The growth of a quality society

The growth of a quality society

TODAYonline

28 Mar 2013

Devadas Krishnadas

Firms which emphasise profits or market share are the most likely to perform poorly and suffer from short-term thinking, so British economist John Kay argues in his book, Obliquity.

As The Financial Times commented in its review: “Strange as it may seem, overcoming geographic obstacles, winning decisive battles or meeting global business targets are the type of goals often best achieved when pursued indirectly.

“This is the idea of Obliquity. Oblique approaches are most effective in difficult terrain, or where outcomes depend on interactions with other people.”

Kay argues that when it comes to complex problems, we often do not know about the nature of our problems to introduce effective direct action solutions. Indeed, we often misdiagnose causation, and this is not made better by simplification of reality in the developing of models or viewing problems through cultural frameworks.

I earlier made the case for an IES sector — Ideas, Entrepreneurs and Start-Ups. The challenge is that we cannot simply expect a random unit of labour to become an active IES participant. That process is a generational one — and is wrapped up within a spectrum of dimensions which have no easy answers, such as how to boost the total fertility rate to maximise each generation’s creative potentia.

In this final part of the series, I argue that to sustain quality growth over time, we must find ways to grow the quality of our society.

We should supplement short-term direct attacks to achieving economic success, with longer term indirect strategies to populate the IES sector with creative minds bursting with innovation, and enlightened risk takers to start future global brands here.

SOCIAL INVESTMENTS, NOT COSTS

Until fairly recently, the Government has seen social policies, other than education, as a cost and not an investment. This was probably for four reasons.

First has been a rigid adherence to the principles of self-reliance and the family as the first line of support. This meant that the individual and his or her family should bear the greater share of the burden to meet their social needs. The State did its best to be the source of last resort for assistance.

Second, the principle of meritocracy fed into a larger framework of belief that it was fair that the best accrued the most gains, and it was not fair to unduly socialise collective costs for the rest at the former’s expense. Over the past two decades, the top income tax rate has fallen almost by half, while regressive taxation such as the Goods and Services Tax has been introduced and increased over the same period.

Third has been the difficulty in showing a positive cause-and-effect correlation in social support systems. In other words, it was difficult to demonstrate that boosting social safety nets lead to positive results that out-sized dollar expenditure. This was very much due to a mindset that perceived social safety nets as welfare, rather than as a means to generate human capital.

Fourth, there was an over-dependency in the use of the price mechanism to achieve policy aims.

An example would be financial incentive-driven marriage and procreation packages, where the underlying assumption is that at some point, a clearing price would be reached where individuals would decide to get married and have babies. The evidence of unrelenting decline in TFR failed to deter this mode of thinking.

BUILD SOCIAL CAPITAL

However, if we were to switch mindsets to view the public finance of social policies and social safety nets as investments rather than costs, we could end up with different outcomes.

We have the examples of Finland and its neighbouring Scandinavian countries as examples. These have been exhaustively studied and discussed by our policy-makers so the lessons of investing in social capital are not unknown to us, nor are the dangers of fiscal irresponsibility of many Western European countries with welfare systems.

The mistake to make is that the one implies the other.

We must overcome the four impediments to switching mindsets and take the risk that achieving social outcomes, such as boosting marriage and fertility rates and generating innovation and creativity, are predicated first on putting in place conditions conducive for socialising and learning.

The process of doing so is neither direct nor simple.

Our labour force works some of the longest hours among developed countries. Our education system is one of the world’s most competitive. Our costs of housing are high and rising. The wages of the workforce, for most income deciles, have been growing slowly when at all. Inflation has been elevated and persistently so.

Competition makes the climb up the career ladder difficult and stressful. All of these characteristics work against conditions for socialising, which is the premise for the higher-order actions of marriage and fertility.

We cannot do something about everything — but there are several things we can do.

WORK TO LIVE, NOT LIVE TO WORK

First, regulation should be introduced to limit the hours worked by all occupations, including PMETS and non-union labour. Protect the private lives of workers so that they have time to live their lives. We must create a culture where workers work to live, and not live to work.

As was noted in Part 1 of this series, the poor wage share to gross domestic product (GDP) shows that firms already retain the lion’s share of GDP as profits. Firms are not therefore in a strong position to make the case that they would suffer competitively if workers worked to a limit of eight hours per day.

It is important to make it mandatory to compensate workers for overtime. This is to discourage the situation where employers, facing tightening labour conditions, pressure their workers to work longer rather than invest or reinvent to make their firms more productive.

‘US’ PLUS ‘I’

Second, we need to move from a mental model that individual gains are derived mostly from individual responsibility, to one where individual gains are best arrived at through collective responsibility supplementing individual effort.

We have shown that we are not averse to spending large sums on physical infrastructure for education at the State level, and large sums on tuition and enrichment at the household level. We must ask if our excessive emphasis on individual merit through hyper-competition is creating more harm than good.

Finland has a high rate of entrepreneurship and a strong knowledge industry base. It is arguable that this was made possible because people are more willing to take risks, knowing that failing need not imply financial ruin for themselves or their families. This is because of strong and comprehensive social safety nets and State-supported social support systems such as education.

We have to use legislation to restrain our impulse to indulge in “arms races” in education. In Finland there are no arms races in education not only because the standard of public education is so high, but also because State support for parents of either gender to take care of the family over a multi-year period helps create a balanced view of life.

Third, we should consider the benefits of national level risk pooling for healthcare. Our costs of healthcare, particularly for catastrophic health crisis, are high and rising. By risk pooling, we can lower the insurance premiums for every Singaporean and absorb the costs of covering those with pre-existing conditions.

As a First World country, we can provide peace of mind for all, especially for those considering having children, that they need not fear the unexpected onset of a catastrophic illness in their family or unforeseen condition in a newborn.

Together, through risk pooling, we are better off than insisting on the individual to assume the costs of his or her personalised risk.

FOR SUCCESS, CELEBRATE FAILURE

Fourth, we have to change our thinking about success and failure. We are addicted to the idea of success where success means not failing. This is a false and dangerous idea. Success is usually a function of iterated failure.

Our misguided notion of success gets in the way of learning, distorts life choices and induces risk aversion. It gets in the way of learning because it encourages students to study to score instead of studying to learn. The recent discussion on the decline in the study of literature in schools is instructive.

It distorts aggregate social outcomes as it affects how we individually prioritise choices in life. Work and career building are seen as nearly mutually exclusive and, in some cases, perhaps even substitutable for relationships and family.

It induces risk aversion because we do not want to fail. But to build the IES, we need to be comfortable with “failure” and even celebrate it.

As much as policy and legislation can accomplish, it will never be enough. The greater share of effort in growing in quality as a society must be made by ourselves, not the Government. Public policy merely reflects the priorities, values and aspirations of the society.

The future is malleable. If we decide to be a quality society, we can do it. The decision to do so must first be made within ourselves.

ABOUT THE AUTHOR:

Devadas Krishnadas, a social and political commentator, is the director of a foresight consultancy. This is the last of a three-part series.