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Ethos Issue 3, Oct 2007
Globalisation and the Challenges
of Social Policy in Asia’s Developed Open Economies
Wong Chack-Kie
Globalisation is transforming developed
open economies such as Singapore and Hong Kong in East Asia;
their growth rates have declined and unemployment has increased
as their economies have become more mature. At a time when
public welfare appears to be losing its growth engine for
raising additional resources, traditional family-based welfare
is being threatened by socio-demographic changes and shifts
in values between generations. Furthermore, while globalisation
tends to reinforce the market orientation and anti-welfarist
stance of the social-economic establishment, the outcomes
of a global economy are often unwelcoming to the vulnerable
classes who may find themselves relatively worse off at the
end of the trickle-down process.
For instance, in Hong Kong, the pre-tax
and pre-social transfer Gini ratio in 2006 rose to a new high
of 0.533.1
In Hong Kong’s case, it is not uncommon for market incomes
of the lowest class to be lower than the benefit payments
of social assistance recipients. However, this is not so much
to do with a welfare dependency culture, but with the fact
that those at the lower end of the labour market are in a
weaker position to compete for a decent wage.
For economically mature, affluent societies
such as Singapore and Hong Kong, there are two challenging
policy issues. First is the dilemma of assisting the working
poor while avoiding the criticism of engendering welfare dependency.
The second is the need to expand upward mobility for the poor
and lower class, especially for succeeding generations.
One approach is to link social assistance
to employment. Considering that the eligibility criteria for
public welfare in East Asian societies are already stringent,
the challenge is to ensure that it does not impose unnecessary
hardship or invite hostility towards the system.
Active labour market policies (for example,
training, retraining, and re-employment support) and universal
education are the usual policy tools to meet the second challenge
of promoting income mobility; however, the effectiveness of
this approach needs to be assessed in the wider economic context
of global downward pressure on market wages, particularly
at the lower end of the scale.
There is also a need to take a critical
look at whether the existing arrangements in social security
and education may in fact put the poor and lower classes in
disadvantageous positions. Is the social security system for
the unemployed flexible enough to allow easy entry, exit,
and re-entry due to an increasingly open economy? In education,
are there equal opportunities for children of different socio-economic
backgrounds? For instance, Hong Kong has adopted the principle
of local admission to primary and secondary schools, but the
fact is that the best schools are often located in middle-class
neighbourhoods.
AN ASSET-BASED APPROACH
There are, however, other noteworthy policy initiatives that
have originated in East Asia and are particularly relevant
to the present global context. Singapore has good asset-based
policies associated with the Central Provident Fund. The term
“asset” can mean financial wealth, tangible property,
human capital, social capital, political participation, and
influence. Here, I focus on financial and tangible assets
in social policy. Property is a personal or family asset;
one can fall back on it before seeking state assistance. The
different personal savings accounts in Singapore under the
Central Provident Fund are also helpful in times of financial
uncertainties arising from life events and needs such as medical
care. In contrast, asset-based policy tools are a new idea
in the West. The Child Trust Fund for newborn babies in the
UK under the Tony Blair administration is an example of such
an initiative. While income-based policies are more about
consumption as well-being, asset-based tools are about building
one’s capabilities; it is hence investment-oriented.
Social and economic development are thus built into these
policy instruments.
Asset-based policies provide dormant but
somewhat ready-to-use resources, and can allow greater freedom
of choice in life on the part of the holders. These policy
approaches are particularly relevant to financial sector-dominated
global economies like Singapore and Hong Kong. A financial
economy is essentially about how to manage assets (particularly
financial assets) well to avoid risks. Needless to say, in
a financial economy where base resources, family capacity,
and social relations are determinant factors for success,
the playing field between the poor and the asset-rich is anything
but level. In the new economic context, where the virtues
of an industrial economy—hard work and self-reliance—are
no longer the most valued factors of success, there is a need
for government to rethink its social role.
The interesting thing about asset-based
policies in an East Asian society like Singapore is this irony:
if assets are simply to be redistributed, it becomes simply
another form of welfarism. Of course, the mandatory savings
and matching principle such as in Singapore may help to overcome
this ideological hurdle, but in general, it is in the long-term
interest of a government to narrow not only the income gap
but also the asset gap in a globalised economy to a level
that is in line with core social values. Nevertheless, it
seems worthwhile to critically examine the effects of asset-based
policies in comparison with traditional income-based policies
in terms of alleviating poverty, reducing social inequalities,
and enhancing social harmony.
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