Free market or govt role? It depends on social goals

Feb 21, 2011

SINGAPORE'S HOUSING SYSTEM

By Hou Shi Hang

DESPITE the strong stance of the Washington Consensus against government intervention, it is not a logical inevitability that governments will mess up the distribution of goods and services. It is merely a tendency that governments generate a degree of inefficiency. Inefficiency is not in itself a condemnation, while efficiency should be seen as an advantage rather than a definitive end, as there are inevitably other social goals that must be considered. Similarly, the efficiency of the free market is not proof it is the 'correct' method of economic distribution.

One good example of this principle is Singapore's housing system. In most countries, the housing market is dominated by the free market. The government usually acts to supplement the market by providing for low-income households, or to promote home ownership through legislation or tax advantages.

Unlike most other countries, Singapore does not emphasise the role of the free market in the provision and distribution of flats. For new flats, the Housing Board has relied on queueing, and, since 2002, the Build-to-Order ballot system.

This is highly reminiscent of the heyday of central planning. The rationale for indulging in central planning in this case is to avoid price volatility in the housing market and to make sure low-income households are not left out.

The high degree of control the Government wields also allows it to use housing policy for social ends. For example, the Government incentivises marriage by making new HDB flats eligible only for married couples or two or more singles above age 35. Similarly, HDB has to maintain a certain ethnic ratio in its estates so as to promote racial integration.

Try as you will, there are precious few arguments you can throw against the Singaporean model. Housing is affordable, despite qualms about a lengthy mortgage period. The flats are well-built and well-furnished, neighbourhoods are convenient, and the aesthetics agreeable.

The housing system also does well at differentiating between high-income and low-income homes by providing varying degrees of luxury. One initiative in recent years is the provision of upscale HDB flats that are completely different from the austere flats of old. Pinnacle@Duxton is an example: out of reach of most Singaporeans and offering material comfort comparable to that in a private condominium. Recently, the HDB introduced Waterfront@Punggol to remake the heartland, and announced plans to revitalise Yishun as an 'exciting place to live'. Hence, the Singaporean housing system does manage to offer choice, and avoids, for the most part, the grey lack of character that plagues other public housing.

Despite the significant expenditure necessary to sustain the carefully controlled housing market, Singapore invests less per capita on housing than most other countries, possibly because of highly developed economies of scale. Ownership rates, at about 90 per cent overall, are higher than almost any other country. Singapore's model seems to match the results which free housing markets achieve, with the additional benefit of stability in the housing market.

Yet, the Singaporean public housing system is also a good illustration of how a policy approach inevitably comes with its own set of disadvantages. One major issue is how finely tuned the system is. The Government has to let house prices rise with inflation to protect the homeowners' investments, yet ensure the rise is in line with wages so flats remain affordable.

Furthermore, as the resident population rises, given limited land supply, demand growth will outstrip the Government's ability to supply flats. Prices will rise, forcing the Government to increase its subsidy to maintain affordability. As it faces these difficulties, the Government is also not excused from the need to pay attention to consumers' demands, or to respond to rising demand for housing, even if it does not adopt a free market system.

Another issue is the inflexibility of the system. Each policy introduces complications within a contained system, and can cause unintended distortions. For example, most young people, who have just graduated from university and earn rather average wages, are forced by prohibitive rents to live with their parents. The Government's restrictions on public rental, mainly introduced to enforce owner-occupation of HDB flats, inflate the rent by depressing supply. Median rent for a three-room HDB flat is about $1,600 a month. Assuming you earn the median wage of about $3,000 a month, the cost of rent would be over half your budget.

This has repercussions that extend beyond housing, and the consequences need to be taken into consideration. It reinforces the cultural norm of children staying with their parents until marriage. The lack of privacy at home may be a deterrent to dating, thus reducing marriage rates and hence fertility rates. More importantly, it is an indirect restriction on personal freedom. Either way, the point is that the mass of regulation the Government imposes has unintended side effects, which may be socially undesirable.

But it is highly misleading to think that there can be absolutely better policy. Rather, there are some policies that offer advantages which are more generally prized. Hence, most arguments against government, citing inefficiency compared to the free market, miss the point. Instead, what critics of housing policy or government intervention in general should be concerned about is whether the policy offers the 'right' advantages, and this depends on understanding the goals we hope to achieve. The only important question that remains is the normative one of what we want. If we accept that different markets have different desired social outcomes, we can no longer insist dogmatically on free markets.

In the specific context of housing, is there an economic case for government intervention? In a small market like Singapore's, it is highly possible that monopolies may occur in housing. Singapore's current approach avoids the possibility of deadweight loss to private monopoly. More rigid house prices also serve as a buffer against volatility, providing stability in housing investments.

To the extent that we prize stability and low prices in our housing markets, it is likely that government involvement in the housing market offers advantages that outweigh the flaws.

The writer has just graduated from Raffles Institution. This essay first appeared on Very Fine Commentary, an online journal written by and for junior college students.

[This is remarkably well-argued paper, more so that the author is so young. ]

PM Lee: Not many can do Budget, S'pore style

Feb 21, 2011

Surpluses enable Govt to dish out goodies but economy must grow

By Elgin Toh & Rachel Chang

THE new Budget, with hongbao to help Singaporeans cope with the rising cost of living, took an approach that very few countries can, said Prime Minister Lee Hsien Loong yesterday.
Calling it 'pro-growth' and 'prudent', he said it also reflected how the Government intended to make life better for Singaporeans.
However, he cautioned: 'We can't do this every year but we had a good year last year.'
With expected higher inflation, 'it's right that we have a Budget a bit more generous than usual', he added.
His comments on Friday's Budget at an event in his Ang Mo Kio GRC set out the thinking behind the 'Grow and Share' package as well as the need for Singaporeans to stay united and work hard for an even better future.
At a separate community event, Senior Minister Goh Chok Tong described it as 'a Budget with a heart'.
One big feature of the $6.6 billion bonanza of goodies is the cash gift for all Singaporeans but many of the other hongbao are tilted more towards the elderly, the lower-income and middle-income families.
In explaining the Budget approach, PM Lee underlined the importance of allocating 'money in the right places so that we see results'.
'But the most important thing is that we work together to make the economy grow every year, so that... as Singapore gets more prosperous, we can have better environments, better towns and, from time to time, we hope, better Budgets.
'That is the way it has to be in Singapore,' he said.
As for the rising cost of living, he noted that it plagues many countries and cited how people in India worried about the shortage of onions - 'no onions you cannot cook curry' - and the Chinese about the drought in northern China affecting wheat and food prices.
But in Singapore, the Government is in a better position to help the people partly because of the Budget surpluses from past years, he noted. 'Very few countries can do like Singapore and say, don't worry, we can help you.'

[Many countries try to address inflation by subsidising rising costs or fixing prices. This distorts the market.]

But much of Singapore's prosperity hinges on a good government that also has the strong support of the people, he said and added: 'So please continue to support us.'
Mr Lee made the call in Cheng San-Seletar when he opened the Ang Mo Kio 3G Centre, a facility for senior citizens to stay active within their community and for intergenerational bonding, hence 3G.
He paid tribute to the late Senior Minister of State Balaji Sadasivan for the idea of building the centre, saying it was his relentless efforts that made it happen.
Dr Balaji, who was MP for the Cheng San-Seletar ward, had worked hard in getting government agencies to cooperate on the $4.2 million centre in his ward.
'Each time I met him, he told me his difficulties getting it through, but also his determination to make it happen. It has happened... And we are indebted and grateful to him,' he said before a 1,000-strong crowd that included Mrs Balaji.
SM Goh, speaking at a dinner of Marine Parade merchants, said the projected 4 per cent to 5 per cent inflation for the first six months is largely because of the rise in certificate of entitlement (COE) prices and imputed rental of homes.
But with most people owning their homes and not affected directly by COE prices unless buying a car, he said without these two, the core inflation would be lower, at 2 per cent to 3 per cent.
'But the more important part of this year's Budget are the measures to grow the economy, create jobs and wealth.
'Unless the economy grows, we're not going to have surpluses to share. We have to 'grow' first, before we can 'share',' not just for this Budget, but for the future,' he said.
elgintoh@sph.com.sg
rchang@sph.com.sg

Two ex-ISA detainees join SDP

Feb 20, 2011
 
By Tessa Wong

Former Internal Security Act (ISA) detainees Michael Fernandez and Vincent Cheng have joined the Singapore Democratic Party (SDP), and may stand as party candidates in the upcoming general election.

The two new members were introduced at the party's anniversary dinner last night at Fort Canning.

Both men told The Sunday Times they would consider standing for election under the SDP banner if they were asked to by party leaders.

Mr Fernandez, 77, is a retired former unionist whose lawsuit against the Government for alleged torture during his detention from 1964 to 1973 was struck out last Friday.

He has another suit pending against the Government that alleges he was unlawfully detained for part of his detention.

He said he joined the party two months ago because he wanted to 'let more young people know about ex-detainees' experiences'.

He felt that his age and health would not affect his decision to run. 'I am still very healthy. As for age, Lee Kuan Yew is also very old, and he is still in Parliament.'

Mr Cheng, 64, is a former social worker who was detained in the late 1980s for being part of an alleged Marxist conspiracy to overthrow the Government. He joined the SDP shortly after speaking at its rally last November.

Both men are advocates for the abolition of the ISA, which the SDP has also called for. They said this issue would be part of their campaign platforms if they ran.

[Good to see Vincent Cheng getting back on his feet. However, most s'poreans don't really give a hoot about the ISA. Campaigning on this platform shows how out of touch SDP is. As for the other ex-detainee, the question is how to move SG forward. Looking back to old enemies/opponents of the PAP hardly fills me with confidence that these potential candidates have answers for the challenges of the future. PAP looks for young blood, looking toward the future. The SDP (Slightly Dead Party) seems to be seeing what corpses they can dig up and reanimate.]

Australia revives multicultural policy

Feb 19, 2011

Minister rejects recent attacks in Europe on multiculturalism amid anti-Muslim sentiment
 
By Jonathan Pearlman

SYDNEY: The Australian government has pledged to curb racism and strive for a multicultural Australia, amid concerns about anti-Muslim sentiment.

Rejecting recent attacks by European leaders on multiculturalism, Australian Immigration Minister Chris Bowen recommitted the government to the policy, saying it was essential to ensure that immigrants were integrated into society and not just treated as 'guest workers'.

'Australia's diverse immigration programme has been to the benefit of both migrants and ourselves,' he said in a speech at The Sydney Institute.

'It is an indelible and irrevocable part of who we are... If people do not feel part of society, this can lead to alienation and, ultimately, social disunity.'

As part of its latest efforts, the government is reviving a portfolio of multiculturalism, to be overseen by a parliamentary secretary, and will launch a nationwide anti-racism campaign.

Mr Bowen used his speech on Wednesday night to address directly the thorny issue of anti-Muslim racism, which flared anew this week after the opposition stepped up its campaign against asylum seekers and pushed for curbs on Muslim immigration.

Mr Scott Morrison, the opposition immigration spokesman, on Thursday brushed aside numerous reports that he had called on the shadow Cabinet to take advantage of community concerns about Muslim migrants and their inability to integrate.

Faced with calls for his resignation, Mr Morrison did not deny the specific allegation, saying only that he could not comment on what was said in the shadow Cabinet room and that such 'gossip... does not reflect my views'.

But Mr Ikebal Patel, chairman of the Australian Federation of Islamic Councils, has demanded a clarification of the matter.

Separately, Liberal Senator Gary Humphries angered the Muslim community when he tabled a petition on behalf of three Sydney residents last week, calling for a 10-year moratorium on Muslim immigration.

Australia's population of 22 million has been bolstered by successive waves of immigration from Europe, Asia and the Middle East. As many as 300,000 immigrants arrive each year and about a quarter of the current population were born overseas.

Australia has an uneasy relationship with its Muslim community, particularly after the Sept 11, 2001 terrorist attacks on the United States. Dozens of Muslim men have been jailed in Australia under anti-terrorism laws.

The friction has also led to violence, as happened during the Cronulla riots in Sydney in 2005, when mobs of whites attacked Lebanese Australians in a bid to 'reclaim the beach'.

In his speech, Mr Bowen insisted that Muslim immigrants were welcome and that the vast majority of Australia's roughly 350,000 Muslims were not trying to 'change Australia' or impose syariah law.

He conceded that it was 'inevitable' that Muslim immigration would be questioned amid 'concern about terrorism inspired by extremist Islam'.

But he added: 'To cast all Islamic migrants or all members of any religious group as somehow unworthy of their place in our national community, however, tars the many with the extremist views of the very few and does an injustice to all.'

Successive Australian governments have grappled with efforts to integrate immigrants. In the mid-1970s, the Whitlam government adopted a policy of multiculturalism to try to promote integration. This followed the formal abandonment of the 'White Australia' policy, which had restricted non-white immigrants.

But the term multiculturalism was dropped in the 1990s by Prime Minister John Howard, who believed it did not assist integration and promoted a 'federation' of separate cultures.

The current Prime Minister, Ms Julia Gillard, also appeared to be backing away from the term when she dropped the multiculturalism portfolio from her new Cabinet last year. Her predecessor, Mr Kevin Rudd, had reintroduced the portfolio.

But the Gillard government this week revived the concept amid an increasingly shrill - and sometimes racist - debate over the treatment of asylum seekers.

Many of the asylum seekers are from Iraq and Afghanistan - and the refugee issue has often overlapped with debates over the integration of Australia's Muslims.

Mr Morrison this week criticised the government for paying for 22 asylum seekers to fly from a detention centre in Christmas Island to the funerals of loved ones who drowned while trying to reach the island in December. He later admitted his criticism lacked compassion and 'was insensitive and inappropriate'.

As part of the revival of multiculturalism, the government will also form a new 10-person independent body, the Australian Multicultural Council, to advise on ways to help immigrants overcome language and cultural barriers.

Mr Bowen on Wednesday distanced Australia from recent statements on the failure of multiculturalism by British Prime Minister David Cameron, French President Nicolas Sarkozy and German Chancellor Angela Merkel, saying the debates in Europe were 'of limited value'.

'We are not a guest-worker society,' he said. 'Rather, people who share respect for our democratic beliefs, laws and rights are welcome to join us as full partners with equal rights.'

jonathanpearlman@hotmail.com

Debating the Two-Party System

Arianna Huffington
February 18, 2011 08:52 AM

Earlier this week, I spent two hours arguing with a very witty libertarian and an avuncular Israeli Rush Limbaugh fan about whether the two-party system is ruining America.

No, it wasn't just another typical night around my dinner table. It was part of a debate sponsored by Intelligence Squared, held at NYU's Skirball Center for the Performing Arts.

I joined David Brooks in arguing for the proposition that the two-party system is making America ungovernable. Arguing against were Zev Chafets and P.J. O'Rourke. Nightline's John Donvan moderated.

Before the debate, which will be shown next week on Bloomberg Television (starting Monday at 9pm), David and I huddled in the green room, plotting our strategy -- actually mostly making sure we weren't planning to say the same things.

We were soon ushered onto the stage in front of a great crowd. Each seat in the auditorium had an electronic device that allowed audience members to vote on which team they thought had won the debate (more on this later).

The debate itself made me nostalgic for my Cambridge Union days.

P.J. showed why he is the most quoted living author in the Penguin Dictionary of Modern Humorous Quotations, tossing off acerbic "a pox on both their houses" rants like, "Republicans and Democrats don't have ideologies. They just have these vague platform planks made of rotten wood of political expediency. If American party platforms were backyard tree forts, you would not let your children climb in them."

Zev adopted the mien of the exasperated outside observer: "In multi-party systems there are many people who also don't feel that they're represented by any of the parties. And I, having lived in a country that has 14 parties, can tell you that I didn't find any that represented me. That's a sort of inherent problem of democracy." He was full of self-deprecation, at one point joking that he couldn't read his own notes because they were in Hebrew, so he was reading backwards.

David made the case that most politicians are "better people than one would anticipate," but that the two-party system has become so polarized that even good people are driven to a lockstep groupthink that punishes those who have original, nonpartisan ideas. He also bemoaned the fact that members of the two parties no longer mix socially, saying: "it's just like junior high."

I focused on all the evidence that the two-party system is failing us everywhere we look:

Why are the too big to fail banks still too big to fail? Why is there still so little emphasis on jobs at a time when 26 million Americans are unemployed or underemployed? Why did our system recently fail us in three spectacular ways: the financial meltdown, the Upper Big Branch mining disaster in West Virginia where 29 miners died, and the BP oil spill in the Gulf?

Because the two-party system is hopelessly broken -- only capable of producing what Tom Friedman calls "sub-optimal solutions" to our major crises. And, as he put it, while sub-optimal is okay for ordinary times, these are not ordinary times.

On issue after issue -- education, our crumbling infrastructure, the rising costs of health care, the deficit, the steady decline of the middle class, foreign policy (where the two parties marched arm in arm into invading a country that did not after all have WMD or pose a threat to our national security) -- our current two-party system has failed us.

It has ossified to the point where it can only deliver short-term fixes. It has led to entrenched thinking, complacency, and the deification of conventional wisdom -- all conditions that have made it harder and harder to challenge a broken status quo.

And the two-party system has not just narrowed our choices, it's narrowed our thinking. It has deeply infected our political discourse, our media, and our politicians. To paraphrase Einstein, the problems we are facing today cannot be solved by the same level of thinking that created them.

The hunger for change is evident on both sides of the political spectrum -- from the meteoric rise to power of an outsider candidate like Barack Obama to the lightning in a bottle creation of the Tea Party -- both the result of grassroots, anti-establishment movements. The American people clearly want alternatives.

On practically every level, potential nominees in each party are running away from the establishment label and desperately trying to show their independence from the establishment wings of the two parties that are held in such low esteem.

And the Internet and social media are making the shakeup of the two parties much more likely, with young people less and less aligned with large, established institutions -- and more empowered than ever to connect with each other and cut through the spin perpetrated by politicians and special interests.

In my closing statement, I summed things up by comparing the two-party system to a stale marriage. Democrats and Republicans need something to spice it up. They need to go on Craigslist and find a third party. (And if that third party isn't wearing a shirt, they really should do a background check, because he might turn out to be a member of Congress... and you don't want to go there.)

Interestingly, right from the start, the other side basically conceded the issue, admitting that the two-party system isn't working, but arguing that, to paraphrase Churchill, the two-party system is the worst political system, except for all the others that have been tried. What, they wondered, would work better?

The rules of the debate held that the winning team would be the one that changed the most minds over the course of the evening. Before the debate, 46 percent of the audience said they were for the motion (i.e. agreed that the two-party system was making us ungovernable), 24 percent were against and 30 percent were undecided. After the debate, 50 percent voted "for", 40 voted "against" and 10, despite two hours of heated argument, remained unsure where they stood. So even though the majority of the crowd agreed with David and me, P.J. and Zev were the winners. I instantly understood how Al Gore felt in 2000.

But P.J. and Zev were more than worthy victors, having kept everyone -- including David and me -- in stitches during the debate.

But, on substance, I'm still with Thomas Jefferson, who said: "I never submitted the whole system of my opinions to the creed of any party of men whatever, in religion, in philosophy, in politics, or in anything else, where I was capable of thinking for myself. Such an addiction is the last degradation of a free and moral agent. If I could not go to heaven but with a party, I would not go there at all."

Look around: It's clear our two-party system is not taking us to heaven. In fact, it's rapidly taking us in the other direction.

Mexico teen on hunger strike for royal invite

Feb 19, 2011

The 19-year-old high school student has been camping outside the British Embassy in Mexico City for nine days.

MEXICO CITY - WHAT would you do for a chance to hobnob with royalty and celebrities at the upcoming wedding of Prince William and Kate Middleton?

Mexican teenager Estibalis Chavez has gone on a hunger strike.

The 19-year-old high school student has been camping outside the British Embassy in Mexico City for nine days.

Ms Chavez describes herself as a 'royalty fan' and says she hopes for an invitation to the wedding of the year.

The British Embassy confirmed in a statement on Friday that Ms Chavez began a vigil last week. It said that 'Buckingham Palace regrets that there are no more spots available.'

Ms Chavez says she believes that if the bride and groom hear of her effort, they will invite her to the April 29 wedding at London's Westminster Abbey. -- AP

[Right. Because that's what every bride and groom wants at their wedding -- beggars and blackmailers.]

Multiculturalism backlash in Europe

Feb 17, 2011
 
FRANCE
'It can only be a French Islam'
Aside from British PM David Cameron, two other fellow conservative European leaders - French President Nicolas Sarkozy and German Chancellor Angela Merkel - have also declared multiculturalism, specifically the integration of Muslims, a failure in their countries. A look at the French and German experiences:
 

IN A TV interview last week, President Nicolas Sarkozy echoed right-wing complaints about Muslims praying on the streets of French cities. 'In France we don't want people to pray in an ostentatious manner in the street,' he said. 'Our Muslim compatriots should be able to live and practise their religion like anyone else... but it can only be a French Islam and not just an Islam in France.

'If you come to France, you accept to melt into a single community... The French national community cannot accept a change in its lifestyle, equality between men and women... freedom for little girls to go to school,' he added.

France has Europe's largest Muslim population, about five million, many originally from Africa. France's policy has been one of assimilation, and in the past few years, it has hotly debated issues related to the veiling of Muslim women in public.


'Guest workers in the wrong place'

CHANCELLOR Angela Merkel declared in a speech last October that the concept of multikulti (multiculturalism) had 'failed utterly' and should be abandoned.

Her remarks came days after polls showing a third of Germans viewed immigrants as nothing more than welfare cheats and only 8 per cent of Germans believe migrants living among them are well-integrated.

The experience of 4.5 million Turks in Germany points to the difficulties of integration. In the 1960s, they came in as 'guest workers' and many stayed on. As their numbers grew, a best-seller book last year warned that the country's national Christian identity was under threat. Dr Merkel had to make clear that those who do not accept the German identity 'are in the wrong place here'.