12 January 2016

Blind men and the elephant: Chua Mui Hoong describes crony capitalism in Singapore

You've probably heard about the blind men and the elephant. In the dominant narrative, the moral of the story one should learn is the limitations to knowledge, how imperfect and incomplete information on the Truth may lead equally wise people to disagree on things. For my readers, I offer a counter narrative. The blind men and the elephant is an allegory for how things look to people who refuse to see what they're looking at.

Case in point: Chua Mui Hoong, Straits Times "opinion editor" and alleged security analyst, talking about disruptive technologies and state regulators. No doubt it is well-written piece, but little niggling details and unforced errors begin to add up. She begins with the idea of disruptive technologies but slips quickly into an eccentric discussion of what she terms "disruptive players", who pose problems for state regulators whom the citizenry and industry players expect to maintain a stable status quo in the affected industry.

Perhaps Chua is out of her depth (even for a security analyst) and is an economics illiterate. Perhaps Chua has been operating in an unhinged version of reality (one that would be recognised as crazy everywhere except in Singapore) where consumer-citizens, companies, and the state regulator exist in some weird tripartite relation to promote and preserve a status quo in each industry. Or perhaps Chua is describing, to the best of her ability, a deep problem in Singapore which she refuses to acknowledge or name directly, out of an ideological blindness.

So let's work backwards.

In what pox-ridden, decrepit economic system would the purpose of the market be to produce "stability"? Where the regulators are expected by any sane person to maintain a status quo? Where non-gibbering consumers mistake the status quo for stability, or where respectable analysts can say this? Where "existing incumbents" in the industry would not want to deny new players access but instead welcome them with open arms?

(Whereas in a healthy economic system, "stability" or rather "price equilibrium" is achieved in the long run, under perfect competition...)

In what pox-ridden, decrepit economic system would a highly educated former security analyst think that the problem of disruptive technologies entering industries is that the regulator thinks its role is to enforce rules instead of managing industry risks on behalf of investors and consumers?

(Whereas in a healthy economic system, a competent, secular, laissez faire regulator sets the rules to ensure free competition or at least neutrality in the industry... because it is the market that will eventually work out, in the long run, the risks of investors and consumers via the price mechanism, amongst others...)

But of course. As a loyalist and former security analyst, Chua cannot conceive or openly name the blight on Singapore that is the crony capitalism arising from both political patronage and government-run conglomerates. Taken together, Singapore's so-called private sector is largely state-run and state-owned, with Forbes, the IMF, and The Economist noting the rent-seeking flavour of the economy. One would probably add low productivity, high rents, and depressed wages as added consequences of crony capitalism.

A free market, one that isn't addled with billionaire cronies and regulators suffering from regulatory capture, requires a true democracy to exist. And yes, Chua's essay is precisely what crony capitalism would sound like to someone in the system who is conditioned not to recognise it, and not to acknowledge it, especially as a problem endemic to the system.

Because to that someone in the system, it's really all about stability, status quo, and managing risks. To that someone in this system where all the incumbents are crony capitalists, the problem is with "disruptive players" and presumably outdated rules and not say, the failure in incumbents to appreciate the need for constant adaptation and permanent competition.

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