Inequality at the root – it’s in the genes, stupid

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Lee Kuan Yew's Hard Truths
 

By Michael Han

Lee Kuan Yew once said that “the problem for the government is: how do you keep a society united when that lower layer can never catch up?” (pg 197, Hard Truth).

But our founding father did not stop there. He added this carrot hoping to bridge (or close) the gap in an unusual (draconian) way, that is, sterilisation.

He said: “So we have offered those at the lower end: If you sterilised after two children, we’ll give you a free flat.”

Understandably, there were no takers. And here is why in LKY’s own words: “Because once they sterilise and the husband leaves them, they look for another husband, but without having children with the new husband, they are not anchored.”

I pause here to think about those words. LKY may have a point there about a woman’s security in childbearing during his time. Even today, we are still conservative or traditional about children being equated with wealth and security.

He then continued: “So they produce more children (instead of taking the offer of the free flat). If this continues, we will have more and more duds and the whole society has to carry themselves. Nobody wants to talk about the hard truths.”

Mm…there’s no mincing of words there. Call a “dud” a dud I guess.

Here’s the other part about genetics or soft eugenics.

Being a keen reader of Edward Wilson’s works, the renown author of sociobiology, LKY said matter-of-factly:-

“So when the graduate man does not want to marry a graduate woman, I tell him he’s a fool, stupid. You marry your clerk or your secretary, you’re going to have problems, some children bright, some not bright. You’ll be tearing your hair out.” (pg 191/2 of Hard Truths).

From Hard Truths

At one point of the interview for the book, he even went uncharacteristically religious when he said:-

“I tell people frankly God has made you that way. I’m not God, I cannot remake you. I can give you extra tuition, better environment, but the incremental benefits are not that much. And their peers with bigger engines will also make progress. So the gap will never be closed.”

That’s his signature hard truth – “the gap will never be closed”. Inequality is here to stay, ever-widening in fact. Maybe love somehow got in the way of “selective breeding” by matching only graduate with graduate?

In any event, I sense that only LKY, the master statesman, can say all that and not raise too many eyebrows in protests.

You see, no political script writer for LHL would even think of penciling in those words in the PM’s annual National Day address, because the outcry from the activists, social media and international public at large would be deafening.   

Basically, what LKY is saying is, “it’s all in the genes, stupid,” and no vanity of efforts and wishful thinking can ever change that hard fact.

And if there is any doubt as to whether LKY was a firm believer in natural selection (or genetic destiny), this personal recounting by him would squash it all for good:-

From Hard Truths

“In 1970, Alex Douglas-Home was then in the (British) opposition. I’d known him when he was a minister. He flew in from Australia on his way back. So I put him up. I said, “I read that your dogs could catch salmon, trout, and bring these birds back.”

He said, “Oh no, they’re specially trained and each has a pedigree – so-and-so field champion, so-and-so field champion, mother, father sire field champions.”

I said, “My dog was bred for beauty, so I gave it away.”

He said, “Oh, you’re interested in a dog?”

By 1971, (Alex Douglas-Home) had become a minister and we had a Commonwealth conference here. He brought a Labrador pup for my daughter. It was the most intelligent dog I’ve ever had.

We sent her to the police training school, learnt all the tricks just like that. After a while you ask her to do it, she gets so bored she performs all the tricks for you – sit down, lie, creep, so on.

And instinct tells her: water, you go in. So she goes into the Istana pool, and we got to wash her.

So I decide that if dogs are like that, the human being – since I believe in Darwinism and I’m not an American fundamentalist who believes in creation and the Bible – I think there must be an affinity between these animals and us, and especially the apes and the chimpanzees.” (pg 196 of Hard Truths).

Alas, this is how LKY saw the world and how he saw the role of government when it comes to addressing this question that has basically stumped our 4G leaders, especially Ong Ye Kung in his May parliamentary speech about fighting inequality incrementally without compromising growth:-

“How to keep the society united so that we don’t have an underclass that feels disaffected, disconnect and rebellious as in America.”

Taking a page off LKY, he believed that “(our) system must accept that human nature is like that. You get the best of people for society by incentives and disincentives.”

And here is the real dilemma for him as expressed with endearing concern: “If you remove too much of their rewards from the top, they will migrate.”

That I guess would be a very costly brain drain for the nation. And for a ruthlessly pragmatic strategist like LKY, that would be a national disaster.

In other words, to use the metaphor above about Labrador pup, I get the impression from LKY that the pedigree dogs at the top are instrumental (if not indispensable) to a nation’s unrelenting pursuit of growth and wealth generation while the groaning (and barking) of “dud” dogs at the bottom (for being left behind) would have to be dealt with no less, but nevertheless, with a less urgent hand because economic growth (regardless) is still the golden standard of good governance.

To me, this seems more like an inconvenient truth that needs to be addressed in a way that would keep the top dogs comfortably rewarded and the bottom dogs largely appeased, and possibly kept at bay.

Mm…this might just explain the top dollars they are getting while in office?

And as an intrepid defender of the system he had created, here is LKY rubbishing another criticism he finds stupid. This time the criticism is directed at the government.

In Hard Truths, he said: “The popular belief that we are an elitist lot is just stupid!”

Here is why as reported in the book:-

From Hard Truths

“The PAP’s leadership selection model is not a hypocritical system that pays lip service to being egalitarian, (LKY) argued. The reality as societies developed is that leaders often come from the same social circles, educational backgrounds and even family trees. Lee pointed to the experiences of other countries, where leadership selection is equally elitist but masquerades under the guise of egalitarianism. Oxbridge graduates stock Whitehall in the United Kingdom, Ivy Leaguers in the United States, graduates of the grandes ecoles in France, powerful oligarchs elsewhere in the world…There is no truly egalitarian leadership anywhere in the world, Lee stated categorically.” (pg 104 of Hard Truths).

Well, LKY has got a point (about nepotistic ties and homogeneity of high achievers with good genes in high places). It may be a blunt, politically incorrect point, but no less true and pervasive. At least he is being unpretentious about it.

Yet, like it or not, it would still be a great political risk for any politician here to try to hint to that hush-hush reality in parliament which screeches in the cerebral chalkboard of the modern mind.

But the more pertinent question is, can LKY be wrong? That is, can he be wrong when he left us with this stark option:-

“You want an equal society with low growth? Or an unequal society with high growth then you take part of the growth and support the lower strata?”

Yes, we are back to incentivising the top for growth and appeasing the bottom by sharing some of the growth.

But, is it always the case that equal society means low growth and an unequal society means high growth? What has recent years of data shown us?

In an article yesterday entitled “How inequality and low wages can stall growth”, Professor Linda Lim cited numerous studies from IMF and OECD and they all reaffirm research results that “on average, higher income inequality is associated with slower gross domestic product growth”.

It bears repeating that the above studies show that higher income inequality means slower GDP growth (not higher growth). And Prof Lim said: “This contradicts the earlier standard economic belief that inequality contributes positively to economic growth, by providing both the motivation and means to work hard and invest more for higher returns.”

It also runs counter to LKY’s equation above.

The reason for such slower growth is that as automation replaces workers, it also depresses their wages. In addition, globalisation has further depressed wages as workers in high income countries like ours are unable to compete with lower-wage foreign workers and lower-wage immigrants.

According to the article, “globally, wage share of GDP has been falling since the 1970s while the share that goes to capital, or corporate profits, has risen.”

This is the result of the top 1% gaming the system by paying themselves high salaries and bonuses and raking in “monopoly returns on scarce land, property and other “non-productive” assets – which are not invested in increasing productive capacity, so they do not raise productivity and wages.”

Professor Lim also observed that “corporate decisions – such as share buybacks, mergers and acquisitions, and cost-cutting – that push up stock prices but discourage long-term investments in increasing productivity and innovation” and this further cuts the wage share of GDP.

As such, if you put the pieces together, what you get is a vicious cycle played out in this manner: lower wages means weaker aggregate demand, and weaker aggregate demand means less incentive for businesses to invest. And this is one of the reasons why high inequality means slow growth.

So, LKY may have a point about the good gene pool (with important caveats of course), incentivizing the top and pacifying the bottom to preserve unity, and the unavoidable atas composition of the elitist, but recent trends/studies have contradicted the simplistic equation that unequal society means high growth, at least not in the long run in an already matured economy.

For automation, globalisation, financialisation, rent-seeking behaviour, excessive salaries and compensation, stock prices hike via merger and acquisition, investment in non-productive assets and a slump aggregate demand due to depressed wages have all conspired to stall growth in an already highly unequal society like ours.

At some point, inequality comes as an insidious drawback of growth, and not its unintended partner or ally, or out of necessity.

And it is surely not about no growth, but what growth, and how to get there, and not about blind growth, at all costs, and hoping that the top can generously share the economic pie with the bottom – history has proven quite otherwise with compliment of our human nature.

In conclusion (in the article), Professor Lim observed that “inequality in Singapore now ranks among the highest of other high-income countries” and even with “many policies recommended to reduce inequality, such as public investments in health and education which reach children from lower socio-economic backgrounds, heavy state investments in public housing and subsidised social services for qualifying populations,…yet inequality remains stubbornly high and social mobility is declining.”

She ended with this caution: “This is clearly an issue that merits further examination.”

Channel Newsasia, May 2018

So, let me end too with this tenuous hope: when Ong Ye Kung talks in May about “tackling inequality” as an “unfinished business,” which requires “ceaseless striving” to close the income gap, strengthen the middle income core, and increase social mobility and social mix, I hope he will be going beyond the rhetoric to ensure that the majority at the bottom gets to share in the economic feasting at the banquet table of growth, and not wait by the side for the crumbs to fall gratuitously from the top dogs.

Most importantly, I hope he is not barking up the wrong tree. Cheerz.

This article was first published on Spittle Splat. We thank the author for his permission to publish it here.