New World Order?

"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." - Thomas Jefferson, May 28, 1816 'Letter to John Taylor'

"I believe that banking institutions are more dangerous than standing armies... If the American people ever allow private banks to control the issue of our currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their father conquered." - Thomas Jefferson, 1802

The Free-Market Reason for the Nationalization of Banks and Closing The Inequality Gap

Free-market economists have always championed for removal of state intervention from the financial markets, to allow them to provide capital efficiently for the optimal functioning of the free market. The recent financial meltdown however, has seen bank after bank being nationalized. While this is now being seen as an ‘inevitable’ step in preventing the real markets from collapsing as well, a deeper look into the original purposes of banks seems to suggest that banks should always be nationalized in the first place. Before that though, let us explore the current financial meltdown and its effects on the ‘productive’ markets.

Firms in the real ‘productive’ markets will only be affected by the meltdown of banks and their inherent financial systems in three possible ways. The first and most blatant: they have deposited their finances and profits into banks and with banks collapsing, see some if not all their deposits liquidated. Secondly, they are unable to obtain further credit from banks and have to cut back operations. And thirdly, in a bid to make more profits, they may have divested their profits into bank shares and options and now see their profits go red. Ditto for the private individual. The logical implication of this is then: governments need to save banks in other to safeguard the real market. In so far as the real market is unlinked to the banks and, (i.e. individuals and firms do not borrow, deposit or invest in banks), there is no need to save the banks.

But of course in this age of globalization and rapid growth, few firms and individuals in the developed world are actually independent of banks. For the rapid rate of growth this part of the world has seen in the past century, banks and money have played a crucial role. Banks provided the credit for growth!

All resources in the world are finite to various levels. However, in the push for speedier rise to riches of the middle classes since the 18^th century, capitalists gradually found a way to make money infinite. The original exchange of money (gold) had an innate value in itself, and was finite. When it was replaced by paper though, it became much less finite backed only by government guarantee, but still managed to maintain some finiteness due to international trade and inflation pressures. However, the stock market is not subject to inflationary pressures, but subject to sentiment and perception of the future. They are based on the evaluation of value and not value itself. Essentially, credit, stock markets, budget deficits are nothing more than a loan from future generations, loaning their expected future profits so that they can be spent today. Their validity rests precariously on public confidence. Resources are finite, but the capital of future generations is always assumed as infinite. The financial market is thus, an artificial creation by capitalists to generate more credit from banks to acquire wealth and growth. Money, the only resource available to banks, has thus become infinite through the introduction of credit.

I will argue then, that the fundamental reason why the developed world has achieved such incredibly fast growth besides the establishment of property rights, is not because of the industrial or technological revolutions, but simply because of the financial markets. Instead of being a response to growth, financial instruments became the catalyst for growth. This is evidenced by this current financial crisis. The majority of firms listed in the stock markets acquire more credit from banks based on high credit ratings which is directly related to their share value. In effect, the market value determines the collateral, thus the amount of borrowing. The fundamental reason why the collapse of Wall Street will lead to a collapse of Main Street is precisely this fall in credit ratings: Banks do not want to lend. And therefore, growth is curtailed, or in firms that have already accumulated bank debts which they are unable to pay off, total collapse.

It is irrational to allow private banks (albeit state-regulated) to exist because there is no structural benefit of having banks private at all. Free market laws enable productive industries to be efficient in producing goods and services but banks cannot be classified as such. The reason is two-fold. Resources are finite and fluid, a car-making firm can shift into fertilizer production if the market dictates that as more efficient and they have access to other resources, but banks cannot do this, their only resource is money which is not a finite resource as it ascribes value to something, but has no value in itself as explained previously.

Closer scrutiny will show that the way banks function as institutions are actually not according to free market laws at all. The free market does not decide which companies get extra capital; it is the banks that decide. Rather than having perfect information (under free-market supply and demand conditions), they decide based upon a set of regulations set by the governments, and then upon the analysis of their managers and analysts. Free-marketeers argue against nationalisation on the strongest reason that the state will never have more complete information than the free market. This is true, but there is no reason to assume the state will have any less information than banks, not when they are privy to exactly the same resources - people!

Next, the deposition of money. Besides the small interest percentage individuals earn when they deposit their life savings in banks, it is undeniable that another motive of most is to safeguard their money. Simply put, banks and their sealed lockers provide more security than the old biscuit tin box or the mattress on the bed. Here again, there is no reason to pre-suppose the bank to be a better alternative than the state, especially not when the state have resource to secure military infrastructure.

If we acknowledge that banks do not comply to free market theory, then, obviously, they should not be run privately. Sovereign governments should nationalize and control all banks to safeguard the interests of their countries. But of course, there will always be the threat of corrupt governments, which brings me to my next innovation. That is for the United Nations to establish an international deposits bank where all global citizens can deposit money into and borrow money from. In the interest of closing the inequality gap, this UN Bank will then be able to provide micro-credit functions to directly benefit the poorest people in the world.

This naturally leads to the question on who will control abuse, inefficiency and rent-seeking in the UN Bank (as it obviously will command huge power). My thoughts are for a panel of respected ex-leaders and treasury heads of governments from the top five economies in the world. My reason for this is that having assumed the prestige and respect that came with their respective terms of office, their natural next direction would be to have an even greater positive influence on the rest of the world outside their own home nation. People who come to mind who already have moved in this direction include ex-Presidents Carter, Clinton, Bush Sr, ex-Prime Ministers Tony Blair etc. My assumption here is their presumed 'greater calling', and that for both intention and ability wise, they would be most up to the job. (I will admit there will always be anomalies, but every system will face the same problem of who final responsibility lies with and ultimately, it is about selecting the people seen best for the role.)

Back to the economic world, the real markets and products will still continue to be subject to the free-market and competition, but individual financial institutions will be controlled and directed into the interests of the greater public good, no longer open to speculation. Under this model, the respective state banks and the UN bank will still compete and allow capital to be created efficiently. Private investment will continue to drive innovation and projects, as long as individuals and firms invest with only their own capital and not the combined capital of others as they cannot accept deposits.

Credit granted by the banks will be based not on any stock market price, but on the book price of the company. This will also require the establishment for a single trading currency in the entire world, and speculation on currency will cease to disrupt the free-market efficiency of resources. Nations will still be able to safeguard and distinguish their sovereignty, less through the accumulation of money, and more through the true innovation of products and services. Trade and competition will be established through the true value of products, and not the value of the currency the products are traded in. Ultimately, one cannot deny the importance of credit-induced capital for growth, however, it being a creation of governance, should remain a tool of governance.

To quote from history, Emperor Qin created a unified Chinese currency to facilitate trade between the former Warring States of China, and while there were problems of famines and floods during the dynastic reign, these were all a result of human corruption and natural disasters. (And corruption does not distinguish between private and public.) Never was there a human-created financial fiasco in the form of what is happening today. Money is a state invention, and only the state will be able to solve its problems. If the free market wants to take over, then we will all have to go back to barter trade (where any form of exchange will represent true supply and demand), without any state intervention to guarantee and establish trust.

The even more radical alternative is to re-look our concepts of growth. Should growth be made possible by the availability of money, or should growth bring about more money? Did money come first, or did the goods come first? History will clearly show that obviously the goods for trade came first, and money was a subsequent invention to facilitate this trade. This is not chicken and egg! If so, then growth should bring about money, and not the other way round. However, the current situation shows that the accepted model in the world is clearly the first. The reasons are simple. Human development and education is a long-term process that will necessarily lag behind almost instantaneous credit creation. But it will necessarily bring about true and productive innovation, and slower but steadier continuous growth. However, this impatient world is unlikely to accept this, and we will probably be left with what happens now, ‘Rapid growth subject to cycles, and little knowledge of true production.’ There can be no other solution, but without enlightened state intervention, the cycles will only get more volatile.

Human Nature and the journey towards sustainable happiness

The underpinning to all philosophical theories, economic models, and political treatises is the eternal question, ‘What is human nature?’ The age-old interpretation of this question was then, ‘Are human beings born good or bad?’ But this developed over time into a range of more objective propositions, as the notions of ‘good’ and ‘bad’ became recognizably subjective across time and space. Instead of trying to unravel if human beings were born good or bad, people started to attempt breaking down human motivations and actions into the simplest components, much like how the study of physics has sought to break down matter into atoms, and so on and forth. So the question evolved into, ‘What is the basic human trait, if there is any?’

The trait that subsequently received widespread acceptance was that of selfishness. Before it would go on to be brilliantly ‘scientifically-proven’ through Richard Dawkins and his ‘Selfish Gene’, the ‘selfish trait’ had already formed the foundations of ‘invisible hand economics’ and the utilitarianism theories. Leading on from this single underpinning, any model of happiness rested on the emancipation of the human selfishness.

However, a divergent school emerged as well from this, and projected themselves in direct opposite to the ‘selfish school’. For simplicity purposes, this will be called the ‘selfless school’. This school articulated that there was something in humans that attracted them towards ‘a greater good’. ‘No man is an island’ would perhaps be the best adage to understand this. The main proposition of all parties that diverged from this group was that ‘the human self would only gain true emancipation through the move away from selfishness to selflessness.’ The ‘selfish trait’ was an artificial façade that had prevented human beings from realizing their true ‘selfness nature’.

I have a different proposition. The reason why previous theories have all underpinned on either the selfish or selfless trait is because these two traits have been assumed to be mutually exclusive, on the different ends of the same spectrum. A more in-depth observation and questioning of human intentions and motives however, leads me to believe that both the selfish and selfless trait are the fundamental components of human nature, and that they act as two separate spectrums within a single human self. On the larger scale, it is the constant interaction between these two spectrums that leads to evolution of the human self and society. But on a more personal level, it is the constant struggle of these two traits that makes the human self such an enigmatic thing even to himself.

To slightly complicate matters though, there is a third ‘pseudo-trait’, that of self-esteem (ie. the way human beings view their own ability). To illustrate all this, I will use an analogy that I hope can set everyone looking deeper into their intentions and getting closer to understand the human self. This is the ‘Bread Analogy’. Imagine it is war time, and food is scarce if any, you see an old person lying by the road, in desperate hunger. You have had little to eat as well, but obviously are in better shape than the old person. On you, you have a single last piece of bread. Will you give it to the old person? Will you keep it for yourself? Or will you give a portion of it away?

Under the influence of the selfish trait, you will keep it for yourself. Under the influence of the selfless trait, you will give it all or a portion of it to the old person. Ultimately, one trait in you will take precedence over the other, and you will act on it. However, there is a third factor which may work on some of us, that of self-esteem. This is the ‘pseudo-trait’ which more often than not, decides which trait wins. If you have very high-esteem, and are self-assured that you will be able to find another piece of bread even after giving this one away, it will be easier for you to come to the decision to give the bread away. If you have low self-esteem, then no matter how much your selflessness trait works on you, your selfishness trait will prevail.

Different individuals are born with different levels of the three traits, and their experiences in society will further develop these three traits simultaneously. The immediate assumption made by most this point, under the influence of the ‘selfish-selfless single spectrum model’ will be that, a person with very high selfish level must then have a correspondingly low selfless level. And precisely because of the ‘selfish-selfless single spectrum model influence’, that would truly be the case in most people. However, it need not be so. A person can be very selfish, and can also be very selfless. How? An artist can be very selfish with his artwork, but almost selfless with his money. A factory worker can be very selfish with his money, but almost selfless with the component part he has contributed to making. The ‘pseudo-trait’ of self-esteem is what makes the difference; how one values oneself are what differentiates when one is selfish and when one is not. Therefore, humans can find emancipation of both their selfish and selfless nature, just through separate avenues! The artist finds selfish emancipation in his artwork, which he values his self-esteem on, but finds selfless emancipation in his money which he does not value his self-esteem on. The factory worker finds selfish emancipation in his accumulation of money which he values in self-esteem on, but finds selfless emancipation in his contribution of the component part to the final product.

So, and we must always come back to this for the discussion of human nature to seem to make any point at all, what does all this mean for human happiness? This means that human happiness is a complicated thing because it is not only the emancipation of either the selfish or selfless trait. It is the balancing act between the selfishness and selflessness trait! But it is only now that I reach the key of the whole article: this balancing act is a completely internal function. It cannot be dictated or aided by any political or economical theory which seeks to maximize anything! Ultimately, any political or economic theory that seeks to maximize the selfish or selfless trait will be unable to bring about sustainable happiness. To maximize something, you never actually need to know how much of it you actually have, you simply attempt to get more of it, and so it makes it still possible for an external party to help you get more. But to balance two things, you need to know the relative level of one to the other first before anything else, and there is no external party that can help you with that! The process of balancing is one of constant self-discovery and self-understanding; it is only this that is the true emancipation of human nature!

Every individual is born with different levels of the same traits. But do not let that misguide us into thinking that we are the same and should be chasing the same things. Chasing and maximizing is always the easy part, the hard part is the balancing between two chasing traits. If we want to be happy, nobody can help us but ourselves first. We cannot let someone else tell us or influence us with what we need for us to be happy, we must dig for it within ourselves. The role of the state then is to aid this emancipation of self-discovery, and not dictate it.


(Footnote: just to clarify. My personal impression is that currently, with the prevalent political and economic models lopsidedly tilting towards selfish emancipation, the general direction will be first to tilt it back towards the selfless model. But as I try to point out, ultimately, it is up to every single individual to balance it within himself.)

Role of Clan Associations in Singapore - Heralding The Rise of the Civil Society

(The following article written by me was published in the quarterly journal of the Hainan Clan Association in September. It explores the main question of how Clan Associations in Singapore can continue to be relevant in the New Millenium and what their role should encompass.)

I thought the article written by Mr Jimmy Yap printed in the March 2008 Issue of the Singapore Hainan Hwee Kuan Bulletin gave a very good overview of the founding purpose and roles of Clan Associations in Singapore (and all over the world actually), as well as raising pertinent questions as to how the Hwee Kuan can continue to stay relevant in the New Millennium, recognizing the original circumstances for which their existence came about no longer exist.

My opinion is that even though circumstances have changed, we must acknowledge that the two main reasons for the Clan’s original existence must continue to be unchanged. These are: 1) To take care of the Hainanese Community in Singapore 2) To provide a link between Hainanese in Singapore and fellow Hainanese in China (and all over the world). In the globalized world of today, and especially a multi-cultural, much less multi-dialect society like Singapore, these two main reasons may seem to encourage communalism, nepotism and even societal division; and this might be the reason why much of Clan activities in Singapore today have been geared towards more benign forms such as promoting culture and heritage. While I feel that the promotion of Hainan culture and heritage should and must continue to be an integral part of the Hwee Kuan’s role, I think that for it to be relevant as an organization, it is not enough. For the Hwee Kuan to remain relevant, it must accept the continued relevance of its original roles, and more than that, it must pro-actively work towards them. The challenge then for the Hwee Kuan, is how to pursue these communalistic objectives, but with a fair and open attitude which will not only not polarize society, but bring it closer instead.

A few key ideas came to my mind when I was thinking of activities that could be carried out under the two objectives:

a) Taking Care of the Hainanese Community in Singapore

In his article, Mr Yap stated that much of the areas of responsibility of the early clans have now been taken up by the government – namely education, health, jobs, and implied that the Hwee Kuan should look beyond these areas. If the Hwee Kuan were to acknowledge the foremost responsibility of taking care of the Hainanese in Singapore however, then these very areas would form the key of their concerns. In this direction, the Hwee Kuan has already taken positive steps all along with the reward of scholarships to deserving students, and even more commendable – the provision of pro-bono legal services to clansmen in need. But these can be greatly expanded,:

• Providing free(voluntary) or heavily subsidized academic aid to students
• Helping Singaporeans who wish to find job or business opportunities locally and overseas through the Hainanese network
• Providing free(voluntary) of heavily subsidized healthcare aid

The attitude the Hwee Kuan should take in pursuing these activities, would not be to replace the government, but to supplement it. The primary focus group for these initiatives must be the Hainanese, but this should not be exclusive. We should and must be open to helping everyone in the society. However, I believe that if the Hainan Hwee Kuan starts pursuing these initiatives vigorously, the other Clans in Singapore will have to follow the lead. So the end product of this bold initiatives, would not be an unbalanced society in which only the Hainanese get extra aid, but rather, a very developed and balanced civil society where all the Clans are helping their respective clansmen while retaining a fair and open attitude towards everyone in the society.

b) Providing Links Between Singapore and Overseas Hainanese

The overseas Chinese community was historically very concerned with developments in China and contributed greatly to China’s economic and social development through the establishment of schools and other financial contributions. The underlying motivation however, was to maintain a link to their fellows kinsmen back home.

The situation today is undeniably different and many Singaporean Hainanese may probably have completely lost contact with their kinsmen back in China. Thus, there would be no overarching reason for them to have any sort of affection for Hainan or China. And leading on, there is no reason for any sense of belonging to the Hainanese community or the Hwee Kuan. To me, this is where the challenge and opportunity for the Hwee Kuan lies. How can we create a sense of belonging amongst Singapore Hainanese to the notion of being Hainanese?

The cultural and heritage awareness are a key solution to this and thus they must be continued, however, I think the Hwee Kuan must also take a much more pro-active role in creating a sense of community. In a similar spirit of our forefathers, these may be done by:

• Organizing community involvement projects for Singaporean Hainanese to return to Hainan
• Creating opportunities and facilitating for schools and students in Hainan to visit Singapore (whereby young members of the association can make friends and re-establish personal links with Hainan)
• Linking up Singapore Hainanese with Overseas Hainanese over business, or social projects

The key to creating such links and a sense of belonging is that efforts must be circular, and not one-sided. We will need to bring Singaporean Hainanese out of Singapore, and also bring Hainanese overseas into Singapore. The upcoming 11^th World Hainanese Clan Association Congress holds the perfect opportunity to kick-start and intensify such efforts.

The New Millennium is a bold one and for the Hwee Kuan to remain relevant, it must be equal in ambition and determination. The challenge for the Hwee Kuan will be first in convincing itself (and then others) that it has the vision and resources to take on such an ambitious civic role, and finally, to actually carry it out.