Chris K: December 1, 2014 at 9:14 pm (Quote) Beg to differ slightly. Krugman’s critique of Singapore’s growth model was both labour and capital, not just labour alone. We see the labour side of the equation becos we see, felt and affected by the massed influx of foreign workers. The other side is capital – lots of it and very cheap. The model from the 70s was a mobilisation of labour and capital (think captive CPF) to drive economic growth but Krugman’s observation was the incremental increase in GDP was completely explained by the incremental increase in labour and capital. In essence Singapore’s growth model is not driven by productivity. In portfolio management, it means returns is driven by beta which is input of risk (capital in economic terms), not by alpha which is “smartness”, “edge” or “cleverness” (productivity). Fast forward to LHL ascending the gilded throne. More of the same but the PAP called it Growth Maximisation which means, now that local labour is exhausted by low TFR, import what SG no longer has; therefore massed foreign labour. On the capital size, witness despite the up and downs of global interest rates, CPF rates of returns remained low and unchanged. The low CPF rates of return and the huge extraction of savings thru Asset Enhancement is throwing capital at the economy. But we become uncertain abt the future so we save more and more, driving down the private rates of return even lower. This provide plentiful of cheap capital. Productivity is not just abt productive use of labour but also about productive use of capital. The end game of Growth Maximisation if history is any guide is implosion. The Soviet Union imploded after decades of throwing labour and capital at economy without productivity gains.
Posted on: Tue, 02 Dec 2014 13:22:35 +0000
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