Despite Lee Kuan Yew Singapore Isn't As Rich As You Might Think
Or as we might put it more accurately, other places aren’t quite as poor as the economic statistics portray them as being. There’s absolutely no doubt that Singapore has developed mightily in recent decades, as has Hong Kong. And there’s no doubt at all that Lee Kuan Yew had a lot to do with the manner in which Singapore developed and the success of that development. Yet there’s less to the lesson of how this happened than many seem to think. The important point being that Singapore is a City State, not a country in the sense that we normally use that word. We shouldn’t really be comparing the economy of Singapore to that of a country therefore: we should be comparing it to other City States, or at least to other economies that could be so categorised. And on that comparison Singapore hasn’t done as well as many seem to think.
For example, take this from NPR today:
“How Singapore Became One Of The Richest Places On Earth
Hmm, well, OK, if we go and look at the list of countries by GDP per capita (PPP adjusted), the way we should look at such things, then Singapore is pretty much at the top. Depending upon who is counting, third, fourth or fifth from the top of our list. In 2013, $78,000 or so per capita: this really is pretty good, that has to be agreed.
However, as Scott Sumner has pointed out, Singapore wasn’t as poor as the rest of SE Asia way back when either. This is something we can back up with the Angus Maddison numbers. Most notably that Singapore always was significantly richer than the adjoining Malaysia. Much of this is down to the fact that Singapore is in fact one of those City States. And cities are always distinctly richer than the rural areas that surround them, their hinterland. On the very simple and basic grounds that it’s the higher value economic activities that tend to get done in cities. This means that this discussion isn’t quite right:
“Conservatives see Singapore as a free-market success story. Low taxes, few capital restrictions and liberal immigration policies have made it one of the most cosmopolitan places on Earth.
“They have very, very free trade, very low tariffs [and] very few non-tariff barriers,” says Josh Kurlantzick of the Council on Foreign Relations. “They’ll boast about how you can start your own company in Singapore in three hours.”
Yes, that’s not just good, that’s great.
““Some of the biggest sectors domestically — shipbuilding, electronics, banking, and now they’re very involved in private banking — got their start because Lee Kuan Yew and the government specially directed state funds into those areas,” Kurlantzick says.
The government also provided social services like housing and health care, in a way liberal economists applauded.
And perhaps that’s also good and possibly even great. Although the secret of that health care system is that it’s markedly more free market, but with the necessary government intervention, than anyone elses’. The thing is though, while this might have made Singapore one of the richest countries in the world it’s only so so as far as City States go. Or, to be wholly accurate, as far as what we might call a city state economy goes. Here’s a listing which is looking at GDP per capita (at PPP) on something much less than country level, (territorial level 3, roughly akin to NUTS 2 in the European ranking system). The numbers are from a few years back (2007) so not directly comparable to the earlier listing. It also doesn’t include Singapore which is a pity. But London (and, almost, Washington DC) were some twice as rich as Singapore from that other list. And at a rough eyeballing I’d slot Singapore into that list at somewhere around Ulsan (in South Korea) or Tokyo in Japan.
Yes, this is a very impressive performance. Lee Kuan Yew really did guide Singapore to excellent economic growth over the decades. But that economic growth isn’t quite as outrageous as it seems once we correct for the fact that Singapore is defined without that entirely naturally poorer rural hinterland. So, when we compare it to other “city state-like” economies, as we most certainly ought to, the result is good, but not as outstanding as usually portrayed.
What this means for us in public policy terms is that we shouldn’t pay quite so much attention to the exact policies that Singapore did in fact follow (for all my desire to see something like their health care and trade policies enacted). For we are talking, to some extent, about the performance of a city state rather than a country. And when we do that we note that Singapore has reached about the GDP per capita of Paris: and it’s really going to be dang difficult pulling any interesting policy prescriptions out of comparing that pair of results and policies.
Or as we might put it more accurately, other places aren’t quite as poor as the economic statistics portray them as being. There’s absolutely no doubt that Singapore has developed mightily in recent decades, as has Hong Kong. And there’s no doubt at all that Lee Kuan Yew had a lot to do with the manner in which Singapore developed and the success of that development. Yet there’s less to the lesson of how this happened than many seem to think. The important point being that Singapore is a City State, not a country in the sense that we normally use that word. We shouldn’t really be comparing the economy of Singapore to that of a country therefore: we should be comparing it to other City States, or at least to other economies that could be so categorised. And on that comparison Singapore hasn’t done as well as many seem to think.
For example, take this from NPR today:
“How Singapore Became One Of The Richest Places On Earth
Hmm, well, OK, if we go and look at the list of countries by GDP per capita (PPP adjusted), the way we should look at such things, then Singapore is pretty much at the top. Depending upon who is counting, third, fourth or fifth from the top of our list. In 2013, $78,000 or so per capita: this really is pretty good, that has to be agreed.
However, as Scott Sumner has pointed out, Singapore wasn’t as poor as the rest of SE Asia way back when either. This is something we can back up with the Angus Maddison numbers. Most notably that Singapore always was significantly richer than the adjoining Malaysia. Much of this is down to the fact that Singapore is in fact one of those City States. And cities are always distinctly richer than the rural areas that surround them, their hinterland. On the very simple and basic grounds that it’s the higher value economic activities that tend to get done in cities. This means that this discussion isn’t quite right:
“Conservatives see Singapore as a free-market success story. Low taxes, few capital restrictions and liberal immigration policies have made it one of the most cosmopolitan places on Earth.
“They have very, very free trade, very low tariffs [and] very few non-tariff barriers,” says Josh Kurlantzick of the Council on Foreign Relations. “They’ll boast about how you can start your own company in Singapore in three hours.”
Yes, that’s not just good, that’s great.
““Some of the biggest sectors domestically — shipbuilding, electronics, banking, and now they’re very involved in private banking — got their start because Lee Kuan Yew and the government specially directed state funds into those areas,” Kurlantzick says.
The government also provided social services like housing and health care, in a way liberal economists applauded.
And perhaps that’s also good and possibly even great. Although the secret of that health care system is that it’s markedly more free market, but with the necessary government intervention, than anyone elses’. The thing is though, while this might have made Singapore one of the richest countries in the world it’s only so so as far as City States go. Or, to be wholly accurate, as far as what we might call a city state economy goes. Here’s a listing which is looking at GDP per capita (at PPP) on something much less than country level, (territorial level 3, roughly akin to NUTS 2 in the European ranking system). The numbers are from a few years back (2007) so not directly comparable to the earlier listing. It also doesn’t include Singapore which is a pity. But London (and, almost, Washington DC) were some twice as rich as Singapore from that other list. And at a rough eyeballing I’d slot Singapore into that list at somewhere around Ulsan (in South Korea) or Tokyo in Japan.
Yes, this is a very impressive performance. Lee Kuan Yew really did guide Singapore to excellent economic growth over the decades. But that economic growth isn’t quite as outrageous as it seems once we correct for the fact that Singapore is defined without that entirely naturally poorer rural hinterland. So, when we compare it to other “city state-like” economies, as we most certainly ought to, the result is good, but not as outstanding as usually portrayed.
What this means for us in public policy terms is that we shouldn’t pay quite so much attention to the exact policies that Singapore did in fact follow (for all my desire to see something like their health care and trade policies enacted). For we are talking, to some extent, about the performance of a city state rather than a country. And when we do that we note that Singapore has reached about the GDP per capita of Paris: and it’s really going to be dang difficult pulling any interesting policy prescriptions out of comparing that pair of results and policies.
