1/02/2009
Market Pricing and market economy
I have posted many times, and most of you are aware of my views and orientation with respect to market pricing and market economy. I always believe in moderation, market pricing with a little govt interference without allowing extremism to push things too far. The pricing of HDB flats, medical fees, and all kinds of services are gradually moving towards full market pricing in a market economy and it is something I don't agree and don't feel comfortable with.
My position is that the govt must always work for the betterment of the people and a market economy running along market pricing is only as good as long as it is good for the people. If it is good just to make more profit at the people's expense or causing more hardship to the people, then it is not good no matter how fair it is claimed to be. The govt must always be for the people. The profit made must also be for the people. The money made from the people must not be excessive. There is no point in hoarding a huge reserves when the reserves are not managed for the interest of the people.
As the govt edges further and further towards a full market economy, many policies will eventually be market driven. Good or bad is not an issue. Here we have a govt that makes it very clear of its philosophy and policies. There will be people who agree and support such philosophy and policies. There will be people who don't agree.
It is good that the govt takes on such a position, clear and transparent. It allows the people to understand how such policies will work out and how they will be affected in the process. The people can then make an informed choice of whether this is what they want. And it will be good if there are alternative parties presenting alternative models for the people to choose from.
For the dogmatic and party loyalists, they may want to view the alternatives as a for me or against me ala the idiot called George Bush. This is a very narrow minded way of how a country and its people should evolve. In a democracy, it is the people's choice and not a matter of you are my friend or my enemy.
I am not sure how many of you are in favour of this trend of market pricing. I know that some are for it and some are against it. While we are discussing such issues, let's be more objective and mature and avoid behaving like kids. It is not a crime to disagree with the policies of market pricing. Neither is it a vindication of goodness to support it.
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25 comments:
My humble personal view is that it is not practical to talk about market pricing in Singapore as it is a completly distorted market place.
The pre-condition towards a free market is that there must be free and fair competition,and the regulators would see to it that the competition to,as much as possible,free and fair.
The rough estimate of Spore economy is about 40% MNCs which operate under global competition rule and have complet freedom to abondon Spore when they do not find it profitable.
40% under government & GLCs which basically operate under monopolistic situation and are not subject to much market competition.
The rest,SMEs,yes they are having competiton,and most of them would disappear within the next few years,under current policies.
The problem with Singapore is that the top production factor,land is under the control of PAP government which makes max use of it to enrich the treasury.
An example is HDB,which buy land fr SLA(Spore Land Authority)that explains why PAP can look into yr face and declare that HDB is losing money building for you,but they do not tell you how many billions HDB paid to SLA to buy over the land.
Not only that,PAP being a rich government,see it fit to open up the residential sector for foreigners to buy,this increase the demand side but make it very expensive for biz to operate here,one of the main reasons why medical service is high is due to high renatl charged by the land lords.
One more example is that PAP,being the biggest land owner in Spore,does not practise true market principle.
What I would mention is the reserve price set in land tender,they maintain the reserve price and withdraw the said land under tender process when bid prices fall below reserved price.
In this way,the government artificial jack up the land price as it is not a commercial enterprise and never have any urgent need to sell off the land to raise money.
The ceiling is thus under control of PAP government with the overall result that high rental is a killer for biz in Singapore.
It is fair to say that at one time,PAP itself realised the importance of competition.This resulted in the duopoly and tripoly experiments currently exist in Spore.
Spore Tel,Star Hub,M1
SPH,Mediacorp
SMRT,TIBS
PUB,Energy Authority
Different power stations under electricity distribution and supply.
The interesting observation about this competition experiment is that there is but one man,or one clan who is from the same household,directing the competition.
The most interesting experiment is the tripoly competition in our banking sector,was it a right decision,I dont know but I know majority of bankers here do not like it,except the designated winner,DBS Bank which performed very badly,the worst of the big three.
We have now reached the stage where if property prices were to go down drastically, we would not be supporting HDB asset-enhancement upgrading schemes, because what enhancement is there to talk about if HDB prices were to fall below what you paid for?
On the other hand, what we are witnessing is that high land bid prices has been translated into high property and rentals and this is not good for business. Either way, something has to give sooner or later. The result or solution will not be pretty, you can be sure of that.
hi guys,
glad to know that you have a good grasp of the bigger picture. in our context, market pricing is really humbug. how could a controlled economy be paraded around as a market economy? some aspects are free market economy but many aspects are not.
now they are even doing away with explaining the cost of land etc. they just simply said that it is now irrelevant and prices should not be governed by the free market.
market pricing is at best a fallacy.
How do you extract yrself fr a bubble,sure,it would be ugly and it would be very ugly.
A few multi-millionaire property investors are already victims,more to come,that is for sure.
Why,simply because our per-capita income is much too low to support our would class pricing and life style
Average household income by decile:
(I believe that there is a new report fr DOS,but the basic info here stays relevant)
1st -10th 0
11th-20th $1,180
21st-30th $2,190
31st-40th $2,990
41st -50th $3,850
51st-60th 4840
61st -70th 5890
71st-80th 7260
81st-90th 9,300
91st-100th 16,480
http://www.singstat.gov.sg/ssn/feat/sep2005/pg1-7.pdf
the other question to ask is whether market pricing in hdb flats and hospitalisation fees good for the people. it is good for the bottom line definitely.
i have doubts about the stats. one senior hdb staff said the even young girls are earning more than $10k pm. and many of them.
and everyone knows that there are plenty of people earning $20K and $30k pm. then there are also many earning $100k or $300k or more a month. how can our 91-100th percentile be earning only $16.5k?
maybe the big earners are inhuman and not included in the stats.
Pl note that the household income survey in typical PAP style,does not differentiate between citizens and P.R.s,they are all classified under:Residents.
It is safe to assume that P.R.s households command higher ioncome from the local Spore citizens,I do not expect any PR famiy to have household income below S$3,000 per month fair?
So the picture is even worse,if you probe further and deeper.
But in typical PAP style,they give accurate figures,but only to the extent that they want to let you know,so in this case Residents,I have asked ICA,DOS for figures on Singapore citizens only,no response.
Of course,HDB has priced beyond the ability of ordinary citizens,just look at the household income,and you know most of our citizens would have a whole life trying to pay their mortgage.worst still,employment has never been so vulnerable,the chances of losing one's employment during a life of employment is truly high,or even unavoidable.
Not that PAP does not know,Minister Mah has openly declared a move back to 2,3 room HDB,so he admitted that we ought to go backwards 20,may be 30 years,as many who stay in condo,terrace now came fr 2,3 room HDB
PAP is also clever,the other soln is to increase the demand,which they do,Spore has the highest population grow in 2007,4.4%,second was Dubai-3.8%.
Note that in most other countries,the growth would be new babies,but here apart fr 30,000 new babies per year,the rest of the increase are able bodied employees,or workers.
So straight away,a huge increase in labour force,how can economy not grow,MNCs of course love it,cheap labour,key to incresed profit.
There are 3 ways to increase the GDP of a country,increase in labour,increase in capital input and increase in productivity.
That is why American Paul Krugman who won this year's Nobel economics prize,after studying Singapore economic,declared that Spore growth is not substainable.
In his very American way of thinking,there is no way for Spore to increse labour supply and capital input,these are but limited resources,the only way for Spore to grow is to have more eductade workers and thus increase the productivity.That is how normal economy grows.
Little did Paul Krugman realised then that he was referring to one very special leader,one who comes along in every 10,000 years.
Increase in labour supply-no problem,we started fr 2.5 -3 million,now we are 4.8 million,and we are going 6-8 million.
Increase in capital input,no problem,put all the resources of the whole country under PAP,we would make all the investment decision,in one stroke,PAP became the biggest single investor in the whole world.
Except productivity growth,which is long,slow and very difficult,so they dont want to talk about it,in fact,our national productivity is going down,and our per-capita income in S$ is not growing mmuch,these are things they and 154th refuse to talk about.
About the statistics,I do have faith in these figures,as it is ridiculous for government to cook the books and show things not well under them.
Pl do note that the figures are househoold average,right now,we have about 1 million households,so a decile is 100,000 households.
So the 100,000 hoseholds in the top decile earned about S$1.65 billion in 2005,some may be earning 3-5 millions p.a.,but these are benchmarks used by PAP to make themselves as top earners in Singapore,an average of S$200,000 per year for 100,000 households is still a respectable figure.
Sorry,mistake,it is S$16.5K per month, S$198K per year,so this sector took about S$20 billion in wages in 2005,that is about right
oops, you added one extra 0 to your decile. 1 decile is 10,000 households, i supposed if total is 1,000,000 households.
In this case,since DOS split 1,000,000 households into 10 deciles,then 1 decile is 100,000 households.
Cheers
Or just the top 10% 100,000 hoseholds,that would be clear.
Sorry I miss out the MONTHLY HOUSEHOLD INCOME
I don't really understand - on one hand, Singaporeans are whining about too much government interfering with their lives, and the lack of 'freedom'.
Yet on the other hand, they clamour for greater government 'help' and to rein back 'raw capitalism' is ever increasing.
Make up your mind!
Sometimes I think Singapore needs a good dosage of socialism - in the LKY sense.
too much kindness can be painful. too much help is very expensive to the recipients.
Well,I only remember one public declaration of help,that is to increase GST to help the poor,whose money to help?
I dont think that can be pronounced help,no way!
You must be able to grasp their version of what they meant by help. For example, raising GST is to help the poor because their argument is that the poor pay less in GST because of their lower spending power. Is that helping?
Another example, erecting more ERP gantries is to help motorist and business because there will be less traffic jams. In reality it is just helping them to collect more road tolls because the jams just move from one road to another, depending on which has the cheaper ERP rates. Is that helping?
Yet another example trotted out is that letting in more foreign workers help to create more jobs for locals. I think the top people in the Union and Govt have really lost touch with the ground on this.
When foreign workers come in and are willing to work for much lower wages than locals, do you think employers will give more jobs to locals? The whole thing is just to help employers make more money, pay more taxes and lower the living standards of locals by forcing down salaries. Is this helping?
i still remember not too long ago that the poor did not have to pay any income tax. not tax at all.
today they are paying gst! the poor paying taxes for every service and goods they used.
Actually PAP is now in a very embarrassing position as they do not have any leverage with all employers.
That is why they can only appeal to employers:Do not retrench Sporeans first because they are more expensive,pl
It is not that PAP is kind hearted,I believe,but rather it is due to erection coming pretty soon.
This is again another blunder by PAP who for some strange reasons gave up the long held PAP's philosophy of "we should have the final say" to employers & now PAP have to appeal for mercy.
NO sensible guy would believe that this will work,only PAP Ah Say does.Pity
The free market price mechanism works and is self-correcting. You can observe this in products like computers, shoes, pens etc. -- and there is a huge variety (choice), freedom of entry for both buyers and sellers, no monopolies, no shortages... all very smooth aand sustainable.
However it is on the fundamental level to talk about 'market prices' for services and goods that have already been interfered with, regulated and controlled by govt.
HDB, medical services, transport, the purchasing power of your dollar are all controlled, regulated and interfered by govt. Therefore you can expect DISTORTIONS in the price mechanism, and those who are on the right side of the govt "protection" will stand to benefit by charging monopolistic prices.
Conclusion: The market price mechanism works as it should in a relatively UNHAMPERED market. When the market is interfered with, one group (buyer or seller) will benefit at the expense of the other, distortions occur and then shortages (and in some cases over-supply)
the market price mechanism, if unregulated, will create so huge a discrepancy that it will be cycles and cycles of boom and bust. regulations helps to slow down the cycles by moderating the extremes.
the whole trading system is regulated. there is no free trade and free market.
> The market price mechanism, if
> unregulated, will create so huge > a discrepancy that it will be
> cycles and cycles of boom and
> bust.
> regulations helps to slow down
> the cycles by moderating the
> extremes.
If you were to look at history, every boom-bust cycle was rooted in central bank mismanagement.
One could argue for government intervention to cushion the 'bust' phase of the business cycle - but this can only work under very specific conditions (not like the one which America is experiencing right now), and what ALWAYS entails is further economic distortion - e.g. had the Fed not intervened and allowed previous recessions to run their course, and also not bail-out any institutions in the past, NONE of this financial mess would have happened.
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