The free market, unregulated capitalism in America during the past two decades has caused a lot of damage to the global economy. It has created sub-prime mortgages, which were then packaged into collateralised debt obligations (CDOs) and backed by credit default swaps (CDSs) and dubious credit ratings and sold all over the world. It created a big, unsustainable bubble in housing prices, which has since collapsed, causing the biggest financial crisis in several decades.
In spite of its shortcomings, there are redemptive features in the American system. The poltical leaders have realized their mistakes and are enacting new laws to protect consumers, taxpayers and to stop the predatory practices.
Their state attorney generals are willing to step forward and take action on behalf of consumers to address cases where financial institutions could have broken the law in misrepresenting products to consumers or were negligent in giving bad advice. In many cases, the financial institutions were willing to settle the cases out of court and to compensate the consumers. The financial institutions knew that they had acted wrongly and that they are likely to be found guilty by the American system of justice.
Many consumers in Singapore have suffered similar damages on similar products sold in Singapore. It is possible for the Attorney General's office in Singapore to take a similar measure on behalf of these consumers who are not able to engage their own lawyers (at unaffordable fees). Their only recourse was through FIDREC (dispute resolution), but the outcome had been tedious and long and usually unsatisfactory. They have to bear their losses silently (as public protests are not allowed).
The poor level of consumer protection in Singapore will cause long term damage to our reputation as a financial hub. I hope that this serious shortcoming can be addressed before it causes irrepairable damage.
Tan Kin Lian
Monday, January 11, 2010
Educating our young
I have been invited by a political party to give my views on the following. I am not able to attend that meeting, due to clash of schedule, but I will be giving my views in this blog.
1.What are the education policies needed to prepare our next generation?
2.How can we make education as the key means of enhancing social mobility and employability of Singaporeans?
3.What are the education plans for Special Need/Disabled Children?
I like to invite my readers to give your views on these topics.
Read here for my views.
Tan Kin Lian
1.What are the education policies needed to prepare our next generation?
2.How can we make education as the key means of enhancing social mobility and employability of Singaporeans?
3.What are the education plans for Special Need/Disabled Children?
I like to invite my readers to give your views on these topics.
Read here for my views.
Tan Kin Lian
Capitalism and socialism
The free market capitalism that the world has gone through in recent years has caused the collapse of the global financial system. Without regulation and restraint, it has created a large asset bubble in housing and has produced unjustified huge profits for the financial sector. The wealth taken away by the financial sector has improverised the rest of the economy and cause long term damage.
Some people think that the capitalist system will continue to work well, if there is stronger regulation. I agree that it is better than weak regulation, but it will still not solve the underlying problems of unemployment, exploitation of the weak and insecurity.
To solve these fundamental problems, we have to adopt socialist principles. It means higher taxes but better social security, such as employment, old age pension, affordable health care and education. More of the basic needs should be provided by society, and funded by taxation, rather than be paid individually (which allows the consumers to be exploited by the providers).
Examples of exploitation of consumers are the high charges taken away by financial institutions, doctors and lawyers for their services. The consumers cannot afford these high charges. If the basic services are provided by the state, and paid by the state, there is less need for consumers to have to pay higher charges for these basic services. These professions can continue to offer their services to the affluent and rich.
There is the fear that services provided by the state can be wasteful and abuse. This is a valid fear, but it can be managed and minimized by adopting transparency and accountability. Under the free market capitalism, there are also abuses, but they take the form of exploitation of the ignorance of consumers (i.e. cheating) and by profiteering (i.e. overcharging).
Socialism and democracy can go hand in hand. Europe has a democratic socialist model. It worked reasonably well in giving a satisfactory life for its people. It is not perfect, but neither is capitalism.
Some people don't like the world "socialism" or "democratic socialism". Professor Paul Krugman has used the world "social democracy", which sounds more acceptable.
What the people need to avoid are abuse of power by the people in charge. This applies to socialist and capitalist systems equally. There are some capitalist economies that are undemocratic and do not respect the will of the people.
Tan Kin Lian
Some people think that the capitalist system will continue to work well, if there is stronger regulation. I agree that it is better than weak regulation, but it will still not solve the underlying problems of unemployment, exploitation of the weak and insecurity.
To solve these fundamental problems, we have to adopt socialist principles. It means higher taxes but better social security, such as employment, old age pension, affordable health care and education. More of the basic needs should be provided by society, and funded by taxation, rather than be paid individually (which allows the consumers to be exploited by the providers).
Examples of exploitation of consumers are the high charges taken away by financial institutions, doctors and lawyers for their services. The consumers cannot afford these high charges. If the basic services are provided by the state, and paid by the state, there is less need for consumers to have to pay higher charges for these basic services. These professions can continue to offer their services to the affluent and rich.
There is the fear that services provided by the state can be wasteful and abuse. This is a valid fear, but it can be managed and minimized by adopting transparency and accountability. Under the free market capitalism, there are also abuses, but they take the form of exploitation of the ignorance of consumers (i.e. cheating) and by profiteering (i.e. overcharging).
Socialism and democracy can go hand in hand. Europe has a democratic socialist model. It worked reasonably well in giving a satisfactory life for its people. It is not perfect, but neither is capitalism.
Some people don't like the world "socialism" or "democratic socialism". Professor Paul Krugman has used the world "social democracy", which sounds more acceptable.
What the people need to avoid are abuse of power by the people in charge. This applies to socialist and capitalist systems equally. There are some capitalist economies that are undemocratic and do not respect the will of the people.
Tan Kin Lian
HDB flats and population growth
Recently, there has been a great deal of interest in the run up in property prices. The following are some statistics from the Yearbook of Statistics 2009 which can help explain why.
Number of HDB flats | Total Population | Resident Population | |||||
2003 | 874,183 | 4114.8 | 3366.9 | ||||
2004 | 876,985 | 0.3% | 4166.7 | 1.3% | 3413.3 | 1.4% | |
2005 | 877,546 | 0.1% | 4265.8 | 2.4% | 3467.8 | 1.6% | |
2006 | 878,820 | 0.1% | 4401.4 | 3.2% | 3525.9 | 1.7% | |
2007 | 883,448 | 0.5% | 4588.6 | 4.3% | 3583.1 | 1.6% | |
2008 | 884,920 | 0.2% | 4839.4 | 5.5% | 3642.7 | 1.7% | |
From 2003 to 2008, the total population increased by 17.6% The resident population increased by 8.2%.
The number of HDB flats however only increased by 1.2%.
It is unclear why HDB has been building so few HDB flats from 2003 to 2008. The numbers very clearly suggest that the HDB building program has been unable to keep pace with the increase in population. The current boom in housing prices is therefore not fueled by "irrational speculation" or HDB pricing polices. Rather it is due to a very real supply shortage in housing to meet the demands of our growing population.
The danger in these type of situations is that the large price increases will bring about a very sharp market correction. In response to criticism, the HDB has recently announced that they will step up building.
Large number of private developers have also launched new projects to "cash in" on the record prices.
On the demand side, MOM has also recently implemented policies so that it is more difficult for foreigners to come and work in Singapore.
The market will therefore almost certainly overshoot and we can be assured of a very dramatic fall in housing prices, most probably in 3Q2010 to 4Q2010.
Aurvandil
Learning from Europe - social democracy works
Read this article by Paul Krugman and weigh the facts.
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