By Neil Reynolds
SINGAPORE has been frequently derided as an authoritarian nanny state - dismissed in one vicious critique as 'Disneyland with the death penalty'.
Singapore is definitely the wrong place for repeat drug offenders and rapists. At the same time, however, it is a good (although imperfect) example of limited government spending: It nationalises only 17 per cent of gross domestic product (GDP) a year (compared, for example, to Canada's 39 per cent).
Yet Singapore has excellent health care, exceptionally low unemployment, minimal poverty, high literacy and one of the world's most dynamic economies. How did it get so many things so right?
Former United States secretary of state Henry Kissinger once described colonial Singapore as 'located on a sandbar with nary a natural resource'. When Britain granted it self-government in 1959, Singapore was an impoverished Third World island nation with all the filth and fever that stagnant sewage ensures in a densely populated city (population: one million) of slums. Per-capita GDP then was US$400.
In the 50 years since, Singapore's nominal per-capita GDP growth has signalled its astonishing advance: in 1990, US$12,000; in 2000, US$22,000; in 2010, US$50,000 (S$65,000) - or, expressed in terms of purchasing power, US$62,000. This ranks Singapore as the fifth highest in the world, well ahead of the US (in 11th place with per-capita GDP of US$47,200) and Canada (in 22nd place with per-capita GDP of US$39,400).
The Economist says Singapore (current population: five million, about the same as Denmark) now has the best quality of life in the Asia-Pacific - though it has no government-run welfare state. The World Bank says Singapore is the easiest country in the world to do business. Transparency International says it is one of the least corrupt countries.
Boston Consulting Group says Singapore has more millionaires, relative to population, than any other country in the world: 15.2 per cent of all households have more than US$1 million of personal assets 'under active management', which means house values aren't counted.
Singapore's unemployment rate normally hovers around 2 per cent. In the aftermath of the global financial crisis, it doubled to 4 per cent. Singapore's economy nosedived only briefly and quickly recovered. Its economy contracted by 0.8 per cent in 2009 and rebounded by 14.5 per cent last year.
Singapore owes much of its success to the blend of eccentric socialism theory, family-based Confucian instincts and the laissez-faire enlightenment of Lee Kuan Yew, the long-time prime minister and lifetime guardian of the parliamentary republic he established in 1965.
Mr Lee's instincts were paternalistic. But he knew, in the 1960s, that his country couldn't afford a welfare state. So he used government's coercive power to compel Singaporeans to build it themselves. Specifically, he compelled people to save 20 per cent of their wages in personal savings accounts - and to invest the money as best they could.
Singaporeans still put 20 per cent of their wages into their Central Provident Fund (CPF) accounts, which they control - subject to some idiosyncratic restraints. You can use CPF funds to buy your home, which explains why 92 per cent of Singapore families own their homes. But you must set aside 6 per cent of your savings for 'Medisave' expenses. (To cover major medical expenses, you can pool your Medisave funds with the Medisave funds of family members.)
Mr Lee understood the strength of socialism as a political doctrine and the strength of capitalism as an economic force. You will need a pension one day. You will need medical care one day. You will lose your job one day. You may well be poor one day. These risks require insurance. So save your money.
At any given time, only 3,000 Singaporeans receive state-distributed, last-resort assistance. Person for person, Singaporeans are the most diligent savers in the world - and among the least taxed. They are apparently quite content to keep it that way.
This commentary appeared in the Canadian Globe And Mail.
GLOBE AND MAIL