Tuesday, March 26, 2013

Elite Cluelessness - Cyprus & Singapore


The recent economic turmoil in Cyprus once again displays how clueless and disconnected the ruling elite are from the reality of people’s lives; once again provides a striking example of their desire, nay obsession, to minimize impacts on the wealthy by taking from the poor.
Cyprus has gained a lot economically by being a haven for offshore banking – their banks’ assets are several times the economy - and so it was easy for the Troika – IMF, European Central Bank and European Commission – to look for bailout money from account holders. A large percentage are owned by Russians and a good percentage of that is shady money being laundered, so to penalize the country they devised a scheme that would levy a one-time tax of 6.7% on accounts of less than €100,000 and 9.9% on accounts over €100,000.
That was a bald-faced attempt to steal from the poor, while concurrently minimizing losses for the rich. Before that proposal was made, it was believed by all depositors in all European banks that all accounts under €100,000 were insured, guaranteed, rock solid. Up until that point, all felt safe that nothing less than a total breakdown of society would jeopardize their savings.
Instead, people with €1000 in the bank were expected to do their share, to the tune of  €67, to save their incompetent banksters. After all, if the little people weren’t taxed than the rich would have to pay a lot more. That made it an easy step to propose reneging on their previous hard-wired guarantee. Not only did all hell break loose in Cyprus, and all legislators in parliament either voted against the proposal or abstained, but now, regardless of the Troika’s insistence that that was a one-off and only applied to Cyprus and no other average people would be forced to assist in bailing out banks in the other Eurozone countries experiencing financial difficulties, nobody will be able to trust that €100,000 guarantee. It’s finished, nobody with money in the bank will feel completely safe again.
They then tried to float basically the same idea but exempt the first €20,000, but that was only marginally more acceptable than the first rip-off plan. The latest proposal is that only deposits above €100,000 would get hit, which is they way it should’ve been from the start.
A guarantee is a guarantee. If you had €100,001 in the bank, you knew the first €100,000 was protected, but that you were taking a chance on the last €1. Especially if you were putting your money in a notorious offshore banking center, unless you are a complete idiot, you had to know there was a good chance, however remote, that you could lose out. That’s what capitalism is supposed to be all about; You invest, you speculate, you take your chances; you win some, you lose some. Instead the elite seek to protect banksters and their investors and wealthy depositors at all costs and the little people are left to foot the bill and then fend for themselves.
The elite have gotten so isolated from masses they live in their own personal bubble and can no longer relate to the real world of the 99%. Like when Romney was asked what a person could do when they couldn’t find a job in a very tough market for job-seekers, he said, Ask your parents for money to start a business. Yes, very simple, ask your parents.
Personally, I prefer in all the chaos afoot that Cyprus is ‘forced out of the Eurozone’. As mentioned in a previous post, leaving the Euro and having their own currency will not stop most transactions in the country being in Euro. Having their own currency used alongside the Euro, as happens in Cambodia where about 80 to 90% of all transactions are in US Dollars, will give them some flexibility. What Cyprus ‘leaving’ the Euro would do is begin a two-tiered currency system in many European countries in which Euro and local money are used side-by-side. It would also be two-tiered in the sense that the Euro would be a master currency backed by and used exclusively in the strongest northern countries – Germany, France, Netherlands, Belgium, Austria - with the remainder of individual states issuing their own currencies for local transactions; for instance, all government salaries and payments to government offices would be in local money. Once the local money finds its proper value - it would be volatile at first - the individual states would try to maintain it within a narrow range compared to the Euro. Cambodia, for instance, has kept its currency within a 5% range of value compared to the USD for the 11 years I’ve lived in the country, so it’s accepted along with dollars with little or no discounting and there’s no need to recalculate every day.
Regardless of how the bailout evolves, Cypriots are in for serious hard times with massive unemployment and punishing austerity for as much as a decade. They got rich off of being an offshore banking haven, now they will pay the price. Once again, the lure of big bucks casts aside all doubts, restraints and reason and it’s full speed ahead until the ship hits an iceberg.


In February, Singapore experienced its largest ever demonstration; 4000 people turned up to protest against the government’s push for increased immigration. People tend not to protest there since they are wealthy and relatively content in the world’s number one nanny state, not to mention the government oppressively and forcefully frowns upon such activity.
The demonstration, along with the loss of a seat in the legislature to the opposition in a by-election, quite stunned the ruling elite. The Lee family, which has ruled the city-state since independence in the sixties, now has to contend with the largest opposition ever – they now have 7 seats in the 87 seat body. Until recently, the largest opposition contingent was four. That is not because 95% of the population has always solidly backed the government, rather the government has devised a painless (for them) and bloodless means of eliminating all official dissent.
The first time an opposition member of parliament makes a statement deemed to hurt the feelings of the ruling family, he/she is sued for defamation for everything they’ve got and is subsequently bankrupted – the government never looses such a case – and once bankrupt is no longer eligible to sit in the legislature.
But this is the 21st century and people over the world are finding their voices and are less able to remain pliant and docile when they feel impacted by social changes that are not to their liking.
Singapore’s population of 5.2 million is now 40% foreign born, up from 22% about twenty years ago. The protest was in response to a government white paper which seeks to add another million and a half immigrants to the city by 2030. The government insists that the country needs more people to continue its industrial and economic growth, but their citizens, like wealthy populations everywhere, are not much interested in making babies. The birthrate there is even low by wealthy country standards. They’ve tried everything including special benefits for having kids and even a government dating service, to no avail.
As almost everywhere the government is locked into endless growth, growth as the be-all and end-all of society, as its guiding philosophy. Bhutan, which is promoting a Gross Happiness Index in place of Gross Domestic Product, is probably the world’s only exception. If Singapore has more people and more wealth, that must be a good thing, no?
However, while the government sees immigration as a  path to increased wealth, the protesters, as the majority of the people at large, see higher property prices, competition for jobs which lowers wages, more crowded public transportation and strains on public services.
The question is; Growth for who? It certainly isn’t the commoners who benefit, it’s strictly the elite who benefit from growth in a mature economy. Growth can be justifiable in a developing country which has large numbers of desperately poor people. In developed countries, small places can be improved by expansion if that growth adds intellectual and financial opportunity, but once a location reaches a certain size, it’s mostly downhill, at least in terms of livability. Sure there’s lots of money to be made in megalopolises, but if you’re in a place like LA and have to spend two to four hours a day commuting, the money no longer has the same value.
Some countries with large geographic areas but small populations, such as Canada and Australia, can benefit from immigration, but Singapore with an area the size of New York City and a projected 7 million people – about the same as NYC - will be just as crowded and difficult to live in, especially for the lower classes. The wealthy have no concerns about housing prices or overburdened public transportation. The country’s legislators earn more than a million dollars a year, so would have little concept for what their constituents deal with on a daily basis.
Singapore’s rulers have never had to consider the people’s wishes before and I’m sure they’ll continue to use their defamation magic to try to quash their token opposition, but the tide is turning and they will be forced to listen to the people.
Personally I’m a fan of immigration, at least in theory. I’m one myself, though few would refer to me that way, but after 11 years in Cambodia, what else could I be? One could even consider me an economic migrant, since I could not make it in my native land without abject penury and bemoaning my fate 24/7. Cambodia’s lax immigration policy has brought hundreds of thousands of relatively wealthy expats to live here. My lowly pension is still several times Cambodia’s per capita income so I’m making a positive contribution in spite of it all.  
Immigration would also be a good idea for countries like Korea, which has the world’s most homogeneous population and Japan with the second most, even though both countries are relatively crowded, because they desperately need lessons in and experience with relating to diverse peoples.
As a long time expat estranged from my own country, it’s unsurprising that I believe that one of the best movements for the world is immigration that mixes people up and gets us closer to understanding each other. That isn’t to say it isn’t extremely important that immigration happen at a slow measured pace otherwise backlashes that have destabilizing impacts are possible.
Welcome to the world.

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