An unwelcome truth is slowly revealing itself to the Singapore Government - all the things that make a virtuous cycle more virtuous on the way up can make a vicious cycle more vicious on the way down.
Here is the virtuous cycle. You take 40 per cent out of everyone's pay packet, half from employer and half from employee, promise it all back to them when they retire and use the money meanwhile to start your own industries and entice foreign ones in too.
These industries employ more people who then pay you more through that 40 per cent deduction (the Central Provident Fund) which enables you to establish even more industries and up and up we go.
And now the vicious cycle - one day the industries discover they have trouble finding markets, their earnings go down, the foreigners move out, labourers lose their jobs, their CPF contributions go down, you have less money to keep your industries, more people lose their jobs and down and down we go.
It is only just beginning to happen in Singapore, but the warning bells are now being rung almost on a daily basis. That recent US dollar-denominated performance of the stock market shown in the first chart is only one of the leading indicators.
It will not do to say that the business cycle is in retreat again all across the region and Singapore is just following the trend. The difference this time is that it is a retreat in high-tech manufacturing and this is where Singapore has staked out its future.
