Political Freedoms for Singapore Economy

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Singapore needs greater political freedoms for economic sustenance.

political-singapore-economyOf late, Singapore’s economy has been listless: GDP grew 1.3% in 2012 and only 0.2% in the first quarter of 2013. This compares to an average of 6% GDP growth in neighboring countries like Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

After years of registering rapid growth, it is clear that Singapore needs a new strategy to revitalize our economy. MIT economist Daron Acemoglu and Harvard political scientist James Robinson seem to have identified what that need is. In their book Why Nations Fail, the authors, supported by breath-taking historical detail, expound why certain states succeed and others fail, why some economies are able to regenerate while others wither and die.

Acemoglu and Robinson demonstrate that political and economic institutions are key players in determining the fate of nations. Extractive political and economic institutions—ones that concentrate power in the hands of a few and extract resources from the many for the few—cause states to wilt.

Inclusive political and economic institutions, on the other hand—ones that practice plurality and encourage innovation—allow states to progress. They write that the ability of inclusive institutions to “harness the potential of inclusive markets, encourage technological innovation, invest in people, and mobilize the talents and skills of a large number of individuals is critical for economic growth.”

The authors say that Singapore, like other authoritarian systems such as Russia and China, employs extractive institutions. Profits derived from public housing, healthcare, transportation, etc all add to the state’s wealth. Singapore’s debt-to-GDP ratio (one of the highest in the world) is another form of this extraction. However, rather than borrow from external lenders, which other governments do, the Singapore government issues debt against the citizens’ pension savings.

Such extractive policies have caused the malformation of the economy

While South Korea manufactures Samsung, Hyundai and K-pop, Japan sells Toyota, and Taiwan exports Acer, Singapore produces little that the world buys. Instead, we rely on vice (prostitution is the fastest growing industry coming on the heels of the launch of the two casinos), money from tax avoidance/evasion, and influx of cheap foreign labor to augment our national income.

Politically, extractive institutions, by their nature, are intolerant of open criticism and dissenting views. The problem is that disagreement and dissent are elements necessary for creative destruction without which economies are prevented from reinvigorating themselves.

Singapore is, unfortunately, a system that is averse to the ways of creative destruction. Steve Wozniak, the engineering wizard and the late Steve Jobs’ other half behind Apple, said that Singapore could not produce a company like Apple because the system here has destroyed “creative elements” and non-conformist behavior that give rise to innovative companies like Apple.

And yet, the ruling People’s Action Party doesn’t see—or, more worryingly, refuses to see—how its extractive policies are driving the economy, once described in miraculous terms, aground. The political incentives and disincentives that we build into our system will determine whether Singapore progresses or stagnates. Political rights and civil liberties, important as they are in their own right, are also crucial for economic sustainability.

Dr. Chee Soon Juan is the Secretary-General of the Singapore Democratic Party. He was awarded Defender of Democracy by Parliamentarians for Global Action in 2003 and Prize for Freedom by Liberal International in 2011. Read other articles by Soon Juan.

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  • Bryan3000

    “While South Korea manufactures Samsung, Hyundai and K-pop, Japan sells Toyota, and Taiwan exports Acer, Singapore produces little that the world buys. Instead, we rely on vice (prostitution is the fastest growing industry coming on the heels of the launch of the two casinos), money from tax avoidance/evasion, and influx of cheap foreign labor to augment our national income.” ~ Chee Soon Juan

    …he makes it sound as if prostitution, gambling, money laundering and the slave trade are Singapore’s key industries.

    This is the (low’ desperate and unprincipled) extent to which CSJ will run Singapore down through devious distortion in order to appeal to the international audience.

    It is not surprising that he is ignored by Singaporeans and (continues to be) politically irrelevant.

    • Yeoh Lian Chuan

      As a Singaporean, I have to agree with your critique of Dr Chee’s comment.

  • Misha Loong

    And here is another Singaporean who strongly agrees with Bryan3000′s critique of Dr Chee’s commentary. Indeed, it saddens me that any of our local politicians – of whatever stripe – can present such a distorted image of Singapore in the international arena.