong in the public sector, not so strong in the private sector. America is strong in the private sector, not so strong in the public sector. We will eventually learn many lessons from the current financial crisis - and we still cannot learn all of them because the crisis is still unfolding - but one lesson stands out clearly already.

In the process of national development, we have to balance the strengths of the 'invisible hand' of the market with the 'visible hand' of good governance. Both are needed. This shows the wisdom of ancient oriental philosophy which held that in life, we need a balance between yin and yang. This is as true of personal life as it is of national life.

One reason why America has come to grief in the current crisis is that it went overboard during the Reagan-Thatcher revolution. President Ronald Reagan said in 1981: 'Government is not the solution to our problem; government is the problem.' The net result of that position is that there has been a progressive dismantling and deterioration of the public service side of the US political structure over the past two decades.

There is a delicious political irony in the story of the dismantling of the American state. Both Ronald Reagan and Margaret Thatcher were right wing and dedicated anti-communists. Yet, in the process of dismantling the state, they fulfilled 'the withering away of the state', as predicted by Karl Marx and Friedrich Engels.

It will not be easy for the US to rebuild its public services. It takes years, if not decades, to build a good public service. Such a service requires a state that can manage its finances well. To pay for good public service, a government needs to collect taxes. But US conservatives - who have in many ways dictated the national agenda over the past couple of decades - have managed to convince the American public that taxes are 'bad'. As a result, no politician in America dares to speak now of increasing taxes. For example, one sensible solution to many of America's energy problems - including greenhouse gas emissions, dependence on Middle East oil, fuel inefficient American cars - would be to impose a dollar a gallon (3.8 litres) tax on fuel consumption. But no politician, not even President Barack Obama, would dare advocate such a tax.

Yet, despite these weaknesses, there is no doubt that America will recover from the current economic crisis. The strengths of American society will compensate for its weakness in governance. Few Americans expect the state to solve their problems. They believe in individual responsibility or in small associations of individuals. When Mr Obama recently called for a new era of responsibility, he will be tapping a rich vein of the American national heritage.

In Singapore, by contrast, there is a very strong belief that the government will do a good job of carrying Singapore through great crises. Indeed, in the past, it has done so. By any standards, Singapore has enjoyed exceptionally good governance. The challenge for Singapore is therefore the opposite of the challenge American society is facing. Singapore needs to foster greater individual responsibility to manage challenges.

This is one opportunity provided by the current economic crisis. It is possibly going to be the worst economic slump that Singapore has suffered in decades. The government is doing its part to help ameliorate the crisis. The time has therefore come for the many fortunate Singaporeans to help other Singaporeans who need help. Over time, this will also enhance Singapore's social cohesion and resilience. And, in a fairly dramatic way, it will enhance the soul of Singapore.

Why this will happen will have to be the subject of another column. In the meantime, I hope that all Singaporeans will step up their efforts to help their fellow citizens.

The writer is Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore. Think-Tank is a weekly column rotated among eight leading figures in Singapore's tertiary and research institutions.

A broad-based mess

Feb 18, 2009
U.S. ECONOMY

By Paul Krugman

BY NOW, everyone knows the sad tale of Bernard Madoff's duped investors. They looked at their statements and thought they were rich. But then, one day, they discovered to their horror that their supposed wealth was a figment of someone else's imagination.

Unfortunately, that's a pretty good metaphor for what happened to America as a whole in the first decade of the 21st century.

Last week, the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

At one level, this should come as no surprise. For most of the last decade, America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 per cent in the 1980s to 5 per cent in the 1990s, to just 0.6 per cent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Yet, until very recently, Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naive, it's worth remembering just how many influential voices - notably in right-leaning publications like The Wall Street Journal, Forbes and National Review - promoted that belief, and ridiculed those who worried about low savings and high levels of debt.

Then reality struck, and it turned out that the worriers had been right all along. The surge in asset values had been an illusion - but the surge in debt had been all too real.

So now we're in trouble - deeper trouble than most people realise even now. And I'm not just talking about the dwindling band of forecasters who still insist the economy will snap back any day now.

For this is a broad-based mess. Everyone talks about the problems of the banks, which are indeed in even worse shape than the rest of the system. But the banks aren't the only players with too much debt and too few assets; the same description applies to the private sector as a whole.

And as the great American economist Irving Fisher pointed out in the 1930s, the things people and companies do when they realise they have too much debt tend to be self-defeating when everyone tries to do them at the same time. Attempts to sell assets and pay off debt deepen the plunge in asset prices, further reducing net worth. Attempts to save more translate into a collapse of consumer demand, deepening the economic slump.

Are policymakers ready to do what it takes to break this vicious circle? In principle, yes. Government officials understand the issue: we need to 'contain what is a very damaging and potentially deflationary spiral', says Mr Lawrence Summers, a top Obama economic adviser.

In practice, however, the policies currently on offer don't look adequate to the challenge. The fiscal stimulus plan, while it will certainly help, probably won't do more than mitigate the economic side effects of debt deflation. And the much-awaited announcement of the bank rescue plan left everyone confused rather than reassured.

There's hope that the bank rescue will eventually turn into something stronger. It has been interesting to watch the idea of temporary bank nationalisation move from the fringe to mainstream acceptance, with even Republicans like Senator Lindsey Graham conceding that it may be necessary. But even if we eventually do what's needed on the bank front, that will solve only part of the problem.

If you want to see what it really takes to boot the economy out of a debt trap, look at the large public works programme, otherwise known as World War II, that ended the Great Depression. The war did not just lead to full employment. It also led to rapidly rising incomes and substantial inflation, all with virtually no borrowing by the private sector. By 1945, the government's debt had soared, but the ratio of private-sector debt to gross domestic product was only half what it had been in 1940. And this low level of private debt helped set the stage for the great postwar boom.

Since nothing like that is on the table, or seems likely to get on the table any time soon, it will take years for families and firms to work off the debt they ran up so blithely. The odds are that the legacy of our time of illusion - our decade at Bernie's - will be a long, painful slump.

NEW YORK TIMES

[Welcome to the Great Recession. ]


Tuesday, February 17, 2009

Time to nationalise insolvent banks

Feb 17, 2009

By Nouriel Roubini

A YEAR ago, I predicted that the losses of US financial institutions would reach at least US$1 trillion (S$1.5 trillion) and possibly go as high as US$2 trillion. At that time, the consensus among economists and policymakers was that these estimates were exaggerated, because it was believed that sub-prime mortgage losses totalled only about US$200 billion.

As I pointed out, with the United States and global economy sliding into a severe recession, bank losses would extend well beyond sub-prime mortgages to include near-prime and prime mortgages; commercial real estate; credit cards, auto loans and student loans; industrial and commercial loans; corporate bonds; sovereign bonds and state and local government bonds; and losses on all of the assets that securitised such loans.

Indeed, since then, writedowns by US banks have already passed the US$1 trillion mark (my floor estimate of losses), and institutions such as the International Monetary Fund and Goldman Sachs now predict losses of more than US$2 trillion.

But if you think the US$2 trillion figure is already huge, the latest estimates by my research consultancy RGE Monitor suggest that total losses on loans made by US financial firms and the fall in the market value of the assets they hold (things like mortgage-backed securities) will peak at about US$3.6 trillion.

US banks and broker dealers are exposed to about half of this figure, or US$1.8 trillion. The rest is borne by other financial bodies in the US and abroad. The capital backing the banks' assets was only US$1.4 trillion last autumn, leaving the US banking system some US$400 million in the hole, or close to zero even after the government and private-sector recapitalisation of such banks.

A further US$1.5 trillion is needed to bring banks' capital back to pre-crisis level, which is needed to resolve the credit crunch and restore lending to the private sector. So the US banking system is effectively insolvent in the aggregate. Much of the British banking system looks insolvent, too, as do many European banks.

There are four basic approaches to cleaning up a banking system that is facing a systemic crisis: recapitalisation of the banks, together with a purchase of their toxic assets by a government 'bad bank'; recapitalisation, together with government guarantees - after a first loss by the banks - of the toxic assets; private purchase of toxic assets with a government guarantee (the current US government plan); and outright nationalisation (call it 'government receivership' if you don't like N-word) of insolvent banks and their resale to the private sector after being cleaned.

Of the four options, the first three have serious flaws. In the 'bad bank' model, the government may overpay for the bad assets, whose true value is uncertain. Even in the guarantee model there can be such implicit government over-payment (or an over-guarantee that is not properly priced in the fees that the government receives). In the 'bad bank' model, the government has the additional problem of managing all the bad assets that it purchases - a task for which it lacks expertise. And the very cumbersome US Treasury proposal - which combines removing toxic assets from banks' balance sheets while providing government guarantees - was so non-transparent and complicated that the markets plunged as soon as it was announced.

Thus, paradoxically, nationalisation may be a more market-friendly solution: It would wipe out common and preferred shareholders of clearly insolvent institutions, and possibly unsecured creditors as well if the insolvency is too large, while providing a fair upside to the taxpayer. It can also resolve the problem of managing banks' bad assets by reselling most of the assets and deposits - with a government guarantee - to new private shareholders after a clean-up of the bad assets.

Nationalisation also resolves the too-big-to-fail problem of banks that are systemically important, and that thus need to be rescued by the government at a high cost to taxpayers. Indeed, the problem has now grown larger, because the current approach has led weak banks to take over even weaker banks.

Merging zombie banks is like drunks trying to help each other stand up. JPMorgan's takeover of Bear Stearns and WaMu; Bank of America's takeover of Countrywide and Merrill Lynch; and Wells Fargo's takeover of Wachovia underscore the problem. With nationalisation, the government can break up these financial monstrosities and sell them to private investors as smaller good banks.

Sweden adopted this approach successfully during its banking crisis in the early 1990s. The current US and British approach may end up producing Japanese- style zombie banks - never properly restructured and perpetuating a credit freeze. Japan suffered a decade-long near-depression because of its failure to clean up its banks. The US, Britain and other economies risk a similar outcome - multi-year recession and price deflation - if they fail to act appropriately.



The writer is professor of economics, Stern School of Business, New York University, and chairman of RGE Monitor.


PROJECT SYNDICATE

From slums to world-class city

Feb 17, 2009

World Bank holds Singapore up as model of development, pointing to its sound policies in urbanisation

By Aaron Low

THE World Bank has held Singapore up as a model of a country which managed to transform its slums and become a world-class city.

In its annual World Development Report 2009, the World Bank attributed this achievement to a government known for its accountability, meticulous planning and coordinated action.

The report discusses the relationship between geography and development and says that a key part of a country's success lies in implementing sound policies that develop economic activity.

It also observes that stopping people from rural areas migrating to cities can be counter productive as this can stifle innovation and growth.

But by instituting flexible regulations and versatile land use, policymakers can make urban areas attractive to firms and investors.

In illustrating these points, the 383-page report, published last November, highlighted the example of Singapore in one of its nine chapters.

When Singapore gained independence in 1965, the country was in dire straits as it faced massive overcrowding, a lack of public services and high unemployment, it noted.

Seven in 10 households were in badly overcrowded conditions, while a third of its people lived in squatter areas on the city's edges. An estimated 600,000 homes were needed, but only 60,000 were in private supply.

Unemployment was at a high of 14 per cent, gross domestic product (GDP) per capita was less than US$2,700 (S$4,000) and half the population was illiterate.

Mortality rates were rising rapidly while migration from Malaysia and the surrounding regions put increasing pressure on housing and employment.

Yet, just 40 years later, Singapore had overcome these and other problems to become 'one of the cleanest and most welcoming cities in the world'. It is also now one of the world's top centres of commerce.

With five million people packed into 700 sq km of space, Singapore's US$300 billion exports in 2006 was close to that of the Russian Federation, which is 16 million sq km, said the World Bank.

'Improving institutions and infrastructure and intervening at the same time is a tall order for any government, but Singapore shows how it can be done,' it said.

The secret of Singapore's success?

'First, institutional reforms made the Government known for its accountability. Then, the Government became a major provider of infrastructure and services,' the report said. 'Multi-year plans were produced, implemented and updated.'

The report highlighted the Housing Board's role in clearing slums, building public housing and renewing the urban landscape. At one point, the HDB was building a new flat every eight minutes.

As a result, nearly nine in 10 Singaporeans live in public housing, and most of them own their homes.

Through land acquisition laws, the Government acquired one-third of city land and slum dwellers were relocated to public housing.

'For a city-state in a poor region, it is also not an exaggeration to assert that effective urbanisation was responsible for delivering growth rates that averaged 8 per cent a year throughout 1970s and 1980s,' said the World Bank.

'It required a combination of market institutions and social service provision, strategic investment in infrastructure, and improved housing for slum dwellers.'

But the factors for its success also make Singapore an anomaly, as not all countries can have rapid economic growth and a 'focused government in power since 1965'.

Nor are many countries able to align priorities of country and city together, the way Singapore, as a city-state, can.

Singapore's transport policies were also cited by the World Bank.

It noted that cars cost four to five times as much as they do in the rest of the world because of the Certificate of Entitlement auction system and car taxes. This was an 'extreme but effective' way to optimise private car use.

aaronl@sph.com.sg

Monday, February 16, 2009

16-year-old claims he's dad, not Alfie

Feb 16, 2009

He wants DNA test, while a third teen is worried he may have fathered newborn baby

LONDON: - A second teenage boy last night claimed that he - and not 13-year-old Alfie Patten - is the father of 15-year-old Chantelle Steadman's newborn baby, Maisie.

Richard Goodsell, 16, insisted he often shared a bed with Chantelle over a period of three months around the time she became pregnant, and he demanded a DNA test to prove he is the daddy, News of the World reported.

Young mum Chantelle and baby-faced Alfie made headlines around the world last week when they told their story, vowing they would be good parents to their daughter.

However, British media reports said it has emerged that Chantelle was having sex with at least three local youths around the same time the baby was conceived.

Now, Tyler Barker, 15, says he fears he might have fathered the child.

Clouding the issue further, News of the World reported that Chantelle's sex life featured at least eight boys.

Richard, a trainee chef, says he had sex with her at least three times at her home in Sussex.

He says he was the first in a series of teenage lovers she had from the time she moved into the neighbourhood nearly two years ago. He says that after they split, he discovered she was sleeping with several boys in the area.

He argued: 'Only a DNA test is going to sort this out properly. If I am the father, I have the right to know.'

Alfie has vowed to take the test to prove he is the father, to silence the gossip and protect Chantelle's reputation, The People reported.

He insisted: 'I am the only boyfriend she has had and we've been together for two years, so I must be the dad.'

The only one not fighting over paternity rights is anxious schoolboy Tyler, who admits he is 'worried' because he too slept with Chantelle, about nine months ago. 'I hope it is not me,' he said.

Richard and Tyler and their parents have made sworn statements before a solicitor detailing the nights of sex that the boys had with Chantelle. But Chantelle's family insists that she lost her virginity to Alfie and that the baby is his.

Tyler's dad, Mr Chris Ireland, claims that Chantelle's mother and Richard's were embroiled in a huge row in the street months ago. He says it was 'over rumours that the father of the baby was Richard'.

[I'm going to sound like an old git. It used to be that getting a girl pregnant before marriage is not something one is proud of, but now 13 yr olds are becoming fathers with 15 yr-old girls and a bunch of other 16 yr-old boys are trying to claim credit?! And quite shamelessly too! About the only one who is behaving "normally" is Tyler. It's all about the publicity, and the money. And where are the parents? If there is a story about children giving birth to children, what I'd want to know is what are the parents doing about this and what if anything had they done to try to prevent this or protect their children? A story without the parents speaks to the attitude the society has about the story. That the parents are not participants in the story? Have no role in the story? Have no say in the lives of their children?]

Saturday, February 14, 2009

When life is more than the sum of its parts

Feb 14, 2009
DAEDALUS

By Andy Ho

NEWTONIAN physics can predict how a celestial body will move around another, like the Earth around the Sun. However, when a third body - the Moon, say - is included, the movement of one body alters the distance between the other two bodies, thus changing the gravitational forces involved. Here, Newtonian physics cannot predict their movements.

In 1887, Swedish king Oscar II was so intrigued that he put up a prize to entice thinkers to solve this 'three body problem'. Cracking the puzzle, French mathematician Jules Henri Poincare showed that when the initial positions and velocities of all three bodies are known, their subsequent positions and velocities may be ascertained. Thus the system may be called 'deterministic'.

But if initial conditions change by a tiny bit, a very different state of the whole system results. So such a deterministic system is also 'chaotic', in the sense it has certain behavioural regularities which, however, can't be predicted accurately. Poincare was the first person to identify a 'chaotic deterministic system'.

Now throw in 'n' number of bodies and the difficulty of predicting behaviours in the 'n-body problem' rises exponentially. In these complex systems with billions of parts - at the molecular level of things, say - the maths was intractable. Until now, that is.

From the latter half of the 20th century, when researchers began to have access to immense computing power, all these problems became part of a new area of study called complexity science, the theme of a conference that the Nanyang Technological University (NTU) co-organised this week.

Those partnering NTU were the US-based Santa Fe Institute and its European cousin, Institute Para Limes. These tiny, standalone nonprofits do trans- disciplinary science by co-locating physicists, biologists, economists, sociologists and everything else in-between to look at problems ranging from quakes and epidemics to stock markets and weather systems.

In fact, Poincare himself had suggested that weather cannot be predicted accurately because it is a chaotic deterministic system but his insight was lost until meteorologist Edward Lorenz rediscovered it. While re-running a simple computer model of the Earth's atmosphere in 1961, Lorenz decided to enter data culled from the midpoint of a previous run instead of starting from the beginning. And instead of entering the value 0.506127 as the start of the new run, he typed in 0.506 instead, having assumed that the minute difference wouldn't matter.

However, the fresh printout was completely different, implying that the 'weather' had developed in a radically different fashion. Thus, a tiny change in initial conditions could lead to a hugely different final state - a possibility that is now hyped as the 'butterfly effect'. (The butterfly effect, it should be said, is largely a myth. A butterfly flapping its wings in Singapore cannot literally cause a storm in Timbuktu.)

Even if the weather can always be measured precisely in the present, what will happen at a future instant can never be predicted accurately enough. But if the raison d'etre of science is prediction, shouldn't complexity scientists just admit defeat?

However, it has also been shown that while chaotic deterministic systems are unpredictable, they do have 'emergent' properties. That is, although their futures can't be predicted, such systems exhibit patterns, so their instability is bounded.

In other words, though their specific behaviours cannot be predicted, such systems do have an overarching general structure of behaviour that can be observed. And precisely because variability in such systems stays within a pattern, complexity emerges.

For example, when birds flock together in the sky, they evince gracefully coordinated, swift swirling patterns, even with sudden course changes, all without one bird being 'in charge'. We know now that all it takes is for each bird to keep constant the distance between itself and the one in front while flying in its general direction as well. Fish schooling - or the 'Kallang wave' - operates similarly.

Hence, simple rules enable very complex behaviours to emerge. Likewise, people who congregate in urban areas and interact in particular ways can give their cities emergent personalities of their own. Thus Singapore is very different from Jakarta. Small-scale interactions among many individual parts can lead to large-scale order. Conversely, think of a magnet being heated up until it melts and its magnetism disappears. If it is cooled down, the magnetism re-emerges at a certain temperature. Individual iron atoms have no magnetism but, collectively, those self same atoms in distributed interaction can cause magnetism to emerge. When perfectly integrated, each individual unit is apparently not really individualistic.

The brain is made up of dense networks of billions of neurons. While individual neurons are not self-conscious, networked together in interaction with each other, human consciousness emerges.

Organs are made up, in descending order 'downwards', of tissues, cells, molecules and atoms. Yet as the layers add up 'upwards' - from atom to molecules to cells to organs - life itself emerges. But how?

Right now, such phenomena can only be identified and described, not explained or predicted. But the latter would be complexity science's calling in the years and decades to come. Complexity is getting very exciting.

andyho@sph.com.sg


Daedalus (meaning "cunning worker" in Greek) was the man who built wings so he and his son Icarus could fly. Flying too close to the sun, Icarus' wings melted and he crashed to earth. Daedalus is a weekly column on the triumphs and challenges of science and technology.