Warning signs for Singapore

Singaporeans celebrating opposition party win. Photo credit : Lawrence Chong Facebook pos

In February 2020 in response to the question “What is Singapore’s economic strategy?” Minister for Trade and Industry Chan Chun Sing outlined the logic of Singapore’s free market ideology. Singapore is often heralded for its achievements in economic development “From Third World to First'' as one of the successful Asian Tigers of the late 20th century. The rapid economic development of the free-market export oriented Asian Tigers relative to the more controlled import substitution models in Latin America from the 1960s to the 1980s inspired a set of free market reform principles known as the “Washington Consensus” (Birdsall, 2010). From the late 1980’s until 2008 the influence of the free market ideology and the Consensus would spread beyond the Asian Tigers and Latin America to influence economic policy around the world. Since the 1980s globally policy makers have adopted these reforms by lowering corporate taxes, trade tariffs and deregulating financial markets in the hopes of replicating the Asian Tiger miracle at home. The sustained success in Asia is used as a living testimony evidence of the ideology’s legitimacy. In 2020 Singapore ranks #1 on the Heritage Foundation global ranking of Economic Freedom report. Prior to the COVID-19 pandemic Singapore’s economy has consistently realized real GDP income growth from 1960 and extended into recent years (MAS, 2011). It survived the test of economic resilience through a strong recovery response to three economic recessions in 1985, 1997 and 2008. So what is Singapore’s economic strategy?

In his response the Minister anchored first on the mandate to provide quality jobs and wages. According to him these jobs come “from quality investments” and he lays out the political economic framework that connects policy to these investment outcomes. He starts with the rhetoric of scarcity “without natural resources, we strive hard to create our own competitive advantages” and then lists 6 policy themes that characterize the Singapore economic strategy - rule of law, policy consistency, business-friendly environment, tripartite alliance, skilled worker and connectivity (Chan Chun Sing, 2020). In short, he affirmed capitalism’s role in the government’s social contract. This affirmation comes just one month prior to when the global COVID-19 pandemic would pause the world economy and slash two years of GDP growth from Singapore. Five months later in July in the heat of the global pandemic the ruling party PAP lost a record of 2 GRCs to the opposition Workers Party and realized a decline to 61%, the lowest level since the tense 2011 election. The top issues in April prior to the election that divided supporters of the ruling party from the opposition were sentiment of antagonism to free market policies - pessimism on economic outlook, social mobility, inequality and support for social safety nets (Quad Research, 2020). While not captured in the survey another concern weighing on Singaporean minds was the integrity of democratic institutions. This sentiment was captured in a popular quote by one of the new figures of the opposition, Janus Lim, in a televised debate.

What we are trying to deny the PAP is not a mandate, what we are trying to deny the PAP is a blank cheque - Janus Lim, 1 July 2020

For Singapore this narrow definition of “economic freedom” is applied selectively. The country scores among the lowest on the list on measures of democratic pluralism, civil liberties and freedom of the press (Social Progress Imperative, 2020). While free market ideology may have originated from Western democracies which are perceived to have an abundance of individual freedoms in the political and economic sphere, this coincidence is not built-in to the core aims of the ideology. Pinning down an exact definition of this ideology for any particular government strategy is not straightforward as even the most free market governments also have regulations and restraints on market operations as well as redistributive taxes and transfers. The following excerpt from the Center for Global Markets and Freedom is a concise summary of the ethos of free market capitalism.

We owe our high living standards to economic freedom, with its reliance on market incentives that encourage us to work, save, invest, innovate, start businesses and take risks. Our free enterprise system favors production over taxes and handouts, responsibility over dependence and opportunity over equality. The rewards have been progress instead of decline, wealth instead of poverty - Michael Cox, 2011 Annual report : William J O’Neill Center for Global Markets and Freedom, Southern Methodist University

Alan Greenspan Photo credit : Kevin Lamarque / Reuters | Credit: REUTERS

In 2008, in the wake of the subprime mortgage crisis in the United States Alan Greenspan testified before the US Congress on the causes of the crisis and specifically the institutions and liberal financial deregulation that he promoted during his time as Chairman of the Federal Reserve. In a rare moment of humility he admitted that he had found “a flaw” in his ideology that had shocked him (Greenspan, 2008). While this economic strategy may have worked well in Singapore’s past, it is an imperfect simplification with side-effects social costs of mental and physical health, wealth inequality and externalities transferred outside Singapore’s borders. Furthermore there is evidence that the basic driving forces of labor productivity growth and global trade growth that the strategy depends on may not be as reliable as in the past. There are valuable lessons to be learned from Singapore’s post independence successes in human development and economic growth and the failures of experimentation with alternatives must be understood. The ideology of Greenspan, Thatcher and Reagan has inspired many and even some within Singapore’s political leadership history, however this ideology may need some refinement in order to prepare the city state to be well positioned for prosperity in the 21st century.