Our economic restructuring efforts will not yield strong results in a fear-based society
by Dinesh Senan: Published: The Straits Times, Singapore: April 2002
The underlying mind-set of our citizens at large will ultimately determine our growth prospects. There seems to be far too much anxiety in the streets about our economic future at present, and too much worry about the ‘loss’ of certain MNC’s which have pulled out of Singapore, in favour of lower cost operating environments.
Is the pie too small? Are there only crumbs available for us?
In the midst of downsizing and massive retrenchments, it is natural to worry, yet in the wake of economic upheavals come newer and grander opportunities. In the global economic arena, will tiny Singapore be left out of the bigger game, due to our physical limitations in land and labour terms? Prof Paul Zane Pilzer, [see ‘Unlimited Wealth’, 1994, former US presidential adviser and Professor at New York University], attacks the basic definition of economics – ‘the study of how people choose to employ scarce resources’ – which rests on a flawed premise that the world contains a limited amount of physical resources (land, oil, gas, minerals, etc), and that a society’s wealth is determined by its supply of physical resources.
He argues that ‘the incorrect supposition that we live in a world of scarce resources has done more than preclude most individuals from achieving economic success. Over the centuries, this zero-sum- game view of the world has been responsible for wars, revolutions, political strategies and human suffering of unfathomable proportions.’
His studies have revealed in scientific terms, through deductive logic, why it is that we live in a world of unlimited physical resources, and how advancing technology continually increases the supply of existing physical resources, and how, over the longer term, advancing technology constantly changes our very definition of ‘physical resources’ as new ones are discovered. The technological breakthroughs that we have witnessed in the past have yielded greater efficiencies of production (eg in the US, in 1930, there were some 30 million farmers producing food for 100 million people, but by 1980, some 3 million farmers were producing enough food for a population of more than 300 million, a 3000 percent increase in productivity per farmer).
Similar examples abound in other sectors, cites Pilzer, such as $300 mechanical carburettors being replaced with much more efficient $25 computerized electronic fuel injectors, or in the case of the vinyl records industry being displaced when the CD captured virtually the entire global industry in just 5 years, between 1985 and 1990.
It is also useful to consider that in 1960, 40% of all US workers were engaged in the manufacturing sector. By 1980, half those jobs were eliminated by advancing technology, whilst the remaining manufacturing employees were producing more than 5 times the total output of 1960. However, the overall unemployment levels were not worrisome, as concurrent lowering of costs through the advent of technology in other sectors, (particularly the food service industry), resulted in the creation of a large number of new jobs as the amount of meals US consumers ate outside of their homes then rose from 5% in 1960 to 50% in 1980.
Therefore, despite the inevitable ‘interim’ resultant unemployment which such technological advancements have brought, huge new wealth for society and many new incidental jobs and markets were invariably created, though not always immediately for the newly displaced worker.
Two things therefore emerge from Pilzer’s writings: first, that new unemployment is the first sign of economic growth, and second, that we would do well to have an affirmative programme to continuously help retrain displaced workers as an ongoing facet of aggressive economic development within our society in the future.
I would guess that ever-newer forms of personal and corporate insurance products will emerge as well, in the near future, better addressing the ongoing retraining needs of every worker in society, in healthy anticipation of mid-career ‘re-placements’, (to use a more positive alternative to the word ‘displacements’), in a robust high-growth economy scenario. At any rate, such re-placements will only help make working life more interesting and exciting for our society, especially where we have planned for it in advance, so as to minimise the personal financial impact it may otherwise have on our workers during such ‘interim’ growth periods.
Where are we now? Where are we headed? Are our costs too high to compete?
We are in the midst of a major transition in our economic development. We have previously made one bold shift, (most successfully!), in our not-too-distant-past. That effort entailed much bravery and determination, when we moved from import substitution activities to highly successful export manufacturing, quite against the odds. We are now compelled to make another such shift further upwards, as we move to engage the global knowledge-based economy….
In our current circumstances, there is too much worry over our operating cost environment. Overly deploring and focusing on our ‘high costs’, (particularly of land and labour, relative to our emerging neighbours), will not get us very far ahead in our new economic restructuring efforts, as there is a law of diminishing returns operating on our bottom-line cost-cutting efforts alone.
We need to boldly address the new top-line revenue opportunities in parallel, and with equal if not greater verve. In the light of strong new top-line revenue opportunities abounding, our costs may then be seen as being merely a ‘relative’ element, and not as being ‘intrinsically bad’ for our economy. For instance, if we were to actively choose high growth, we may boldly address our minds to the new frontier of economic development at the very top of the economic value adding chain, ie in the realm of Intellectual Property (‘IP’) ownership, which we could achieve through the active creation and/or co-creation thereof.
The returns on investment in creating and owning IP, (which may yield multiples of income through multiple licensing of the same base design solution, against a fixed initial commitment of resources), will potentially outstrip by far the economic returns on activities which are lower down the value adding chain. To play effectively in this high-end arena will require neither large tracts of land nor large numbers of workers; from this perspective, Singapore’s land and labour configurations actually seem ideal for such futuristic economic activity! Here, we may, for instance, proactively set about to work to build bridges between high-end ‘technological design architects’, (eg software engineers, biotech engineers, etc), and ‘business domain experts’ (eg pharmaceutical experts, auto industry experts, agricultural experts, etc), such that we emerge as owners/co- owners of the resultant IP in the generic technological base designs, (which could then be deployed via licensing modalities to all such vertical industry sectors worldwide), which would emerge from such focused bridge-building efforts.
The public sector could play a very strong catalytic role in fostering the development of such bridges. This represents unlimited potential new revenues for us, as but one example of new economic activity. With such potential new top-line revenues emerging from such proactive economic activity, why grieve over our base costs being ‘too high’ relative to our neighbours? They would only be so, relatively speaking, if we were not choosing to set our own sights high enough on the economic value adding chain in the first place.
Circumstance does not make the man; it reveals him to himself – James Allen
We are, in the end, what our thoughts make us. There’s nothing around us in the magnificently abundant material world that wasn’t first a thought, whether from a theological perspective, or from the field of quantum mechanical physics’ scientific findings on thought energy and its direct relationship to matter. [see : James Allen – ‘As a Man Thinketh’; Gary Zukav – ‘The Dancing Wu Li Masters’; Deepak Chopra – ‘The Seven Laws of Success’; Watty Piper – ‘The Little Engine That Could’].
Our successful economic growth depends on our ability to think positively about the directions we choose for our growth. Creativity cannot thrive in a negative atmosphere. Unlimited wealth generation is possible for us, only if we choose to act positively and creatively. Undue worry will not help very much.
The Pragmatic Idealist 