SimState: The Myth Of Free-Market Singapore

When looking for case studies of free market societies throughout history Singapore, a polity built from scratch in 1965, is an oft-cited example of how enlightened political leadership can stand back and let the market build a prosperous community for all. But was Singapore really guided by free market thinking at the executive political level? And should the free market in Singapore get the praise (or the blame) for subsequent economic developments? In consulting the autobiography of Lee Kuan Yew, Singapore’s first and longest-serving executive politician, an autobiography which covers the life and career of both Lee and the modern country of Singapore itself, the answer seems to carry a bit of nuance.

Chapter 1 Going It Alone

Singapore was a former British colony and military base/trading depot. It had no “hinterland” economy. It was dependent upon British military subsidies, the bases on the island costing nearly GBP$100M and losing these subsidies early on was a major fear of Lee’s.

Lee’s Top 3 Concerns after independence:

  1. Get international and UN recognition
  2. Defense against Malaysian encroachment
  3. “how to make a living for our people”

Chapter 2 Building An Army from Scratch

Rebuilding the military was a jobs program and an opportunity to create loyal party adherents and factional interest groups. Utilized conscription to build national unity and, modeled on Israeli military, be able to field a large fighting force in a short amount of time.

One official lamented that, “The Spartan approach to life does not come about naturally in a community that lives by buying and selling.” [The need for a military was to protect the political system from foreign dominance, not the commercial system.] “we were building up our defense forces to protect our fledging state.”

“Those who enlisted in the SAF as a full-time career would be guaranteed hobs in the government, statutory boards, or the private sector when they left full-time service to go into the reserves.”

Perceived and actual political threats from Malaysia and Indonesia and a desire to racially and ideologically unify the Singaporean citizenry and re-educate Chinese cultural norms led LKY to build SAF w/ Israeli training and partnerships with “Western democracies” for practice

Chapter 3 Britain Pulls Out

Contribution of British bases to the economy of Singapore in 1966, 20% of GDP.

LKY referred to by a British official “as good a left-wing and democratic socialist as any in this room” and “the government of Singapore… is the only democratic socialist government… in Southeast Asia” and “his housing programme… defies challenge in anything that has been done in the most advanced social democratic communities.”

Later, LKY “attended a Socialist International conference in Stockholm to keep in touch with British and European socialist party leaders.”

Singaporean government lost lots of money on the devaluation of the British pound, in which many of their reserves were held, and feared the departure of British troops in mainland Asia would shake investor confidence, particularly investors in Hong Kong, resulting in a desire to have an arms buildup for credible defense.

Chapter 4 Surviving Without a Hinterland

Recommendations of Dutch economist Dr. Albert Winsemius in 1965:

  • common market agreement with Malaysia
  • resumption of barter trade with Indonesia
  • seek favorable entry for Singapore-manufactured goods into US, UK, Australia and New Zealand

Sent trade delegation to Africa to try to drum up business but failed. Fears of unemployment since 1959 led to desire to industrialize. Formed Singapore Tourist Promotion Board to try to address unemployment.

To promote industrialization, “we protected locally assembled cars, refrigerators, air conditioners, radios, television sets and tape-recorders, in the hope that they would later be partly manufactured locally. We encouraged our own businesspeople who set up small factories to manufacture vegetable oils, cosmetics, mosquito coils, hair cream, joss paper and even mothballs!

Spent “vast sums” on infrastructure only to find the “Jurong industrial estate” mostly empty. Formed an Economic Development Board which got into JVs to recycle paper products with a businessman with no manufacturing experience, as well as ceramics without technical know-how. Also JVed with a Japanese shipbuilder but it did not prove profitable versus ship-repair, which was labor intensive.

“I was convinced our people must never have an aid-dependent mentality” yet formed the Bases Economic Conversion Department whose job was “to retrain and redeploy redundant workers, take possession of land and other assets the British were vacating, put them to the best use, and negotiate mitigatory aid.” Resulted in 1968 agreement for GBP$50M aid package to be spent on British goods and services, 25% being grants and 75% being loans.

Generated S$4-5M in annual USN ship repair business for the Singaporean government. The Singaporean government formed private entities to manage shipyards which later transformed into public companies.

Sought to “leapfrog” regional economies to become trading partner with developed world (America, Europe, Japan) to attract manufacturers to export to developed countries.

Formed Development Bank of Singapore, “DBS helped finance our entrepreneurs who needed venture capital because our established banks had no experience outside trade financing and were too conservative and reluctant to lend to would-be manufacturers”, ie, subsidized a top-down manufacturing-centric policy.

Keng Swee, first chairman of the Economic Development Board, “every time he drove by a school and saw hundreds of children streaming out, he felt downhearted, wondering how to find jobs for them when they left school.”

“The government played a key role in attracting foreign investments; we built the infrastructure and provided well-planned industrial estates, equity participation in industries, fiscal incentives and export promotion. We established good labor relations and sound macroeconomic policies, the fundamentals that enable private enterprise to operate successfully.”

Also, by end of 1970 had “issued 390 pioneer certificates giving investors tax-free status for up to five years, extended to 10 years for those issued after 1975”

“During this period, China was in the mad throes of Mao’s Culturual Revolution. Most investors thought Taiwan and Hong Kong too close to China and headed for Singapore.”

“By the late 1970s we had left our old problems of unemployment and lack of investments behind us. The new problem was how to improve the quality of the new investments and with it the education and skill levels of our workers.”

“After several years the EDB finally convinced Rollei, the German camera manufactuer, to relocate in Singapore. High German wages had made them uncompetitive.”

“We left most of the picking of winners to the MNCs that brought them to Singapore. A few, such as ship-repairing, oil-refining and petro-chemicals, and banking and finance, were picked by the EDB or Sui Sen, our minister of finance, or myself personally. Our ministry of trade and industry believed there could be breakthroughs in biotechnology, computer products, specialty chemicals and telecommunications equipment and services. When we were unsure how new research and development would turn out, we spread out bets.”

“Our job was to plan the broad economic objectives and the target periods within which to achieve them.”

“We did not have a group of ready-made entrepreneurs such as Hong Kong gained in the Chinese industrialists and bankers who came fleeing from Shanghai, Canton and other cities when the Communists took over. Had we waited for our traders to learn to be industrialists we would have starved.”

“The government took the lead by starting new industries such as steel mills (National Iron and Steel Mills) and service industries such as a shipping line, Neptune Orient Lines (NOL), and an airline, Singapore Airlines (SIA).”

Development Bank of Singapore, Insurance Corporation of Singapore, Singapore Petroleum Company; Chartered Industries of Singapore (CIS), a mint and a factory for small ammunition. Pg 67, conversion of “successful” public monopolies into private companies.

With economic consultation from a Dutch academic, Singapore embarked on economic experimentation which involved at various times a combination of tariffs and no tariffs, tax concessions for new MNCs, extensive investment in infrastructure and at times direct government investment in “from scratch” national industries, which despite being successful and profitable were mysteriously privatized at points. The Singaporean government benefitted from political tailwinds created by economic chaos in other parts of the world, but also attracted FDI by pledging not to interfere in business affairs for those relocating to Singapore (1973 oil crisis being a good example).

Chapter 5 Creating a Financial Center

To become a world financial center, Singapore’s government realized it needed to lift foreign exchange control restrictions on all currency transactions between Singapore and territories outside the sterling area.

“I had decided in 1965… that Singapore should not have a central bank that could issue currency and create money. We were determined not to allow our currency to lose its value against the strong currencies of the big nations… so we retained our currency board which issued Singapore dollars only when backed by its equivalent value in foreign exhcange. The MAS has all the powers of a central bank except the authority to issue currency notes.”

Why did Singapore need its own currency if it had no plans to expand its issuance?

“We attracted international financial institutions by abolishing withholding tax on interest income earned by nonresident depositors. All Asian dollar deposits were exempted from statutory liquidity and reserve requirements.”

“The foundations for our financial center were the rule of law, an independent judiciary, and a stable, competent and honest government that pursued sound macroeconomic policies, with budget surpluses almost every year. This led to a strong and stable Singapore dollar, with exchange rates that dampened imported inflation.”

“To meet the competition from international banks, the MAS encouraged the four largest local banks (known as the “Big Four”) to acquire and merge with the smaller local banks to become bigger and stronger.”

1985 “The SES [Stock Exchange of Singapore] was closed for three days while MAS officials… worked around the clock with the Big Four banks to arrange an emergency “lifeboat” fund of S$180 million to rescue the stockbrokers.”

Government of Singapore Investment Corporation formed to manage the Central Provident Fund, Singapore’s pension scheme.

“For over three decades, I had supported Koh Beng Seng on restricting the access of foreign banks to the local market. Now I believed the time had come for the tough international players to force our Big Four to upgrade their services or lose market share… the MAS liberalized access to the domestic banking sector by allowing qualifying foreign full banks to open more branches and ATMs. It lifted limits on foreign ownership of local bank shares.”

Singapore sought to be a global financial center, becoming a key chronological link in the chain between markets in SF, Tokyo and Zurich. Singapore went without a central bank but did establish a “monetary authority” and currency board similar to HK. Special rules and taxes were established to attract foreign financial capital, but a primary attractor was stability in an unstable region. The government managed a pension scheme and sovereign wealth fund which somehow earned above market returns with a conservative stance. The banking sector was partially deregulated and globalized after a period of productive controls.

Chapter 6 Winning Over the Unions

“I started my political life fighting for the unions as their legal adviser and negotiator.”

“I owed my position as prime minister largely to the trade union movement.”

“We banned all strikes in certain essential services”

Britain’s withdrawal of military announcement in 1968 led to Employment Act, Industrial Relations (Amendment) Act and Trade Unions Act amendment, “These laws spelled out minimum employment conditions and placed limits on retrenchment benefits, overtime bonuses, and fringe benefits. They set out uniform provisions for rest days, public holidays, working days, annual leave, maternity leave and sick leave. They restored to management the right to hire and fire, to promote and transfer, functions the unions had encroached upon during the years of industrial strife… we made it illegal for a trade union to take strike or industrial action without a secret ballot.”

1972, sets up National Wages Council “with representatives from unions, management and government”

“The NTUC [National Trade Union Council] expanded into health services, child care, a broadcasting station, a seaside resort hotel for workers called Pasir Ris Resort, and a country club, the Orchid Country Club with a golf course by Seletar reservoir. It also developed quality condimuniums its members could buy… To make them affordable, the government provided state land at nominal prices.”

LKY’s political career began as a union consultant and advocate. But when he came to power, he threatened unions with treason if they striked. A series of reforms were put in place which reduced union power and enhanced company/management power, but it all takes place within a system of “managed relations” where the government is a “stakeholder”. For some reason, the national union organization has made conglomerated investments in semi-private for-profit businesses and co-ops aimed at worker welfare, which the government has helped subsidize.

Chapter 7 A Fair, Not Welfare, Society

“We believed in socialism, in fair shares for all. Later we learned that personal motivation and personal rewards were essential for a productive economy. However, because people are unequal in their abilities, if performance and rewards are determined by the marketplace, there will be a few big winners, many medium winners and a considerable number of losers. That would make for social tensions because a society’s sense of fairness is offended.” [set this up as the leading quote for the essay?]

“A competitive, winner-takes-all society, like colonial Hong Kong in the 1960s, would not be acceptable in Singapore. A colonial government did not have to face elections every five years; the Singapore government did. To even out the extreme results of free-market competition, we had to redistrivute the national income through subidies on things that improved the earning power of citizens, such as education. Housing and public health were also obviously desirable. But finding the correct solutions for personal medical care, pensions, or retirement benefits was not easy. We decided each matter in a pragmatic way, always mindful of possible abuse and waste. If we over-re-distributed by higher taxation, the high performers would cease to strive. Our difficulty was to strike the right balance.”

CPF policies imposed a total savings rate of 50 percent of wages.

“I further amended the law to give the government the power to acquire land for public purposes at its value on a date fixed at 30 November 1973. I saw no reason why private landowners should profit from an increase in land value brought about by economic development and the infrastructure paid for with public funds.”

On the development of HDB and resettling of farmers and squatters: “Compressing 30 years into a few pages makes it all appear simple and straightforward. There were enormous problems, especially in the early stages when we resettled farmers and others from almost rent-free wooden squatter huts with no water, power or modern sanitation, and therefore no utility bills, into high-rise dwellings with all these amenities but also a monthly bill to pay. It was a wrenching experience for them in personal, social and economics terms.”

“As incomes increased, fewer patients chose the lower-cost wards, which had the highest government subsidies, and opted for wards with more comfort but lower subsidies. We considered but rejected a means test to determine which wards patients were entitled to use; it would have been difficult to implement. Instead we encouraed people to upgrade to the ward they could afford by making clear differences in comfort between different types of wards. It was in effect a self-administed means test.” so is the market!

“Government expenditure has averaged 20 percent of GDP, compared to an average of 33 percent in the G7 economies. On the other hand, our development expenditure has consistently been much higher than that of the G7 countries.”

“Our aim is to have partial or total cost recovery for goods and services provided by the state. This checks overconsumption of subsidized public services and reduces distrotions in the allocation of resources.”

The Singapore government was dominated by one party, PAP, for its modern history. They very openly bought botes with their welfare programs. But they sought to make many of these programs less generous to ensure their solvency. The government forced high rates of saving on workers which it deployed to finance infrastructure spending and welfare housing. Lower tax rates compared to other developed countries helped Singapore remain competitive. LKY is very clearly NOT a fan of the free market in this chapter.

Chapter 8 The Communists Self-Destruct

On fighting Malayan National Liberation Front/communist guerrillas: “Could we have defeated them if we had allowed them habeas corpus and abjured the powers of detention without trial? I doubt it.”

Singapore had two major political factions, the Communists and the PAP. After a series of political blunders and internal turmoil, the communists formally exited the electoral scene leaving the PAP to run unopposed for 30 years, allowing them long and consistent control over policy-making. They used “ends justify the means” and subverted sound legal principles to obstruct and detain communists.

Chapter 9 Straddling the Middle Ground

“while overall sentiment and mood do matter, the crucial factors are institutional and organizational networks to muster support… in our HDB new towns, there is a network that leads from the RCs to the MCs and CCCs on to the prime minister’s office…”

“The PAP had countered the opposition’s ‘by-election’ strategy with the electoral carrot that priority for upgrading of public housing in a constituency would be in accord with the strength of voter support for the PAP in that constituency.”

The PAP faced no serious political opposition and turned to various patronage and vote-buying schemes to solidify support. It seems the HDB housing projects also allowed the PAP to corral supporters and have a physically defensivle political communications network. Many political opponents made claims of corruption only to be sued, sometimes into bankruptcy, by LKY. The few times his own PAP members were charged with libel, they settled out of court. LKY employes specious reasoning to defend this authoritarian legal approach on the grounds that to let the charges go unmolested would threaten his political power– he has a pure, unviolated record of ethics in a region known for corruption!

Chapter 10 Nurturing and Attracting Talent

“Traditional methods of choosing marriage partners had been ruptured by universal education: The government had to provide alternatives to the family matchmakers of old.”

“I gave special income tax concessions to married women”

Stop-at-Two policy of the 1960s “Without that policy, family planning might never have brought population growth down, and we would not have solved our unemployment and schooling problems.”

“Difficulties over our talent pool were aggravated when the rich Western countries changed their policies on Asian immigration… [the US] decided to accept Asian immigrants, reversing more than a century of its whites-only policy.”

The Singapore government was obsessed with population management, first trying to limit births on Malthusian grounds, then trying to promote the marriage and childraising of educated parents on the grounds of skewing the IQ or “talent” pool. Many subsidies Singapore granted to educate its citizenry was “leaked” as people immigrated to other countries to pursue opportunity, partly in response to changing immigration policies elsewhere (such as the US in the 1960s). Now it has taken to liberalizing immigration for high IQ emigres, especially those with jobs, to try to increase the “talent pool.”

Chapter 11 Many Tongues, One Language

LKY enforced language laws on the population in a desire to achieve social harmony and globally integrated economic progress. He encountered much popular resistance but believes these policies proved prescient given global events. It also allowed for a more homogenized culture.

Chapter 12 Keeping the Government Clean

“Human ingenuity is infinite when translating power and discretion into personal gain.”

Singapore got high marks for honesty of government in a region where corruption is an ingrained part of culture. LKY attributes this cultural success to the ideological rigor, invasive investigative authority given to the anti-corruption bureaus and the willingess of government to pay high salaries to public servants to attract them away from the private sector [distortion]. But who watched the anti-corruption officers to ensure they weren’t on the take? And why would this be a corruption issue if government didn’t have the power over the economy? LKY again admits that the PAP bought political favors with public resources by engaging in welfare spending once in office.

Chatper 13 Greening Singapore

“Hundreds, eventually thousands, of pirate taxis clogged our streets and destroyed bus services… only after 1971, when we had created many jobs, were we able to enforce the law and reclaim the streets.”

“It was immensely better that we competed to be the greenest and cleanest in Asia. I can think of many areas where competition could be harmful, even deadly.”

“We phased out the rearing of over 900,000 pigs on 8,000 farms because pig waste polluted our streams.”

“After we had persuaded and won over a majority, we legislated to punish the willful minority… if this is a ‘nanny state’, I am proud to have fostered one.”

Much in the vogue in the 1970s, LKY got swept up in environmentalism and made it a major policy priority to “green” Singapore; this included building public utility infrastructure to control waste and pollution, but also involved “nudge” legislation to change or ban cultural habits deemed offensive or a nuisance. Agricultural practices were changed as were retail practices (pirate taxis, street hawkers). LKY put great emphasis on the “morale” of greening and its affect on visiting dignitaries and VIPs. There is no discussion of the cost of these programs or whether there were alternative approaches to accomplishing the stated goals: he embraced charges of “nanny statism.”

Chapter 14 Managing the Media

“Our journalists are exposed to and influenced by the reporting stytles and political attitudes of the American media, always skeptical and cynical of authority. The Chinese and Malay press do not model themselves on newspapers in the West. Their cultural practice is for constructive support of policies they agree with, and criticism in measured terms when they do not.”

“My early experiences in Singapore and Malaya shaped my views about the claim of the press to be the defender of truth and freedom of speech. The freedom of the press was the freedom of its owners to advance their personal and class interests.”

“That was exactly what we had the right to do, to seek a mandate to deal firmly with foreign, in this case colonial, interests in the press. It was our declared policy that newspapers should not be owned by foreigners.”

“I needed the media ‘to reinforce, not to undermine, the cultural values and social attitudes being inculcated in our schools and universities. The mass media can create a mood in which people become keen to acquire the knowledge, skills and disciplines of advanced countries. Without these, we can never hope to raise the standards of living of our people… Freedom of the press, freedom of the news media, must be subordinated to the overriding needs of Singapore, and to the primacy of purpose of an elected government.'”

“A few years later, in 1977, we passed laws to prohibit any person or his or her nominee from holding more than 3 percent of the ordinary shares of a newspaper, and created a special category of shares called management shares. The minister had the authority to decide which shareholders would have management shares.”

“We decided in 1986 to enact a law to restrict the sale or distribution of foreign publications that had engaged in the domestic politics of Singapore.”

Freedom of the press is clearly not a cherished ideal in Singapore, in so far as PAP-controlled government is concerned. The law allows various forms of censorship used to control “foreign influence” of the press but there is no discussion of whether this was also used to control domestic press.

Chapter 15 Conductor of an Orchestra

LKY built a national airline, but insisted it make a profit. He engaged in enormous airport building projects without explanation for why they were necessary. He used the unions to pressure foreign politicians. LKY banned jury trials in Singapore, he appointed lawyers, many friends from his school days, to many important ministries related to commerce. He regulated the housing system and enforced desegregation quotas which he knew depressed the capitalization of the housing stock and went against the ethnic groups’ desires to segregate. Is this multi-cultural harmony, based on edict?

###

http://www.slate.com/articles/arts/culturebox/2003/08/cult_of_personalism.html

At one point, he brags that Uganda has more female hotel managers than any other country in Africa. “We have got four managers, and another two assistant managers.” This is a strange thing for the president of an entire country to worry about—but Amin seems to feel that he has to worry about it: Only if he controls everything, and only if he can keep the country in line, will Uganda prosper. Success, Amin seems to believe, is a matter of will and of heeding his good advice. People just need to work harder—women need to get up at “about 5 o’clock in the morning”—and love their leaders. If something’s wrong, then, it’s because a citizen has personally failed, not because the system is screwed up. Amin had no ideology. (“We are not following any policy at all,” he says at one point.) Like so many Third World tyrants, he was not a fascist or a Communist. His idea of the world was purely personalistic. He was an Amin-ist.

[similar to the # of car competition between LKY and indonesian leader; also, the rejection of ideology by LKY, following his own intuition]

Why We Don’t Read The Rainbow Fish To Our Children

If you’re the parent of a young child, you probably have a copy of The Rainbow Fish somewhere in the house– probably two or three! It seems this is one of several books that every family member and friend wants to be the one to give to you.

The book’s popularity and appeal are rooted not just in its attractive art style, including reflective foil silver fish scales, but also in its moral lesson. In simple terms, the book teaches about sharing and every modern parent knows that sharing is the Cardinal Virtue of Childhood. Whatever your child’s other vices, shortcomings and individual weaknesses might be, if he or she knows how to share and does it consistently in public social settings the parent can be confident, even proud, that they’ve raised their child right.

But why is sharing so important? Ah, this is the question to which no parent seems to know the answer!

We do not read The Rainbow Fish in our house, not to our children and not for the pleasure of the adults. We don’t think “sharing” is a virtue, cardinal or otherwise. We think it is an unthinking codeword of social metaphysics– the idea that one’s individual value is relative to what other individuals think it is.

Here is how The Rainbow Fish teaches social metaphysics to children:

The eponymous pisces is born with beautiful shiny scales. His shiny scales are coveted by other fish who are born without them. These fish ask for his scales, which he does not give to them. As a result, the other fish scorn and ostracize him. He meets a “wise” octopus (ie, a not-fish) who tells him that he can be desirable to the other fish if he gives the virtues he was born with to others. He proceeds to do so until he is left with one shiny scale for himself, all others being distributed pro-rata to the other fish. At this point, the other fish are happy with him and he is accepted into their community.

What’s going on here? Let’s parse this.

The protagonist is an antagonist. The school of fish, the fish community, is the protagonist and he has antagonized them simply be existing. The reason his existence is bothersome is because he was born with qualities (beauty, in this case) which they lack. They feel lessened in their pride and their own existence by witnessing things he came into life with that they were not.

Without making any attempt to know and understand the Rainbow Fish, the other fish determine he is unlikable because he won’t give them the things they have, simply because they ask for it. His virtues are vices if they can’t have them for themselves.

The Rainbow Fish faces exclusion and emotional pain if he chooses to keep himself to himself. He is not free to exercise his property rights as he likes without fear of being alienated by the other members of the community.

To gain wisdom about how to participate in a community of his peers, he speaks with a creature outside of his species. He learns not to trust his instincts or his own rational capabilities but to trust in alien powers. He learns that he is wrong “as a person” just for being who he is– he must make some gift, offering or sacrifice of himself to the community to be accepted.

Finally, he gives up what is desirable and virtuous of himself to others. Only when there is equality are the others happy with him. And suddenly, he is happy with himself for being liked by them. It is not explained how and why he needed to be unhappy without that condition being met nor why he couldn’t survive and prosper without giving away his virtue and strengths to others, now totally diluted.

We believe that the strengths and capabilities people are born with are virtuous. At minimum, they benefit the individual and at maximum they may be utilized in social cooperation to benefit others as well. But they do not harm or hinder other people who are born without them.

We believe that people should be free to choose who they associate with and on what terms. Giving away one’s values and virtues is not an acceptable condition for gaining group membership or loyalty in our minds. Any group that values an individual as a member should be able to value them for who they are, not for what they can take from them.

We believe individuals should trust themselves and their own reasoning. They should not need to rely upon the “wisdom” (opinions) of people who are not like themselves to learn how to live their own life truthfully and successfully.

We do not believe that self-sacrifice is a reasonable price to pay for the approval of others. We do not believe the approval of others to be valuable or desirable criteria for self-esteem and the ability to live life joyfully on one’s own terms.

We believe there are other means for establishing group harmony and the bonds of community than simple equality of property, possessions or ideas. The Cardinal Virtue in our minds, in childhood and otherwise, is Integrity– honesty with oneself, full visibility of one’s individuality, and the courageous nobility of embracing the unique challenges and triumphs of each person’s identity.

For these reasons, we do not read The Rainbow Fish in our household even though many families do.

Why Self-Esteem is Necessary to Future-Proof Your Child, and How to Give It to Them

The formal study of the psychology of self-esteem is a modern development, while the concept itself is timeless, immemorial and universal to the nature of the human mind. That we only recently discovered it as an intellectual category and began to examine its principles and the practical applications thereof in concrete detail does not mean that self-esteem was not an operant condition of the human psyche throughout history.

The spirit of the ancient world and the pre-modern past is often thought to be one of tradition and imposed order. Every person was born into a certain station in life which they would inhabit, without change or any particular effort, until their death. Another way to consider this set of circumstances is that the past was a place of entitlement. Entitlement often carries a pejorative connotation indicating undue privilege, but in its broadest sense it applies to any situation in which people deem what they have and what they are due to be a function of “who they are” rather than “what they have done” and it applies to high and low alike.

The emergence of markets, of dynamic technologies and of new thinking about meritocratic social orders heralded the arrival of the age of personal responsibility trodding over the threshold of the age of entitlement. In this new world, the modern world, people had new opportunities to change their station and position in life through strategic ideas and the will to carry it out. Life outcomes began to shift from what role or relationship they were born into, to being due more and more to individual thinking and decisions people made over the course of their lives.

This age of responsibility, unlike the age of entitlement that preceded it, demands active engagement with the psychology of self-esteem to maximize the opportunities presented. Rather than finding oneself resentful, frustrated and confused by an ever-changing society, business and technological landscape, the individual who has mastered the psychology of self-esteem is enabled to continue to change their own ideas and with them, their actions, in relation to this kaleidoscopic shifting of external reality and continually stand to benefit from whatever arrangement it takes. In contrast, the individual living with entitlement feels threatened by change, discouraged by having to think and come up with new plans and ultimately concludes that personal transformation is hopeless and if they can not benefit from progress, they ought to stand in its way and at least enjoy the satisfaction of gumming it up for their historical antagonists and enemies.

The parenting of the past, founded on authority and parental license and the diminution of the individual identity of the child to prepare him or her for their “entitled” adult future, is a severe liability in the modern world and one which few have come to terms with or even understand as a problem. An ever-changing future demands a growth, rather than a fixed, mindset, and a growth mindset stems from confidence in the self’s ability to remain flexible and adapt to new conditions. In other words, a growth mindset is directly tied to the psychology of self-esteem.

Self-esteem being at root a relationship that one has with oneself — feelings of personal worthiness and the capability to seize the good in life — it is incumbent upon parents who wish to “future-proof” their children in a world of hyperactive change to start in infancy with a parenting approach based upon respect. The respect shown for the infant becomes a model for the later child and future adult in how they should relate to themselves.

In other words, parents who wish to benefit from the modern knowledge of the psychology of self-esteem so as to arm their children with a growth mindset in a continuously developing world that demands the greatest creativity and flexibility of thinking to seize the numerous advantages presented on an almost daily basis, should start by grounding their parenting approach in respect for the individual child before them.

Quote – The Struggle For Success

What is success? A mysterious, indescribable power– a vigilance, a readiness, the awareness that simply by my presence I can exert pressure on the movements of life around me, the belief that life can be molded to my advantage. Happiness and success are inside us. We have to reach deep and hold tight. And the moment something begins to subside, to relax, to grow weary, then everything around us is turned loose, resists us, rebels, moved beyond our influence. And then it’s just one thing after another, one setback after another, and you’re finished.

~Thomas Buddenbrooks, in Buddenbrooks

Review – The Medici

The Medici: Power, Money and Ambition in the Italian Renaissance

by Paul Strathern, published 2017

The history of the Medici family might best be summarized with the phrase “from dust to dust.” As if to emphasize how they were destined for greatness and nobility, the family started out as a bunch of Tuscan hillbillies who could trace their lineage to a legendary knight of the Holy Roman Empire who settled near Florence in the 8th or 9th Century. From there and then, no one heard much of these people until some of the clan moved into Florence proper in the early 1300s and formed a small money-changing business.

Using conservative business practices and investing in roles of civic responsibility, eventually a Medici was elected to the position of gonfaloniere, the primus inter pares of the Florentine Republic. From this position the dice were carefully loaded in the favor of subsequent Medici generations by artfully forming governing coalitions that cemented their public position while creating leverage across their business and investment portfolio through the tactical use of subsidy, official privilege, insider information and regulatory capture wielded against competitors and opponents.

The story of the “overnight success” of the Medici begins here. The first great head of the Medici family and Medici bank, Giovanni de Medici, had jockeyed for favor with the newly appointed (anti-)Pope John XXIII in order to secure a role as the personal banker to the Papal Curia upon his ascendancy, which was then granted. For much of the 14th Century and Renaissance period in general, the papal revenues and banking needs were equivalent to managing the treasury function for the modern era’s most wealthy and complex multi-national corporations. To gain this trust was not only a measure of unique esteem valuable in and of itself, but a responsibility that carried with it priceless information and irreplaceable business franchises throughout European Christendom and even the Levant.

However, Pope John XXIII soon became embroiled in the Great Schism in which he and 2 other rival popes were called before the Holy Roman Emperor and summarily dismissed, to be replaced with his appointment, Pope Martin V. At his son Cosimo’s urging (whom he had sent to be his representative at the delegation attending the papal conference) the Medici’s continued to support the defrocked pope, even helping to pay his ransom for his release from imprisonment. Rather than being a financial disaster, this loyal support of the former pope led to a new lucrative banking relationship under Martin V, because in return for bartering his release the former Pope John XXIII agreed to support the nomination of Martin V and participate in the reconciliation of the Schism, leading to greater legitimacy for the new pope.

As a major political player on top of his business responsibilities, Giovanni left three apocryphal warnings for his descendants:

  1. focus on business, not politics
  2. do not be ostentatious
  3. don’t oppose popular will, unless it is aimed at disaster

It seems as if it should be unnecessary to say that in time this advice was forgotten and eventually, so, too, were the Medici.

But the dissolution of the Medici was a ways away yet. After Giovanni came Cosimo as head of the family and the Medici bank. He faced a disastrous and unpopular war between Florence and Lucca (backed by Milan) which threatened to ruin the Florentine treasury and which had pitted the various leading families against one another. Subscribing to Rule #3, Cosimo opposed the conduct of the war and worked to hide the bank’s assets outside of Florence to avoid expropriation in the war’s aftermath.

For these maneuvers and others, Cosimo was recalled to Florence and imprisoned in the bell tower of the Palazzo Vecchio by a faction led by the rival Albizzi who had plans to execute him for treachery. However, Cosimo’s far flung banking business and participation in the geopolitics of Western Europe had led him to a series of alliances and power relationships with foreign entities such as the Venetian Republic and the Papal States which he utilized to create a kind of diplomatic protection for himself, pressuring his enemies to choose exile over execution as his fate.

In the meantime, he used bribes and the threat of invasion of the city by his own mercenary forces outside its walls to add to the diplomatic pressure and engineer a favorable outcome for himself, all while behind bars.

Shaken but not stirred, Cosimo came to rule Florence through the intervention of the Pope and Venice, but vowed that “he would rule, but he would not be seen to rule” going forward. He had learned his lesson about bearing personal responsibility when it came to matters of state. Further, he was coming to understand that it was easier to wield power when others weren’t watching.

According to one supporter, “Whenever he wished to achieve something, he saw to it, in order to escape envy as much as possible, that the initiative appeared to come from others and not from him.” One policy he pushed for through his crony network was the use of the “catasto”, which had originally been levied to pay for the war, as a punitive tool to crush his political and business opponents through ruinous taxation. While he was forcing his enemies into exile to avoid financial ruin, purchasing and redistributing their former property to his supporters on a bargain basis, he simultaneously used inflated personal balance sheets to hide his income and appear to be bearing the heaviest personal tax burden on a relative basis.

But Cosimo was far from poor:

Between 1434 and 1471, Cosimo spent 663,755 gold florins supporting public works, by comparison, total assets of the Peruzzi bank at its height were 103,000 florins from Western Europe to Cyprus and Beirut.

If he was able to spend 6X the total assets of a well-known competitor at the height of its powers on public works, his total assets and wealth must have been a multiple of that amount. Normal banking and family secrecy aside, the Medici wealth at this time seems to have been nearly incalculable. It is no wonder, then, that one of Cosimo’s key strategies in building and wielding power was to always return favors with favors.

Following Cosimo, who was once to have said that “Trade brings mankind together, and casts glory on those who venture into it” his son Piero and Piero’s son, Lorenzo began to venture the family increasingly beyond the scope of banking and business and into the realm of politics and social standing via nobility. Depending upon how you interpret the events that followed, Piero and Lorenzo were either some of the most “magnificent” leaders of the Medici banking and political enterprises or they were equivalent to the decadent dissipators of the true talent and generational thrift of their greater ancestors.

Either way, the local power of the Medici in and around Florence was successively traded for inter-regional power and influence within the royal families of Europe. As the Medici gained a queen mothership in France, they lost their rule over the Florentine Republic to foreign invasion and intervention and increasingly squandered the capital of their banking and related enterprises. By the early 18th Century the Medici had failed to produce a male heir and had ceded their Grand Duchy of Florence to the Holy Roman Emperor and ceased to be a meaningful business or political entity forever.