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The Straits Times (Singapore) November 27, 2008 Thursday

Fostering greater trust

BYLINE: Alex Tham, For The Straits Times SECTION: REVIEW - OTHERS LENGTH: 860 words

AS SINGAPORE heads into recession, prudent fiscal and monetary policy becomes even more crucial. Policy decisions can either lay a strong foundation for future recovery or worsen an already unstable situation. Yet, though good policies are necessary, they are insufficient by themselves to ensure economic recovery. Without consumer confidence generating demand, government actions to pump money into the economy will be as effective as pouring it into a bottomless well. It is under such circumstances that efficient and reliable institutions play an important role. We have seen how United States President-elect Barack Obama has been able to revitalise a nation in despair. But he is just one man and he faces many political and bureaucratic obstacles. He realises this and has pledged to adopt a bipartisan approach. Politics in Singapore is less messy. There is no need to reach a broad consensus across political factions and our civil service is renowned for its discipline. As a result, policy decisions can be made and implemented quickly. In terms of efficiency, Singapore is exemplary. But reliability is just as important as efficiency in restoring economic confidence. The more reliable institutions are, the more confidence people will have to engage in everyday economic activity. Knowing that inflation is not going to skyrocket, for instance, or that banks will not collapse, helps keep money in the formal economy. Trust is the oil that keeps the modern economy running. The most prominent institution in Singapore is the Government. Prime Minister Lee Hsien Loong recently voiced his doubts that the two-party model would work in Singapore. He cited, among other things, the need for the People's Action Party (PAP) to lead the country through this economic crisis as it has done in the past. Such leadership over society, however, entails power. It constitutes a relationship with citizens that is fundamentally different from trust. In terms of social networks, trust can be visualised as horizontal ties that manifest themselves as solidarity; power, on the other hand, can be depicted as vertical ties that give rise to compliance. Sometimes the two intersect and there can be a constellation of interests where leadership gives rise to solidarity. Compliance, in this case, is given willingly and sustained by legitimate authority. But legitimacy is a two-edged sword. The PAP's legitimacy is based on its ability to steer Singapore onto a path of economic growth and to ensure that each Singaporean reaps the benefits of that growth. The paradox is that as the Government acquires more power because of its success, the greater are the demands laid at the Government's door. The so-called 'crowding out' theory in political economy argues that the expansion of state spending can lead to higher

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borrowing costs for private investors. A similar dynamic can be observed in the moral economy. The reliance of Singaporeans on the Government can result in the expectation that the Government will always provide. But no one institution, however capable, can adequately satisfy the expectations of all social groups. This is where civil society comes in. Currently, the extent of the Government's influence in everyday life has the effect of crowding out civil society. As a result, blame for any shortcoming in Singapore is often apportioned to the Government. This was apparent in the recent uproar over structured financial products. After the bankruptcy of Lehman Brothers resulted in the devaluation of derivatives sold in Singapore, angry investors called upon the Monetary Authority of Singapore to conduct an inquiry into the sale of the instruments. MAS did set up a review process. However, those most deeply affected by the collapse of the instruments were unhappy with the pace of the investigation. Trust was eroded and there was a palpable unwillingness to comply with government exhortations for patience. This erosion of trust among investors has also affected the wider populace. Although we might not have invested in the derivatives, we are all linked, however weakly, to one another through the shared network of citizenship. When Singaporeans protest that they trusted DBS Bank, say, because it is a 'government-linked' bank, we understand what they mean though such comments may seem naive to sophisticated investors. The unhappiness over the Lehman Minibonds reminds us that social groups can be a powerful form of solidarity. Investors are usually anonymous but in this instance, a common cause provided them with an opportunity to gather and build networks for collective action. New media channels such as online forums enabled the formation of new groups, such as those which gathered over the past month at Speakers' Corner. Likewise, the establishment of other social groupings can foster greater trust among people. These separate groups can be connected via the common denominator of citizenship. In this time of economic crisis, good government policies could perhaps benefit from the trust created by a confident and cooperative civil society. The writer is a research associate at the Institute of Southeast Asian Studies. LOAD-DATE: November 26, 2008 LANGUAGE: ENGLISH PUBLICATION-TYPE: Newspaper

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