Welfare – Good or Bad?

I am reading the article US economic myths bite the dust written by Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington D.C. He writes:

As economist Paul Krugman noted after reading [a study on US economy]: “One more American myth bites the dust.” Indeed it has. And as both the authors of the paper and Krugman note, there is a plausible explanation for the US’s low score in the small business contest: our lack of national health insurance.

There are enough risks associated with choosing to start a business over being an employee, but the Europeans don’t have to worry that they will go bankrupt for lack of health insurance.

(SBW17, The Star, Aug 15, 2009)

Mark Weisbrot’s comments on the US small businesses deserve the attention of Malaysian government and, more so, the Singapore’s government. Lee Kuan Yew, the first prime minister of the city state – and now the Minister Mentor – has always scorned at the Western welfare states. He believes that welfare has made the Europeans lazy, and argues that Singapore should never follow the Western model.

Somehow, welfare is a double-edged sword. For those who are willing to take risk, it serves as a safety net. Europeans and Americans are more willing to start their own businesses because they know that should they fail, they can still survive on unemployment fund or other forms of welfare.

By comparison, Singapore has one of the lowest rates of entrepreneurial activities among the rich countries, and its people are risk-aversive. Even the poorer Malaysia has produced some famous entrepreneurs such as Genting’s Lim Goh Tong and AirAsia’s Tony Fernandes. Singapore’s most famous companies, such as Singapore Airlines, are mostly state-owned. Temasek Holdings, the republic’s sovereign wealth fund, has made one blunder after another.

Both Malaysia and Singapore should rethink their welfare policies. Welfare should be seen as a safety net and given to those who ‘deserve’ it. If well-implemented, such policies can encourage the people to take risk and ultimately lead to a more vibrant economy.

Heck, if Malaysian government provides decent safety net, I also want to be my own boss!