Tuesday, 21 July 2009

The free market does not protect consumers

The Singapore Government is often said to be pragmatic in the extreme, perhaps even to a fault, and not in the least bit dogmatic or ideological. But I've always believed that when it comes to matters of consumer protection, it hews to an ideological adherence to corporatist free market ideals, preferring to leave things to the market instead of regulating to protect Singaporeans.

Two recent incidents bring this into sharp focus. Firstly, the slap-on-the-wrist by the MAS on financial institutions over the misselling of structured deposits, which I've posted about. Secondly, the Brookes Business School incident, where it now turns out that RMIT had complained to MOE as early as 2007.

The Brookes incident, and indeed all previous fraud cases involving private schools, fundamentally stem from MOE's previous reluctance to regulate the private education sector. Just like how MAS did not, and continues to decline to, closely regulate the sale of high-risk investment productsm, setting the stage for Singapore consumers to lose up to half a billion dollars. Just like how MND steadfastly refused to regulate property agents, until the sheer chutzpah of some ERA agents was exposed in court, and only then did the Ministry start talking about regulating the industry.

These instances demonstrate that when it comes to consumer matters, the Government would very much prefer to leave things to the free market, which is as good as saying that the Government would prefer not to regulate to protect consumers, presumably in the name of avoiding imposing additional compliance costs on businesses.

I've always wondered about that -- if they are not supposed to engage in prohibited conduct in the first place, then how much incremental costs would they incur, and should they not be incurring those compliance costs in the first place? The reasoning is just too unconvincing. It is nothing short of an abdication of a government's responsibility to protect consumers.

If one firmly and sincerely believes in protecting consumers, then one would surely adopt a proactive stance in doing the right thing, and not wait for multiple cases to occur before taking action. As mrbrown tweeted so succinctly, "Must more people kena then act ah?"


Chee Wai Lee said...

The first thing that needs fundamental change is the Government and Civil Service's "Ruling" mindset. They need to seriously start thinking , at least, with a "Governing" mentality if not a "Service/Enabling" mentality.

So far, genuine complaints and reports to the "authorities" fall on deaf ears until they become a significant problem.

Maid abuse? "Oh, most employers are not like that, nothing for us to do!" Same with foreign construction worker abuse ... even with the prominent Chinese worker sit-outs at MOM, MOM officials have not responded adequately, imho. North-East corridor congested? It needed Mah Bow Tan to actually take a bus ride during the peak hours to acknowledge the truth. The list goes on.

Talljoanne said...

I personally think that the free market argument has gone too far in S'pore, way ahead of economic theory. Proponents of free market here almost always ignore the concept of information assymetry, which can be found in any good microeconomic book. Individual consumers cannot sieve out the chafe when the world has become too complicated to tell what is a real wheat.

family man said...

Thank you sir.

Thanks for your analysis. Look forward to more of your posts!

WL said...

If petty theives are jailed, why are these people in banks and schools who caused public to lose thousands and more not being seriously penalised; including being jailed if criminal intent to cheat can be proven.

Anonymous said...

I do sympathise with the public who lost their money in this supposedly legal (products?).I have often wondered about the (products?)being sold in the business world i.e. MTN,SBLC,ROLL PROGRAMME,NO ASSET LOANS and many many more.I have known many an innocent parties caught in this web of greed and lost family fortunes and their life savings.It all boils down to one thing.NO SUCH THING AS EASY MONEY LEGAL OR OTHERWISE.

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