Thoughts on economics and liberty

Extracts from a superb article on Singapore – must read this snippet

I’ve written an article on the Singapore model for TOI which is expected to be published in a few weeks. Then, while researching some other issues, I came across this which I’m extracting. A brilliant article in The Economist written in 2011.

Go East, young bureaucrat   – Emerging Asia can teach the West a lot about government, Mar 19th 2011

Singapore is important to any study of government just now, both in the West and in Asia. That is partly because it does some things very well, in much the same way that some Scandinavian countries excel in certain fields. But it is also because there is an emerging theory about a superior Asian model of government – it comes in four parts.

First, Singapore is good at government (which is largely true). Second, the secret of its success lies in an Asian mixture of authoritarian values and state-directed capitalism (largely myth). Third, China is trying to copy Singapore (certainly true). Last, China’s government is already more efficient than the decadent West (mostly rubbish, see next section).

Singapore provides better schools and hospitals and safer streets than most Western countries—and all with a state that consumes only 19% of GDP.

The Chinese are fascinated by it. “There is good social order in Singapore,” Deng Xiaoping observed in 1992. “We should draw from their experience, and do even better than them.” It sends streams of bureaucrats to visit Singapore. One of the first things that Xi Jinping did after being anointed in 2010 as China’s next leader was to drop in (again) on Lee Kuan Yew, Singapore’s minister-mentor, who ran the island from 1959 to 1990, and his son, Lee Hsien Loong, who has been prime minister since 2004. … It is hard to think of any rich-country leader whom China treats with as much respect as the older Mr Lee.

So what lessons are the Chinese learning? In particular, two humdrum virtues: a good civil service and a competitively small state.

One thing that stands out in Singapore is the quality of its civil service. Unlike the egalitarian Western public sector, Singapore follows an elitist model, paying those at the top $2m a year or more. It spots talented youngsters early, lures them with scholarships and keeps investing in them. People who don’t make the grade are pushed out quickly.

Sitting around a table with its 30-something mandarins is more like meeting junior partners at Goldman Sachs or McKinsey than the cast of “Yes, Minister”. The person on your left is on secondment at a big oil company; on your right sits a woman who between spells at the finance and defence ministries has picked up degrees from the London School of Economics, Cambridge and Stanford. High-fliers pop in and out of the Civil Service College for more training; the prime minister has written case studies for them. But it is not a closed shop. Talent from the private sector is recruited into both the civil service and politics. The current education minister used to be a surgeon.

Western civil services often have pretty good people at the top, but in Singapore meritocracy reigns all the way down the system. Teachers, for instance, need to have finished in the top third of their class (as they do in Finland and South Korea, which also shine in the education rankings). Headmasters are often appointed in their 30s and rewarded with merit pay if they do well but moved on quickly if their schools underperform. Tests are endemic.

Come in, the water’s lovely

Rather than seeing foreign investment as a way to steal technology or to build up strategic industries, as China often does, Singapore has followed an open-door policy, building an environment where businesses want to be. The central message has remained much the same for decades: come to us and you will get excellent infrastructure, a well-educated workforce, open trade routes, the rule of law and low taxes.

In other words, Singapore’s competitive advantage has been good, cheap government. It has worked hard to keep its state small; even education consumes only 3.3% of GDP. But the real savings come from keeping down social transfers and especially from not indulging the middle class. The older Mr Lee thinks the West’s mistake has been to set up “all you can eat” welfare states: because everything at the buffet is free, it is consumed voraciously.

Singapore’s approach, by contrast, is for the government to provide people with assets that allow them to look after themselves. Good education for all is one big part of it. The other mainstay is the Central Provident Fund. A fifth of everybody’s salary goes into their account at the CPF, with the employer contributing another 15.5%. That provides Singaporeans with the capital to pay for their own housing, pensions and health care and their children’s tertiary education.

There is a small safety net to cover the very poor and the very sick. But people are expected to look after their parents and pay for government services, making co-payments for health care. The older Mr Lee especially dislikes free universal benefits. Once you have given a subsidy, he says, it is always hard to withdraw it. He is convinced that if you want to help people, it is better to give them cash rather than provide a service, whose value nobody understands. China, he thinks, will eventually follow Singapore’s model.

Arguably the place that should be learning most from Singapore is the West. For all the talk about Asian values, Singapore is a pretty Western place. Its model, such as it is, combines elements of Victorian self-reliance and American management theory. The West could take in a lot of both without sacrificing any liberty. Why not sack poor teachers or pay good civil servants more? And do Western welfare states have to be quite so buffet-like?

By the same token, Singapore’s government could surely relax its grip somewhat without sacrificing efficiency. That might help it find a little more of the entrepreneurial vim it craves.

Sanjeev Sabhlok

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3 thoughts on “Extracts from a superb article on Singapore – must read this snippet
  1. Bhanu shukla

    Good article but you left some facts here, Singapore is one of the costliest countries to live in, life is difficult and people have less money to enjoy the city, condition is traumatic there, every day struggle is intense than any other western country. If this model is so successful why there is so much pressure for higher earnings, work life balance is really at low.

  2. Sanjeev Sabhlok

    There is no nirvana. Singapore has created more rich people in the shortest possible time per capita than any other country. But no, there is no nirvana.


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