Big countries should build capabilities that help workers rather than hold competitors down: Tharman

Senior Minister Tharman Shanmugaratnam said countries should not sacrifice absolute economic performance to secure relative performance. With him on stage is moderator Bronwen Maddox. PHOTO: MINISTRY OF COMMUNICATIONS AND INFORMATION (MCI)

SINGAPORE - Major countries should not seek to establish a relative lead over each other internationally by protectionist means, because doing so would compromise their own “absolute performance” and ability to maximise their people’s opportunities so that ordinary working people can benefit, Senior Minister Tharman Shanmugaratnam said on Tuesday evening.

Speaking at a dialogue in London organised by Chatham House on strategies for a more resilient world, he described how, for example in the context of United States-China relations, strategies should not sacrifice absolute economic performance – which is what matters for ordinary workers – just to secure a relative edge over each other.

He pointed out that while protectionist strategies can achieve the latter, they hurt the former.

“If we go for a system that is protectionist, that imposes restrictions on competitors, or where your actions domestically have negative spillovers on the rest of the world, you might be able to preserve relative superiority, at least for some period of time,” said Mr Tharman.

“But it is almost certainly at the cost of absolute performance everywhere. Most economists would agree on that.”

He added that the ordinary worker depends on absolute performance – through the growth of an economy, jobs being created, the quality of jobs being created and opportunities for social mobility.

“It is not about how well this economy is doing relative to another economy somewhere else in the world. That doesn’t improve the life of ordinary workers... absolute performance and the international game in which if I win, you don’t need to lose, should be the way forward,” he added.

When asked about how a government should go about making its country attractive amid an era of rapid change, Mr Tharman described how to best carry out social policies and also ensure economic competitiveness.

He noted that many advanced countries have essentially run out of fiscal space to fund benefits for everyone at the same time.

“They have to face the task of targeting spending to help those more in need.”

He added that this was especially because governments could not avoid increased spending on healthcare, which was the biggest fiscal challenge in the advanced world because of ageing.

Singapore has utilised a strategy that is progressive, by supporting the poor more, and ensuring that the upper-middle-income and the rich pay for their share in healthcare costs.

“Either you do that, or you have to ration healthcare by having very long queues or having some people go abroad for treatment, which is not fair and not progressive,” he said.

He added that insurance was needed to pool healthcare risks. “But if you go for the ultimate insurer being government – the government simply paying for all costs, you end up with an ever-increasing bill that has to be met by taxing everyone more.”

This ties in with economic competitiveness as well, he said. In looking to improve absolute performance for one’s country rather than holding others down so as to stay ahead, countries should spend 90 per cent of their efforts building up the capabilities of their people, and 10 per cent making sure that no one else is abusing their position in the global system.

“Right now, we are very far from that mix. There is very little effort being made to develop the capabilities of domestic populations, starting from the earliest years of life, where the gaps once entrenched last all the way through life.”

Employers are also not investing enough in ordinary working people through their careers. This cannot be left to the market, which always has a short-term lens as an employer is mainly interested in what a worker could do today, rather than preparing the worker for a new technology or job with another employer, he added.

“There is a basic market failure. The state has to step in, and this has to be an opportunity for the state, private sector, unions and people themselves to collaborate to invest in people regularly through their working lives, so as to keep upskilling, reskilling and making sure that the quality of jobs that are available to them goes up,” he added.

“It is a most neglected element of public policy in too many countries.”

Countries should start thinking about domestic capabilities, skills and human potential as fundamental to both social and economic policies, including economic competitiveness, rather than thinking about what they can do to hold adversaries down, he said.

“Focus first and foremost on what we can do to maximise our own capabilities.”

Mr Tharman also spoke on how the real challenge in getting governments to change their policy approaches lies in re-creating a robust “politics of the centre”.

“That is a challenge for both those who are left of centre and right of centre, but not far left and far right. We’ve got to find a way… (to) address the needs of the working class and avoid the extreme right taking over,” he said.

“It has fundamentally been a failure of the left, to address the needs of ordinary working people, and has allowed the far right in many advanced countries to win them over... Likewise, the right of centre needs to have a strategy that is not just about free markets and keeping taxes low, or talking about individual responsibility.”

He added: “It is not as if societies have weakened because of an upsurge in individual irresponsibility. People haven’t become suddenly more irresponsible. We face challenges now that require a more active role for the state.”

President meant to preserve integrity of system

Mr Tharman also clarified the role of the President in response to moderator Bronwen Maddox, chief executive of Chatham House.

She had, in her introduction, mentioned that he had recently announced his plans to run as a candidate in the upcoming Presidential Election.

She said the role of the President in Singapore was a “crucial non-party-affiliated role in Singapore, a position that allows that person to challenge the Government on behalf of the people”.

Mr Tharman clarified that the role of the President is not to challenge the Government on behalf of the people.

Rather, “the President is elected directly by the people in order to preserve the integrity of the Singapore system, financial integrity as well as the integrity of key appointments of the public service”, he said.

“It is a very important innovation in our democratic system that we embarked on a few decades ago, and one that I am offering to put myself forward.” He added that he did not wish to say more about the matter beyond clarifying this.

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