A Dubai College Intiative
MARCH 2021 l ISSUE 22
DUBAI KEYNES SOCIETY NEWSLETTER
"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."
JOHN MAYNARD KEYNES
TABLE OF CONTENTS EDIITORIAL ISSUE 22 Joe Biden’s $1.9 trillion stimulus bill and its effect on the U.S economy l Viha Kedia
Cryptocurrency and its impact on Monetary policy l Khwaish Lakhiani & Zainab Haider
The Political Economy and Society l Lorcan Fallon
To what extent have the UK’s macroeconomic objectives and major industries taken a hit on account of the COVID19 pandemic l Sehaj Choukse
To what extent are problems in providing sufficient affordable housing a consequence of a real estate paradigm which emphasises the economic rather than the social importance of property? l Rohan Khaleghian
CEO of Innoventures Education - Poonam Bhojani l Tiya Bhatia
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EDITORIAL The Dubai Keynes Society has accomplished another term suffused with thought-provoking presentations and high attendance rates on a constant, weekly basis. A range of fascinating, super-curricular topics were explored thoroughly in our internal talks, from The influence of millionaire migrants on gentrification patterns in London to Agents and Game Theory. In addition to these internal talks, we had the wonderful pleasure of welcoming back Mr. Jahangir Aka for the sixth consecutive year. As a managing director for Neuberger Berman - one of the most reputable investment management firms - Mr. Aka provided deep insight into topical financial and economic affairs, including the impact of the US political transition on markets, the GameStop and general stock market situation, as well as how the unrolling of vaccination programs will contribute to market recovery. The Keynes Society also hosted Mrs. Treasa Tomy-Sirko, a Goldman Sachs Executive Director, who engaged in deep discussion concerning Investment Banking and the financial sector, providing valuable advice on pursuing this career. Finally, Mr. Sandeep Gupta, a Dubai College parent and Senior Manger of Al Tayer Group, delivered a marvellous workshop on presentation skills, emphasisng the significance of minimal text on slides and natural dialogue to keep the audience constantly engaged with the speaker. Overall, the Dubai Keynes Society has enjoyed a fantastic start to the year of 2021. We are grateful for all those who have contributed to its persistent success, especially Mr. Christopher, those who volunteered to research their chosen topic and express their findings to a wider audience, and all the pupils and teachers who consistently attend the sessions and actively engage in the talks.
- Khwaish, Kian and Vedant
Joe Biden’s $1.9 trillion stimulus bill and its effect on the U.S economy Viha Kedia
Biden's $1.9 trillion stimulus is a wish list of his spending measures meant to help both people and the economy recover from the coronavirus pandemic, from state and local aid and more generous unemployment benefits to mass vaccinations. The bulk of the money is going to extremely worthy causes. For example, it would send $1,400 per person for those under certain income thresholds. It’s also allowing tax cuts, intended to avert tax bills for people who lost jobs, waiving federal income taxes for unemployment benefits received and households earning under $150,000. It’s helping parents get financial help, by increasing the size of tax credits, making them refundable. This means people would get cash even if they do not earn enough to owe income taxes. Its impact is deemed to reduce the poverty rate by more than a quarter for adults and cut the child poverty rate in half.
Though the Senate bill is largely the same as the 2 trillion one, one of the main differences is that Biden’s method to juice the economy, is to bet on the poor. Instead trump, focused on cutting taxes for corporations.
His aim was to accelerate business investment and generate a sustained economic boom that would in turn drive up incomes for low earners, even though the direct benefits of the bill were disproportionately concentrated among the rich. However, as with all fiscal policy, there is the risk of inflation. The multiplier effect of government spending on output is hard to estimate, however is predicted to remain small as households are more likely to save the stimulus money. However, if vaccinations allow the economy reopen fully, the built up effects of the stimulus may cause the economy to overheat.
Assuming that consumers save half of the amount they receive from government, it would represent approximately $500bn in additional consumer spending. This would not be enough to offset the negative output gap, which is estimated at approximately $1tn. Biden is currently turning to the lowest-paid workers in America, and to the people who are currently unable to work at all to help them. His stimulus proposal is as far away as you can get from regressive, supply-side economics. This is progressive economics that puts money in the hands of working people who will spend that money. The US is at war with the pandemic, and the question is not whether the stimulus plan has imperfections and issues like inflation, but whether it will help win the war.
Cryptocurrency and its impact on monetary policy Khwaish Lakhiani & Zainab Haider INTRODUCTION The 21st century and 4th industrial revolution have nurtured extraordinary technological developments, revolutionising every sector of industry. They have prompted the emergence of cryptocurrencies, which have penetrated our day-to-day financial transactions and have notably changed the economic landscape.
IMPORTANT IDEAS Cryptocurrency is a completely digital, decentralised currency built upon principles of computer science, cryptography and economics as a method of protecting information and communication through the use of codes so that only those for whom the information is intended can read it. Bitcoin is the protocol governing cryptocurrency, which was created by Satoshi Nakamoto in 2009. As of the fourth quarter of 2018, the Bitcoin blockchain had grown to nearly 200 gigabytes in size, and in the fourth quarter of 2017 Bitcoin reached an all-time high market cap of 237.6 billion U.S. dollars.
Undeniably the emergence of a digital currency that bypasses the intermediaries will have an impact on central banks and their monetary policies.
The question arises that If digital currencies are sufficiently similar to commercial bank deposits then why hold a bank account at all?
THE GOOD The intersection between the digital and the physical poses a great prospect for the future of financial transactions. Cryptocurrencies provide a pathway to a higher degree of financial inclusion, enabling parts of our economic ecosystem to be reached more directly than they currently are. Such is especially beneficial to emerging economies where domestic efficiency of existing payment systems and financial inclusion could be transformed completely. Additionally, the use of digital networks would enable central banks to access much more granular data, of where money is being transferred and where debt is accumulating – all in real time. With low government borrowing being one of the macroeconomic objectives, monitoring debt and money transfer in such a way seems like a blessing for governments. Additionally, the global financial crisis of 2008 illustrated that the interest rate policy could be majorly constrained by the presence of cash. Interest-bearing digital currencies, however, would eliminate the effective lower bound on interest policy. The crisis also taught us that the power of central bank money extends well beyond the property of the medium of exchange. Central banks act as lenders of last resort to satisfy the liquidity (credit) needs of the economy, to make the financial system more resilient. Additionally, the protracted situation of subdued inflation and zero interest rates have prompted the thesis that the inflation targets now being set by central banks are too low, and that a bit more inflation could be beneficial in avoiding liquidity traps as well as stimulating the economy.
THE BAD However, the existence of digital, decentralised currencies that are sufficiently similar to central banks pose a considerable threat to their authority and hence most financial institutions.
With the integration of crypto currencies in the economy, methods of payment will be exclusively offered by private actors – this opens up the risk of system failure and emerging monopolies. This is due to the fact that when monopolies gain excessive power, it allows them to exploit consumers. Additionally, the cost associated with the provision of cash is 0.5% of GDP, or €560 million. The cost mainly falls on banks – who despite losing significant power in economic activities are now having to pay further for the inclusion of digital currencies. Vice chair of the U.S. Federal Reserve Bank, Randal Quarles, at a financial conference in 2017, had argued that the existence of an alternative asset like Bitcoin during times of economic adversity may frustrate efforts to stem price and credit risk because the exchange rate for the US dollar may become unstable. This could be attributed to the fact that it is a macro economic objective and moral responsibility of the central bank to be the sole controller of the money supply and help simulate or sedate the economy in times of crisis, in his view, cryptocurrencies make his job harder. Arguably the most significant disadvantage is that private digital currencies facilitate tax evasion and criminal activity. While digital and government currencies have some similar properties, government money also has special characteristics that today’s cryptocurrencies lack. Central banks also issue interest-bearing liabilities (reserves) and set policy in terms of this risk-free interest rate. Cryptocurrencies do not take the form of interest-bearing securities, and the growth in their supply is determined by an algorithm that allows new units to be minted.
CASE STUDY The real-life impact of integrating cryptocurrencies as a medium of exchange can clearly be studied in Venezuela. With hyperinflation at 438.12%, the economic climate of Venezuela is dismal, bringing misery and uncertainty to its people. In the past, Venezuelans would have had very few options through which to attempt to save some kind of value, with those options being unevenly distributed, with wealthier individuals more able to protect their assets than those in the lower classes.
Today, many Venezuelans of all classes turn to Bitcoin and other cryptocurrencies to protect themselves against the ravages of extreme inflation and bad governance. Venezuela has already suffered major shortages in critical household goods, and public protest against government policies has grown to sometimes violent levels. In this kind of economic climate, cryptocurrencies can be a godsend to families that need a more stable store of value. However, this upset the Venezuelan government who changed tactics to try to trick their citizens into purchasing a state-controlled and ostensibly oil-backed “Petrocoin,” which is a mostly worthless decoy of a cryptocurrency. Nevertheless, this has done little to stem the surge of true cryptocurrency activity undertaken by Venezuelans to protect their financial assets. In this kind of situation, it is a very good thing that Bitcoin has undermined the Venezuelan central bank’s authority to wreak havoc on its citizens.
Therefore, it can be argued that the existence of cryptocurrencies as an alternative safe haven during times of financial crisis may prompt central banks to behave in a more responsible way than they otherwise would as it challenges their monopoly power. Responsible central bankers should therefore welcome the flourishing of cryptocurrencies as a way to bind their institutions to the mast of prudent monetary policy. CONCLUSION In conclusion, cryptocurrencies are still a very new medium of exchange so it is very hard to judge its impacts on the financial system and the extent to which it will be integrated into our daily lives. While cryptocurrencies today may be favored by some for ideological, technological, or monetary policy reasons and the blockchain technology does have some important advantages in controlling for fraud and maintaining privacy, cryptocurrencies are still not at the point currently to fulfil the main function of money and the responsibilities of central banks.
MARCH 2021 l ISSUE 22
THE POLITICAL ECONOMY The interactions between political ideologies, money and people.
Lorcan Fallon INTRODUCTION The terms communism, socialism, capitalism, left wing and right wing have been widely used and thrown around in today's society, Often with incorrect and improper meaning. But what do they actually mean? What would society look like with these ideologies? There is no doubt that politics directly associates itself with money and the economy and so, the success of a country can depend on its ideology and the society itself. This article and presentation hopes to clear the blurred lines of what these ideologies mean, and what they would look like. Perhaps you will see where you stand on the political spectrum.
WHAT IS A COMMUNIST SOCIETY? It may be hard to determine what a communist society would look like given that there are no communist societies that exist in the world and there never has been (de facto). However, we can draw key features from Karl Marx's Communist Manifesto that in a communist society, everyone works, everyone is provided for equally, and there's no class, no money and no state. Karl Marx clearly identifies that there are two players in the capitalist society: The bourgeoisie and the proletariats, the latter being the workers and the former being the owners of the means of production and society. The means of production are capital , land and Labour. Marx identified that the bourgeoisie who owned the means of production took all the profits despite the proletariats working to make the profits themselves. Karl Marx envisioned that all the means of production would be transferred to the proletariat, and they would claim the rewards that they worked hard for themselves.
Therefore, it can be deduced that in a communist world, all humans come together and look out for each other. There's no such thing as greed and no one takes everything for themselves. A world will be created where no one would have to work much, and people will have more freedom to pursue whatever they find fulfilling. In order to form a communist society, the society must transition from a capitalist society to a communist society as capitalism was destined to collapse according to Karl Marx. He believe that the proletariat would overthrow the bourgeoisie and with it, abolish exploitation and hierarchy. Therefore to transition, most land would be transferred to the state, income disparity will be solved with high tax and redistribution by the state, and the nationalisation of major industries will strip power from private enterprises. However this is considered ironic given that Karl Marx envisaged that there should be no state yet the transition would require heavy state presence in economy and society.
FLAWS WITH COMMUNISM Although a communist society may seem like a utopia to some, there are many flaws to the model. We can expect the government to provide public services or goods such as roads, fire services and policing as these services cannot discriminate between people with varying levels of wealth. However with the distribution of more private goods and services, such as food, phones, TVs and beds, the government becomes very inefficient due to high levels of bureaucracy and low levels of efficiency. The Achilles heel of communism is ultimately the conflict between human nature and political ideology. You cannot have a political ideology that goes against human nature. It is evident that humans are inherently greedy, and in a communist society, it is believed that humans are selfless individuals, despite this not being the case. This has been illustrated by scenes of corruption, were individuals take more than they are supposed to, and we see this in the world today with countries that claim their Communist, such as China.
WHAT IS SOCIALISM Socialism is often described as the bridge between capitalism and communism. In socialists societies, there is social ownership of the means of production, meaning everyone owns the means of production. This leads to an equal share of profit and prosperity. It is important to distinguish the difference between communism and socialism. We must remember that in a communist society, there is an absence of money and ownership. In contrast, socialism is the equal share of profit and prosperity derived from the social ownership of means of production. In a socialist society, there is heavy public sector presence, i.e. the government. This means there is high tax and redistribution in the form of welfare, and most prices are determined by the government. There is heavy central planning, nationalisation, and reduced class distinctions. Essentially money is taken away from the rich in the form of tax, and it's redistributed to the poor. The tax money can also be used to invest in public sector industries, this is often the case with healthcare and education. The aim is to reduce the gap between the rich and the poor. Outside the sphere of the economy, socialism is often associated with several progressive movements, such as the LGBT movement, the feminist movement, and the environmental movement.
FLAWS WITH SOCIALISM Like communism, there are problems with socialism. These problems are especially evident if socialism is not done right; however, there are countries that exists that apply socialism correctly and are very successful, such as Scandinavian countries. Like communism, political ideology contrasts with human nature, but on a smaller scale. There is often slow economic growth meaning less creation of wealth. Socialism also ignores those within society who are competitive and focus on personal gain and there's less entrepreneurial opportunity and competition. This leads to potential lack of motivation by individuals due to lesser awards, as their awards may be taken away in the form of tax. Additionally the government is inefficient and corruption may occur. In the free market when the government intervenes, whether is in the form of tax or subsidies, there is always a welfare loss; a lost that will never be recovered by society, and this is why many free marketers argue that government intervention should be minimal, to reduce these welfare losses.
WHAT DOES A CONSERVATIVE ECONOMY & SOCIETY LOOK LIKE? When using the term conservatism, it is often referred two as a social political ideology. However there is fiscal conservatism, which is typically identified as a right wing economic ideology. In a conservative economy, there is very little tax, very little regulation, free trade, minimal government spending and intervention. Essentially, the government tries to get rid of its debt. The market is often left to its demand and supply mechanics where in theory there should never be a shortage and there should never be a Surplus. Government intervention is heavily discouraged and Conservatives argue that the market should be free from any constraints and intervention. With minimal government planning and control, there should be the freedom of opportunity, and the freedom of choice. Core conservative values often place heavy emphasis on human and perfection. Unlike communists and Socialists, Conservatives believe that humans are inherently greedy, which they are, and that they are competitive. Conservatives are also pragmatic, meaning they deal with things sensibly and realistically in a way that is based on practical rather than theoretical considerations. Conservatives also stick to tradition and are typically less progressive. They also believe in paternalism, where the upper class take care of the lower class. One famous example of this is the ‘trickle down effect’, where the rich invest in the economy and create businesses, therefore creating jobs in which those in the lower class can be employed and receive an income. This is how wealth is created in a conservative economy. As mentioned before, tax is minimal and therefore tax redistribution is also minimal. Conservatives believe that taxing the rich to give to the poor create a dependency culture. This is when the poor solely depends on the tax money that they receive and are less incentivised to work, this also discourages those who are hard working and earn money and they will also be less incentivised to work.
To What Extent has the UK’S Economic Objectives & Major Industries Taken a Hit on Account of the COVID-10 Pandemic? Sehaj Chouske
FINANCIAL WELLBEING Despite unprecedented government support, financial wellbeing has exacerbated. The latest IHS Markit Household Finance Index shows the largest fall in overall perceptions of financial wellbeing since the survey began in 2009-UK households reported a severe drop in job security and a decrease in earnings from employment. This is consistent with UK consumer confidence dropping sharply to levels not seen since the 2008 financial crisis.
TRADE The outbreak of a new strain of coronavirus coupled with the tightening of restrictions led to France closing its border with the UK for 48 hours from 21 December 2020, with the Port of Dover halting traffic. This disrupted supply chains significantly, to the detriment of wholesalers. Similarly, weekly data on shipping volumes have shown gradual falls in the number of visits to UK ports. According to Financial Times reports, companies reported a rise in demand for moving cargo by air to avoid port blockages. Flight traffic, which has been directly affected by travel restrictions, has fallen more sharply: Heathrow’s traffic fell by 97% in April and air cargo volumes are down 62 per cent. The World Trade Organisation has estimated that global trade is likely to fall between 13% and 32% — larger than the falls during the financial crisis when world trade fell by 12% from peak to trough. Reductions in global trade would typically be accompanied by slower productivity growth which could limit the ability of the economy to rebound quickly.
FISCAL IMPACTS The cover ratio (the ratio of financial market bids for bonds to the amount of debt issued) has averaged above two since early March, although it has fallen slightly since early April. The yield tail (a measure of the range of bid prices where a larger spread indicates weaker. A major driver of the sanguine market reaction has been the Bank of England’s purchases of gilts as part of its recent expansion of its quantitative easing programme (asset purchasing).
ECONOMIC ACTIVITY All sectors of the economy contracted sharply with almost every sector experiencing a falling GDP in Q1 (wholesale and retail, hospitality, and transport and communications making the biggest contributions). In the first quarter of 2020, the UK experienced the sharpest economic contraction since the peak of the peak of the financial crisis. The only positive contributions came from real estate and public administration (other services) .
THE LABOUR MARKET Universal Credit (UC) claims remain twice the pre-crisis level with over two million new claims for benefits have been made since mid-March, despite the Government Job Retention Scheme (JRS). The claims peaked at 100,000 per day which is around an extra 20,000 claims per day. In comparison, the peak of the financial crisis only saw an extra 7,000 average daily claims to Job Seekers Allowance JRS has been so important in preventing even faster rises in unemployment, while helping to cushion falls in household incomes and allows workers to remain connected to their employer (which should support a faster economic recovery as soon as workers can go back to their workplace safely) 7.5 million jobs are covered by the furlough scheme since it opened on the 20th of April 2020 (¼of all employees and 935,000 businesses). A further 440,000 claims have been made on the first day of the Government’s Self-Employment Income Support Scheme. HMRC has said that £10.1 billion worth of claims have been made so far on the JRS and £1.3 billion on the self-employed scheme. The Office for Budget Responsibility (OBR) estimates that the JRS will ultimately lead to £58 billion of government borrowing. Without the JRS many of those furloughed would have become unemployed, incurring substantial welfare costs as UC claims rose even higher — leaving many more families with even larger income reductions.
MARCH 2021 l ISSUE 22
The Real Estate Paradigm Rohan Khaleghian
INTRODUCTION
Market failure occurs when the market system fails to allocate goods and services efficiently. For example, if street lighting provision was left up to the private sector, no firm would provide it, because many people would use the street lights without paying for them. This would lead to an under-provision of street lighting. The same thing can happen with housing; sometimes, housing can be underprovided. When considering the causes behind the under-provision of housing it is important to define our premise: assuming full access to safe housing is a social priority, we can define the ‘under- provision of housing’ as when those who need sufficient, affordable housing cannot access it due to low supply. Using market-based price mechanisms to allocate housing can lead those with the lowest incomes to fall below the threshold required to access it, hence the need for alternative solutions under the broad rubric of ‘affordable housing’ policies. Central to this argument is a recognition of the social value of housing. Article 25 of the Universal Declaration of Human Rights designates housing as a human right (Drafting Committee of the Universal Declaration of Human Rights, 1948) and poor housing supply can bear significant social problems: it can lead to increased rates of homelessness, which in turn leads to increased crime (Remster, 2019) and rising social unrest (National Coalition for the Homeless, 2008).
In this essay, I will examine two housing markets as case studies. I will analyse the state of the housing market in each area and then having a look at the factors that created that market environment. This allows us to look at the causes of ‘problems in providing sufficient affordable housing’ and see
if they really are largely due to a ‘real estate paradigm which emphasises the economic rather than the social importance of property’. The two housing markets I will look at are California and Singapore.
Case Study One: California The state of the Californian housing market California has been suffering from a housing shortage since about 1970, especially in its major coastal cities. Insufficient housing supply is endemic and low housing supply has not been matched by low demand. For every 100 new residents, only 24.7 housing permits were filed in California, as opposed to the national average of 43.1 (Perry, et al., 2018). This then has an impact on house prices: in 2017, the median home price was over twice the national average (United States Census Bureau, n.d.). The high price of housing in California has translated itself into anaemic home ownership levels: 54.8%, in 2019, the 2nd lowest among U.S. states (United States Census Bureau, 2019). We can see that the state of the housing market has had a social impact too. California’s homelessness levels are exceptionally high. In 2019, California was the U.S. state with the fourth highest rate of homelessness per capita (Council of Economic Advisors, 2019). The cost of housing also makes it harder for those on lower incomes to get by. If we use Census Bureau’s Supplemental Poverty Measure—which factors the cost of housing into the poverty rate—to measure the poverty rate, California has the highest poverty rate of any state in the U.S. (United States Census Bureau, 2018) This compares with 21st highest, when using the traditional measure (United States Census Bureau, 2017).
Factors contributing to the state of housing in California Starting in the 1970s, several changes to the way land was used in California started to occur. These changes caused housing construction to slow, and helped create the current housing shortage. Three main ones were the increased restriction of land use, geographical and political factors that
lowed urban expansion, and a shift towards community participation in urban planning (Romem, 2018).
Land use restrictions Following the Second World War, the population in California began to grow rapidly, as veterans, immigrants, and people from the South and Midwest started to move there and the state’s coastal urban areas grew exponentially. In the 1970s, homeowners started to push for slower growth and expansion in urban areas. They argued that rapid urban growth needed to be moderated and lobbied for more restrictive land use policies (Morrow, 2013). Decision-makers responded to their activism by downzoning—assigning areas zones whose permitted housing density is lower—large areas, increasing minimum lot requirements, and imposing height restrictions on buildings (Morrow, 2013). This then made increasing the population density of residential areas difficult.
Slowing of urban expansion Population growth failed to dwindle (United States Census Bureau, 2000). California’s population was growing and land use restrictions meant that the population density of the state’s metropolitan areas could not increase. This meant that to house the people coming in—those driving its population growth— new areas of land would have to be developed. But developers encountered opposition from two places. The first was geographical: over 50% of the land in California’s four most populated cities is unable to be developed (Saiz, 2010) (United States Census Bureau, 2019). There was little area for them to move into. The second came from a burgeoning environmental movement to preserve open land in California. This limited the expansion of urban sprawl and impeded housing construction. The environmental movement campaigned for the passage of the California Environmental Quality Act (CEQA). Passed in 1970, the CEQA requires developers to carry out tests to ascertain the impact of their development on various social and environmental factors and
produce a report on the results. The CEQA allows people to put forward legal challenges in this process. However, many consider the CEQA to be much abused. Less than 15% of all CEQA lawsuits have been brought forward by environmental advocacy groups (Hernandez, 2018): many appeals are brought forward by NIMBY groups. In California’s largest ten cities, CEQA appeals delay development projects by an average of 30 months (California Legislative Analyst's Office, 2016). This makes it more difficult for developers to produce housing.
Community resistance In the 1960s, the involvement of community groups and homeowners’ associations in the urban planning of their locality became more widespread. These associations grew to have a lot of power in the planning process; they became a powerful lobby for downzoning, lowered development in the area, and were able to veto plans for development. This posed three problems (Morrow, 2013). First, homeowner-driven urban planning meant that local housing concerns were prioritized over concerns over regional housing shortage. Second, this method of facilitating social involvement in the urban planning process failed to take into consideration the view of non-homeowners. Finally, affluent areas tended to have stronger homeowners’ associations that had the leverage to severely restrict population density change, while poorer areas with no or few homeowners’ associations could not do the same and, as a result, increased dramatically in density.
Case Study Two: Singapore The state of the Singaporean housing market Singapore’s housing market is an interesting topic of study. Singapore has a land area of only 724.2 km2 (Singapore Land Authority, 2019) and a population of 5.6 million (United Nations Population Division, 2019). Its population density is one of the world’s highest at almost 8 000 people/km2 but this hasn’t impacted housing affordability, ownership, or even size. With regard to housing
affordability, many Singaporeans never have to pay out-of-pocket to buy a home (Housing and Development Board, 2020); mortgage repayments are taken care of by a government savings plan. When we look at home ownership, Singapore has one of the highest homeownership rates in the world: 91.0% (Singapore Department of Statistics, 2019). If we consider housing size, the average size of a public housing flat—where roughly 80% of Singaporeans live—is 90 square meters (Koh, 2018). This is larger than in the UK, where the average is 67.8 (Local Authority Building Control Warranty, 2019).
Factors contributing to the state of housing in Singapore Singapore’s unusual circumstances—being so densely populated—have led it to find an unusual solution to its housing problem.
Public-sector housing provision Unlike other places, where most housing is provided by developers in the private sector, the vast majority of Singaporeans live in public housing, 80% (The Economist, 2017). In most other countries with a public housing system, public housing tends to be low in quality and tends to be used exclusively by the poor: but not in Singapore. Public housing is provided by the Housing and Development Board (HDB). The HDB takes care of urban planning in public residential areas, administering government housing schemes and grants, and coordinating demand for public housing. The HDB provides subsidized flats of different sizes and layouts to cater to varying demands. These flats are the property of the Singaporean government and are sold to households on a 99-year leasehold (Housing and Development Board, 2017). Eligibility for HDB housing is dependent on a number of factors: the nationality of the applicant, the structure of the applicant’s household, their age, and income.
Types of housing Government-subsidized HDB housing comes in two types: HDB-produced flats and executive condominiums. HDB flats are designed for average middle-class families - the income ceiling for a non-extended family unit is roughly
SGD $14 000 per month—and come in a range of sizes: from small singlebed, 45 square meter flats to larger 4-bedroom flats of 130 square meters. Executive condominiums are a hybrid between government-provided and private housing. They are built and sold by private companies, but they are subsidized and require buyers to meet eligibility requirements, including an income ceiling, like HDB-produced flats (Housing and Development Board, 2017). There is, of course, completely private housing, but HDB flats tend to be 20 to 30% cheaper than similar units on the private market (How Singapore Fixed Its Housing Problem, 2018). Private housing is used mostly by those who don’t fit the HDB income ceiling: the highest ceiling for any kind of subsidized housing is SGD $21000 per month (Housing and Development Board, Singapore has a mandatory government savings program called the Central Provident Fund (CPF). Under the program, Singaporeans save a proportion of their income in their CPF for their retirement, healthcare, and housing. When Singaporeans buy a government-subsidized flat, they can use their CPF to pay for it (Housing and Development Board, 2019). This means that many Singaporeans never have to pay out-of-pocket to buy their home.
Conclusion Here we must consider the reasons for the stark differences between Singapore’s and California’s housing markets. Housing shortage has afflicted California for fifty years, while the vast majority of Singaporeans own their homes, even though Singapore’s population density is over eighty times that of California. Why? California’s housing policy is, at best, inadequate and at worst, discriminatory: it has, over the last fifty years, overlooked the welfare of several groups.
Homeowners’ desire for slower urban development was prioritized over growing demand for housing, leaving many homeless. Urban planning was subject to the whims of homeowners’ associations, ignoring housing concerns on a state level. NIMBY associations then consistently abuse the CEQA: causing housing development to stagnate for reasons other than environmental protection. These policies benefit homeowners by increasing the cost of housing, but those renting have to spend greater proportions of their income on housing, migrate elsewhere, or forfeit their housing. What is most extraordinary is that the government has not intervened to make the situation better. If, as proposed in the introduction, we define an underprovision of housing as when those who need sufficient, affordable housing cannot access it due to low supply, the government should have enacted policies to deal with this chronic excess demand.
Some policies the government could have enacted to deal with the situation include migration restrictions to prevent demand for housing from increasing, boosting state housing programs, and loosening land use regulation. None of this was done. California still relies entirely on market mechanisms to produce and allocate housing, with almost no role for the government. This reflects a lack of any cognizance whatsoever of the social importance of housing. We can see from the first case study that if we have, as there is in California, a housing paradigm that fails to recognize the social value of housing, issues regarding the provision of affordable and sufficient housing arise. When we look at the second case study, we see an entirely different picture. Firstly, the Singaporean government places great emphasis on facilitating people’s ability to afford housing. This is evidenced by the establishment of Central Provident Fund—allowing people to buy a house without having to spend out of pocket—and the donation of government funds towards public housing subsidy—public housing is usually 20 to 30% cheaper than comparable housing found on the private market (How Singapore Fixed Its Housing Problem, 2018) As acknowledged in the introduction, a complete reliance on market mechanisms to produce and allocate housing, emphasizing the economic as opposed to the social value of housing, can lead to an under-provision of housing. Singapore has countered this by establishing a large public housing sector: unlike in California, housing is not a private-sector monopoly. On the contrary, the largest supplier of housing in Singapore is the Housing and Development Board. Many have cited this attitude towards housing as a key factor in Singapore’s success in dealing with its unique housing needs. For example, John Bryson, a professor of enterpriseand competitiveness at the University of Birmingham attributes Singapore’s successful housing policy to its regard of housing as ‘a social, not financial asset’ (Bryson, 2019).
But why, fundamentally, does Singapore’s housing policy recognize the social value of housing and why doesn’t California’s? It is worth noting that the political economy of housing policy in Singapore is markedly different from that of California. Since independence, Singapore has been a one-party state. Due to this political arrangement, it is less easy for groups to influence policy-making via activism, political pressure, and lobbying. In California, however, well-organized community groups wield great power: not only is financial assistance from these groups invaluable to policy-makers, but their electoral strength rewards and punishes politicians who support or oppose their platforms. All in all, I think that a recognition of the social value of housing is integral to any successful housing policy. Paradigms that ignore housing’s social value and instead favour the economic or the political or the environmental importance of housing do create housing markets where housing is underprovided; as a result, housing becomes less accessible to those who need it.
CEO OF INNOVENTURES EDUCATION POONAM BHOJANI Tiya Bhatia Poonam Bhojani the CEO of Innoventures Education, a company committed to bringing world-class education to Dubai. Innoventures Education manages many of the leading international schools and nurseries, including Dubai International Academy-Emirates Hills and Al Barsha, Collegiate American School, Raffles World Academy, Raffles International School and Raffles Starters & Nurseries. These schools and nurseries are reputed for their high-quality curriculum, inspiring learning environment and commitment to academic excellence. Together, Innoventures Education has a total enrolment of more than 7000 students from over 100 countries, with a dedicated and inspirational team of educators and administrators from virtually every corner of the globe. During our interview, Ms Bhojani’s passion for education was clear, with her beginnings in a career in education driven by her mission is to empower students with a holistic, international and rigorous education for success in an ever-changing world. 1) Before pursuing a career in education, you had an IT job at an international bank. What inspired you to change your career path and how did your previous experience prepare you for a career of running a range of international schools in the UAE?
Moving from a highflying career in banking technology to education was an incredibly major shift for me and one that I really didn’t expect. I got into it from the perspective of so many others out there - the perspective of the parent. Especially in 2004, when Dubai was a new burgeoning city I fostered my passion for education through the best possible option for my sons and for the hundreds of children I have had the privilege of providing an education. I was driven by the desire to achieve the best possible education for a child that was rigorous, holistic and international.
" I was driven by the desire to achieve the best possible education for a child that was rigorous, holistic and international. " 2) This current pandemic has proven to be undeniably difficult for servicebased industries like education. How have you managed to keep students motivated and involved during online education? At Innoventures Education, we are very mindful of continuing to be creative, engaging and supportive while also understanding the challenges for our students and parents. To ensure children continue to thrive despite being out of school, there has to be a consistent flow of communications between school leaders, teachers, students and parents. While teachers check in regularly on students through daily online interactions, they also depend on parents’ feedback on what’s happening at home. Yet despite the challenges, our students have shown incredible resilience. We believe achievements must be recognized and celebrated even more in these times – and we do so regularly through virtual assemblies, social media and school announcements. Students are recognized and applauded not just for academic excellence but also for values such as kindness and perseverance.
3) How does your company customize the education experience to fit every child’s needs? Across our schools, Innoventures Education takes a student-centred approach to learning. It’s an educational approach wherein learners take responsibility for their learning by setting appropriate goals that align with their interests and talents. Their progress is monitored and learners stay motivated and challenged to meet those goals.Ongoing professional development of teachers in the usage of modern techniques has also supported the personalisation of education as has our significant investment in technology-based solutions and systems over the years. We focus on formative and summative assessments with data analysis to facilitate the personalisation of learning across our schools.
"Innoventures Education is unique in its vision and mission to holistically empower children for success in today’s dynamic, global community"
In uncertain times, with so many families under economic and mental distress, we know that schools can be a vital safe space for children. With personalized learning goals and attention from teachers, we keep our students feeling secure, motivated and inspired to learn even under challenging circumstances.
4) How have you seen the education sector in the UAE change over your tenure in this industry? The UAE has always prioritized education, and the statistics testify to this. Since the formation of the UAE in 1975, the rate of adult literacy has increased from 54 per cent among men and 31 per cent among women to close to 95 per cent for both genders in 2020. As President His Highness Sheikh Zayed Bin Sultan Al Nahyan, founder of the UAE, noted, “The greatest use that can be made of wealth is to invest it in creating generations of educated and trained people.” New initiatives are being launched at all educational levels. A key area of focus has been to transform K-12 programs, to ensure that UAE students are fully prepared to attend universities around the world and compete in the global marketplace. In addition, some of the world’s best universities are creating programs in the UAE, attracting talented students in the Arab world and globally.The national educational policy has placed aspirational goals for the UAE to emerge as a global leader in education with a target of ranking in the top 15 nations globally in the TIMSS benchmark and within the top 20 nations in the PISA assessment. Other changes include the emergence of a wellresourced sector in private higher education with many foreign universities across the UAE as well as the importance the state has given to special educational institutions. The current pandemic has seen the emergence of online education across the K-12 sector as well as in higher education. The UAE’s commitment to education has helped the nation diversify its economy and prepared a new generation of young people ready to compete in the global marketplace. 5) The current predicament of the United States with cases of police brutality has brought about a widespread impact of racism in a range of areas, one of them including education. In fact, numerous schools around Dubai have started online pages where they have reported issues of racism that they have experienced. How does your school promote inclusivity and open discussion of such sensitive topics?
Having several IB schools in our group and being based in Dubai – a city that is home to 200 nationalities living in harmony – has naturally created a culture where unity in diversity is celebrated every day. Our schools are truly international and inclusive in nature with students from over 120 countries and staff from all over the world. We celebrate our diversity in many ways, in the classroom and outside it. Our curriculum has units on global mindedness, tolerance and respect and these values are embedded in our day-to-day school life, in line with our mission statement and core values.Dubai International Academy organizes a Model United Nations (DIAMUN) convention, which sees hundreds of students from many schools engage in constructive debates and discussions on global concerns. This year, DIAMUN was scaled down and held online on account of the pandemic, and still had more than 100 delegates participate. While we value diversity, we also encourage our students to cherish their heritage. Innoventures Education also has a Mother Tongue Programme focused on encouraging children to learn their native languages within the school curriculum and as an After School Activity. The unique aspect of this programme is that the languages are taught by certified native-speaking teachers who also include elements of geography, history and culture.
"The greatest use that can be made of wealth is to invest it in creating generations of educated and trained people." - his highness sheikh zayed bin sultan al nahyan
6) Dubai International Academy is one of the most highly commended IB programmes in the region. In fact, it was the first school to establish an IB curriculum in the UAE. What led you to decide to establish an IB programme in the UAE rather than perhaps an A-Level or an American system of curriculum and what challenges did you face as the first school to implement this system? I got into the education sector in the early 2000s from a parent perspective as I wanted the very best for my two young sons. I felt they could be far more challenged and that their education could have a more international perspective. My two sons have been my inspiration in every way. At that point, much of the education in Dubai was either British, American or Indian. The international aspect of education was not so pronounced and that was what I felt was missing. With some research I discovered that the International Baccalaureate was offering not just a Diploma Programme by also programmes for children from the age of 3. Innoventures Education was established in 2004 to provide world-class education to Dubai. At that stage, Dubai was opening up with new business models. We were fortunate to get this break of establishing a dream school aimed at providing truly holistic, international and rigorous education for success in an everchanging world. Even completing the school building in time was a challenge. Other challenges included finding IB trained staff and educating parents on the new concepts in education as DIA was the first school to get authorized by the IB for its continuum of programmes. For instance, a teacher would teach not just what was in the textbook but would educate children through the process of inquiry and this was a difficult concept to explain to parents at that time. Parents needed to understand this way of learning and much energy was invested by school leaders and teachers to enable the same. 7) How has your status as an expatriate impacted your experience in the education industry?
The UAE is a truly inclusive nation. Though we are expatriates, it has not diminished our access to opportunities or hindered our growth. Our experience in the education sector has been rewarding. The UAE’s leadership has generously provided a platform to resolve issues and lent support to find solutions for a stronger education sector. "The UAE's leadership has generously provided a platform to resolve issues andlent support to find solutions for a stronger education sector." 8) In what ways has Dubai, both in the terms of its culture and its policy, helped you expand your business? The diverse and inclusive culture of Dubai played an enabling role in us setting up the first truly international school following the IB continuum in 2005, Dubai International Academy, Emirates Hills. A supportive government policy coupled with a clear national focus on the education sector has seen tremendous growth in this sector of the educational landscape in Dubai. 9) In what ways has Dubai, both in the terms of its culture and its policy, helped you expand your business? The diverse and inclusive culture of Dubai played an enabling role in us setting up the first truly international school following the IB continuum in 2005, Dubai International Academy, Emirates Hills. A supportive government policy coupled with a clear national focus on the education sector has seen tremendous growth in this sector of the educational landscape in Dubai. 10) What do you see in the future of your company in the education industry? Following a period of consolidation consequent to the pandemic, we see ourselves emerging stronger than ever due to our focus on the quality of education and the progress of our students.
MARCH 2021 l ISSUE 22