
sm
Oolong the Rabbit balances a smaller toy version of himself on top of a pancake on his head.
Harvard professor Michael Porter, head of the Institute for Strategy and Competitiveness at Harvard Business School, recently addressed the Lee Kuan Yew School of Public Policy. A recent article on TODAY shows his reiteration of the “it’s time to try something new” theme. Rather than quote the entire article (which is worth reading by the way), I will summarize it as follows
The bottom line is that the “old formula won’t work any more”: historically important drivers of growth have already reached a reasonable peak in terms of contributing to economic developement, or (worse) are passé and cannot be relied on.
The traditional factors of growth covered were:
- Foreign direct investment (FDI): in soliciting large multinationals, SMEs (small and medium enterprises) have been neglected.
- (International) trade: for every dollar produced in Singapore’s GDP, foreign trade contributes $3.69.
- Efficiency-driven business practices.
- Government-driven resource mobilization and top-down economic development policies.
- Focus on goods, rather than services.
Porter goes on to state the obvious, that
We need the private sector to start initiating things for itself because that’s the only way to be fundamentally successful.
The efficiency angle is also worth noting. With rising cost of living comes natural price pressure to increase salaries, and hence cost of labor. Government manipulation via mandating wage freezes, setting the trend with public sector wages, and tinkering around with CPF contribution percentages can only go so far to control the cost of labor; already people are getting the feeling of being shortchanged and woefully underpaid. But we are stuck in the uneasy liminal régime of being too expensive for low-level button-pressing, wrench-turning manual labor, but being severely inadequate in managing the “high-value” jobs that require quick thinking, flexibility and risk-taking. Porter states this as
Singapore understands it can no longer compete on being an efficient place in order to do business. Increasingly, it has to be a knowledge-based, differentiation-based, innovation-based economy. That’s a very challenging transition[...]
In a previous era, it may have been your efficiency and your cost structure. Today, increasingly it’s the skill and education level of your workforce that allows you to compete for high-value (sic) activity that pays a good wage.
All in all, a sobering message for policymakers and the Singaporean workforce. For the policymakers, it’s to step aside, stop the Keynesian madness and go all-out to nurture the long-neglected domestic economy. For laborers, it’s upgrade your skills set or perish under the auspices of Social Darwinism.
Read the rest of this entry »
Footnotes