The Story of Singapore: Properly Whitewashed and Dried

According to Singapore, the history of Singapore "really" begins in 1819, when Sir Thomas Stamford Raffles bought the island from the local sultan on behalf of the East India Trading Company, where he intended to create a freeport that would be a useful stopping position on the way to greater trade with China from India.

(They kinda tell you at one point in the National Museum that the "local sultan" was actually in a dispute with his brother as to who was the proper owner of the title. The sultan was quick to sell the land to the British because they would recognize him as the rightful heir and he would be able to draw an income from the British who would set aside some land for him in Singapore.)

The island grew fairly well in British hands, but, as you can imagine, the East India Trading Company created some troubles for the locals (as any government mandated monopoly with a "private" army backed by British troops is wont to do).

Eventually, Singapore broke from the Company and moved into British hands. This was generally celebrated, and then generally booed (as all idiotic feats appear to be, like Obama's election).

(Note: McCain's election would have also been a disaster, so no angry emails from any statist Obama lovers)

Singapore was conquered by the Japanese in 1942 and remained in Japanese control until the end of the war. As you can imagine, things went swimmingly well, and only 50,000 people were viciously murdered. Albeit, there were some Japanese in leadership positions that sought to offer Singapore a non-imperial (read: Japanese imperial) future.

Finally, in 1959, Singapore received its independence from Great Britain. Lee Kaun Yew, who would be prime minister of the island and generally the all around ruler (let's just say everything a dictator would love to be except in name), brought Singapore into federation with Malaya. This was a complete disaster and Singapore left in 1963 (read: Malaya was like "get the f*ck out"). Singapore organized itself into a Parliamentary democracy which has been ruled by the People's Action Party and Lee Kaun Yew and his hand-picked successors ever since (YAY democracy).

How Singapore Industrialized: Government Version

So, according to the official history of Singapore, Singapore received its independence in 1965 and had a GDP that was basically everyone living on about $512 per capita. Lee Kaun Yew and Goh Ken Swee decided to start the process of industrialization, which, obviously, could never have happened without government inducement because history proves this...

Goh Ken Swee is considered the second architect of Singapore. Lee Kaun Yew sent him to negotiate with Malaya in order to preserve the Federation, but told Swee to keep independence as a last option. Swee was like "screw this", and used it as a first option. He also is responsible for Singapore's military. Since Singapore is surrounded by potentially hostile partners, it was *very* important that they have a military. So, Swee instituted universal military drafting and forced young Singaporeans to spend 2 and a half years of their lives in military slavery. Afterwards, until the age of 45, Singaporeans must spend a week taking tests to make sure they are fit for military service (if they aren't, they have to go back to basic training). Goh recently died and the flags have been at half mast in general government celebration of his importance. I say, good riddance to bad rubbish. I mean, come on, we're talking about a nation full of Asians. Why not try the Swiss model, at the very worst, and encourage everyone to learn a martial art and practice with guns. No one can take over a nation that has a well-armed citizenry (sometimes referred to properly as a militia, although this term itself becomes perverted).

Anyway, in the later 60s, Singapore put itself out there for any kind of job, in the 70s it oriented itself toward manufacturings, in the 80s began to do light manufacturing, and in the 90s began adding more "high-valued" jobs. Today, it's attempting to become a global leader in biomedical, chemistry, medicine, and the "knowledge economy".

All of this is accomplished through the government Economic Development Board, with the power to attract foreign talent and business, and, through the Government Linked Corporations (GLCs). The GLCs are a lot like America's Government Sponsored Entities (GSEs), like Freddie and Fannie; however, Singapore demands profits and allows for far greater market determination in prices. It's definitely a better system, but still a government system.

Anyway, the narrative generally goes that in 45 years, the per capita GDP went from $531 or thereabouts to over $55K (depending on how you measure), but the government allowing prices to move and picking the right industries in which to allow investment to flow.

A short bit of criticism

Obviously, this story is crap. It's about as good as the story that Alexander Hamilton managed to push through protective tariffs and an early banking system that protected nascent American industries that grew into the powerhouse of an economy and financial sector that we have today.

Singapore has some of the lowest tax rates in the world. Top marginal income and corporate tax rates top off at 20% and begin extremely low. Private savings is one of the highest in the world, and government regulation (although present as shown before) is far lower than in other areas. Also, there is a flexible labour market that allows for the free movement of human capital into and around the country. Although the government has attempted to favor different industries, it is clear that it has done more so through following trends than in leading in any particular way.

Singapore has a mandatory savings program (lower than the domestic private savings, but listen up a little bit). It's about 13% of earnings, matched by the employer, but capped after a certain amount. Much of the money goes to a fund called the CPF (I forget the full name right now). The CPF is something like their version of Social Security, but much better, but still evil. The CPF is your money that is placed into three areas, retirement, education/housing, and medical. The funds stays with you and is actual money, rather than transfer payments like in SS. However, the money can only be spent in government approved ways and the government actually guarantees against certain downside risk. (How? Obviously, it will just tax current earners to pay for the losses of previous earners, yeah, real meritocratic Singapore). As you can imagine, the system is much lauded by people at the top, and it's certainly much better than the social systems of the West.

Singapore has very low medical costs. The idiots in power claim that this is because of government subsidy (to a small extent), and the forced savings. In fact, Singapore has no welfare system. Instead, people rely upon family (for the most part), and certain civic institutions. This is actually a better thing to see in Singapore. They actually are far less generous than the American people, which speaks volumes of how much better freedom would work in America too. Not having a welfare system and having only minimal government involvement means that medical providers have to compete. Furthermore, the user pays for the service, and so, demands good service at a reasonable price. Medical care can be found at any time of the day, a check-up for about $5 (5 Singapore dollars, or $3.75 American), and you don't need a referral to see a specialist. In other words, freedom works.

Singapore has public roads, but they have found an interesting theory of the second best. Obviously, private roads would mean that businesses would attempt to limit traffic through proper price signals in order to reign in the best profits and also provide the best service as they would be competing with all the other means of transportation around Singapore. However, because they do have public roads, people pay quite a bit for their cars, and must pay for a yearly "entitlement" to use those roads. This has encouraged private taxis and various other forms of private "public" transportation. Unfortunately, the government owns large stakes in the trains, but its a much better system than is found in the US. In other words, it's a better theory of the second best. Traffic is heavy; however, there are never any jams and things move quite often.

Cool thing about taxis, I was riding in one and noticed this. You can call a taxi from a phone anywhere and schedule a pick-up, or go to any of the stops. However, if you call in a taxi, it will go out to any taxi that has not been hired and the taxi cab drivers can bid down the initial fee that you get for entering in the taxi. In other words, the taxi cab drivers get to compete with one another on fares. It's a pretty nifty solution that helps connect supply and demand. You can get a taxi during any time, but during high times, you're going to pay a bit more, and during low times, you can travel cheaper.

Singapore has the highest home ownership rates in the world, at about 90%. How? It mandates that part of the savings program that everyone who lives in Singapore (except foreigners), must purchase houses. Well, what do you think that does? Housing developers (who are often government subsidized) know that they cannot receive rental income and that people must buy the houses and that most people already have a large forced pool of savings that they can dip into. Supply is kept somewhat low, and therefore, prices sky-rocket. Supplier power is enormous and one million Singapore dollars ($750,000 US), will only buy you 1,000 square feet of space. Obviously, many of the poor cannot afford this, and are thus forced to move across the water to Malaysia in order to live. I have not heard too much about what goes on there, but I doubt that the living conditions are as nice, or as safe, if they could live in the city.

The official narrative of Singapore states that a smart government with knowledgeable, good, and forward-thinking officials managed to direct investment and produce the Singapore of today. Singapore is thus the lucky inheritor of Lee Kaun Yew and Goh Keng Swee.

In truth, Singapore grew because of capitalism. The savings rate of its people, their productivity, open markets, and allowing capital to move, have produced a powerful economy. By borrowing knowledge and capital from the West, Singapore has moved itself into a great creditor nation. There are still many problems, generally generated from government interference and previous history.

Let's be clear. The way that the Singapore government does things is much better than many in the rest of the world. Also, because the government is forcibly small it can only be so much of a parasite. As a theory of the second-best, Singapore offers many solutions. However, let's not lose sight of economics and reality. Governments do not have special insights, they produce calculational chaos, and don't have the means to generally improve the lives of people.

By the Way (BTWs)

I have more stories, but I thought I'd share some of what I learned and some of my observations on Singaporean economics so that some of my future comments will make more sense.