Tuesday, January 6, 2009

A Few Good Men.....

Welcome to my blog.

It is taken me some time to get going. Blogging is not something which comes naturally to me. I am more an old school face-to-face sort of guy. But times they are a-changing.

And how they are changing. It seems that not a day goes by without there being news of bad economic results, or poor job numbers, or some disturbing trend or other. But the real shocker recently was the discovery of the Ponzi scheme in New York run by Bernie Madoff, where investors are estimated to have lost US$50 billion. To put that into perspective, its about a third of Singapore’s GDP.

The term “Ponzi scheme” was derived from a scam in the 1920s in Boston. We often read these stories, and wonder how people back then can be so gullible. But people, even in modern Singapore, continue to be fooled today – be it a “magic stone” scam or a Nigerian letter.

The Madoff victims are not those we would ordinarily consider as gullible. They included hedge funds, large institutions and very wealthy individuals. They were, or were run by, highly intelligent, financially savvy people. It is easy to argue that everyone’s judgment can be clouded by greed, except that Madoff did not promote “get rich quick” schemes. His allure was that he (apparently) consistently delivered a steady and reasonable rate of return on investments.

So how did it happen? The investigations will probably expose the true nature of the fraud. But what will happen is predictable: regulators will be criticised, those involved prosecuted, careers, reputations and fortunes will be lost, regulations will be tightened, and ultimately, the incident will be consigned to a footnote in history. Except that this history will repeat itself. It always does.

The truth of the matter is that the world, and not just the financial world, has become too complicated for most of us to fully understand. Neither can we make ourselves immune from the dishonesty or folly of others by acting sensibly ourselves. Everything is just too inter-connected. There will always be those who will abuse their position at the expense of others. The law does not in every case protect and compensate the innocent. It is often too busy playing catch-up to man’s ingenuity to bend the rules or find a loophole.

Ultimately, the best protection is that those in power have the intelligence, integrity and character to do what is right. The sub-prime problem would not have happened if unscrupulous property and mortgage agents had not conspired to give credit to those whom they knew could not afford to repay it. One commentary I have read suggested that it is very likely that Madoff's operation was legitimate initially, but that he took the Ponzi route when he began to suffer losses that he was too proud to acknowledge. In other words, his lack of character led to his downfall, and others’ pain.

Politicians should be no different. I was bewildered about the many discussions during the US elections on whether it is important to vote for someone “you can have a beer with”. In this world of images and sound bites, politics is too often reduced to choosing the better performer – deciding who is more likable or popular, or dresses or looks better or makes grand and poetic (but usually hollow) speeches. And the media and electorate are consumed by inane questions such as: why doesn’t Obama wear an American flag pin on the lapel of his suit?

I am not concerned about how others choose their leaders. I do care about how we choose ours. We live in a tiny country in a very complicated and turbulent world. It is a tough job to run a country, no matter how small, even in the best of times. Lives and livelihoods are at stake. I do not want people I can have a beer with running Singapore. I want the best people, who have the intelligence, integrity and compassion to work out what is best for Singapore and Singaporeans, and to see us through these difficult times. Other countries may be able to afford a Madoff scandal. We cannot.