From 3rd World to 1st World, notes from Singapore

I recently visited Singapore and read Lee Kuan Yew’s (LKY) “3rd World to 1st World – The Singapore Story” to get a feel for the history, culture and politics. What an incredible character and an intriguing place! LKY is an unusual mixture of free-market advocate, state interventionist, anti-communist but adherent of socialism and yet he’s also against the welfare state. There is lots to learn from Singapore’s success and LKY’s character but it’s also critical to understand the scale of the Singapore project. Central planning is possible in the micro but difficult in the macro.

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No nonsense, no aid, no communism

When he came into power in the late 1950’s LKY tried to avoid ideology and pragmatically targeted what was needed, jobs. Singapore refused aid handouts from developed countries because of the dependency it created. He wanted Singaporeans to add value, learn new skills and create productive sustainable jobs. After being a union lawyer in his earlier years, he managed to persuade the unions, align them with goals and break up the more militant strikers. Let’s not beat around the bush – govt. came down like a shit ton of bricks on communist disrupters – sometimes putting people in detention for years and expelling people from the country. He opened the economy up to international competition, partnered with large multi-nationals, encouraged them to do business in Singapore and created a culture of training, hard work and merit-based reward. He refused to see Singapore as a victim and chose to leapfrog economic neighbours, generating unprecedented economic and social development from the 1950s onwards. Singapore is one of the very few countries to transition from a 3rd world country to 1st world. It’s incredible how few have achieved this transition in the past century (off the top of my head, Singapore, South Korea and perhaps Estonia) so there should be lots to learn.

Capable but limited state

Commentators often cite Singapore as an example of a “capable state” that other states can aspire to but I think we have to be aware of the details, differences and what is possible in what context. Yes, the government is integrally involved in the Singaporean economy but budgets are always balanced outside of recessions and the Monetary Authority of Singapore (MAS) ran a prudent monetary policy from the start. They refused to use debt, low interest or a cheaper currency to stimulate the economy because they understood the negative long-term consequences of these short-term policies. He doesn’t actually spend much time detailing these concepts in the book, almost taking them as a given. What I would give to live in a country where monetary and fiscal prudence are the default… Perhaps these, in of themselves, are enough to drive a capable state, or at least limit the degree of destruction caused by government in society.

People benefit by respecting capital

Added to these core principles, Singapore has astonishingly low tax rates. Approximately 28% for the top income tax rate, 26% corporate tax, 3% VAT, 5% estate duties and no capital gains taxes. Back in the 50s and 60s Singapore would sign 10-year tax-exempt agreements with multinationals to encourage them to set up industry and train local people. Talk about an effort to promote savings, capital accumulation and economic growth! LKY also didn’t just pander to multinationals. Singaporeans were trained, upskilled and eventually held senior positions. If you’re uncertain about the impact on Singaporeans, consider that in 1960 Singapore’s per capita real GDP was 7 times smaller than the United States and equivalent to South Africa’s. By 2017 Singapore’s per capita real GDP was equivalent to the United States and 10 times higher than SA’s.

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Hard-line on corruption

Officials, including Lee himself, had to pay for any legal fees if there was any wrong-doing. This seems like a no-brainer – why doesn’t every government implement! After admitting guilt for a corruption offence, one senior official chose to commit suicide rather than face the public backlash, which provides an idea of the social cost of being found guilty of corruption in Singapore. LKY refused to curry favour to political friends and managed to create a capable public service. These guys seem like angels in comparison to any other public service around the globe. This level of integrity is not the norm, which is why I generally favour a limited government approach in order to limit the potential destruction government can reap in society.

Integrity above all else?

One defining aspect that comes across clearly in LKY’s book is his personal integrity. He stood for the truth at each and every turn, spoke his mind even under trying circumstances and held his colleagues to the same standard. This characteristic was apparent at international conferences when he openly criticised world leaders, major powers and stood against the status quo when needed. For example, supporting US involvement in Vietnam because he appreciated the buffer it created against Chinese and Russian communism, as well as criticising the US for their overreach when trying to impose their political and economic systems in the 3rd world. He also criticised 3rd world leaders for their focus on race politics, lavish lifestyles and consistent focus on the past (LKY took ordinary passenger aircraft into the 1990’s in attempt to maintain 3rd world wealth, while much poorer countries’ Presidents were cruising in private jets in stark contradiction to their requests for aid support). My sense is that these criticisms were offered to their face and in a non-antagonistic way, which is a delicate balance that he seemed to navigate successfully. There were also examples where he potentially overstepped the mark – like when he encouraged educated Singaporeans to marry other educated Singaporeans – but he was afforded a degree of leniency because people appreciated his honesty and knew his heart was generally in the right place.

Perhaps integrity should be the primary characteristic we look for in politicians and society needs to find a reliable format to test these principles? Unfortunately, politics seems to attract the opposite characteristics, flaky individuals who bend to popular pressure in order to win favour at the next election.

Values: Confucian socialism vs. Western individualism

Singapore is often taken to task for its authoritarian approach. LKY argues that they aren’t authoritarian but that their Confucian values elevate society above the individual, which is why they’re more comfortable on limiting the rights of the individual than Western Democracies. The contrast between various values is a common thread throughout the book and LKY has a wonderful handle on it due to his extensive travel. While clearly some ideas are better at targeting certain outcomes, LKY was very cognisant of the values that held certain cultures together and disliked the mono-philosophical approach followed by some. For example, free markets support economic growth and democracy can empower individuals, which are reasonably good outcomes. However, LKY disagreed with the dogmatic way in which the US tried to assert these values across the 3rd world because it under appreciates the societal differences. This naivety lead to significant failure. Western countries, particularly America with it’s brash approach, should have been more careful in the way they imposed their values. An evangelical approach can turn people against the values in the first place. This really resonates with me. Good ideas should be shared but they need to be grappled with, understood and adapted to circumstance. A dogmatic student-teacher, “I’m right – you’re wrong” approach is dangerous and I think we’re seeing the consequences in society today. I can appreciate where they come from but reactionary anti-colonial movements that espouse communist values result in damaging outcomes for their people.

Authoritarianism restricts individual freedoms

There’s no doubt that there are authoritarian aspects to Singapore that I wouldn’t appreciate. Alcohol and liquor taxes are outrageous, Singaporean’s get charged special fees for entering casino’s, there are strong mandates on savings with very little choice for the individual and I’m sure there are a ton of other annoying restrictions on personal freedom. It’s also probably also a little boring living in Singapore – my friend living there tends to fly elsewhere to have fun in SE Asia. LKY obviously doesn’t spend too much time on the negatives in his book… He does, however, note that Singaporeans aren’t as entrepreneurial as some of cultures because people have become dependent on the state. It’s not all unicorns and rainbows but just glance back to the increase in per capita GDP…

Different land policies for a very different state

After full independence from Malaysia in 1965, the Singaporean government started to purchase large portions of its national land for housing developments. This example is used as a justification for nationalisation of South African land by the government but I think the examples above highlight clear differences between South Africa and Singapore. National land ownership is not the normal economic path but perhaps a state with almost zero corruption, an incredibly disciplined approach to property rights and a strong record in obeying contract law is capable of land ownership and distribution on an incredibly small island. Singapore’s land mass is 722km2, which is 25 times smaller than Gauteng – South Africa’s smallest province (Singapore is 1700 times smaller than SA). Even if it were possible to overcome the pressures created by the sheer size of South Africa, corruption is endemic, respect for property rights is weak and policies are prone to change depending on the political pressure at the upcoming election. The character of government between Singapore and South Africa is divergent, creating question marks about whether SA can use Singapore as an example on such a tricky issue.

Central planning: possible in the micro  but difficult in the macro

I think this matter of size cannot be underestimated. Central planning has higher a much higher probability of success on a smaller scale where you have a better handle on the people & issues, can limit the risk of systemic failure and can adjust policy quickly if it doesn’t work. At the extreme, central planning at the family level makes complete sense. Central planning can be a disaster on a bigger scale, particularly if we over-estimate our understanding of the people & issues. Everyone always thinks they know what everyone else wants, but in reality, we don’t. Often people don’t even know what THEY want. At a bigger scale, problems are compounded, become systemic & policies can’t be changed quickly if they’re incorrect. This doesn’t imply we must not plan on a bigger scale but we have to be simple, clear and limited in our approach. SA can learn a lot from Singapore about efficiency, long-term planning, fiscal prudence, policy stability, but detailed central planning with a large government trying to outline each area of the economy is not one of them.

Overall, 3rd world to 1st world wasn’t the greatest book I’ve ever tucked into – there were long sections of geopolitical ramblings of little interest to me that I did my best to skim over – but it certainly provided wonderful context and enhanced my travel experience. I had lots to chew on as I experienced the professional service on Singapore Airlines, walked through the ultra-clean streets, whizzed around the city on efficient (and cheap) public transport, ate a variety of tasty foods at their world-renowned restaurants, glared up at the towering sky-scrapers and took solace in the beautiful parks, gardens and multitude of flowers in this wonderfully green city. It’s also great to be posed with so many intriguing political, economic, historical and cultural questions. Singapore confirms my belief in free markets, sound money, austere fiscal policies, education and integrity but it also challenges my scepticism of the state, authoritarianism and centralised planning. It’s great to be challenged and learn from such an iconic figure of the 20th century.


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