Free Flow II

Paul Krugman - Rare and Foolish

Comments:

Bill Pieper

Taiwan
October 18th, 2010
12:13 pm

While the behavior of the PRC government may well be despicable, one almost has to admire how they consistently school western “barbarian” nation, especially the oafish Americans, at nearly every turn. This time they might have overreached, but so what. They have gotten what they want and can sit back while the US officials wring their hands, desperate not to upset their mighty corporate pay masters with a response deemed too harsh. The hand wringers will of course be fully supported by an army of allied ideological warriors from DC think tanks, universities, federal regulatory sleeper cells and elected/selected members of Congress on both sides of the aisle.

The Chinese are masters of two classic strategic and tactical policies used in concert and with complimentary effects. One is divide and conquer, that is, pitting nations which should be naturally allied against the PRC to instead quarrel with one another. This is frequently accomplished by pitting the US exporters and financiers against their European counterparts for example. The other is to exploit an opponent’s weakness, using it as a weapon. In the case of United States, the weakness would be the American slavery to an ideology of “free” trade and unrestricted capital flow; an ideology that provides a near perfect cover for unfettered greed on the part of the nation’s political and financial class. In a hyper-financialized oligarchy such as the US, this fanatic devotion to ideology has benefited a handful of players enormously, while contributing greatly to the ongoing decimation of the middle class.

After the epidemic of tainted products from China, toys poisoning children, toxic drywall, pet food, bad baby formula (presumably none of which reached American shores) etc., etc., a responsible government would have simply imposed a flat out ban of any product that can be consumed, worn or used to build homes until the Chinese government can demonstrate that it has the ability and the will to police its own manufacturing industries. If the US had a government that cared about its people and actively worked in their long term interests, such a ban would have been in place years ago. As far as I can tell it would be perfectly legal within the framework of WTO and other international trade agreements to do so, since public safety interests trump trade deals. In fact, I imagine that if the shoe were on the other foot and US companies had routinely shipped tainted and dangerous products to the Chinese, the PRC would have stepped in and halted such trade until the US can prove it is a responsible trading partner.

The REE debacle illustrates an alarming trend that has been going on for decades. The loss of REE processing resources will take years to replace, so even if mining commences tomorrow, the ore cannot be processed until the plant and expertise is in place. But it is not just rare earths that should concern Americans. When a nation loses its ability to create things, even non-strategic industries will decline over time because there is a lot to learn by making stuff.

Even when products are produced using high level design, creation and engineering talent located in the US, many innovations in process and design are taking place in the locations that actually manufacture the products. The US is losing the “culture” of manufacturing, a culture that contributes to improvements of the products being produced. In addition to this, there is an enormous amount of technological transfer and outright theft of intellectual property from western companies going on, especially in China where western companies are forced to partner with local operations to produce at least some components. These local partners will flat out steal patented technology, even highly sensitive defense related technology, all while being protected by political allies in the PRC. The western companies go along with these risks and costs because they either feel they have no choice in order to remain competitive, or they are eyeing the alluring and thus far illusive carrot of a billion person market. Some companies are finding out too late that it has simply not been worth the cost. But the C-level managers who made the decisions to go to China in the first place - as well as their eager financier partners - have long since made their millions and care not a bit about the costs to their home countries and fellow countrymen.

Paul Cohen

Hartford, CT
October 18th, 2010
12:34 pm

Paul,

There are already too many conflicts around the world that could embroil everyone. We are fighting two endless wars to protect our access to oil, without which, our mighty military machine would collapse. Now you want to escalate tensions with China because they won’t share their rare-earth materials? Let’s throw in Panda Bears. And hey, they have the Great Wall for tourism too. We need to end our colonial foreign policy, not extend it. The greed and selfishness (the ever escalating concentration of wealth flowing to the top) of Corporate executives is the reason we export jobs to exploit cheap labor. If there were a more equitable distribution of wealth in this country, Americans could support demand without having to cut jobs and the opportunity for amassing wealth would still flourish. I’m a bit surprised at the hawkish tone of this piece.

19 October 2010

Middle Class

President Obama on Small Business Jobs & Tax Cuts: "We Don't Have Time for Any More Games"

Posted by Jesse Lee on September 15, 2010 at 06:05 PM EDT

Having just emerged from a Cabinet meeting focused on getting every agency doing all they can to help America create jobs, the President zeroed in on two major fights for the middle class.

The first was the long-overdue breaking of the Republican blockade against help for small business -- for which he thanked the two Republican Senators who stepped up and abandoned their party's parliamentary gimmicks. The second was the ongoing attempt by Republicans in Congress to hold middle class tax cuts hostage to additional, excessive tax cuts for the very wealthiest Americans.

And while I am grateful for this progress, it should not have taken this long to pass this bill. At a time when small business owners are still struggling to make payroll and they’re still holding off hiring, we put together a plan that would give them some tax relief and make it easier for them to take out loans. It’s a bill that’s paid for. It won’t add a dime to the deficit. It’s a bill that was written by both Democrats and Republicans.

Right now, we could decide to extend tax relief for the middle class. Right now, we could decide that every American household would receive a tax cut on the first $250,000 of their income.

But once again, the leaders across the aisle are saying no. They want to hold these middle-class tax cuts hostage until they get an additional tax cut for the wealthiest 2 percent of Americans.

We simply can’t afford that. It would mean borrowing $700 billion in order to fund these tax cuts for the very wealthiest Americans -- $700 billion to give a tax cut worth an average of $100,000 to millionaires and billionaires. And it’s a tax cut economists say would do little to add momentum to our economy.

Now, I just don’t believe this makes any sense. Even as we debate whether it’s wise to spend $700 billion on tax breaks for the wealthy, doesn’t it make sense for us to move forward with the tax cuts that we all agree on? We should be able to extend right now middle-class tax relief on the first $250,000 of income -- which, by the way, 97 percent of Americans make less than $250,000 a year. So right off the bat, 97 percent of all Americans would get tax relief on all their income. People who are making more than $250,000 a year, say, you’re making half a million dollars, you’d still get tax relief on half your income.

And everybody agrees that this makes sense. Middle-class families need this relief. These are the Americans who saw their wages and incomes flat-line over the last decade, who’ve seen the costs of everything from health care to college tuition skyrocket and who have been hardest hit by this recession.

Extending these tax cuts is right. It is just. It will help our economy because middle-class folks are the folks who are most likely to actually spend this tax relief -- for a new computer for the kids or for maybe some home improvement.

And if the other party continues to hold these tax cuts hostage, these are the same families who will suffer the most when their taxes go up next year. And if we can’t get an agreement with Republicans, that's what will happen.

So we don't have time for any more games. I understand there’s an election coming up. But the American people didn't send us here to just think about our jobs; they sent us here to think about theirs. They sent us here to think about their lives and their children’s lives, and to be responsible, and to be serious about the challenges we face as a nation.

That's what members of both parties have now done with the small business jobs bill. And I hope we can work together to do the same thing on middle-class tax relief in the weeks to come.

25 September 2010

NEW WORLD ORDER

18 August 2010

Putting Singapore’s GDP in perspective

By Furry Brown Dog

Supporters of the ruling party and status quo are fond of citing Singapore’s GDP per capita, one of the highest in the world as evidence that its government has done well. Measuring economic success by GDP has many disadvantages as various other netizens have elaborated. I don’t intend to add to those, but in this post I will endeavour to show how this metric is flawed even without disputing that GXP (where ‘X’ refers to any of various national income accounting measures) measures the economic well-being a country’s people.

In 1959, when the PAP first took power in Singapore, Singapore’s GDP per capita (US$2186) in constant 1990 USD (hence adjusted for inflation and PPP) was second only to Hong Kong’s (US$3027) and Japan (US$3554) in East Asia. In this respect, Singapore was already ahead of all the countries in East Asia including China and Taiwan, and South Korea. This did not change when Singapore split from Malaysia in 1965, GDP per capita at US$2667 was highest in the region excluding Hong Kong (US$4825) and Japan (US$5934). These figures are a far cry from the nominal US$500 GDP per capita in 1959 often cited by PAP supporters which ignores both PPP and inflation adjustment. Fast forward to 2008, Singapore’s GDP per capita has overtaken Japan (which was mired for a decade and has yet to recover) but still trails Hong Kong.

Secondly, it is misleading to use GDP per capita when comparing between countries because Singapore only comprises of a single city whereas larger nations have rural areas and smaller towns. A fairer standard of measurement would instead be between cities rather than countries adjusted for purchasing power. This gives rise to the measurement of gross metropolitan product (GMP) per capita , PPP. This measurement compares between cities and towns instead of between countries where the relative poverty of rural inhabitants would distort the measure of GDP per capita. Because PPP involves a routine measurement of a country’s consumer price levels, data is much harder to come by compared to nominal GDP.

The latest data I could find dates back to 2005. Singapore’s GMP per capita PPP when measured against other cities worldwide ranks only at 53rd out of 100 (many other cities above belong to the same country), whilst not a bad showing is far from its spectacular perch of 9th ranking if one considers ranking by country only. This is certainly nothing to crow about.

Lastly, GDP (per capita) suffers from the fatal flaw as a economic indicator because it does not subtract profits earned in Singapore but which is remitted back to foreign shareholders and foreign investors. It also ignores incomes sent back by Singaporean corporations overseas. A more appropriate measure would be gross national product (GNP), which measures national income and profits held by Singaporean firms and residents (citizens + PRs) only. The latest figures for 2009, show that Singapore’s GNP for that year was S$182.536 bn, compared to its GDP of S$265.057bn. In other words, total income and profits for 2009 earned by Singapore residents and firms is only a mere 69% of GDP; the remaining 31% is repatriated overseas.

How does this compare to other countries? Expressing GNP as a proportion of GDP and ranking all the countries worldwide shows that Singapore is ranked only at 32nd place (figures appear to be dated 2007):

If you’re wondering how impoverished countries like Seychelles and Djibouti could rank above Singapore, remember we’re not talking about GDP or GNP (per capita) here as an absolute measure, but instead GNP as fraction of GDP. Such a metric is a loose way of determining how much of economic growth is generated by local employees and firms, while netting out foreign contributions. Singapore doesn’t appear to fare particularly well in this category, which likely reflects its over-dependence on foreign-owned corporations (MNCs) and the lack of a strong local economy and comparatively minor contributions to national income of Singapore firms which have ventured overseas.

Update 7th Aug: A commenter named Jason pointed out that the numbers seem off because it only lists 3 countries worldwide as having greater GNI than GDP, which doesn’t make sense since total world GNI and GDP should theoretically equate. So I went to look for another more reliable source and settled on World Bank figures here. More specifically I used GNI Atlas and GDP current US$.

Using data for both GNI and GDP for the year of 2007, and excluding countries for which no GDP and/or GNI figures are provided (for 2007), Singapore ranks about 138th place out of 183 countries worldwide for GNI/GDP:

Here’s the raw data which I used for those who want to see the full ranking. So while the earlier data is off, my conclusion doesn’t change, since Singapore’s ranking according to World Bank figures is even worse.

PS. The GNI data from the World Bank uses a special Atlas method which smoothens out exchange rate fluctuations and inflation over a few years, whilst the GDP figures are stated in USD terms for the exchange rate of a single year. This may account for some of the discrepancies observed. So like many things in economics, it serves as a reasonable first approximation, but certainly far from ideal. Cross-country comparisons are difficult, I’ll grant you that.

07 August 2010

By Alex Au

Domestic costs drive inflation, not import prices

For a long time, the Monetary Authority of Singapore (MAS), our central bank, has used the management of the Singapore dollar exchange rate as the chief tool to influence inflation locally. It argues that since Singapore’s economy is so open to external trade, inflation tends to come in via rises in prices of imported goods. By shifting our exchange rate up or down, MAS compensates for changes in import prices, thus moderating inflation.

An economist from the National University of Singapore says this is less than half the story. His conclusion is that managing the exchange rate is not good enough for the task.

In an article published in the Straits Times, 29 July 2010 (headlined: Rising Sing$ may not keep prices low), Tilak Abeysinghe dealt with the question: Why are consumer prices rising while the Singapore dollar is appreciating and import prices are falling?

His answer opened with these words:

" From 2006 till last year, consumer prices rose by 3.1 per cent annually while import prices fell by 2.3 per cent. Last year alone, import prices fell by a hefty 8 per cent, while consumer prices went up by 0.6 per cent. The general trend of import prices since 1981 has been downwards and consumer prices upwards. Given Singapore’s extreme dependence on imports, this has puzzled some.

My co-researcher Choy Keen Meng and I examined this puzzle and found, somewhat unexpectedly, that non-tradeables account for 55 per cent of Singapore’s consumer price inflation, while import prices account for the rest. "

Further down, he explained what he meant by non-tradeables. These include labour costs, rental and storage costs, government fees and charges and so on, he explained.

What he is saying therefore is that even as we manage to enjoy lower import prices through the deliberate strengthening of the Singapore dollar, this is more than wiped out by increasing domestic cost elements such as salaries, rents and payments to the government. The result is that we still continue to suffer inflation.

So why not strengthen the dollar some more until it balances out domestic cost increases? There’s a limit to how far the dollar can strengthen; at some point, it will severely affect our export competitiveness.

Abeysinghe was too polite to discuss the far-reaching implications of his findings, especially on policy, but they are not hard to see.

Firstly, the long-standing belief that inflation is mainly the result of external price movements may have blinded our policy-makers to the true impact of domestic cost pressures. Has our government been raising fees and charges, and pushing up land prices in the mistaken belief that these do not have much impact on inflation?

Secondly, if salaries are another domestic cost component that has been pushing up prices of goods and services in Singapore, this begs another question: whose salaries? In 2009 when we faced a worldwide recession and Singapore’s GDP contracted an inflation-adjusted 1.3 percent, the median household incomes of all sectors (by housing type) fell. However, those living in more modest homes suffered the greatest contraction in income. Here are data from a paper titled Key Household Income Trends 2009, from our Statistics Department.

What you see in the table is part of a much longer trend wherein the income gap widens year after year. There is a tendency for salaries to increase more for those already earning more, or in the case of 2009, to decrease less when bad times hit. But salary-rises feed into overall inflation, and inflation affects the poorer segments of society disproportionately. This is because they spend a larger portion of their income. The rich save a substantial part of their income, putting it into interest-bearing or dividend-producing assets.

Then there is the huge influence that the government has over land prices. They impose massive redevelopment charges when an owner wishes to redevelop a piece of land for more intensive use while empty parcels of land are not auctioned off until a minimum bid price is reached. This minimum bid price appears to be quite arbitrarily set. Between them, the ever-rising cost of land results in rents going up inexorably, cyclical downturns excepted.

In turn, land for public housing are then revalued to catch up with notional “market” values (which as explained in the preceding paragraph are heavily affected by government action), and the selling prices of flats marked up accordingly.

In other words, the government’s failure to act effectively on inflation hurts the less well-off particularly hard. The belief that tackling inflation is a job that can be left to the MAS managing the exchange rate is misplaced. There are plenty of domestic cost pressures, many related to government policies, that have a greater effect.

03 August 2010

Regressive Taxation and Fiscal policy

Martin Wolf:

The political genius of supply-side economics

July 25, 2010

The future of fiscal policy was intensely debated in the FT last week. In this Exchange, I want to examine what is going on in the US and, in particular, what is going on inside the Republican party. This matters for the US and, because the US remains the world’s most important economy, it also matters greatly for the world.

My reading of contemporary Republican thinking is that there is no chance of any attempt to arrest adverse long-term fiscal trends should they return to power. Moreover, since the Republicans have no interest in doing anything sensible, the Democrats will gain nothing from trying to do much either. That is the lesson Democrats have to draw from the Clinton era’s successful frugality, which merely gave George W. Bush the opportunity to make massive (irresponsible and unsustainable) tax cuts. In practice, then, nothing will be done.

Indeed, nothing may be done even if a genuine fiscal crisis were to emerge. According to my friend, Bruce Bartlett, a highly informed, if jaundiced, observer, some “conservatives” (in truth, extreme radicals) think a federal default would be an effective way to bring public spending they detest under control. It should be noted, in passing, that a federal default would surely create the biggest financial crisis in world economic history.

To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: “supply-side economics”. Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets. Supply-side economics said that one could cut taxes and balance budgets, because incentive effects would generate new activity and so higher revenue.

The political genius of this idea is evident. Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?

How did supply-side economics bring these benefits? First, it allowed conservatives to ignore deficits. They could argue that, whatever the impact of the tax cuts in the short run, they would bring the budget back into balance, in the longer run. Second, the theory gave an economic justification – the argument from incentives - for lowering taxes on politically important supporters. Finally, if deficits did not, in fact, disappear, conservatives could fall back on the “starve the beast” theory: deficits would create a fiscal crisis that would force the government to cut spending and even destroy the hated welfare state.

In this way, the Republicans were transformed from a balanced-budget party to a tax-cutting party. This innovative stance proved highly politically effective, consistently putting the Democrats at a political disadvantage. It also made the Republicans de facto Keynesians in a de facto Keynesian nation. Whatever the rhetoric, I have long considered the US the advanced world’s most Keynesian nation – the one in which government (including the Federal Reserve) is most expected to generate healthy demand at all times, largely because jobs are, in the US, the only safety net for those of working age.

True, the theory that cuts would pay for themselves has proved altogether wrong. That this might well be the case was evident: cutting tax rates from, say, 30 per cent to zero would unambiguously reduce revenue to zero. This is not to argue there were no incentive effects. But they were not large enough to offset the fiscal impact of the cuts (see, on this, Wikipedia and a nice chart from Paul Krugman).

Indeed, Greg Mankiw, no less, chairman of the Council of Economic Advisers under George W. Bush, has responded to the view that broad-based tax cuts would pay for themselves, as follows: “I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.” Indeed, he has referred to those who believe this as “charlatans and cranks”. Those are his words, not mine, though I agree. They apply, in force, to contemporary Republicans, alas,

Since the fiscal theory of supply-side economics did not work, the tax-cutting eras of Ronald Reagan and George H. Bush and again of George W. Bush saw very substantial rises in ratios of federal debt to gross domestic product. Under Reagan and the first Bush, the ratio of public debt to GDP went from 33 per cent to 64 per cent. It fell to 57 per cent under Bill Clinton. It then rose to 69 per cent under the second George Bush. Equally, tax cuts in the era of George W. Bush, wars and the economic crisis account for almost all the dire fiscal outlook for the next ten years (see the Center on Budget and Policy Priorities).

Today’s extremely high deficits are also an inheritance from Bush-era tax-and-spending policies and the financial crisis, also, of course, inherited by the present administration. Thus, according to the International Monetary Fund, the impact of discretionary stimulus on the US fiscal deficit amounts to a cumulative total of 4.7 per cent of GDP in 2009 and 2010, while the cumulative deficit over these years is forecast at 23.5 per cent of GDP. In any case, the stimulus was certainly too small, not too large.

The evidence shows, then, that contemporary conservatives (unlike those of old) simply do not think deficits matter, as former vice-president Richard Cheney is reported to have told former treasury secretary Paul O’Neill. But this is not because the supply-side theory of self-financing tax cuts, on which Reagan era tax cuts were justified, has worked, but despite the fact it has not. The faith has outlived its economic (though not its political) rationale.

So, when Republicans assail the deficits under President Obama, are they to be taken seriously? Yes and no. Yes, they are politically interested in blaming Mr Obama for deficits, since all is viewed fair in love and partisan politics. And yes, they are, indeed, rhetorically opposed to deficits created by extra spending (although that did not prevent them from enacting the unfunded prescription drug benefit, under President Bush). But no, it is not deficits themselves that worry Republicans, but rather how they are caused: deficits caused by tax cuts are fine; but spending increases brought in by Democrats are diabolical, unless on the military.

Indeed, this is precisely what Jon Kyl (Arizona), a senior Republican senator, has just said:

“[Y]ou should never raise taxes in order to cut taxes. Surely Congress has the authority, and it would be right to — if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending, and that’s what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans”

What conclusions should outsiders draw about the likely future of US fiscal policy?

First, if Republicans win the mid-terms in November, as seems likely, they are surely going to come up with huge tax cut proposals (probably well beyond extending the already unaffordable Bush-era tax cuts).

Second, the White House will probably veto these cuts, making itself even more politically unpopular.

Third, some additional fiscal stimulus is, in fact, what the US needs, in the short term, even though across-the-board tax cuts are an extremely inefficient way of providing it.

Fourth, the Republican proposals would not, alas, be short term, but dangerously long term, in their impact.

Finally, with one party indifferent to deficits, provided they are brought about by tax cuts, and the other party relatively fiscally responsible (well, everything is relative, after all), but opposed to spending cuts on core programmes, US fiscal policy is paralysed. I may think the policies of the UK government dangerously austere, but at least it can act.

This is extraordinarily dangerous. The danger does not arise from the fiscal deficits of today, but the attitudes to fiscal policy, over the long run, of one of the two main parties. Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic.

In sum, a great deal of trouble lies ahead, for the US and the world.

Where am I wrong, if at all?

02 August 2010

Free Flow

Paul Krugman: Making Financial Reform Fool-Resistant

Reader's Comment

Joel L. Friedlander
Plainview, New York

One fellow says to restore Glass-Steagall. He is of course correct. There is an idea running around America that it is our unrestricted market that promotes creativity in American Science, American Business, American Medicine, and American Industry. This is of course baloney. Our scientists, who are not really well paid at all, work primarily because of their innate curiosity, their intellectual drive, their altruistic motivation to make the World a better place, and their interest in improving the condition of humanity. A true free marketeer would argue that those motivations are not what runs America, but he or she would be wrong. The great discoveries that have come from America have come from the freedom to act upon your talents and skills, not upon your ability to make fortunes of money. Those who say otherwise are dancing around the golden calf.

The rigid insistence of the financial system in America to have its pound of flesh in financing any new scientific idea is what has driven the production and distribution of the products of those ideas out of America to China, Japan, and elsewhere. We discover and then the products are made elsewhere. They are made elsewhere because our "Bankers" will only finance a new idea by sucking the future blood out of it. Our greed, avarice, and cupidity do not drive our system of creation and production, they drive it out of our country.

America is not great because of unrestricted capitalism, it is great in spite of unrestricted capitalism, and the tide is turning.

Mark my words, if we allow the continuation of the past 40 years we will be living in a banana republic and when it all comes crashing down the very rich will become expatriates; the rest of us will be left to pick up the pieces. Capitalism cannot be unrestricted because greed and stupidity are always uncontrollable.

Bill Pieper
Taiwan

Robert Reich is also not at all impressed with the proposed bill in either the House or Senate. From his blog Professor Reich states “More fundamentally, neither bill begins to rectify the basic distortion in the national economy whose rewards and incentives are grotesquely tipped toward Wall Street and financial entrepreneurialism, and away from Main Street and real entrepreneurialism.”


This issue requires more than mere reform. It goes to the heart of how work and effort are rewarded in the modern economy. The enormous leaps in worker productivity we have witnessed over the past two decades have had little or no positive effect on the incomes of the workers responsible for the gains. It is precisely this “financial entrepreneurialism” that is responsible for funneling the corresponding rewards to a tiny number of uniquely advantaged people - a privileged class who seem to have no limit to their cynical contempt of people struggling to contend with the mess they have made.


And why are we like that ?

Dr Wong Wee Nam

Big Rats and Fat Cats

Exploitation of the poor by the rich and powerful is innate in human nature. It has existed ever since human beings became civilized. It existed more than 3000 years ago and it is still present today. It is, therefore, to be expected that the poor will continued to be bullied by the rich, the weak to be oppressed by the powerful and the workers will be exploited by the unscrupulous employers in the future.

Confucius, the wise man, saw this flaw in man. Thus in his compilation of poems known as the Book of Songs 诗经, he had included a folk poem that carries a desperate cry of the human heart against the callous injustice of the inhuman greed. He felt that man needs to be educated and be constantly made aware of his flaw.

The title of the poem is Big Rat 硕鼠 and it goes like this:

硕鼠硕鼠，无食我黍！
三岁贯女，莫我肯顾。
逝将去女，适彼乐土。
乐土乐土，爰得我所！
硕鼠硕鼠，无食我麦！
三岁贯女，莫我肯德。
逝将去女，适彼乐国。
乐国乐国，爰得我直！
硕鼠硕鼠，无食我苗！
三岁贯女，莫我肯劳。
逝将去女，适彼乐郊。
乐郊乐郊，谁之永号！

Crudely translated, it reads:

Big Rat O Big Rat, eat no more our millet!
Three years we have fed and kept you alive, yet not a care you shown us.
We swear that we’ll leave you, to look for that Paradise.
Paradise O Paradise, thereupon the only place we can stay!

Big Rat O Big Rat, eat no more our wheat!
Three years we have fattened you, yet no kindness you have given us.
We swear that we’ll leave you, to look for that Paradise on Earth.
Paradise on earth O Paradise on earth, thereupon the only place we can depend!

Big Rat O Big Rat, eat no more our seedling!
Three years we have nourished you, yet no gratitude from you we received.
We swear that we’ll leave you, thereupon to look for a happier plain.
Happier Plain O Happier Plain, where none will groan and whine!

That a poem, crying out for justice, written over three thousand years ago could find a place in Confucius’ canonical Book of Songs, suggests its importance in Confucian values. In Confucian thoughts, oppressors and exploiters are despicable creatures — just like the Big Rat portrayed in the poem, eating away the production of the farmers who were struggling to survive.

In life, this truth remains: oppression of the weak and the poor is the reality of life and Utopia is a dream of the sufferers.

From the poem we can see that the greed of the Big Rat is insatiable. For many years it scrounged on the poor farmer, first feeding on the millet, then the wheat and finally even eating up the seedlings. Yet during the time it was helping itself to the labours of the peasant, it did not show any kind of care, compassion or gratitude to its benefactor.

As for the poor fellow, he could only dream of a Utopia or an earthly Paradise that he could stay or depend upon for a decent life. In the end, he gave up such dreams and just hoped to migrate to a nicer place where he need not have to groan and complain.

The Present Society

In this present modern world, we no longer call such people Big Rats. Instead we termed them Fat Cats. Like the Big Rats, the Fat Cats, too, show the same insatiable greed for profit and the same lack of social compassion for workers who have contributed to their obesity.

What is a Fat Cat? As described in The Economist, he is just a rich, greedy person who, due to ownership of large amounts of capital, is able to “live easy” off the work of others. He is, therefore, very much like Confucius’ Big Rat. It is also used loosely to describe any obscenely paid person who still thinks he is not paid enough.

Don’t expect many Fat Cats to have a social conscience. This is because the aim of Fat Cats is to make money and not to provide social services. They lobby governments to influence policies and wring concessions from workers in order to maximise profits.

Fat cats do not care about widening of the income gap because they believe they deserve they indecent pay. Some even think they are underpaid! They do not care for the fact that if a smaller and smaller percentage of the population is getting a larger and larger proportion of the national income and assets and a large percentage of the population are sharing a meagre proportion of the leftovers, there is going to be a potential social problem.

Fat cats are found everywhere, even finding their way into social and charitable organisations. Furthermore, their income is recession-proof. In the 1st April 2010 issue of The Sun, reporting on the Rise of Fat Cats in Britain, the Taxpayers’ Alliance’s John O’Connell said: “Town hall bosses have had a very good recession at taxpayers’ expense.” (See Here)

Role of Government

The poor will only get a fair share of the economic pie through a just re-distribution of income. The only way to re-distribute income is through public policies and laws. Unfortunately the problem is that most of the people who are in the position to influence, initiate or implement the changes are members of the tiny apex who have the largest share of the national income. Unless one is very altruistic, who would want to come out with an equitable system especially when it means affecting one’s self-interest? It is natural for anyone in this position to believe completely the virtue of Adam Smith’s “invisible hand”.

Big businesses and corporations love to wave the flag of globalisation, free market and competitiveness. This is because the wages of the workers can always be kept low by making them compete against foreign workers that can be imported from the part of the world where many people are still hungry. They can easily wring concessions from workers with the threat of relocation. Conversely, no worker can hope to wring concession from the bosses with the threat of resignation or emigration.

The power of big corporations and businesses can also be be seen in Singapore. Thus when companies do not make profit, they can put pressure to cut the workers’ salaries so that they can still be profitable. If the profit is not attractive enough, they can exert pressure to bring down the corporate tax rates.

In the end not only do they pay lower taxes, the tax payers’ money that is used to produce skilled workers, good infrastructure and a safe environment for these companies will be raised through the GST that is paid by everyone.

In a just and equal society, the role of the government should be to act as a regulator to balance the needs of the people and the greed the big businesses. Its job should be to iron out any kinks that may give rise to injustice and conflict and to re-distribute wealth in a fair manner. Its policies should not favour one side or the other. It cannot play such role if it decides to go into business and become a Fat Cat itself.

For a just an equal society, a government must be able to control the greed of the Big Rats and trim the fat of the Fat Cats instead of justifying the necessity of their existence.

A benevolent government is the basis of Confucian teaching, Mencius said :“民贵，社稷次之，君为轻。” meaning “The People come first, the country next and the ruler last”. Confucius obviously did not preach authoritarianism, otherwise the quote would have read the other way round.

We believe in Confucian values, don’t we?


08 April 2010