Risks of Unchecked Export-Driven Growth

Singapore's basic economic strategy of surviving by tapping on the global economy by attracting foreign investments to Singapore and exporting our goods to international markets is flawed. Goldman Sachs said in a client note on Thursday that, "We reiterate our view that Singapore has one of the highest exposures to weakness in external demand, because of its high ratio of exports to GDP and the high portion of exports-driven domestic demand". The brokerage firm has lowered its forecast for Singapore gross domestic product for 2009 to -8 percent from -4 percent previously as the US economy is expected to contract further in the year, curbing already weak demand for Asian goods.

In Singapore, consumption composes only 40 percent of the GDP versus at least 55 percent in other developed Asian economies. With globalisation, more players have entered the "export-driven" economic playing field. Good skills are offered at lower wages by these players. This globalisation will only continue to progress faster than ever as the pace of technological advancement continues to accelerate. Many jobs that have been lost during the past recessions are gone forever. Many more will be lost in the current depression. Structural unemployment is here to stay for a long time. We cannot continue to bury our heads in the sand by claiming that "The fundamentals of our growth model are sound". Although Singapore supposedly 'bounced back' three times within the last ten years from comparatively milder crisis, the current global mayhem makes it increasingly unlikely that Singapore's export-driven economy is going to 'bounce back' any time soon.

How do we rise up and meet the challenges of this crisis? Fairness and equality do matter as we attempt rise up to meet this economic challenge. There is an imperative need for new, appropriate economic policies to be drawn; bearing in mind the connections between society, environment and the economy. We cannot continue to rely on continuing growth to provide sufficient finance for public services, or on market mechanisms to ensure their efficiency – because financial markets are less reliable than ever; because markets only reflect and cannot repair inequalities. Unchecked export-driven growth puts everything we hold dear at-risk.

Comments

Small and said…
Perhaps our government should benchmark themselves against what other governments are doing to create jobs. See article at http://www.transitioning.org/?p=702
kwayteowman said…
In Singapore, consumption composes only 40 percent of the GDP versus at least 55 percent in other developed Asian economies.

This is not a bad thing. Part of America's woes is that they dun save enough and consume too much. We definitely don't want to go there.

Do you even understand the meaning of size in terms of a domestic market? How much do you think the domestic market can grow? How much more productive do you think are people can get? If dun export, how to grow GDP? Do you understand the consequences of not growing the GDP?

When this crisis is over, we have no choice, but export even more to fuel growth. Frankly, it's really not a big deal 'cos we're small and there a lot people that we can sell to. We just better go and figure out what people want to buy and make those things + diversify.

Given the present situation, diversification is USELESS 'cos everything is tanking. Just have to grit our teeth and tahan till the present recession is over. What's the big fuss about?

We cannot continue to rely on continuing growth to provide sufficient finance for public services, or on market mechanisms to ensure their efficiency – because financial markets are less reliable than ever; because markets only reflect and cannot repair inequalities.

If we dun grow to make more money to pay for stuff as people grow old, then who pays? You pay ah?

Unchecked export-driven growth puts everything we hold dear at-risk.

Explain to us why "unchecked export-driven growth puts everything we hold dear at-risk"? What's at risk? Why is it "export-driven growth" or is it "growth" or is it "unchecked growth" that put us at risk?
ravi4u2 said…
kwayteowman I will let the tone of your post and your pseudonimity to speak for itself.
kwayteowman said…
I will let the tone of your post and your pseudonimity to speak for itself.

Tone is frankly quite irrelevant. The question is substance, which your post has very little in my opinion.

Pseudonymity (the KTM just made this word up :-P) is overrated. What's your point? Just because you post your name for the world to see, you are more credible? :-)
ravi4u2 said…
kwayteowman, you are of course entitled to your opinions, just as I am entitled to mine. That has never been an issue with me. For me, the question remains, "who is kwayteowman that I should waste my time, to make a reasoned rebuttal especially when the queries (or rather remarks) are rude, unfair and assumptive?" But if you want a serious discussion on the topic to persuade or dissuade me otherwise, we could do so over the phone.

I will also quote the PM on the issue of pseudonymity, "But even in the Internet, there are places which are more considered, more moderated where people put their names down and identify themselves. And there is a debate which goes on and a give and take, which is not so rambunctious but perhaps more thoughtful. That is another range."
kwayteowman said…
For me, the question remains, "who is kwayteowman that I should waste my time, to make a reasoned rebuttal especially when the queries (or rather remarks) are rude, unfair and assumptive?"

Fair enough, if you think that the KTM is rude and refuse to respond. That frankly is your prerogative. :-) The KTM was only asking 'cos he couldn't parse and understand your previous response. Thanks for clarifying. :-P

But seriously, why should it matter WHO the KTM is? Is it worth wasting your time if the KTM were the PM since you seem to like to quote him? Frankly, it makes no difference to the KTM if you were not Ravi but Santa Claus or Mickey Mouse. The KTM is disagreeing with what you say and suspects that you don't know what you're saying. You could choose to respond to demonstrate otherwise or you can leave it. Doesn't change the price of pork really. :-P

Since you like to quote the PM, the PM also said something like "For the internet also enables clever propaganda, inflammatory opinions, half-truths and untruths to circulate freely and gain currency through viral distribution, and these are not always easily countered by rational refutation or factual explanation." The KTM considers this post minimally half true and possibly untrue. :-P

But if you want a serious discussion on the topic to persuade or dissuade me otherwise, we could do so over the phone.

The KTM will give this opportunity a pass. He's not quite keen to make phone calls. :-P Thanks.
anonymous said…
dear ravi, i think the question put to you by ktm is a fair one, and i was myself keen to ask you about the following statement you made:

"Unchecked export-driven growth puts everything we hold dear at-risk."

i wonder why this might be the case.

economics understood in the old-fashioned sense is about production and productivity. true, singapore is trying to develop its service industry such as banking and finance, but manufacturing still plays a critical role, and will continue to do so as long as we remain sensate beings.

in this vein, it seems to me that export-driven growth is a necessity for a small country like singapore. we are but a city-state of four million souls, and there are only so many things to produce for this number of people. so, might it not be plausible to suggest instead, that abandoning export-driven growth would put everything we hold dear at risk?

kind regards.
ravi4u2 said…
Dear anonymous,

Nobody in their right mind will advocate a complete halt to exports. I had said "unchecked export-driven growth". The key word there being 'unchecked'. How can growth be faulted?

The right question to ask will be, "What is the risk of not having this high export driven market economy?"

As a friend replied in facebook, "The risk is that we will have a lower rate of economic growth, while still in transition. Still the point is that there's a very big chance that Americans will and have got so burnt in this recession- 20 years of overspending, and getting into debt- their spending habits will change forever. So whether or not we should be taking a chance that they don't- or not- it'd be better to NOT take that risk, and start inoculating ourselves by diversifying our economy more...In fact most economic policies don't last for more than 10 years, let alone 40-45. Ours have gone on for 45 years. That's long enough."

Singapore faces a daunting crisis from three fronts; the credit-fuelled economic crisis, the accelerating climate change and an approaching peak in oil production. These challenges will need a new perspective on the market economy. More than ever, besides the development of market economies, there is an imperative need to nurtures two other economies – the resources of the people and the planet.

The three economies – people, planet and markets – must work together so that they support one another and promote social justice for people in all levels of the society.
Bernie said…
Given our population size, we do not have the critical mass to increase domestic consumption and to reduce the ratio of export to GDP. I agree with KTM on that after the crisis is over, Singapore is most likely to "resume business as usual" with its export-driven focus.

We cannot continue to rely on continuing growth to provide sufficient finance for public services, or on market mechanisms to ensure their efficiency – because financial markets are less reliable than ever; because markets only reflect and cannot repair inequalities.

Do you suggest that the finance for public services come out from deficit spending like what the US is doing (or has been doing) to reform their healthcare and education?

When you talk about financial markets, the bond markets are pretty reliable and safe. If you are referring to the share and derivative markets, then it is common knowledge that they are of higher risk and hence more volatile.

In short, I'm quite confuse over what this paragraph is talking about.
anonymous said…
dear ravi,

thank you for your reply. i apologise for misreading you, and this leads me to ask: why do you mean by "unchecked export-driven growth"?

in layman terms, do you mean to say that the port of singapore authority should do business only with x number of cargo ships per year, and turn away the rest which comes after it? do you see what i mean?
ravi4u2 said…
Hi Anonymous,

In layman's term, this is the current reality: http://www.chicagotribune.com/business/columnists/chi-fri-greising-feb20,0,6955296.column

And this reality may continue for many more years to come; which would affect Singapore, unless she diversifies.

The unchecked export-driven economy depends largely on the US and its consumers to lead the world out of this depression.

However the reality may be this: http://www.prospect.org/cs/articles?article=fromconsumers_to_commons
ravi4u2 said…
Hi Bernie,

You said, "Given our population size, we do not have the critical mass to increase domestic consumption and to reduce the ratio of export to GDP."

That is a mere hypothesis. The reality is the current government, repeatedly fails to implement measures that would fuel more domestic consumerism. My thoughts here: http://singaporesocialactivist.blogspot.com/2009/03/dont-hide-behind-mere-hypothesis.html

You also asked, "Do you suggest that the finance for public services come out from deficit spending like what the US is doing (or has been doing) to reform their healthcare and education?"

The current government, have constantly argued that government should be required to run a balanced budget in order to have sound public finances. However, there is no economic reason why public borrowing need necessarily be bad. For instance, if the debt is used to invest in things that will increase the growth rate of the economy (e.g. infrastructure, educstion) it may be justified. It may also make more economic sense to try to balance the budget on average over an entire economic cycle, with public-sector deficits boosting the economy during recession and surpluses stopping it overheating during booms, than to balance it every year.

As to your query, "I'm quite confuse over what this paragraph is talking about."

When I said market mechanisms, I meant the mechanism of aggregating possible buyers and sellers and the transactions between them. I meant they are only reflective and cannot repair any inequalities. I meant there needs to be an economic re-think which involves not just the markets, but the resources of the planet and the people as well.
Aloysius said…
Hi Ravi, my thoughts here on S'pore domestic consumption: http://eternal-hap.blogspot.com/2009/03/simple-guide-to-spore-domestic.html