Talking about Britain while talking about Singapore By Scott Sumner

The Guardian has a long piece on Lee Kuan Yew, with the following subtitle:

The founding prime minister of an independent Singapore, he sought to encourage prosperity through ensuring a dominant role for the state



The article also contains this:

The first 10 years after the expulsion from Malaysia saw Lee forge the society that is modern Singapore. It could have been done differently. Colonial Hong Kong, so similar in many ways, prospered as well without the guidance of a “philosopher king” or a “Moses”, as Lee was to be later described. Nonetheless, Lee was very much in charge of the new Singapore and thus deserves the credit, and the blame. The ingredients included a dominant role for the state. This combined aspects of social democracy, for example in major efforts to improve health and public housing, with “the mandarins know best” attitudes to social and economic activity.

What can we conclude from all this?

1. Hong Kong “prospered as well” as Singapore, without a “philosopher king” like Lee.

2. Lee deserves credit for Singapore’s prosperity.

3. Lee believed that Singapore would prosper if the state was given a dominant role, and was well run.

This doesn’t make much sense, unless you interpret the Guardian piece as a veiled comment on UK politics. Right now the Conservatives are in power in Britain, and are trying to reduce the size of the British state from 40% of GDP before the recession, (and at least 46% during the recession) to about 36% by 2018. Many critics on the left are critical of this policy.

Now suppose you write for the (center-left) Guardian, and favor a larger state. What aspect of Lee’s policy would you emphasize? First you have to figure out if Singapore is a success or not. For instance, when people on the left talk about China they call it a state-led economy when discussing its 10% growth rate over 3 decades, and a capitalist country when discussing environmental degradation and worker exploitation. Singapore is generally viewed as being a success, so a left-leaning journalist would want to emphasize that the government plays a “dominant” role in the economy (as if there are any developed countries where the government does not play a dominant role).

Even though the article is exceedingly long, they do NOT find room to mention that Singapore is #2 on just about every global ranking of “economic freedom.” Nor do they find room to mention that the ratio of government spending to GDP in Singapore (17.6%) is the lowest of any developed economy, even lower than Hong Kong.

Let’s test this hypothesis by looking at a different British newspaper—The Economist. Unlike the Guardian, the (center-right) Economist supports the Conservative policy of shrinking the state:

FROM the howling on the opposition benches as George Osborne delivered his sixth budget speech on March 18th, you would think the British state had been ground to a husk over his five-year chancellorship. It was a familiar chorus. The notion that the coalition government’s spending cuts are an ideologically driven wrecking job, spreading anguish to which the Conservative chancellor is icily indifferent, has sustained the Labour Party since its 2010 fall. Hospitals, schools, local government–in their constituencies Labour MPs swear to rescue them all from “Tory cuts”. In Birmingham, the Labour MP Liam Byrne has accused the government of trying to “destroy” Britain’s second city–which is a bit rich considering it was he, as an outgoing Treasury minister, who left the note by which 13 years of New Labour government became instantly defined: “There is no money.” Yet something odd is going on. After one of the biggest fiscal squeezes in post-war Britain, which has seen a million public-sector jobs cut, Britons tell pollsters they have never been happier with public services.

And now let’s see how the Economist describes Singapore’s success under Lee:

Why did Singapore become an economic success? First, its strategic location and natural harbour helped. . . . Second, under Mr Lee, Singapore welcomed foreign trade and investment. Multinationals found Singapore a natural hub and were encouraged to expand and prosper. Third, the government was kept small, efficient and honest–qualities absent in most of Singapore’s neighbours. It regularly tops surveys for the ease of doing business.

No mention at all of the “dominant” role played by the state. Instead Singapore is described as a capitalist haven, with very small government.

I happen to think the Economist’s description is more accurate, but economies are so complex that it’s easy to see how opinions would differ. It depends which aspect of the economy you wish to emphasize. Like the Economist, I favor small government. So it’s also hard for me to be completely objective. All I can really say is that people should think for themselves, be very skeptical, look at hidden agendas, and check out the data on their own. Don’t rely on the specific data points spoon fed to you in a journalistic piece with a political agenda lurking in the background. And be even more skeptical of articles that lack data, and merely tell you their overall impression of the state’s role in the economy.

Interesting fact: Singapore was part of Malaysia until it was kicked out in 1965. If you use PPP GDP estimates for 2015 from the Economist, you find that “old Malaysia” (including Singapore) has an estimated GDP per capita of $35,242, which is above Spain and Italy and below Britain and France. I think it’s fair to say that not many people would have predicted that in 1964. Indeed with the possible exception of Mr. Lee, perhaps no one. But then no one would have pegged South Korea at $36,520 either. Of course South Korea’s success is even more astounding, and is due to:

A. Its open, export-oriented capitalistic economy

B. Its import substitution, state-led development model

Depends which paper you read.