In his address to the Association of Banks (ABS), Tharman Shanmugaratnam attributed the cause of the global financial crisis to hubris after the boom of the past two decades. The long period of macroeconomic stability had led to heightened risk-taking behaviour and leveraging reaching unprecedented levels in global finance, while credit spreads on risky assets fell to exceptionally low levels. Financial engineering and the search for higher yields led to an explosion of complex financial derivatives, as such high-yield securities backed by sub-prime mortgages originating in the United States found their way into the books of financial institutions in other parts of the world, especially Europe.

Shanmugaratnam emphasised the exogenous origins of the global financial crisis, stating that Singapore’s experience had been somewhat exceptional in that:

He alluded to the possibility that the global financial crisis would trigger a new phase in the globalised world. Monetary policy in the past had been too loose and with this as the fundamental flaw, symptoms such as boosted aggregate demand and increased leveraging in financial markets had surfaced. He alluded to a systemic problem with Western practices of neo-liberalism—in particular, in the United States.

Although at this stage the depth and implications of the global financial crisis in Asia had not yet materialised, and the speech featured no new policy commitments, it was interesting to note Shanmugaratnam’s defence of the non-prescription of fiscal policy at this early stage of the crisis. Later, Singapore’s stimulus policy intervention would come to pass in the form of the so-called ‘Resilience Package’, totalling S$20.5 billion, creating the largest budget balance deficit ever incurred in the city-state.

At the time of Shanmugaratnam’s address to the ABS General Meeting in June 2008, the depth and implications of the global financial crisis in Singapore had not been fully realised. Crisis rhetoric and framing processes in mid 2008 were largely subdued in comparison with later speeches. At a press conference marking the release of the MAS’s Annual Report, Heng Swee Keat referred to the crisis as ‘unusual market volatility’ and maintained that despite external market volatilities, Singapore had still recorded strong growth, though economic activity had moderated. No radical policy had been introduced to combat the early stages of the global financial crisis.

In this press conference, Heng attributed Singapore’s economic slowdown to factors beyond the control of the Singaporean Government. The rise in inflation was imputed to external developments, such as high oil prices, continued high prices of food and inflationary pressures on trading partners. Although the cause of the rise in basic living expenses and inflation was attributed to external influences, at this point, blame was not a large factor in the framing of the crisis. As Heng commented on the United States and Europe: ‘The international financial system and the global economy are still facing significant challenges and downside risks. So far, prompt action by financial authorities in the US and Europe has helped avert a wider crisis. But financial markets remain uncertain and volatile.’

Overall, Heng’s remarks at the press conference typified a type-2 ‘crisis as critical threat’ posture. Although no blame had been allocated, causation had been attributed to external factors. Heng’s address represented a defence of the status quo. He reassured his audience of the soundness of past MAS policies in combating rising inflation. Reminiscent of Lee’s stance, Heng expressed that in the face of increasing volatility globally, there was no room for complacency and that the MAS had tightened its monitoring of financial markets and supervision of financial institutions:

In October, Heng gave a press conference in response to stakeholders’ concerns about the suspect sale of high-risk financial instruments to poorly informed retail investors, the effects of which became evident only in lieu of the global financial crisis, forcing many to forgo their entire savings, including many who could not afford to do so. This speech represented a crisis within a crisis. The PAP professed to have well-regulated financial institutions, but in light of the global financial crisis, flaws became evident.

Heng began by recognising the significance of the inappropriate selling of bonds, especially to vulnerable customers unable to absorb adverse market fluctuations without risking financial ruin. He also largely externalised the blame for the fiasco to the private sector financial institutions and their representatives, portraying the regulator (MAS) as well meaning and proactive in finding a solution to protect the most vulnerable of Singapore’s investors.

The speech also highlighted, however, the pragmatic ideology of Singapore’s elite. Although stressing that the MAS required financial institutions ‘to have a rigorous process to look into every complaint and resolve them fairly’, Heng delegated the responsibility for investigating the scandal to the very financial institutions that had sold the products to begin with. This left him open to questions about the MAS’s commitment to aiding those affected. Although Heng assured his audience that there would be an independent third party overhearing complaints, he did not give operational details about how this third party could audit the decisions of financial institutions’ review panels. He emphasised a self-regulating approach in putting his trust in the review panel and their chairs to conduct thorough reviews of each case and communicate their decision to their customers within a short time.

Given the PAP’s traditional emphasis on detailed regulation to achieve economic prosperity and social stability, the MAS, as Singapore’s de facto central bank, might have been identified as having failed to monitor closely enough the activities of financial institutions. Heng’s posture in this speech was clearly a defensive one. Damage control was the name of the game.

Shanmugaratnam’s 2009 budget statement foreshadowed the government’s intended policy responses to the global financial crisis, which had begun to hit Asia hard in the preceding months. He opened by mentioning the uncertain times Singapore had fallen into and that the prospect for 2009 remained uncertain as all major economic regions of the world were experiencing a simultaneous recession. He re-emphasised that the global financial crisis had descended on Singapore from outside, as its economic fortunes were so closely tied to those of the global market: ‘We had known and had highlighted the downside risks of a US recession and a worsening global credit crunch. But like other governments and the vast majority of private forecasters, we did not anticipate the speed and scale of the deterioration in the global economy in the last six months’.

Acknowledging the far-reaching implications of the global financial crisis, Shanmugaratnam mentioned systemic changes happening right across the financial sector, including in Singapore:

He maintained that the credit situation in Singapore had held steady until October 2008, when there was a decline in credit due to a decrease in demand as well as banks becoming more cautious about the prospects of loan recovery.

Although in 2008 growth in Singapore had been much faster than in any other Asian newly industrialised country, and the government’s strategy had kept unemployment low, Shanmugaratnam predicted that the worst manifestation of the global financial crisis in Singapore would be in terms of job losses. Attempting to soften the bad news, he emphasised Singapore’s advantage in the global crisis in that the government was able to provide resources to respond to the immediate needs of businesses and households while not compromising long-term investment. On this issue, Shanmugaratnam claimed credit for the government having ‘rigorously adhered to a prudent fiscal policy, spending within [its] means, maintaining a stable base of revenues, and building up a nest egg of reserves for contingencies’.

Shanmugaratnam also mentioned that the government, while it could help sound companies weather the storm of the global financial crisis and sharpen their competitiveness, would ‘not be able to save companies that are inefficient or whose products have lost relevance or appeal in the marketplace’. In other words: the government would allow the crisis to cull inefficient or lagging businesses, while its own interventions would be aimed at supporting thriving industries. He emphasised that the major measures taken by the government were not necessarily aimed at preserving the status quo. How well companies were able to benefit from the government’s support would depend largely on how well they were able to review their business models, restructure and put efforts into improving their products and exploring new markets. This was in line with PAP’s longstanding meritocratic ideology of finding Singapore’s niche strength through a form of market-based natural selection. In a bid to reduce unemployment, workers were also encouraged to make significant adjustments to allow businesses to cut costs, such as accepting pay cuts, and businesses also were responsible to ‘cut costs to save jobs, not cut jobs to save costs’.

To aid productivity, Shanmugaratnam detailed the Resilience Package totalling $20.5 billion, aimed at saving jobs and helping viable companies stay afloat. He outlined that this package would not bring Singapore out of recession, but would help avoid a sharper downturn and lasting damage to the economy. Unlike the fiscal policies of foreign countries, Singapore’s Resilience Package entailed a supply-side approach aimed at helping businesses retain workers by strengthening cash flow in order to provide more support and confidence for the domestic sector. This strategy reflected the government’s desire to bolster Singapore’s service sector in order to, like Hong Kong, develop a more competitive service and retail industry. As such, the global financial crisis provided the opportunity for the PAP to restructure and retrain the labour market so that the country could ‘emerge stronger and ready to seize new opportunities, just as [we] did when [we] responded to the Asian Financial Crisis a decade ago’.

Throughout Prime Minister Lee’s speech to the Standard Chartered gala dinner on 19 February—his first major utterance in recognition of the crisis—he moulded his crisis rhetoric to stress the superiority of the Singaporean model. The crisis, he said, was due to a systemic problem with Western practices of neo-liberalism. Careful not to criticise neo-liberalism itself, he found fault with the ways in which Western governments had managed their financial institutions, the effects of which were now spilling over into the local economy:

Lee’s criticism of the West’s lack of prudential care and responsibility implied a belief that its culture bred an acceptance of unnecessary risk taking and careless disregard for the flow-on effects of individualistic behaviour that epitomised Western neo-liberal culture. This was clever politics, serving to exogenise the causes of the economic problems and at the same time reaffirm that the PAP’s apprehensiveness about Western-style liberal democracy was justified and the alternative model of a controlled, phased liberalisation of the financial industry had served Singaporeans well.

In the wake of the 1997 East Asian financial crisis, the PAP had taken a pragmatic approach to liberalising the banking sector. Unlike the policies of foreign governments that installed more protectionist measures in times of recession, Singapore had eased its competition policy, exposing its banking sector to overseas rivals. Combined with consolidation of the banks, these measures served to create a stronger and more dynamic local banking sector. At the same time, however, prudent and conservative regulatory policies were implemented, which Lee now claimed had buffered Singaporean banks from exposure to toxic assets and non-performing loans (NPLs). Lee claimed credit for preparing Singapore with a well-developed ‘disaster subculture’ and ‘safety culture’ that ensured protection of banks and resources through conservative lending policies and high levels of government surveillance and interference—otherwise referred to as ‘vigilance’. As a result, Singapore had been able to put away reserves in the form of high past surpluses that ultimately helped the State weather the global financial crisis.

Although Lee acknowledged that the collapse of Lehman Brothers had an unexpected impact in Singapore (and around the world) through credit-linked structure products, he ascribed this not to the failure of government supervision, but to the poor conduct of financial institutions grounded in a lack of understanding of the failing instrument they had sold. Lee took the opportunity to warn investors against future investments in complex securitisation products or investing in risks they could not bear, as such high-risk investments ‘can destabilise the whole financial system in unforeseeable ways’—a reminder to Singaporeans that their foremost duty was to their country.

Just three days later, Lee continued his meaning-making efforts. In his speech on 22 February, he focused on the strength of Singapore as a nation and, by association, the strength and conviction of its government in looking after the best interests of Singaporeans. He acknowledged that the global financial crisis was the worst economic crisis experienced in Singapore in the past 60 years. He exogenised the causes of the problem and the responsibility for its solution by saying that in order for Singapore to recover, other economies must first recover—in particular, the United States and the European Union—which he did not expect to happen any time soon. Communication of these sentiments achieved a dual objective: it acted to absolve the government from any blame while also playing down public expectation about the government’s ability to resolve the crisis.

Lee reiterated the success of his policies that had enabled the government to store reserves from past surpluses, which fully financed the current Resilience Package, as well as the so-called Skills Programme for Upgrading and Resilience (SPUR), aimed at retraining Singapore’s workforce to make it more competitive.

Lee highlighted the government’s intervention through the introduction of the Credit Scheme, which had helped businesses avoid wage cuts, defer retrenchments or reduce the number of workers that had to be retrenched, while other businesses had used it to expand. With expected growth of 2–3 per cent in GDP in the next four to five years, Lee emphasised his government’s proactive stance in buffering Singaporeans against the massive job losses seen in other countries—again, juxtaposing Singapore’s situation with that overseas. He often drew comparisons with ‘other countries’ to attempt to reassure the audience that Singapore had not suffered badly comparatively, and moreover, that the PAP had been prepared and well funded to aid Singaporeans through programs to help the unemployed find jobs through training and professionals through their Professional Skills Programme (PSP). This stance was reminiscent of Singapore’s rejection of a welfare state. Instead of proposing monetary aid for the unemployed, the PAP encouraged the workforce to retrain.

Lee maintained that only in Singapore could a company cut costs without massive retrenchment and he gave three reasons for this: the Job Credit spurt, Singapore’s flexible wage system and flexible work arrangements. As such, Singaporean workers must aspire to be ‘better than the cheaper ones, and cheaper than the better ones’. Although the global financial crisis was an exogenous problem, Singapore must endogenise its long-term interests. Instead of hiring foreign workers, jobs could be found for Singaporeans by reducing the cost of hiring Singaporeans and upgrading the skills of each Singaporean employee through training.

With the local economy nosediving, Heng’s address to the International Institute of Finance offered dire prognoses, designed to communicate a sense of urgency that had been lacking in Lee’s and Shanmugaratnam’s speech acts. Consistent with Lee and Shanmugaratnam’s crisis rhetoric, Heng emphasised the unprecedented and exceptional nature of the crisis, and recognised the unconventional measures taken by financial authorities in efforts to arrest the unfolding events.

The combination of European banks’ and other financial institutions’ significant exposure to US assets, over-leveraging and dependence on benign conditions for liquidity aided the rapid financial stresses that had travelled from the United States and into the European Union. Japan, having relied on external demand, had also been derailed by the contraction in the US and EU markets. With its own domestic activity afflicted, Japan’s capacity to support other emerging economies had diminished, thus damaging those emerging economies. In 2007 alone, the United States, the European Union and Japan had accounted for 50 per cent of global GDP.

Heng predicted the possibility of a new global order, as US households might no longer be able to function as the engine for the world economy—and with no clear alternative yet in sight. On this point, his view interestingly, though subtly, deviated from that of Lee and Shanmugaratnam. For the Prime Minister and Minister for Finance, it had not been a matter of whether the United States would regain its position in the status quo, but when.

In his address, Heng called for a proactive, decisive and coordinated response from Asian financial leaders in order to counter the effects of the global financial crisis in Asia. Although he believed that since the 1997 East Asian financial crisis, fundamentals in the Asian financial system and economy had become generally sound—banks had been well capitalised and, unlike their Western counterparts, had limited exposure to toxic assets—Asian economies that were more reliant on external demand were expected to contract more sharply. Heng emphasised that although it had been important to focus on the ‘here and now’, structural weaknesses could emerge from short-term measures, damaging the long-term viability and health of Asian economies. As such, leaders were encouraged not to base their actions on sequential responses that had underestimated the severity of the global financial crisis. Remedial action that was too tentative or lacking in conviction could trigger renewed bouts of panic and thus delay recovery.

In a speech to the Singapore Business Awards on 24 March, Shanmugaratnam acknowledged the significance of the global financial crisis as likely the deepest recession in history. The Minister for Finance did not, however, offer the same optimistic view of Singapore’s situation as had the Prime Minister. Recognising that Singapore’s growth had been notably affected by the global financial crisis, he did not expect the worst of the recession to surface within the next two quarters. He forecast that growth for Singapore would remain weak until at least the end of 2010. This admittance of the dire situation of Singapore’s economy was not unexpected, as the economic indicators were there for all to see.

Echoing his own and the other two leaders’ assertions that the blame for the crisis lay elsewhere, Shanmugaratnam was explicit in his criticism of foreign governments and foreign politicians for not taking a hard policy line to discipline their constituencies, as well as not having provided much boost to their economies by way of discretionary spending. Their tightening of credit, according to Shanmugaratnam, had acted as a drag on the global economy and Singapore would suffer the consequences.

In contrast, he congratulated the incumbent PAP for taking forward measures during the 1997 East Asian financial crisis, which had cushioned the impact of the global financial crisis in Singapore. Furthermore, Shanmugaratnam praised Singapore’s entrepreneurs. As this was an address to the Business Awards, Shanmugaratnam’s audience would likely have consisted of stakeholders who would find most benefit from the PAP’s measures to counter the effects of the global financial crisis. Some of the measures included supporting cash flow through reduction in corporate tax, property tax rebates, the enhanced-loss carry-back scheme to help companies making losses and foreign-sourced income exemption. He also foreshadowed a suite of other business-friendly measures—for example, a reduction in administrative speed bumps and reducing regulatory roadblocks. Shanmugaratnam also highlighted small and medium enterprises (SMEs) as a point of focus for future growth whereby they would be encouraged to expand globally, at the same time appealing to foreign SMEs to invest in Singapore. He also proposed to introduce an integrated system of financial reporting to lighten the regulatory compliance burden of companies, especially SMEs. Most significantly, he highlighted the government’s decision to enter into a risk-sharing scheme with banks to encourage banks to continue lending to SMEs by moderating the risks. Although these measures were proposed to encourage competition and coordination among businesses, it is interesting to note that some of the measures proposed would draw corporate governance away from the democratic issue of corporate transparency.

In Prime Minister Lee’s speech to the Manual and Mercantile Workers’ Union (the biggest and one of the oldest unions in Singapore) on 28 March, he took a defensive stance. This presented a significant variation from his previous speeches, revealing deeper concerns about the local impact of the crisis. In what by now had become a familiar mantra, Lee first exogenised responsibility and blame for the global financial crisis and attributed Singapore’s current plight to the United States and Europe, omitting more endogenous contributing factors such as Singapore’s heavy dependence on speculative trade. Lee acknowledged that while recent US Government crisis measures were helpful, the global storm had, inevitably, produced a surge in unemployment, particularly in Singapore’s manufacturing sector, tourism and transportation businesses. Although job losses had so far not affected the service sector, Lee advised Singaporeans to brace themselves, as eventually the service sector would also be affected.

Lee’s thinly veiled concern in this speech was about social stability. Pointing to France, where three million people had taken to the streets in protest against the policies of President, Nicolas Sarkozy (see further Windle, this volume), Lee feared the discontent of the unemployed and impoverished would trigger fear and frustration. Eventually the unemployed would look for someone to blame and would lash out at governments. Highlighting the social impact of recession in this way, Lee betrayed an awareness of the growing unrest among the Singaporean workforce. He then attempted to address this issue before it could potentially become a crisis situation in itself, urging Singaporeans to unite in times of duress. He stressed that tripartite cooperation between the government, workers (and unions) and businesses had never been more important. Its strength had to be preserved in these times of economic decline.

Lee reiterated once again that Singapore had no control over its external environment and must do the best with what was available to it. Singapore, being a ‘price taker’, had to accept and operate within global economic constraints. As such, the PAP had been capable of only buffering Singaporeans from the worst effects of the global storm—limiting their overall responsibility.

Policies covered by Lee in this speech were largely in line with the PAP’s longstanding rejection of protectionist measures and welfare payments to the aged or unemployed. Rather, Lee encouraged workers to accept demotions, pay cuts and, alternatively, retrain to work in a different industry as job opportunities presented themselves. The government had, as part of its Resilience Package, set up agencies to help reallocate the unemployed to available jobs—at times in different fields—as well as encouraging the aged to continue working.

As such, based on a loose assessment of the employment situation, the likely outcome of the crisis-exploitation game would be elite escape with little change in public opinion regarding Lee’s credibility. In part, this could be attributed to Lee’s and the PAP’s consistent and established political and economic ideology, which had been endogenised by the majority of Singaporeans. Based on the issue of unemployment alone, a paradigm shift would be an unlikely event, thus a policy stalemate between the opposition and the PAP would likely endure.