Without that sense of group interest, we could not have cut employer CPF rates, nor restored our competitiveness in a way that few other countries could do. This collective response continues to be critical. In our current remaking, the key changes are in our mindsets, and the main driver of change is private initiative and enterprise. To succeed, the change must come from the people themselves. In this process, the government can only play an encouraging and facilitating role. The additional challenge for us is that this time, the motivation for remaking ourselves is less obvious. Previously we were catching up from behind, but now we are at developed country standards of living. Why do we need to sacrifice what we already enjoy? Yet if we do not accept the sacrifices and change, not only will we not make progress, but we will even likely lose what we already have. No union leader who has visited Shanghai doubts this. It is the reality that we must get home to every Singaporean. Social consensus and political will Fourth, reform and restructuring is never a purely economic exercise. Success depends critically on social and political factors. Economic reforms are not painless. There will be winners and losers, at least in the short-term. Therefore there must be political support for the changes, a willingness to accept the pain of the transition, and a confidence that those adversely affected will be helped. This depends on a feeling of shared nationhood, of going through thick and thin together.
This mechanism amplified the immediate effect of public spending on aggregate demand. Monetary policy – in charge of credit conditions – was entrusted with the task of alleviating, through a careful policy of accommodation, the impact that government borrowing  BIS central bankers’ speeches  3  would have exerted on the cost of private debt. The central bank was financing the Treasury by creating money. Under these conditions, an increase in public spending could “add demand”– where this would be lacking for the goal of full employment – without taking away resources from other uses. Since then, the theory of economic policy has followed two paths that have led it to invert the ranking of relative potential of tools and to enhance the definition and measurement of the objective. As for the instruments, a different theory of the formation of expectations – no longer extrapolative – has highlighted the strong impact of monetary policy and has weakened the expected effects of fiscal policy. In the models that we use today, agents, when formulating their expectations, are attentive to the sustainability conditions of the choices in the long term. Economic policies deemed unsustainable in the long run are ineffective. For example, an active deficit-financed fiscal policy is limited by fears about the government’s ability to refinance the debt from which that policy originates. These fears may lead to behaviours that weaken the private sector – or, at worst, completely neutralise – the impact of public spending as a means of controlling demand.