Social Cohesion: How we can get it back

In the inaugural episode of this series, LKYSPP's Associate Professor Leong Ching, Vice Provost (Student Life) and Professor Danny Quah, Dean and Li Ka Shing Professor in Economics (who has also recently been recognised as one of the 'Top 100 most influential academics in government in the world' by global platform, Apolitical), discuss the intriguing connection of how we lost social cohesion through careless economics, and how we can get it back.

In 17 years: are we for better or worse?

The COVID-19 pandemic has spared nothing and no one. Aside from people, the virus' global threat has also impacted economies, intra-national relations and public policy.  

When the Lee Kuan Yew School of Public Policy was set up almost two decades ago – in 2004 – the socio-political mood and economic outlook then was a universe away from now, in 2022.

Professor Danny Quah recalls, in his conversation, with Assoc Prof Leong Ching, "[2004] had some dark spots and some bright spots… [it] was three years after 9/11, and one year after the Americans and the British invaded Iraq."

But there was optimism in the era too. "In 2004, the world, the global economy was still mostly coalesced around a narrative of globalisation, then in its heyday," Prof Quah adds, "the world was in a good place… we had not yet seen the global financial crisis [or] the collapse of the [subprime] housing bubble in the US, we did not yet have Pope Francis tweeting, 'inequality is the root of social evil' and we didn't have Barack Obama calling out inequality and social mobility for undermining social cohesion in the US." 

Who's the villain?

Yet, is social and economic inequality the villain to blame for today's seemingly worse-off state? 

To this, Prof Quah is clear that the blame game is misdirected. He shares that "inequality is a poster child to take the blame of many of the things we see wrong in our societies."

In his 2020 working paper, "Mobility and Political Upheaval in an Age of Inequality" , he highlights that the "World Economic Forum Global Agenda Councils (2015) named inequality the biggest challenge facing the world – ahead of, among other things, the failure of global leadership, geostrategic rivalry, and global climate change." It is a charge echoed by Kaushik Basu, former World Bank chief economist, who says: around the world, the effects of alarmingly high economic inequality are spilling over into politics and society. 

Yet, Prof Quah stands short of being alarmist, and warns, in the same paper, that inequality does not equate to poverty, and in the end, it is more a matter of 'power, not pennies' that undermines social cohesion; that inequality is more an outcome, less a cause of social discontent.

Fixing the problem: mobility, not inequality

Social cohesion, Prof Quah defines, is an enduring sense of trust and community. While it is a needful condition, it is insufficient to address social betterment. The answers, he argues, has to come from social and income mobility: "social immobility takes away hope from us in a very real way. Deprivation makes us insecure."

It is an argument he has set out in his earlier working paper: "For people to lead enabled, meaningful, and satisfying lives, what matters is what income they have, not how that income compares to those of others around them… not whether they are ranked top 25 per cent or bottom 15 per cent in the income distribution, nor how much disparity there is between them and the top 1 per cent of the income distribution. "

This difficult solution, though, is more than just a matter of economics – careless or not. Assoc Prof Leong points out, "The economics is not just markets, but really a theory of moral sentiments… what is fair, and what is unfair? What is due [or] not due to you? And today, maybe that is also the realm of public policy because this aggressive redistribution that is needed [is] not something that markets are set up to do. [It is] something that governments are set up to do, and maybe the loop needs to be that way to include not just markets, but also the role of the state."

It is a sentiment rigorously echoed by Prof Quah, "we should be looking at the real challenges of immobility and deprivation, not focused on inequality." He also cautions against drawing from the generalisation that inequality is a signal for societal well-being in his working paper, "Public policy needs to [consider] the possibility of disinformation or just inequality illiteracy overwhelming rigorous empirical evidence. This is especially important in such policy domains where political and populist rhetoric can inappropriately dominate the national conversation."

Looking to the next steps: managing the middle class and more for upward mobility to happen, good, fulfilling jobs for people are a necessity. Yet, balancing that against not just social cohesion deterioration, but increasing automation and productivity makes for a tricky equation. 

The magic to making everyone happy – including the dominant, seemingly squeezed middle class – lies in [upward] social mobility. "When social cohesion deteriorates, no one is happy; everyone feels set upon," says Prof Quah. Those already receiving aid worry about insecurity, while the rich fear being taxed further. "[But] if we build channels for social mobility, as long as there's hope to continue to improve the situation for yourself, your children, their children… you're going to be okay."

He elaborates, "that societies are successfully lifting the poor is a good thing, not a bad thing. [If] the poor are improving their situation, then the middle class are also being lifted… as long as we have channels of social mobility open, there should be no one feeling squeezed. They might perceive they're feeling squeezed, and we need to explain better what is happening."

Beyond the balancing act though, Prof Quah extolls all to think bigger and longer: "should we concentrate on protecting the worker rather than the job – good or bad? What we want are opportunities for workers and people, not [just] the artefact of having a good job [that] delivers satisfaction and likelihood… what can economics –an enlightened, careful economics – think ahead to what the next step should be? What are the opportunities we should be creating?”

Listen to the full podcast of How we lost social cohesion through careless economics, and how we can get it back here.

Byline: Danny Quah, Dean and Li Ka Shing Professor in Economics, Lee Kuan Yew School of Public Policy, NUS