2 - External Challenges Facing the Economy

Summary

IntroductionThough economists may disagree about whether globalization today is unprecedented compared with an earlier period a hundred years ago, there is broad consensus that the trend in the new millennium is towards greater integration of national economies across factor and product markets, fuelled by the rapid developments in information and communication technologies.

Globalization and the information and communications revolution, and their effects on Singapore and the city-state's responses to them, dominate discussions on the country's economic future. They are the key external challenges. This chapter examines three aspects of this debate — financial liberalization, attracting foreign talent, and the role of government intervention in the Singapore economy.

Financial Liberalization

Global Casino

Speculators may do no harm as bubbles on the steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.

Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

These two quotes exemplify the two worries on the globalization of capital markets for national economies — the capriciousness of capital and its capacity to wreak havoc with national currencies and domestic stability. Malaysian Prime Minister Mahathir Mohamad has, for instance, denounced the volatility of capital as a Western conspiracy to destroy the country's economy. He has likened foreign speculators to “rogues” and “scoundrels”. The Soeharto government in Indonesia at the height of the Asian crisis had accused foreign speculators of subversion, a crime that it pointedly confirmed was a capital offence. This sentiment was also shared by the Chavalit government in Thailand, although, unlike Indonesia, it did not make clear that speculators ought to be hanged.