Week 9 Essay on Globalisation (Final)

          In today’s world, borderlines of nations have become much less easier to define due to the characteristics of globalisation. It has largely impacted the way of international interactions, and the mobility of globalisation has created various problems, including environmental destruction, media and cultural influences, and even widening income gap. This essay would pertain specifically to the problem of widening income gap, with particular focus on the Singapore society and its current tax policy that relates to the problem.

          The rise of globalisation has accelerated the formation of Multinational Companies (MNCs), which are companies with a worldwide approach to markets and productions[1]. MNCs often adopt the policy of production outsourcing, which basically means to purchase goods or services from an outside vendor rather than producing in-house[2]. This in turn leads to income inequality between the skilled workers and the unskilled (or less-skilled) workers – both were hired in large numbers indeed as a result of the policy, however the former is more valued and favoured, receiving much higher salary as compared to the latter. Therefore it becomes a problem, which is particularly common in the developed countries, as the gap between the skilled and unskilled workforce is even greater than developing countries. On the surface, it seems that income inequality is not a serious problem as it only shows the difference between the higher and lower end income within a country, indeed a certain extent of inequality actually encourages investment and maintains the country’s economic competitiveness. However, studies have shown that income disparity has a correlation with health and social problems, where greater inequality leads to “higher levels of psychosocial stress and status anxiety which can lead to depression, chemical dependency, less community life, parenting problems and stress-related diseases[3]”. There is also a potential risk of increasing crime rates and decomposition of social cohesion due to psychological anxiety. Therefore it is important to raise awareness of this issue in order to prevent these problems from arising.

          Singapore, as a fairly developed country, is one of the nations that have been affected by the waves of globalisation. It has a high Gini Coefficient of 0.437, which is not very far away from the world’s highest value of 0.7. Thus the Singapore government places much attention on this issue, and have been implementing various policies to alleviate the problem. The most known policy would be the progressive tax policy, where tax rates are determined based on different amounts of income earned by each individual.  Households whose income is below a certain amount are allowed to be exempted from paying taxes, and simultaneously receive government subsidies to help them meet financial demands. This policy is effective in equalising the income gap by placing a greater responsibility on the high earners, thus lessening the wealth disparity after the reduction of tax payments. However in recent years, personal income tax rates were readjusted in an attempt to attract foreign professional workforces and at the same time retaining its own talents in Singapore. Marginal tax rates were modified, ranging from the lowest end of 2% to the highest end of 20% in 2012, as compared to the range of 4% to 22% in 2005[4]. The problem with this policy is that it ultimately benefits the people on the higher end much more than the lower end, which leads to an even greater income gap. To improve the situation, the government can re-establish the tax rates on the higher income categories, which proved to be more effective in the previous years by comparing the Gini Coefficient. They can also refer to the U.S and Canada’s earned income tax credit (EITC), a refundable tax credit for low- and medium-income individuals and couples[5], to further balance the income gap. Although the feasibility of these policies is still unknown without experimentation, the notion is that Singapore could pick up some ideas from foreign countries’ policies such as the U.S, which handled the inequality issue slightly better than Singapore.

          Besides, the policy of not posing any taxes on capital gains has indirectly exacerbated the wealth disparity as well. Capital gain is the income generated from selling assets, including buildings, equipment and shares of a corporation. These incomes were categorised under the capital income, which is separated from the taxable revenue income and considered as non-taxable income. However those who possess these capital assets are usually affluent or high-net-worth individuals, by selling capital assets they gained even greater wealth. Without taxing the capital gain, the high earners are getting richer, while the low and middle earners remains relatively the same.  As such, the government should revise their policy and impose a taxation model similar to the progressive tax system on capital gain. Although this might lead to attempts in tax avoidance, after all it is still a way to garner budgets in assisting the poor and balancing the unequal wealth distribution.

          In conclusion, globalisation has worsened the problem of income inequality which can lead to severe social and economic consequences. However in Singapore, the existing policies are insufficient in countering the ever-accelerating gaps. By considering reinstatement of tax policies in the aim of shifting the financial burden from the less affluent to the more capable high-net-worth individuals, the situation can be largely improved, creating a more stable and prosperous society.

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[1] Wikipedia (2013). “Globalisation.” Retrieved 10^th October 2013.

[2] Kenneth Boyd (2013). “To Outsource or Not to Outsource: a Cost Accounting Decision”. Retrieved 10^th October 2013. http://www.dummies.com/how-to/content/to-outsource-or-not-to-outsource-a-cost-accounting.html

[3] Wikipedia (2013). “Economic Inequality.” Retrieved 16^th October 2013.

[4] Inland Revenue Authority of Singapore (3^rd June 2013). “IRAS: Income tax rates.” Retrieved 16^th October 2013.

[5] Wikipedia (2013). “Earned income tax credit.” Retrieved 16^th October 2013.

Week 6 Reader Response (Final)

In Nayan Chanda’s article “The Double Edge of Globalisation”, the author mentioned that increased international trading incurs negative impacts to the environment, but it also gains widespread attention from the public. I would like to pinpoint one of his arguments, that the largest factor contributing to the current situation is the inefficiency of current system in controlling the situation, that crucial world forces are either reluctant or incompetent to devote their power. I do agree to this point, although we cannot solely blame the inefficiency of world governance for the effects of globalisation.

It is always a matter of choice when it comes to the decision of policies, and in this case the decision is between economy and environment. Standing on the government’s position, it is understandable that they choose the economy growth over the protection of environment, because it affects the living of people in the nation. Moreover, if anyone is to be blamed for environmental problems, ordinary people like us are also largely responsible since the use of electric equipment such as refrigerator and air-conditioners produce large amount of chlorofluorocarbons (CFCs) which depletes the ozone layer. However, although it is understandable, it does not mean that the decision is necessarily justifiable. The government is indeed still responsible for the control of environmental damages, since they possess the power to implement policies in limiting the destruction caused, such as setting a cap for every logging companies based on their size, or subsidise factories for more environmentally friendly technologies of productions.

In conclusion, crucial world forces do possess decisive power in controlling environmentally related activities, but speaking of responsibility, every person regardless of social status is liable for environment issues.

Week 5 Summary Assignment: The Double Edge of Globalisation (Final Draft)

The article states that globalisation contributes to the destruction of the environment. International trading brought by globalisation promotes consumerism, resulting in increased productions throughout the world, leading to a rise in fishing, deforestation and even expansion of factories. In fact, pollution generated by one country passes on to other countries, especially in the case of air pollution. Although globalisation is not the sole factor of global warming, it serves as a catalyst. However the situation is not as bad as it seems, provided that there is effective global governance. The current system is inefficient in controlling the situation, and crucial parties are either reluctant or incompetent to devote their power. Although non-governmental organisations’ efforts are remarkable, the cooperation between global forces in addressing environmental problems is still of the utmost importance.

(131 words)

Week 5 Summary Assignment: The Double Edge of Globalisation (draft 1)

The article states that globalisation commits to the destruction of environment. International trading brought by globalisation promotes consumerism, resulting in increased skidding throughout the world, such as fishing, deforestation and expansion of factories. In fact, pollution generated by one country passes on to other countries, especially in the case of air pollution. Although globalisation is not the sole factor of global warming, it serves as a catalyst. However the situation is not as bad as it seems, provided that there is effective global governance. The current system is inefficient in controlling the situation, and crucial parties are reluctant or incompetent to contribute their power. Non-governmental organisations’ efforts are remarkable, but the cooperation between global forces in addressing environmental problems is still of utmost importance.

(124 words)