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How much like the West should Singapore become?

How much like the West should Singapore become?


I just finished a research paper on Singapore’s Second Industrial Revolution when, in the early 1980s, they incentivized growth in their tech sector to compete with other first world countries — a departure from their manufacturing-based economy. Most of their success was due to the stronghold the government had on the people and the vision of Lee Kuan Yew, their Prime Minister. For years after Singapore’s founding, nobody even contested Yew’s People’s Action Party (PAP). Though they were “socialist”, they thought welfare-state programs created soft societies with little prospect for economic progress. Amidst their variation in policy over time, the agenda of the PAP is rather simple: “a strong, wise and far-sighted government will lead public participation … viewed basically as a process of mass education.”

Anyway, the reason Singapore is looked upon as a bastion of laissez-faire is basically because these folks recognized the outward orientation the city-state relied upon. They kept tariffs low, money stable, and did not create a large welfare state (aside from public housing, which was largely to keep different ethnicities meshed together and to create physical space for outside investors). Since the 1980s, Singapore has stayed economically free and prosperous, feeding into Brink Lindsay’s thesis in his latest paper.

In their latest election this past week, the PAP’s “opposition [garnered] around 40 percent of 2 million votes cast in Saturday’s election. But the first-past-the-post parliamentary system – modeled on that of Britain, the former colonial power – ensured that the ruling People’s Action Party (PAP) retained firm control, with 81 out of 87 seats. … For the first time, opposition candidates contested virtually every seat in parliament.”

The PAP has brought Singapore from a third world country to a first by letting market forces work amidst a very well-tuned incentive structure. The Singaporean government may have had a tremendous amount of influence in the institutions that shaped the market, however it used an understanding of market forces to incentivize, not impose, growth. In the 1980s, when the Singaporean government saw that they could no longer compete with low-wages, they calibrated their incentive structure to promote more high-skilled labor. Singapore’s government encouraged activities without closing out other investment proposals or forcing foreign companies into activities they did not want to pursue. Actual investment was done by the private sector. There was no corporatist structure: even state-owned corporations, largely built to promote industry in other spheres (an airline to assist foreign travel, for instance) operated to either succeed or fail in a free-market. Even the more theoretically intrusive structures in Singapore at the time, such as the Economic Development Board, had a free-market bend. They provided direct investment in industrial ventures, as a sort of national venture capital firm, which went mainly into ventures with foreign investors, later selling their rights.

As Benjamin Franklin wrote, though, “When the people find they can vote themselves money, that will herald the end of the republic.” The Workers Party, which opposed the PAP in the latest campaign, seems to be pulling Singapore further to the left economically:

“The campaign was notable for the defensive tone struck by PAP leaders when confronted with voter frustration over the government’s performance. In the final days of campaigning, Lee apologized for the government’s failure to build enough public housing…. PAP candidates were also accused of ignoring the plight of ordinary households.”

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Let’s hope Singapore keeps their market-oriented incentive structure and isn’t inspired by the ‘Great Society’ that is leading America further into debt. Let’s hope they stay a little far from the modern Western democracies in Europe and North America.

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Charlie Rose has interviewed Lee Kuan Yew a few times over the years, the most recent just a couple of months ago. I've seen him interviewed by Rose twice — he's a very impressive, wise old man. I loved in the most recent interivew how he dismisses out of hand that state capitalism is the future (that's the Chinese model Thomas Friedman writes every other column advocating for). Here's the interview:

(Hi Kathleen)

Singapore has something of a state-controlled capitalism, which seems like an oxymoron. It seems to work, I think, because of a combination of number of factors like size of population, geographic location, history, etc. I think of it as paternalistic capitalism.

One thing to note is that the Singapore Gvmnt and LKY do not handle criticism well. They have had a long history of clashing with the WSJ, NYT, and other publications that have been critical of it. I am sure they have a bot running to monitor comments on blogs as well. 🙂

Something to read –