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Return to normal office life is a return to an economic model that is losing value

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I went to the office this morning to find that the train system was on the blink again. People were having to leave the stations to get onto buses to get back to their favourite place – the office. The breakdown in the train system coincides with the announcement that Singapore will be taking yet another step to returning to “normal” and that “work-from-home” systems, which had been in place, would no longer be the “default” mode.

I guess people are happy to return to normal. After all, working from home and attending endless Zoom meetings could be stressful. In China, the birthplace of the virus and the concept of lockdowns, there was a surge in divorce cases as couples couldn’t take the stress of being with each other 24/7. I guess, to many, returning to the office could feel like returning to normal life.

However, the broken train system coinciding with the return to “normal” of going back to the office made me realise one thing: Our “normal” pre-Covid economic model was pretty much like the train system – still functioning but increasingly faulty. And, instead of trying to fix the fundamental problem, the powers running the economic model were behaving like the train operators arranging for emergency buses – slapping on a band-aid instead of fixing the fundamental problem.

Like our train system, the economy looks good on the outside and still hums along nicely, compared with quite a few other places. However, like the system, a large part of the economy was built for a different era. And there have been notable breakdowns in the economy in the same manner that there have been notable breakdowns on the MRT. Our economic managers have behaved in the same way as the MRT managers rushing emergency buses to the stations – slapping on band-aids instead of looking for fundamental problems and fixing them. As a small nation, Singapore cannot afford to rest on the idea, “The system is still better than elsewhere.” This thinking is a recipe for future problems.

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The problem with the MRT is simple. The original system was built back in 1987 when our was a shade under three million (2,775,000) and it grew to around 3,047,000 in 1990, which is an increase of 272,000 people in three years. This is roughly 90,000 a year or less than one per cent a year. In 2004, when a new Prime Minister came into power, our was 4,167,000. In 2007, our population reached 4,589,000, an increase of 422,000 in three years. Our population growth between 2004 and 2007 was steeper than that of Hong Kong (which has an influx of migrants from China, which is a stone’s throw away) and Kuala Lumpur.

Photo: Google

The majority of the population growth came from migration. The logic behind opening the doors to migration was simple – economic growth. The logic was simple — with more people, there would be more money. More people would give local businesses more customers and there would be a larger labour force.

The MRT system was built to withstand the influx of people, but instead of choosing engineers to fix the basic rail system, successive SMRT CEO’s were given the mandate to make more money from the retail operations. That benefited the shareholders (the largest shareholder at the time being Temasek Holdings, which has since bought SMRT).

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Call it a coincidence, but how is it that there were no breakdowns when Covid restrictions were in place and fewer people used the system? Now when the restrictions are being lifted and more people using the system, it breaks down again.

Something similar could be said about the economy. Our economy was built on being the centre of everything. First, it was manufacturing, where the key was to attract multinationals to build big factories. Then, it was finance, where multinationals were encouraged to set up huge, gleaming offices to be regional headquarters. This model did provide lots of jobs for a while. It gave Singapore plenty of shiny buildings and made vast fortunes for Singapore’s landlords (the largest being the government, Far East Organisation and Hong Leong Group).

However, just as our MRT system was not prepared for an influx of customers, the economy never factored the rise of cheaper manufacturing centres in the region like China and increasingly Vietnam as well as rival financial centres. The economic solution has consistently been the same – tax breaks and credits for investors willing to set up shop to build big factories and/or to rent expensive properties.

Unfortunately, there are limits to this. Covid-19 forced businesses to work differently. Remote working had to become a fact of life, and suddenly, there was no need to house people in expensive offices. Entrepreneurs found that they could work without interruption. Small-time start-ups, which are the backbone of any economy, had a way of doing things without having to take on the crippling cost of criminally high rentals to unproductive organisations.

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Instead of encouraging this movement to develop, the Government remained focused on the glamorous parts of the economy that centred around big offices. Sure, I can understand that there was a need to help businesses get through the early stages of Covid-19. However, instead of trying to encourage the return to normal, more could have been done to create an economic model that worked for Singapore and for as many of her residents as possible. Missing that opportunity to create something new is a pity.

This article first appeared at https://beautifullyincoherent.blogspot.com/Follow us on Social Media

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