In early 2007, I wrote this:
This is a common complaint that I hear day in and day out : that although the official growth rate for the third quarter is 5.8%, why are people still feeling that the economy is stagnant?
I am not an economist, but just use common sense and some elementary mathematics:
growth rate : 5.8%
inflation rate : 3.5 %
actual growth is only = 5.8 -3.5 =2.3%
So the cake is expanding at a rate of 2.3%. But population growth rate is 1.8% meaning that there is now 1.8% more mouth to eat the cake.
So, if you take this arithmatical calculation,
the cake has actually grown 2.3%-1.8% = 0.5% which is negligible.
Which is why you feel that although the growth figure is still good, you are not getting any benefits.
Just like if you earn 100 dollars a year and your increment is only $5.8, and things you spent on now costs $3.5 more, your actual increase is only $2.3. But your children now spends $1.8 more than last year, so you actually have $0.5. more to spend than last year, a very negligible amount.
Coupled with that, you have life style changes. You spend more on handphone bills, internets bills, Astro bills, cafe bills and so on. So with this life style changes, your $0.5 increment is not going to cover this . You therefore feel that your saving rate has gone down and you have less money to use.
The above scenario was when the growth rate was 5.8% and the inflation is estimated to be 3.5%. And that was in early 2007. Most people then were already cutting down on expenses. Now, just replace the above figure with these: inflation rate of 8-10%, growth rate of 5% and population growth of 1.8%. With these figures, it means that the actual growth is in the minus territory. Many businesses will face bankruptcy and closure and many people will become unemployed.
So what have you? We have a scenario that everyone is feeling the pinch, except the very rich or the very top. The very rich will have plenty of reserve whereas the very top will have lots of allowances, so they have nothing to worry about. It is the common people that are struggling.
Well, people are actually very understanding . If they know the country is facing a crisis and the leadership is good and have tried their best, the people will still stand behind the government even during the time of hardship. Like the Singaporeans did in 1965 when their country was expelled from Malaysia, the whole country stood behind LKY and his government. Like the British people during the second world war….
But when people are fed up because of so much of mismanagement, abuses, misuse of funds, corruptions, wastages and what have you… any economic hardship will not be well tolerated. People are not stupid, especially now with all the info they can gather from the net.
People do not mind the hardship, if the government can really repent , do away with the corrupt culture, the culture of patronage, the culture of commission and middle man, the culture of abuses, the culture of self enrichment, the culture of selective prosecution, the culture of what have you………….
Will we see that day?