Dual Economy Thesis

Dual Economy Thesis-39
Our back-of-the-envelope estimates suggest that roughly half of the economy is foreign.Interestingly, the parts of the economy that are currently in free fall — manufacturing and key parts of finance — are largely foreign.Analysts at Morgan Stanley at the time attributed it to a supposed time lag between an output decrease and job losses.

Our back-of-the-envelope estimates suggest that roughly half of the economy is foreign.Interestingly, the parts of the economy that are currently in free fall — manufacturing and key parts of finance — are largely foreign.

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Many formerly unexplained things become explicable once we consider this theory.

For example, retail sales were down 3.4% compared to a year earlier, likely attributable to a much slower growth in consumer spending (local sector) as compared to export growth (foreign sector).

The government’s recent decision to bring in 100,000 foreign workers may be seen as attempt to largely offset the huge exodus of foreign workers back in 2009, which left Singapore’s unemployment rate largely untouched.

The foreign sector may be viewed as a machine which is now starting to rev up with China assuming the place of export destinations instead of Western nations.

Local economist Manu Bhaskaran presciently explained so back in May 2009: We have one part of the economy that, judging by ownership and employment, is largely foreign and another part largely Singaporean.

For example, manufacturing is largely foreign — MNCs produce the bulk of exportable manufactured goods and a huge fraction of the workforce comprises foreign workers.

Commentators and economists everywhere noted that this was Singapore’s worst recession since independence, and credit de-leveraging in the United States and Europe meant that Singapore could no longer rely on debt-financed consumer spending for export growth.

Yet contradictory signs of economic activity were witnessed in Singapore.

It is important to note that this distinction between the 2 sectors does not fall within the class distinction of the have and the have-nots, ie.

one where income and wealth inequality explains much of the difference between the two classes.

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