Thursday, 21 March 2013

Switching Cost and Confidence in PAP Policies and Institutions

There are two ways for a firm to keep its monopoly status, restricting entry and exit. For the PAP, it is getting more and more difficult to prevent people from joining opposition politics.  Hence, the limited entry of the past has become an open entry for everyone.  In addition, the PAP has its own problem of finding suitable candidates.

What can the PAP do? Control the exit, create confidence issues.  There is a price for Singaporeans to pay if the PAP is no more in government.  And because the PAP government is a show of confidence, the exit of the PAP means the loss of confidence in policies and institutions.  The result will be a less successful Singapore.

Is this logically correct?  We need to get the priority right first. Who can decide the loss of confidence in Singapore policies and institutions? The local people must be the first to decide, especially citizens, then foreigners.     

When asked about Singapore’s success and whether it can continue to thrive, Mr Lee said that for the Republic to remain successful, it needs to “retain the confidence” of investors and the people in the Government’s policies and institutions.  
“It will be very stupid of us to shake that confidence. The confidence rests on several pillars: Institutions, sound policies by the Government and an open trading area,” said Mr Lee.  
Singapore has had the chance to build up its institutions and rule of law, which requires “stable governments” that do not change policies when the next ruler shows up, he added.
The former prime minister seems to suggest there is a switching cost from a PAP government to a non-PAP government. The cost is the loss of confidence in policies and institutions.

So, the quick analogy is if there is a switch of government, it will lead to a loss of confidence and as a result Singapore will be less successful.

The question is who are to decide the confidence in policies and institutions. The citizens and the voters of course.  If they have no confidence in PAP policies and the institutions (taking instructions from the PAP), they will be willing to pay the switching cost.

However, every citizen will have his or her own calculation of the switching cost.  It cannot be the same.

The confidence has to come from the people, not investors, especially foreign investors who have no right to build the local confidence.

The PAP is warning Singaporeans there is a price to pay.   The switching cost is very high and “It will be very stupid of us to shake that confidence.”

After the famous story of “would you send in the army”#1, now we have another message, a soft approach.  There is a change of strategy perhaps due to GE2011. The PAP now uses civilian word rather than the military language.

How true is the threat of switching cost? If it is like a switching from Singtel to M1 or Starhub, then the cost is bearable and affordable.  If the switching is like from MSM to social media, then there is no cost at all. Of course, the PAP will tell you it is not so simple.  Investors and some people will lose their confidence and so we will have a less successful Singapore.  

Why are we letting other people, especially foreign investors to decide the confidence of Singapore?  Singaporeans and Singapore voters must decide how confidence they have in PAP policies and its operating institutions.

There are checks and balances, transparency and accountability issues in many PAP policies and administrations. The AIM investigation, the reserve, the ISA, the police investigations and the population white paper are policies and institutions affecting public confidence.

There is certainly a switching cost and the PAP can always uses it to prevent voters leaving them and supporting the oppositions. They have been doing so for the past 50 years using different methods. However, public confidence has also changed, especially after GE2011.  

How low the switching cost is will depend on how confidence you have in the PAP. If the public confidence is low, voters will be willing to pay for the switching cost.

The PAP has lost their control on the entry - setting game play, restrictions, and obstacles for people joining oppositions. If the PAP once again loses the control of exit – switching cost and confidence, then it is the end of the monopoly of the PAP in Singapore politics.

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