Tuesday, June 12, 2018

Trump and Kim can learn a lot from Singapore

By Tyler Cowen

12 June, 2018


SINGAPORE — United States President Donald Trump and North Korean leader Kim Jong-un are spending such a short amount of time in Singapore this week. Maybe they should stick around longer to see what makes its economy tick.

Singapore is an especially wealthy nation, with a per capita income of about US$90,000 (S$120,000), well above that of the US But how is this prosperity maintained, and why has Singapore commanded so much admiration from liberals and conservatives alike?

Singapore has many features shared by other wealthy countries, such as a high capital stock, a predictable legal environment and a well-educated workforce, but what are some of the less common factors behind its success?

Strikingly, Singapore is one of the few countries where there is brain drain into the public sector. This stems partly from the high salaries paid. Top bureaucrats typically receive more than their American equivalents, and Cabinet-level pay may exceed US$800,000, with bonuses attached that can double that sum for excellent performance.

[In the US, the brightest students graduate and want to work for Wall Street, come up with new financial instruments (e.g. derivatives) that NOBODY understands, and make MILLIONS. Meanwhile the less bright students join the govt, and are tasked with regulating Wall Street. Naturally Wall Street's brightest run rings around them.

In SG, the brightest graduate and join the Civil Service, and regulate the financial sector. The less bright join the financial sector and are hemmed in by the regulations made by the Govt's brightest. They can't come up with a way to innovate.

Replicate for all other sectors.

That is the Singapore Problem.]

Yet it's not just about the money. Since independence in 1965, Singaporean leaders have cultivated an ethos of public service in the bureaucracy. The country moved from being relatively corrupt to having one of the best ratings on transparency indexes.

[Singapore is ranked 6 out of 180 countries.
USA is 16. Malaysia is ranked 62.

North Korea is ranked 171 out of 180.]

There are now complex and overlapping incentives whereby top public-sector workers are paid well, respected highly, and develop the personal networks for subsequent advancement in either the public or private sectors.

I've met a number of times with Singaporean government officials, and I've always been impressed with their state-of-the-art social science knowledge. The participants typically have top educational backgrounds (doctorates from Harvard or Princeton are common, and now two of Singapore's universities have achieved world-class status). Their analysis is pragmatically geared towards finding the right answer or at least a workable solution.

I view the development of Singaporean civil service culture as one of the world's great managerial and political success stories of the last 50 years, though it remains understudied and underdiscussed in the West.

Singapore also mixes many of the virtues of both small and big government. The high quality of the civil service means the country gets "good government", which pleases many liberals and progressives. The high quality of the decision-making means Singapore often looks to market incentives — congestion pricing for the roads is one example of many — which pleases conservatives and libertarians.

[When you have a hammer, everything looks like a nail. But sometimes, you need to have another tool.]

Singapore's healthcare system has been praised by both liberals and conservatives. The country has some of the world's best health outcomes, while spending only about 5 per cent of gross-domestic product on the medical sector, as compared with more than 17 per cent in the US.

A statist perspective would emphasise that the government owns most of the hospitals, but market-oriented economists would stress that the hospitals are instructed to compete with one another.

Is Singapore a small government or a big government country? The correct answer is both.

That is actually the wrong question, and the wrong or irrelevant answer.

The US Republican Party stands for small government. The Democrats generally try to enlarge government - to provide social services, etc. The two party shuffle has the Democrats in power, then the Republicans are in power, and then the Democrats take over. The two parties are locked in a dance of "small govt-big govt" - it's thesis-anti-thesis-thesis-anti-thesis.

But they NEVER move onto synthesis.

The right answer is not whether big govt is better or small government is better. WHY ARE YOU COMPARING SIZES?

The correct answer is "Good government"! The correct answer is "Competent Government". The correct answer is "Honest Government".

Instead of choosing Big Inefficient Govt, or Small Corrupt Govt, choose a govt that WORKS!

Government spending is about 17 per cent of GDP, which makes it look small and helps hold down taxes, which is good for business and productivity. (And there are no additional state and local governments.)

But if you look at stocks rather than flows, the government owns shares in many critical Singapore businesses, plus it de facto controls lucrative sovereign wealth funds. The government claims ownership of the land, although it allows for active markets for transferring rights of use. All of these resources give the government the ability and credibility to get things done.

One of the most common caricatures of Singapore is as an authoritarian state where you can be tossed in jail for chewing gum. The government does still regulate chewing gum, in part because it was being used to jam the sensors on subway doors. But is this so different from a wide array of proscribed substances and public-health regulations elsewhere?

[Kinder Surprise is illegal in the US.]

These days, it is best to think of Singapore as a democracy with legitimate elections, although it is a democracy with some restrictions on political entry and political speech (attacking political figures by name and character can lead to expensive libel suits).

[These are same old Criticisms. Here is the 10 year series answer.]

The most significant barrier to entry probably is that the dominant political party, the People's Action Party, has amassed so much talent, and is such a vehicle for career advancement, that potential competitors find it hard to mount serious challenges. There are also plenty of American states and cities where a single party has a dominant, persistent advantage.

Overall, I see the government of Singapore as more responsive to public opinion than the federal government in the US, or for that matter the European Union.

[This is from an outsider looking in.

Here's a view from 2010 (from an American and a Canadian):

" 'I'm American and you don't want what we have. Democracy isn't about choice. It's just a fancy word for partisan bickering and gridlocked government.' "]

You don't have to approve of everything that goes on in Singapore to grasp what a unique and successful blend of political and economics the nation has created.


Tyler Cowen is an American economist and economics professor at George Mason University. 

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