Tax stories can be funny too!
Tax policymakers have thus far concluded for good reasons that taxes that everyone pays are fiscally superior to narrow or focused taxes on certain defined goods or social groups. Broad based taxes can generate huge revenues at low rates. The more focused a tax, that is, the narrower is base, the higher the rates have to be to generate sufficient revenues to justify the administrative expensive and political controversy associated with it. In addition, if tax rates are very high, there are strong incentives for taxpayers to limit the kind of activity or behaviour that evokes the tax. In eighteenth century England, for example, a tax on windows was seen as a reasonable and efficient way to generate revenues: people with many windows in their homes had more money to tax than those with few or no windows. It was also easy for the taxman to count windows and assess the tax due. But as the rates of this tax grew, so did the propensity of homeowners to fill the window openings with bricks. Even today in England, one can see many large, dark manor houses with bricks where there once were windows. – Steinmo
Then and Now II
To start with, as the leader of both the PAP and the Opposition, Lee Kuan Yew was obviously an ardent defender of democracy and workers’ rights. T.J.S. George recorded such an image in his books:
… a knight-errant of democracy and socialism… Lee could not have been … other than a champion of the oppressed. His time until then had been taken up in defence of workers and students, in opposition to colonialism. He was an advocate of popular causes, a progressive… a liberal whose conscience was sensitive to the slightest sign of injustice around him… Almost any speech he made in the Assembly between 1955 and 1959 could go straight into the liberal democrat’s bedside book-shelf.
A look at the Legislative recods of the time would illustrate Lee’s philosophical bent and also his open criticisms against the government on what he saw as its undemocratic practices. During the First Legislative Assembly sitting on 4 October 1956, this was what Lee charged of the government:
You take over the organisation … the government machinery, the instruments of policy, the administration, the police, broadcasting and all the ‘gimmicks’ of a modern colonial state. Then you use your machinery with the connivance and concurrence of you colonial masters against rival organisations… All you have to do is dissolve organisations and societies and banish or detain the key political workers in these societies… Then an intimidated Press … and the govenrment-controlled radio together can regularly sing your praises and slowly and steadily people are made to forget the evil things that have already been done. Or if these thigns are referred to again, they are conveniently distorted, and distorted with impunity, because there will be no opposition to contadict it… But if we say that we believe in democracy, if we say that the fabric of a democratic society is one which allows for the free play of ideas … then, in the name of all the gods … give that free play a chance to work within the constitutional framework…
–
Although LKY had issues with the communist faction in his party, he said this of them:
They are not crooks or opportunists. These are men with great resolve, dedicated to the communist revolution … many are prepared to pay the price… in terms of personal freedom and sacrifice.
I think the quote captures how the clash of ideology is sometimes less of political opportunism but more of a dedicated belief in what works best
Then and Now
As a party in the Opposition, the PAP campaigned and fought for certain principles. These principles were declared in its Mass Rally at the Victoria Memorial Hall on 30 January 1955, and also in its 1955 election campaign. The Rally called for five resolutions, namely:
i. that the supreme authority of the govenrment should be vested in the people’s elected representatives and not the Governor.
ii. that the present regulations under the Emergency Ordinance which prohibited the freedom of speech, expression, assembly of association, be removed so as to achieve democracy
iii. that there should be a multilingual Assembly to reflect the multi-racial composition of the people,
iv. that the provisions in the Labour Ordinance which prohibited the setting up of political funds by unions be repealed as this is undemocractic
v. that the REndel Commission’s provision recognising the extra-territorial rights of the British military forces in Singapore be repealed as it is an infringement of sovereignty
vi. merger with Malaysia
vii. the scrapping of National Service (it argued that only a fully-elected Assembly has the right to introduce conscription
viii. legislating a Workers’ Charter to give more rights to workers
IX. free education for all children below 16 years
X. the necessity to build low cost housing and clear the many slum areas
A cool interview
A calm and measured response by Sheikh Bader al-Saad, head of the Kuwait Investment Authority against western paranoia over SWFs.
http://www.spiegel.de/international/business/0,1518,554042,00.html
A New Epoch
In the last 18 months, there has been the emergence of a breed of capital that is vast, secretive and powerful.[i] The very mention of its name evokes mixed feelings of excitement and fear, however, whether you rave about its tremendous potential in transforming enterprises or you caution against its growing (perhaps insidious) incipience, sovereign wealth funds (hereafter SWFs) all over the world are rapidly changing the geo-politics of international economy. In the aftermath of the sub-prime mortgage crisis, SWFs such as the Abu Dhabi Investment Authority, Government of Singapore Investment Corp and China Investment Corp owns on average 11.43% of four major financial institutions in the United States.[ii] Such sizable investments are hardly missed by the international community and consequently, a ferocious debate broke out in Washington and European capitals over whether SWFs should be allowed to buy up swathes of corporate west. More often than not, these talks boil down to fears over national security. Nevertheless, the mood with regards to SWFs has changed considerably as the full scale of financial malfunction in the West is unveiled and SWFs are seen as potential lenders of last resort.
Our concern in this essay is of course not the exact machinations of SWFs. Rather it marks an attempt to discern the broad trends that are unveiled in such developments and an effort at understanding how the changing landscape of geopolitics is impacting on economic activities in the global arena. I believe that what we are about to see is the beginning of another epoch in world’s history. The previous epoch, characterized by a jubilant effervescence over the promise of globalization and permeated by the belief that distance is increasingly an anachronistic variable in thinking about multi-national structures and collaboration, seems to be entering its twilight. Welcoming us instead is an epoch where the state is assuming an urgent mandate in becoming a major player on the global economic stage. Quite understandably, the state is in a state of considerable shock as it finds itself with the previously-abducted prerogative to mete out regulations thrusted back onto its lap. As it bails out banks after companies and companies after banks, the state is suddenly the greatest capitalist in town. This bodes well, and bodes ill. Let’s hear the bad news first, so that we will not leave on a cheerless note.
The Bad News
The bad news is that as we all know, when it comes to the state, there is a perennial jealousy about maintaining sovereignty and observing boundaries demarcation. Hence, it might not be preposterous to suggest that the current trajectory of development would lead us back to the days where states wield immense power over deciding the destiny of industries, a time which harkens back to the mercantilist paradigm that characterized the 16th to 18th century. It may sound far-fetched but it is definitely plausible if we consider the scale and type of bailouts that had happened recently. Billions were pumped into saving banks which are the penultimate determinant of macro-industrial planning – the boss who decides which firms get loans and which does not. And guess who becomes the boss now?
Such a trend is necessarily regressive as it reverses the work of generations of economic liberals who believes in the efficacy of a freer market. While unquestioned liberalisation might not work, as searingly elucidated by Joseph Stiglitz in his discussion of the Asian and Russian Financial Crisis in Globalisation and its Discontent, on the whole, massive state intervention in economics had been simply disastrous. The triumph of the market had been fully demonstrated when we consider the flow of immigrants from East to West Berlin during the Cold War and the undisrupted economic reforms that the Chinese undertook thirty years ago. It is therefore critical that businesses must constantly ensure that the state does not overstep its boundaries and issue onerous legislations that would cripple the normal functioning of the firm in the name of ‘regulation’, which has become a byword for any state action against the firm.
When Adam Smith wrote the Wealth of Nations in 1776, he expounded how the free market, while appearing to be chaotic and unrestrained, is actually guided by the so-called ‘invisible hand’.[iii] He believed that while human motives were driven by self-interest, the competition in the market would tend to benefit the society fundamentally because everyone gets what he wants and can demand. Adam Smith was however wary of businessmen and argued against the formation of monopolies for he is deeply aware of the asymmetry in information and power that these agents would create in the market, and consequently the distortion that would result from the arbitrage and high barriers of entry. Yet, from where he was, he did not foresee how governments do not have to directly intervene in the market by means of regulation, but could instead evolve into market agents and introduce new confounding variables into the whole business of market equilibrium.
It is clear from the SWF example given above that when it comes to the state, they are not always purely economic incentives driven. There is the new, added dimension of state sovereignty which confounds market sensibilities. If we were to accept Benedict Anderson’s famous argument of how the nation is a community that is socially constructed, imagined by the people who perceive themselves as part of that group, we must then realise that as part of the citizenry in business corporations, we ought not be bound by such artificial concepts. Money is fungible, but currency is not. The former is an instrument of the market which recognizes only price signals and incentives, while the latter is essentially a political innovation to reinforce the national identity. Nevertheless, with the increased role of the state, the firm is now vulnerable to its idiosyncrasies which include not wanting to accept money from another country, though these money may at times be even denominated in the same currency. SWFs are often awashed with cash due to their stellar exports of oil, gas or commodities, and hence represent a cheap source of loans to many companies with liquidity problems. However, if the state gets a say in it, it might just starve firms of such resources in the hallowed name of ‘national security’.
The essay’s aim is not to issue a value judgment on whether the state or firm is right in such an instance, it merely wants to elucidate the plausible conflicts of interests that might arise due to fundamental differences in the perception of risk and opportunities. When such clashes happen, it is vital for the firm to then maintain its own sovereignty against the encroachment by the state and defend its corporate interests against crippling legislations as well as ‘less-than-rational’ risk evaluations with regards to the source of capital.
In addition, it is clear from recent events that the era of dirt-cheap loans from financial institutions and rampant investments on basically nothing is over. The model of building businesses like castles in thin air without real economic activities has seen its inevitable demise on Wall Street. As nations begin the long process of soul-searching on what had happened, one thing is certain and that is business have to go back to the basics and adopt some good old-fashioned rules such as creating value for customers, having returns which are proportionate to the risk undertaken for projects and being hungry for opportunities but not too hungry. Interestingly, a quote from American activist and labour organiser, Cesar Chavez, rings salient as we take stock of our current economic malaise, “we cannot seek achievement for ourselves and forget about progress and prosperity for our community… Our ambitions must be broad enough to include the aspirations and needs of others, for their sakes and for our own.” Corporate top-guns must learn how to share their wealth with the masses and not simply exploit public trust and then later public funds (much of the bail-outs went to saving the top personnels in rogue institutions which created the problem in the first place). There is a whole system of values that is missing out in this era of financial management and it is vital that we create it for the next.
The Good News
While the state and businesses seem to be strange bedfellows, they are not necessarily doomed to fail. There is a role for the state in the market. Smithsonian fears of monopolies and oligopolies will not dissipate on its own, given enough first-movers advantages, these colossal entities can get themselves well-entrenched into the capitalistic order of their days. Similarly, the collapse of the entire financial system will not right itself if there is no able agent to facilitate its recovery; the market is seldom lauded for inching out of a recession itself. John Maynard Keynes remind us of the critical role that states can play to ensure macro-economic stability, even Adam Smith himself was prepared to accept government’s intervention if it is judged that their net effect would be beneficial and would not undermine the basically free character of the system.
As men rave and sigh at the promises and failings of the market in the past years, they are manifestating symptoms of Keynsian much feared ‘animals spirits’ which can groom or doom a market on basically nothing but expectations. We need more coherent policy directions than simply market mania. In March, free market guru Martin Wolf, chief economics commentator at the Financial Times, announced the death of the dream of global free-market capitalism, and quoted Josef Ackermann, chief executive of Deutsche Bank, as saying “I no longer believe in the market’s self-healing power.” Evidently, we cannot expect the patient to do a shake-out here, we need a qualified doctor. Can we look to the state for coherent policies and to be a qualified doctor? Probably not, but it’s a Hobson’s choice anyway. The state is not always businesses’ best friend but it is the only one that we got now and it has demonstrated its willingness to help.
Conclusion
It is now up to the state to decide for itself how it wants to balance the desire to stay true to the goals of market liberalisation and the compulsion to preserve national security by adopting a more mercantilistic outlook. It is inevitable that as each state begins its domestic initiatives to combat the recession, they will become more inward-looking. Nevertheless, it is also at this juncture, where the states themselves are becoming important market players, that there is a greater need than ever for states to foster greater trust amongst themselves. For one, SWFs need not always be viewed in such negative light, Singapore’s GIC and Temasek Holdings investments in the American banks while strategic, can also be viewed as an attempt at promoting goodwill and earning some honest interests on their capital.
Perception is of paramount importance in international relations and with perceptions come norms, therefore, it is vital that we start on the right page, with the right expectations. With hope, we might not have to witness the revival of political and economic barriers. As we have seen in the creation of the United Nations, which occurred in the aftermath of a terrible, cathartic WWII that finally convinced the world that we are not of many races but one, it could be in time of adversity like ours, that we see the harbingers of extraordinary efforts at building multi-lateral cooperation in the economic sphere as well. As there is only one race instead of many races, there should also only be money instead of currencies.
Barack Obama
| By Nick Bryant BBC News, Washington |
To measure fully the historical achievement of Barack Obama’s victory it is worth recalling what America looked like in 1961, the year of his birth.
Back then, much of the American South remained segregated, the races separated from the cradle to the grave.
Black people – or Negroes as they were known then – were born in segregated hospitals, educated in segregated school systems and buried in segregated graveyards.
Handed down in 1954, the Supreme Court’s Brown decision, which called for the integration of southern schools, had been met in many southern communities with a campaign of “massive resistance”.
For segregationist die-hards it became the twisted metaphor of the age, as they fought to uphold a system of racial apartheid that was known by the deceptively friendly aphorism, Jim Crow.
Washington DC was regarded still as a hardship posting for African diplomats, despite the efforts of Presidents Truman and Eisenhower to desegregate the nation’s capital.
Restrictive covenants prevented them from living in the most fashionable parts of town, and they were denied service in the high-end barber shops.
Distance travelled
When they made the journey to the United Nations in New York, they travelled a road, Route 40, which was lined with segregated motels, diners and restaurants.
Back at the start of the 1960s, America’s first black presidential aide, a former public relations man called E Frederic Morrow, published a memoir of his years working under Dwight D Eisenhower.
It was titled Black Man in the White House. It revealed how he was never allowed to be left alone in the same room as a white woman, such was the fear that he might sexually molest her.On becoming president in 1961, Jack Kennedy made a series of senior black appointments. Still, the young president’s most valued African-American aide was a man called George Thomas, whose job each morning was to lay out his clothes.
Leaving others to attach racial meaning to his candidacy, Barack Obama has not spoken much about the struggle for black equality, nor the tumultuous decade into which he was born.
Go through his speeches, and you will find little mention of the civil rights era.
For to become a history-defying candidate he has been something of a history-denying figure. The strategy throughout has been to de-emphasise his race.
A quirk of scheduling and a quantum leap of history meant that Mr Obama delivered his acceptance speech in Denver on the 45th anniversary of Martin Luther King’s I Have a Dream speech.
But even then, Mr Obama did not mention Dr King by name, referring to him instead as the “young preacher from Georgia”.
Black and white
Back in June, on the night when he finally saw off the challenge from Hillary Clinton, his celebration speech made no reference to his historic racial first, and noticeably he dedicated his victory to his white grandmother.
Throughout the campaign, Mr Obama has emphasised his whiteness as much as his blackness.The president-elect understood one of the great paradoxes of the civil rights era.
While it helped pave the way for his ultimate success, it also made it more difficult for northern candidates, like him, to win the presidency.
When President Lyndon Johnson signed the landmark 1964 Civil Rights Act into law, he told an aide: “We have lost the south for a generation”. But he had miscalculated.
The once solid Democratic South – the Democrats used to be an unhappy alliance between Northern moderates and progressives, and southern segregationists – started to go reliably Republican in presidential elections.
Prior to 1964, the Democrats won six out of eight presidential elections. After 1964, they lost seven out of 10.
Achieving the impossible
The civil rights era was responsible for the great historical anomaly of US post-war politics: the process through which the party of Abraham Lincoln, the Great Emancipator, established a stronghold in the states of the Old Confederacy.
It is no coincidence that every Democratic president since the passage of the 1964 Civil Rights Act has hailed from the south: Jimmy Carter, Bill Clinton and, the die-hards would contest, Al Gore.
The new law not only demolished segregation, but re-drew the US political map.
So it is worth remembering that Barack Obama will not only be the first African-American president, but the first Northern Democrat to serve in the White House since Kennedy.
To achieve this racial first represents the most extraordinary of achievements.
Since the end of Reconstruction – the period in the aftermath of the US civil war – there have been just three black US senators.
Only two states, Massachusetts and Virginia, have elected a black governor.
With the election of a black president, what many considered the politically impossible has now become real.
On 28 August 1963, Martin Luther King spoke of his dream for America, with the brooding statue of Abraham Lincoln offering the most glorious of pulpits.
On 20 January 2009, Barack Obama will appear on the west steps of the US Capitol, at the other end of the Washington Mall, and seal his historic triumph with just 35 words: the presidential oath of office.
Nick Bryant is the author of The Bystander: John F. Kennedy and the Struggle for Black Equality
Joshua Benjamin Jeyeratnam
“A remark you often hear is, there’s nothing we can do, you can’t do anything in this place, I tell them that’s nonsense.” – JBJ
There is a group of people in Singapore mourning for the late JBJ. Many of these people exclaim what a great opposition leader JBJ had been and how much he had done for Singapore but according to LKY, JBJ is “a poseur, always seeking publicity, good or bad.” Considering how many of these people who grieves for him never come into contact with him, it is somewhat peculiar how Singaporeans are happy to support an icon of opposition in the country and disregard the remark made by LKY who has sparred with JBJ personally as the grudging remark of a sore adversary. I would think that his role as an opposition icon had been important and deserving of our respect but then and again, how hard is it really to be peddling books and criticising a structure? However, it is perhaps true that anyone who has stood up against such odds should be given his due credits, he was brave and he was the underdog for the people. He chose to fight in flesh as the rest of us choose to fight with our tongues. In addition, he gave up so much for his ideals – his job, his money, and ultimately his life.
Initially I was rather upset that everyone raved about JBJ seemingly just because he opposed PAP as I feel that there is no basis to such sentiments at all, however, after thinking for a while longer, I figure that this is the so-called popular sentiments and there is legitimacy to it. It stems from the populace’s long term dissatisfaction with the way a country is run by the government, hence, any opposition to break the regime’s hold on the country is celebrated as beacons of democracy. The death of such an icon symbolised a sudden break in this ambitious endeavour and it is natural that society grieves for the disappearance of such a symbol. Also, JBJ had while he was alive, fought for the creation of a welfare society and minimum wage, two issues which I feel are close to my heart and I believe should be implemented.
Joshie asked why I was thinking about this issue in the first place. I guess it is due to my initial inclination towards JBJ. I wondered whether i was really justified in thinking that he had done a lot for Singapore. Hence, I feel that there is a need to really go through what he stands for and what he did for the ideals, to think about whether this were really his ideals or just popular rhetorics. Also, I was wondering whether if LKY hadn’t won back then, he would have been in JBJ’s position, trying to crticise the resultant structure. Seen in that perspective, our generation has been less kind to LKY who had done what every politician would have done in consolidating his party’s power and creating a favourable structure.
I am thankful to Joshie who stayed up till 4am trying to explain to me over MSN why JBJ deserves the attention that he is getting.
IHT’s flattering obituary of JBJ – http://www.iht.com/articles/2008/09/30/asia/obits.php?page=1
Economist – http://www.economist.com/obituary/displaystory.cfm?story_id=12376738
Speaker’s Corner
Had a debate with a friend yesterday about the utility, purpose and viability of the speaker’s corner. Through the debate, I realised that my impression that the state of our civil society in Singapore as being infantile and flailing is increasingly outdated. He ‘lectured’ me on the proliferation of more organised and professional groups such as The Online Citizen (http://theonlinecitizen.com/) and Maruah (http://maruahsg.wordpress.com/), which surprised me considerably because for the longest time, I had imagined speaker’s corner to be dominated by opposition members, taxi uncles and random individuals. After looking through the websites and the Maruah position paper on the proposed ASEAN Human RIghts Body, I must say that I am impressed by the work that they have done. I agree with him that I have not given them due credits.
Cacique Democracy in the Philippines: Origins and Dreams
Benedict Anderson’s narration of Philippines political history is so good. Despite my lack of interest in Southeast Asian history other than Burma’s, his writing makes the events so riveting and political figures so intriguing that I wish I had taken a Southeast Asia minor. An excellent writer who makes history comes alive!
As far as the oligarchy was concerned, Marcos went straight for its jagular – the ‘rule of law’. From the very earliest days, Marcos used his plenary Martial Law powers to advise all oligarchs who dreamt of opposing or supplanting him that property was not power, since at the stroke of the martial pen it ceased to be property.”
Gosh, such clever use of every word.
Generalisations and poverty
As Andrew C. Janos put it, social scientists go on creating generalisations because:
This is the only way to create some order in disorder and to discern pattern, without denying the ultimate uncertainty that makes the study of human affairs so exasperating yet so tantalising.
A sobering fact:
The richest 20% of the world’s population receives 82.7% of the total world income while the poorest 20% receives only 1.4%. (1992, UN Development Program)
