Wednesday, January 19, 2011

The State Capitalist Mixed Economy of Singapore

The Heritage Foundation has just released its latest index of economic freedom around the world and has Singapore in a solid and rising second place behind Hong Kong. Fifth in real per capita income behind Qatar, Liechtenstein, Luxembourg, and Bermuda (CIA World Factbook data), Singapore is much praised by many as a "well-manicured" place with low corruption and transparent laws, although with considerable political autocracy based on the long-running rule in the country by Lee Kuan Yew and his son, the current prime minister (the father is Minister Mentor).

Despite this general perception of super laissez-faire-dom, Wikipedia labels it as I did in the title of this post. It is a curious mixture of socialism and state planning with innovative free market approaches. 60% of the GDP is produced by companies with at least partial state ownership. Nevertheless, one can start a new business in only three days, compared to a global average of 34 days. It is the first country to have congestion pricing (1992), and is now very green with limits on car ownership, given by the Certificates of Entitlement (COEs), or rights to buy a car, which in turn are auctioned off and currently selling for about 70,000 Singaporean dollars (1.3 of them to US $ roughly), or substantially more than most new cars cost. Public transport, infrastructure, and education are excellent and efficiently provided. Most housing is built by the government, with private citizens becoming owners under very strict regulations, including very active intervention in property markets to control speculative bubbles.

I just returned from a conference in this curious place, which has much to please for visitors, including diverse, high quality, and inexpensive food, as well as lively ethnic neighborhoods. However, I became aware of elements of the dark side of Singapore, which it must be said are not as bad in some other autocratic countries. Thus, political dissidents tend to get sued by the ruling family for defamation rather than thrown in prison or tortured. However, caning is widespread for many crimes and rising, doubling between 1993 and 2007. While some of the canable offenses are regular crimes, they also include illegally immigrating and engaging in illegal money lending, with Singapore receiving its lowest freedom ranking for "financial freedom" from Heritage at 60 (out of 100, Singapore's overall score is 87.2).

Unsurprisingly the darker side shows up in labor markets and income inequality. There are no reliable statistics on poverty. While I did see one beggar, they are reportedly picked up off the street and arrested. The latest Gini coefficient is 48, the same as Mexico's. Of 164 countries listed by CIA, only 27 have worse ones, 12 of those in Latin America, 11 in Africa, Bosnia and Herzegovina in Europe, and Hong Kong, Sri Lanka, and PNG worse in Asia.

In labor markets there is the largely unreported matter of indentured laborers from other countries (the unemployment rate is very low). I saw some in the backs of trucks, and I was told to avoid certain parts of Little India on Sunday because they congregate there and are reputedly engage in theft on their one day off (although some indentured domestic servants get no time off). A good source on them and their situation from 2006 can be found at http://newamericamedia.org/news/view_article.html?article_id=8a93766ff16fec2a9dfdfc2516f87482. If that does not work, just google, "indentured labor Singapore" and it is (or was) the top hit. Ironically, or perhaps unsurprisingly, Heritage praises Singapore's labor laws, ignoring this indentured labor situation while praising their lack of any restrictions on laying off workers, and giving them a 98.0 on "labor freedom" (just behind their 98.2 for "business freedom,").

So, Singapore is not what it seems in many media accounts, in many ways a progressive and innovative society that is growing rapidly economically, while also experiencing substantial inequality and repression in various forms. It is unsurprising that many commentators have seen the former communist/socialist and now Confucian Lee Kuan Yew's system as a model for the post-Mao Dengist reform movement in China.

12 comments:

mark said...

I saw an interview on abs-cbn news in the Philippines on the 'economic freedom index', which was disappointing for the interviewer's failure to question. The low score for the country is attributable, among other things, to the fact that foreigners can not own Philippine property (including natural resources), and that it is difficult to fire workers.

Mark Harris
Cebu, Philippines

Barkley Rosser said...

mark,

While it is possible for foreigners to buy real estate in Singapore, there are some limits on that, which is why the category Singapore gets its second lowest score in is "investmant freedom" at 75.0.

A curious item that not many know is that supposedly #1 in freedom Hong Kong actually has state ownership of land, although not of structures on the land. That system dates back to the period of British rule, when the land was technically owned by the Queen.

can said...

Consider Singapore and Hong Kong in the framework of "how do you arrange incentives so that the best option of the domestic rich and powerful is to (1) create economic growth, and (2) perpetuate the system, rather than pillage it" and both look rather similar, despite different historical routes.

Singapore's PAP once had its entire party organization hijacked by its communist wing - Lee Kuan Yew had to have the British come in and detain them - ever since then it has ensured that business, ethnic Chinese, etc. groups are all deeply integrated with party leadership, and non-integrated groups are dismantled. Go to any of Singapore's statutory boards and observe how many board members are also on other corporate/government organizations. Add in family ties and it becomes clear that most of Singapore's human organizations - government, corporate, civil/social - are essentially lead by the same people as that which makes up Singapore's civil service elite. Climbing one ladder allows you to climb another. Business leaders are waved the carrot of being co-opted while threatened with some very deadly sticks - in the same way political opponents, other civil organizations, etc. are treated - and thus the system deters local rich from funding power grabs. On the other hand, its social structure is sufficiently decentralized that nobody can suddenly seize all of it as Barisan Sosialis did in 1961.

Hong Kong, of course, simply elects its business elite to its legislature (LegCo). Hong Kong calls it "functional constituencies"; bluntly it is granting the rich and powerful a vote worth tens of thousands that of normal citizens. Oligarchy, formalized. Compare Singapore's elaborate gerrymandering, perhaps (66% of popular vote generates 98% of seats in parliament). The result is that the reins of formal and informal power tend to function similarly in both places - elective dictatorship in formal power, relatively open but self-reinforcing informal structures, restrictions on politics outside those arenas - call it Lenin's democratic centralism in action.

Both Singapore and Hong Kong have high Ginis. In fact, Hong Kong is worse, as you noted. It may be due to the British and then Chinese underwriting the power of the ruling elite; Singapore's elite has no such luxury.

Gini indexes may miss the benefit of having housing, education, healthcare, safe environment, other social infrastructure etc. guaranteed, though - perhaps inequality hurts less in such a situation.

On indentured labor: One in five people in Singapore are indentured foreign workers. The numbers are staggering, although not as eyebrow-raising as Qatar (four in five). Singapore reportedly keeps any social problems under control, though, by relying on neighboring countries absorb the costs (e.g., indentured laborers who lose their job must return home even if they intend to search for another one in Singapore; this ensures that foreigners who are unemployed, are unemployed elsewhere. The rate of retrenchments in Singapore and the level of crime in neighboring Johor state in Malaysia is thus correlated, even though Singapore itself never rises above 3% unemployment). I haven't heard of any associated crime problems. Perhaps it is new and related to ongoing world economic problems.

can said...

Consider Singapore and Hong Kong in the framework of "how do you arrange incentives so that the best option of the domestic rich and powerful is to (1) create economic growth, and (2) perpetuate the system, rather than pillage it" and both look rather similar, despite different historical routes.

Singapore's PAP once had its entire party organization hijacked by its communist wing - Lee Kuan Yew had to have the British come in and detain them - ever since then it has ensured that business, ethnic Chinese, etc. groups are all deeply integrated with party leadership, and non-integrated groups are dismantled. Go to any of Singapore's statutory boards and observe how many board members are also on other corporate/government organizations. Add in family ties and it becomes clear that most of Singapore's human organizations - government, corporate, civil/social - are essentially lead by the same people as that which makes up Singapore's civil service elite. Climbing one ladder allows you to climb another. Business leaders are waved the carrot of being co-opted while threatened with some very deadly sticks - in the same way political opponents, other civil organizations, etc. are treated - and thus the system deters local rich from funding power grabs. On the other hand, its social structure is sufficiently decentralized that nobody can suddenly seize all of it as Barisan Sosialis did in 1961.

Hong Kong, of course, simply elects its business elite to its legislature (LegCo). Hong Kong calls it "functional constituencies"; bluntly it is granting the rich and powerful a vote worth tens of thousands that of normal citizens. Oligarchy, formalized. Compare Singapore's elaborate gerrymandering, perhaps (66% of popular vote generates 98% of seats in parliament). The result is that the reins of formal and informal power tend to function similarly in both places - elective dictatorship in formal power, relatively open but self-reinforcing informal structures, restrictions on politics outside those arenas - call it Lenin's democratic centralism in action.

Both Singapore and Hong Kong have high Ginis. In fact, Hong Kong is worse, as you noted. It may be due to the British and then Chinese underwriting the power of the ruling elite; Singapore's elite has no such luxury.

Gini indexes may miss the benefit of having housing, education, healthcare, safe environment, other social infrastructure etc. guaranteed, though - perhaps inequality hurts less in such a situation.

can said...

On indentured labor: One in five people in Singapore are indentured foreign workers. The numbers are staggering, although not as eyebrow-raising as Qatar (four in five). Singapore reportedly keeps any social problems under control, though, by relying on neighboring countries absorb the costs (e.g., indentured laborers who lose their job must return home even if they intend to search for another one in Singapore; this ensures that foreigners who are unemployed, are unemployed elsewhere. The rate of retrenchments in Singapore and the level of crime in neighboring Johor state in Malaysia is thus correlated, even though Singapore itself never rises above 3% unemployment). I haven't heard of any associated crime problems. Perhaps it is new and related to ongoing world economic problems.

rosserjb@jmu.edu said...

can,

Thanks for the interesting and informative comments. On the crime issue, it may be overblown, local prejudice against "scary" foreigners and red light districts, plus a bunch of racial prejudice (the Indians seem to be the most downtrodden and also angry of groups in Singapore, with Lee Kuan Yew having reportedly said that if they do not like it there, they can "go home," something we have heard here in the US as well).

The only caveat I would have is that some of the sources I read raised questions about the solidity of the health care provision, which you may note I pointedly said nothing about. Education, and general infrastructure are in very good shape, but the medical care situation is murkier, although I think it is of high quality, but a lot of people are apparently paying quite a bit for it, in contrast to food and some other items.

rosserjb@jmu.edu said...

can,

Thanks for the interesting and informative comments. On the crime issue, it may be overblown, local prejudice against "scary" foreigners and red light districts, plus a bunch of racial prejudice (the Indians seem to be the most downtrodden and also angry of groups in Singapore, with Lee Kuan Yew having reportedly said that if they do not like it there, they can "go home," something we have heard here in the US as well).

The only caveat I would have is that some of the sources I read raised questions about the solidity of the health care provision, which you may note I pointedly said nothing about. Education, and general infrastructure are in very good shape, but the medical care situation is murkier, although I think it is of high quality, but a lot of people are apparently paying quite a bit for it, in contrast to food and some other items.

can said...

My (anecdotal) impression is that the Singaporean Malay community is the angriest, provoked by a sense of Malay nationhood and continuing ethnic bickering in neighboring Malaysia. The Indian community is divided; the multi-generational families speak English and are thus successful in Singapore - more successful than even the Chinese-speaking Chinese majority, on average, in fact, with higher incomes and more university education. On the other hand, post-independence waves of migration have had more trouble integrating and there is certainly resentment both by and against. Aren't first-generation immigrants always accused of crime everywhere in the world?

The Malay community, in comparison, has only seen their influence and importance decline, as Singapore finds itself having less to prove next to Malaysia. Accusations from Kuala Lumpur that Singapore is depriving Malays of their heritage don't seem so convincing when Malaysia's own ethnic policies are less than stellar.

("Chinese-speaking Chinese majority" is somewhat of a misnomer, at that, since Singapore has miraculously imposed Mandarin - a northern Chinese dialect - atop a community of mostly assorted southern Chinese descendants, who didn't speak any Mandarin two generations ago. Mandarin, and English. Thus, the English-speaking Chinese, Chinese/Malay (Peranakan) and Indian elite dating from the colonial era have done well, while the Malay and Chinese lower classes have had their ethnic identities rewritten for them in a generation. Now to be Chinese in Singapore is to speak Mandarin and dialects only remain as vulgarities, and any resentment over this seems weak or absent.

Singapore's modern ethnic divisions are inventions; once upon a time Singapore elected a Chief Minister who was Jewish, when identities of nationhood and class and ethnicity were less prescriptive. Loudly assigning individuals a given racial identity for five decades seems to have suppressed past and potential faultlines, though, perhaps unintentionally. Singapore is fascinating case study in social engineering - The Economist called Singaporeans "malleable" recently. I am inclined to agree.)

I have personally heard nothing but good about its healthcare system; this includes disregarding reports of dissatisfaction by Singaporeans that the (foreign) hospital nurses speak Filipino among themselves instead of English (an attitude which seems excessively petty). That was apparently published in the local broadsheet, although I have only seen online accounts - that was the last major health-related news I heard out of Singapore. Consultation prices seem spectacularly cheap, especially compared to the US, which corroborates other comparative studies bandied about back when Congress was arguing over PPACA.

can said...

Something seems to be eating my comments a few seconds after I post them; it shows up briefly but vanishes when I refresh the page. Weird. Aggressive (but slow) spam filter?

rosserjb@jmu.edu said...

Can,

Very insightful comments. When I was there I became aware of the situation of the mixed-race Peranakans, who were apparently favored under the British. Their neighborhood does not appear on many maps nor in a lot of guidebooks. I found out about it accidentally. Went and enjoyed the food, but noticed that it is being torn up to be replaced by modern junk. They are asserting themselves somewhat, and there is a new museum about them, but these people who could arguably claim to be the "real Singaporeans" as much as anybody are clearly being downplayed and downtrodden to a considerable degree.

I also noticed very few interracial couples on the streets, although a few. It seems that there is an emphasis on groups maintaining their identities and sticking to themselves. The Peranakans are not the model for that.

can said...

Oh, the Peranakans are having their identity asserted for them, too, as part of the broader campaign to recover some kind of historical identity. Like many changes in Singapore, it is being imposed from the top. Did you notice the new campaign to identify the remnants of the Arab community, too? The National Library in Singapore apparently has an exhibition.

Kuan Yew is Peranakan himself, but the ethnic identity is buried under a generation of Malay nationalism, Chinese nationalism, and then bitter Malay-Chinese disputes, and then Singapore's language policies, Malaysia's bumiputera policies, and Indonesia's Chinese suppression.

In decolonizing and post-independence Singapore it was important for the politically-active and rich Peranakans to emphasize how Chinese they were to other, poorer, and more numerous Chinese, not emphasize how ethnically and culturally different they were. I mentioned the PAP socialist/communist split earlier; one thing you will never see mentioned in official readings is that the (Chinese) socialists were largely Peranakan descendants, studying in British schools and participating in the British civil service, and thus influenced by Labour Party ideas - the communists were from later waves of migration and were more loyal to the then rising tide of pan-Chinese nationalism and thus Chinese communism. The split had an ethnic tint to it.

An ethnic summary of postcolonial Singapore would be the Peranakan minority anglicizing the Chinese majority and in the process losing their own distinctiveness. As an example, one of the more troubling riots in early Singapore was due to the PAP attempting to transform the Chinese schools from the 3year/3year middle/high Chinese system (which the PRC and ROC still follow) to the 4year/2year British GCSE/GCE system. If Singapore's modern government tried to change it back, I think there would be severe resistance again today - a majority of Chinese in Singapore now speak English as their first language and Mandarin second - even Malaysian Chinese are more similar to the Singaporean Peranakans than this.

Singapore's government will build a museum to its heritage, but it wants to keep its current identity under control. The Peranakan Museum lost the prewar shophouses to one side to make a car park for the museum (back when it was still the Asian Civilizations Museum) and the old National Library building behind it to a highway underpass built to redirect traffic away from the Museum Planning Area so as to improve its ambience. I only wish I were kidding.

Incidentally, just this month Singapore made a major policy change; the policy emphasis on distinct identities may be fading. You may have seen it in the local news while you were in Singapore.

Barkley Rosser said...

Can,

Again, very interesting comments, and I did not see this last point. I got that the Peranakan Museum is in the building that was where the first classes were held in 1929 to teach Mandarin to the local Chinese. Was that a Peranakan push also?

Had not heard that Lee Kuan Yew is actually a Peranakan. Thought he was pure Chinese. An ironic point on that is that in one guidebook I saw a Peranakan restaurant on Joo Chiat Road listed as being his favorite Peranakan restaurant. I tried to go to it, but it no longer exists, being in a section of the street currently all torn down, presumably to be replaced by a bunch of modern crap like the Joo Chiat Complex at the end of the street.