SimState: The Myth Of Free-Market Singapore

When looking for case studies of free market societies throughout history Singapore, a polity built from scratch in 1965, is an oft-cited example of how enlightened political leadership can stand back and let the market build a prosperous community for all. But was Singapore really guided by free market thinking at the executive political level? And should the free market in Singapore get the praise (or the blame) for subsequent economic developments? In consulting the autobiography of Lee Kuan Yew, Singapore’s first and longest-serving executive politician, an autobiography which covers the life and career of both Lee and the modern country of Singapore itself, the answer seems to carry a bit of nuance.

Chapter 1 Going It Alone

Singapore was a former British colony and military base/trading depot. It had no “hinterland” economy. It was dependent upon British military subsidies, the bases on the island costing nearly GBP$100M and losing these subsidies early on was a major fear of Lee’s.

Lee’s Top 3 Concerns after independence:

  1. Get international and UN recognition
  2. Defense against Malaysian encroachment
  3. “how to make a living for our people”

Chapter 2 Building An Army from Scratch

Rebuilding the military was a jobs program and an opportunity to create loyal party adherents and factional interest groups. Utilized conscription to build national unity and, modeled on Israeli military, be able to field a large fighting force in a short amount of time.

One official lamented that, “The Spartan approach to life does not come about naturally in a community that lives by buying and selling.” [The need for a military was to protect the political system from foreign dominance, not the commercial system.] “we were building up our defense forces to protect our fledging state.”

“Those who enlisted in the SAF as a full-time career would be guaranteed hobs in the government, statutory boards, or the private sector when they left full-time service to go into the reserves.”

Perceived and actual political threats from Malaysia and Indonesia and a desire to racially and ideologically unify the Singaporean citizenry and re-educate Chinese cultural norms led LKY to build SAF w/ Israeli training and partnerships with “Western democracies” for practice

Chapter 3 Britain Pulls Out

Contribution of British bases to the economy of Singapore in 1966, 20% of GDP.

LKY referred to by a British official “as good a left-wing and democratic socialist as any in this room” and “the government of Singapore… is the only democratic socialist government… in Southeast Asia” and “his housing programme… defies challenge in anything that has been done in the most advanced social democratic communities.”

Later, LKY “attended a Socialist International conference in Stockholm to keep in touch with British and European socialist party leaders.”

Singaporean government lost lots of money on the devaluation of the British pound, in which many of their reserves were held, and feared the departure of British troops in mainland Asia would shake investor confidence, particularly investors in Hong Kong, resulting in a desire to have an arms buildup for credible defense.

Chapter 4 Surviving Without a Hinterland

Recommendations of Dutch economist Dr. Albert Winsemius in 1965:

  • common market agreement with Malaysia
  • resumption of barter trade with Indonesia
  • seek favorable entry for Singapore-manufactured goods into US, UK, Australia and New Zealand

Sent trade delegation to Africa to try to drum up business but failed. Fears of unemployment since 1959 led to desire to industrialize. Formed Singapore Tourist Promotion Board to try to address unemployment.

To promote industrialization, “we protected locally assembled cars, refrigerators, air conditioners, radios, television sets and tape-recorders, in the hope that they would later be partly manufactured locally. We encouraged our own businesspeople who set up small factories to manufacture vegetable oils, cosmetics, mosquito coils, hair cream, joss paper and even mothballs!

Spent “vast sums” on infrastructure only to find the “Jurong industrial estate” mostly empty. Formed an Economic Development Board which got into JVs to recycle paper products with a businessman with no manufacturing experience, as well as ceramics without technical know-how. Also JVed with a Japanese shipbuilder but it did not prove profitable versus ship-repair, which was labor intensive.

“I was convinced our people must never have an aid-dependent mentality” yet formed the Bases Economic Conversion Department whose job was “to retrain and redeploy redundant workers, take possession of land and other assets the British were vacating, put them to the best use, and negotiate mitigatory aid.” Resulted in 1968 agreement for GBP$50M aid package to be spent on British goods and services, 25% being grants and 75% being loans.

Generated S$4-5M in annual USN ship repair business for the Singaporean government. The Singaporean government formed private entities to manage shipyards which later transformed into public companies.

Sought to “leapfrog” regional economies to become trading partner with developed world (America, Europe, Japan) to attract manufacturers to export to developed countries.

Formed Development Bank of Singapore, “DBS helped finance our entrepreneurs who needed venture capital because our established banks had no experience outside trade financing and were too conservative and reluctant to lend to would-be manufacturers”, ie, subsidized a top-down manufacturing-centric policy.

Keng Swee, first chairman of the Economic Development Board, “every time he drove by a school and saw hundreds of children streaming out, he felt downhearted, wondering how to find jobs for them when they left school.”

“The government played a key role in attracting foreign investments; we built the infrastructure and provided well-planned industrial estates, equity participation in industries, fiscal incentives and export promotion. We established good labor relations and sound macroeconomic policies, the fundamentals that enable private enterprise to operate successfully.”

Also, by end of 1970 had “issued 390 pioneer certificates giving investors tax-free status for up to five years, extended to 10 years for those issued after 1975”

“During this period, China was in the mad throes of Mao’s Culturual Revolution. Most investors thought Taiwan and Hong Kong too close to China and headed for Singapore.”

“By the late 1970s we had left our old problems of unemployment and lack of investments behind us. The new problem was how to improve the quality of the new investments and with it the education and skill levels of our workers.”

“After several years the EDB finally convinced Rollei, the German camera manufactuer, to relocate in Singapore. High German wages had made them uncompetitive.”

“We left most of the picking of winners to the MNCs that brought them to Singapore. A few, such as ship-repairing, oil-refining and petro-chemicals, and banking and finance, were picked by the EDB or Sui Sen, our minister of finance, or myself personally. Our ministry of trade and industry believed there could be breakthroughs in biotechnology, computer products, specialty chemicals and telecommunications equipment and services. When we were unsure how new research and development would turn out, we spread out bets.”

“Our job was to plan the broad economic objectives and the target periods within which to achieve them.”

“We did not have a group of ready-made entrepreneurs such as Hong Kong gained in the Chinese industrialists and bankers who came fleeing from Shanghai, Canton and other cities when the Communists took over. Had we waited for our traders to learn to be industrialists we would have starved.”

“The government took the lead by starting new industries such as steel mills (National Iron and Steel Mills) and service industries such as a shipping line, Neptune Orient Lines (NOL), and an airline, Singapore Airlines (SIA).”

Development Bank of Singapore, Insurance Corporation of Singapore, Singapore Petroleum Company; Chartered Industries of Singapore (CIS), a mint and a factory for small ammunition. Pg 67, conversion of “successful” public monopolies into private companies.

With economic consultation from a Dutch academic, Singapore embarked on economic experimentation which involved at various times a combination of tariffs and no tariffs, tax concessions for new MNCs, extensive investment in infrastructure and at times direct government investment in “from scratch” national industries, which despite being successful and profitable were mysteriously privatized at points. The Singaporean government benefitted from political tailwinds created by economic chaos in other parts of the world, but also attracted FDI by pledging not to interfere in business affairs for those relocating to Singapore (1973 oil crisis being a good example).

Chapter 5 Creating a Financial Center

To become a world financial center, Singapore’s government realized it needed to lift foreign exchange control restrictions on all currency transactions between Singapore and territories outside the sterling area.

“I had decided in 1965… that Singapore should not have a central bank that could issue currency and create money. We were determined not to allow our currency to lose its value against the strong currencies of the big nations… so we retained our currency board which issued Singapore dollars only when backed by its equivalent value in foreign exhcange. The MAS has all the powers of a central bank except the authority to issue currency notes.”

Why did Singapore need its own currency if it had no plans to expand its issuance?

“We attracted international financial institutions by abolishing withholding tax on interest income earned by nonresident depositors. All Asian dollar deposits were exempted from statutory liquidity and reserve requirements.”

“The foundations for our financial center were the rule of law, an independent judiciary, and a stable, competent and honest government that pursued sound macroeconomic policies, with budget surpluses almost every year. This led to a strong and stable Singapore dollar, with exchange rates that dampened imported inflation.”

“To meet the competition from international banks, the MAS encouraged the four largest local banks (known as the “Big Four”) to acquire and merge with the smaller local banks to become bigger and stronger.”

1985 “The SES [Stock Exchange of Singapore] was closed for three days while MAS officials… worked around the clock with the Big Four banks to arrange an emergency “lifeboat” fund of S$180 million to rescue the stockbrokers.”

Government of Singapore Investment Corporation formed to manage the Central Provident Fund, Singapore’s pension scheme.

“For over three decades, I had supported Koh Beng Seng on restricting the access of foreign banks to the local market. Now I believed the time had come for the tough international players to force our Big Four to upgrade their services or lose market share… the MAS liberalized access to the domestic banking sector by allowing qualifying foreign full banks to open more branches and ATMs. It lifted limits on foreign ownership of local bank shares.”

Singapore sought to be a global financial center, becoming a key chronological link in the chain between markets in SF, Tokyo and Zurich. Singapore went without a central bank but did establish a “monetary authority” and currency board similar to HK. Special rules and taxes were established to attract foreign financial capital, but a primary attractor was stability in an unstable region. The government managed a pension scheme and sovereign wealth fund which somehow earned above market returns with a conservative stance. The banking sector was partially deregulated and globalized after a period of productive controls.

Chapter 6 Winning Over the Unions

“I started my political life fighting for the unions as their legal adviser and negotiator.”

“I owed my position as prime minister largely to the trade union movement.”

“We banned all strikes in certain essential services”

Britain’s withdrawal of military announcement in 1968 led to Employment Act, Industrial Relations (Amendment) Act and Trade Unions Act amendment, “These laws spelled out minimum employment conditions and placed limits on retrenchment benefits, overtime bonuses, and fringe benefits. They set out uniform provisions for rest days, public holidays, working days, annual leave, maternity leave and sick leave. They restored to management the right to hire and fire, to promote and transfer, functions the unions had encroached upon during the years of industrial strife… we made it illegal for a trade union to take strike or industrial action without a secret ballot.”

1972, sets up National Wages Council “with representatives from unions, management and government”

“The NTUC [National Trade Union Council] expanded into health services, child care, a broadcasting station, a seaside resort hotel for workers called Pasir Ris Resort, and a country club, the Orchid Country Club with a golf course by Seletar reservoir. It also developed quality condimuniums its members could buy… To make them affordable, the government provided state land at nominal prices.”

LKY’s political career began as a union consultant and advocate. But when he came to power, he threatened unions with treason if they striked. A series of reforms were put in place which reduced union power and enhanced company/management power, but it all takes place within a system of “managed relations” where the government is a “stakeholder”. For some reason, the national union organization has made conglomerated investments in semi-private for-profit businesses and co-ops aimed at worker welfare, which the government has helped subsidize.

Chapter 7 A Fair, Not Welfare, Society

“We believed in socialism, in fair shares for all. Later we learned that personal motivation and personal rewards were essential for a productive economy. However, because people are unequal in their abilities, if performance and rewards are determined by the marketplace, there will be a few big winners, many medium winners and a considerable number of losers. That would make for social tensions because a society’s sense of fairness is offended.” [set this up as the leading quote for the essay?]

“A competitive, winner-takes-all society, like colonial Hong Kong in the 1960s, would not be acceptable in Singapore. A colonial government did not have to face elections every five years; the Singapore government did. To even out the extreme results of free-market competition, we had to redistrivute the national income through subidies on things that improved the earning power of citizens, such as education. Housing and public health were also obviously desirable. But finding the correct solutions for personal medical care, pensions, or retirement benefits was not easy. We decided each matter in a pragmatic way, always mindful of possible abuse and waste. If we over-re-distributed by higher taxation, the high performers would cease to strive. Our difficulty was to strike the right balance.”

CPF policies imposed a total savings rate of 50 percent of wages.

“I further amended the law to give the government the power to acquire land for public purposes at its value on a date fixed at 30 November 1973. I saw no reason why private landowners should profit from an increase in land value brought about by economic development and the infrastructure paid for with public funds.”

On the development of HDB and resettling of farmers and squatters: “Compressing 30 years into a few pages makes it all appear simple and straightforward. There were enormous problems, especially in the early stages when we resettled farmers and others from almost rent-free wooden squatter huts with no water, power or modern sanitation, and therefore no utility bills, into high-rise dwellings with all these amenities but also a monthly bill to pay. It was a wrenching experience for them in personal, social and economics terms.”

“As incomes increased, fewer patients chose the lower-cost wards, which had the highest government subsidies, and opted for wards with more comfort but lower subsidies. We considered but rejected a means test to determine which wards patients were entitled to use; it would have been difficult to implement. Instead we encouraed people to upgrade to the ward they could afford by making clear differences in comfort between different types of wards. It was in effect a self-administed means test.” so is the market!

“Government expenditure has averaged 20 percent of GDP, compared to an average of 33 percent in the G7 economies. On the other hand, our development expenditure has consistently been much higher than that of the G7 countries.”

“Our aim is to have partial or total cost recovery for goods and services provided by the state. This checks overconsumption of subsidized public services and reduces distrotions in the allocation of resources.”

The Singapore government was dominated by one party, PAP, for its modern history. They very openly bought botes with their welfare programs. But they sought to make many of these programs less generous to ensure their solvency. The government forced high rates of saving on workers which it deployed to finance infrastructure spending and welfare housing. Lower tax rates compared to other developed countries helped Singapore remain competitive. LKY is very clearly NOT a fan of the free market in this chapter.

Chapter 8 The Communists Self-Destruct

On fighting Malayan National Liberation Front/communist guerrillas: “Could we have defeated them if we had allowed them habeas corpus and abjured the powers of detention without trial? I doubt it.”

Singapore had two major political factions, the Communists and the PAP. After a series of political blunders and internal turmoil, the communists formally exited the electoral scene leaving the PAP to run unopposed for 30 years, allowing them long and consistent control over policy-making. They used “ends justify the means” and subverted sound legal principles to obstruct and detain communists.

Chapter 9 Straddling the Middle Ground

“while overall sentiment and mood do matter, the crucial factors are institutional and organizational networks to muster support… in our HDB new towns, there is a network that leads from the RCs to the MCs and CCCs on to the prime minister’s office…”

“The PAP had countered the opposition’s ‘by-election’ strategy with the electoral carrot that priority for upgrading of public housing in a constituency would be in accord with the strength of voter support for the PAP in that constituency.”

The PAP faced no serious political opposition and turned to various patronage and vote-buying schemes to solidify support. It seems the HDB housing projects also allowed the PAP to corral supporters and have a physically defensivle political communications network. Many political opponents made claims of corruption only to be sued, sometimes into bankruptcy, by LKY. The few times his own PAP members were charged with libel, they settled out of court. LKY employes specious reasoning to defend this authoritarian legal approach on the grounds that to let the charges go unmolested would threaten his political power– he has a pure, unviolated record of ethics in a region known for corruption!

Chapter 10 Nurturing and Attracting Talent

“Traditional methods of choosing marriage partners had been ruptured by universal education: The government had to provide alternatives to the family matchmakers of old.”

“I gave special income tax concessions to married women”

Stop-at-Two policy of the 1960s “Without that policy, family planning might never have brought population growth down, and we would not have solved our unemployment and schooling problems.”

“Difficulties over our talent pool were aggravated when the rich Western countries changed their policies on Asian immigration… [the US] decided to accept Asian immigrants, reversing more than a century of its whites-only policy.”

The Singapore government was obsessed with population management, first trying to limit births on Malthusian grounds, then trying to promote the marriage and childraising of educated parents on the grounds of skewing the IQ or “talent” pool. Many subsidies Singapore granted to educate its citizenry was “leaked” as people immigrated to other countries to pursue opportunity, partly in response to changing immigration policies elsewhere (such as the US in the 1960s). Now it has taken to liberalizing immigration for high IQ emigres, especially those with jobs, to try to increase the “talent pool.”

Chapter 11 Many Tongues, One Language

LKY enforced language laws on the population in a desire to achieve social harmony and globally integrated economic progress. He encountered much popular resistance but believes these policies proved prescient given global events. It also allowed for a more homogenized culture.

Chapter 12 Keeping the Government Clean

“Human ingenuity is infinite when translating power and discretion into personal gain.”

Singapore got high marks for honesty of government in a region where corruption is an ingrained part of culture. LKY attributes this cultural success to the ideological rigor, invasive investigative authority given to the anti-corruption bureaus and the willingess of government to pay high salaries to public servants to attract them away from the private sector [distortion]. But who watched the anti-corruption officers to ensure they weren’t on the take? And why would this be a corruption issue if government didn’t have the power over the economy? LKY again admits that the PAP bought political favors with public resources by engaging in welfare spending once in office.

Chatper 13 Greening Singapore

“Hundreds, eventually thousands, of pirate taxis clogged our streets and destroyed bus services… only after 1971, when we had created many jobs, were we able to enforce the law and reclaim the streets.”

“It was immensely better that we competed to be the greenest and cleanest in Asia. I can think of many areas where competition could be harmful, even deadly.”

“We phased out the rearing of over 900,000 pigs on 8,000 farms because pig waste polluted our streams.”

“After we had persuaded and won over a majority, we legislated to punish the willful minority… if this is a ‘nanny state’, I am proud to have fostered one.”

Much in the vogue in the 1970s, LKY got swept up in environmentalism and made it a major policy priority to “green” Singapore; this included building public utility infrastructure to control waste and pollution, but also involved “nudge” legislation to change or ban cultural habits deemed offensive or a nuisance. Agricultural practices were changed as were retail practices (pirate taxis, street hawkers). LKY put great emphasis on the “morale” of greening and its affect on visiting dignitaries and VIPs. There is no discussion of the cost of these programs or whether there were alternative approaches to accomplishing the stated goals: he embraced charges of “nanny statism.”

Chapter 14 Managing the Media

“Our journalists are exposed to and influenced by the reporting stytles and political attitudes of the American media, always skeptical and cynical of authority. The Chinese and Malay press do not model themselves on newspapers in the West. Their cultural practice is for constructive support of policies they agree with, and criticism in measured terms when they do not.”

“My early experiences in Singapore and Malaya shaped my views about the claim of the press to be the defender of truth and freedom of speech. The freedom of the press was the freedom of its owners to advance their personal and class interests.”

“That was exactly what we had the right to do, to seek a mandate to deal firmly with foreign, in this case colonial, interests in the press. It was our declared policy that newspapers should not be owned by foreigners.”

“I needed the media ‘to reinforce, not to undermine, the cultural values and social attitudes being inculcated in our schools and universities. The mass media can create a mood in which people become keen to acquire the knowledge, skills and disciplines of advanced countries. Without these, we can never hope to raise the standards of living of our people… Freedom of the press, freedom of the news media, must be subordinated to the overriding needs of Singapore, and to the primacy of purpose of an elected government.'”

“A few years later, in 1977, we passed laws to prohibit any person or his or her nominee from holding more than 3 percent of the ordinary shares of a newspaper, and created a special category of shares called management shares. The minister had the authority to decide which shareholders would have management shares.”

“We decided in 1986 to enact a law to restrict the sale or distribution of foreign publications that had engaged in the domestic politics of Singapore.”

Freedom of the press is clearly not a cherished ideal in Singapore, in so far as PAP-controlled government is concerned. The law allows various forms of censorship used to control “foreign influence” of the press but there is no discussion of whether this was also used to control domestic press.

Chapter 15 Conductor of an Orchestra

LKY built a national airline, but insisted it make a profit. He engaged in enormous airport building projects without explanation for why they were necessary. He used the unions to pressure foreign politicians. LKY banned jury trials in Singapore, he appointed lawyers, many friends from his school days, to many important ministries related to commerce. He regulated the housing system and enforced desegregation quotas which he knew depressed the capitalization of the housing stock and went against the ethnic groups’ desires to segregate. Is this multi-cultural harmony, based on edict?

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http://www.slate.com/articles/arts/culturebox/2003/08/cult_of_personalism.html

At one point, he brags that Uganda has more female hotel managers than any other country in Africa. “We have got four managers, and another two assistant managers.” This is a strange thing for the president of an entire country to worry about—but Amin seems to feel that he has to worry about it: Only if he controls everything, and only if he can keep the country in line, will Uganda prosper. Success, Amin seems to believe, is a matter of will and of heeding his good advice. People just need to work harder—women need to get up at “about 5 o’clock in the morning”—and love their leaders. If something’s wrong, then, it’s because a citizen has personally failed, not because the system is screwed up. Amin had no ideology. (“We are not following any policy at all,” he says at one point.) Like so many Third World tyrants, he was not a fascist or a Communist. His idea of the world was purely personalistic. He was an Amin-ist.

[similar to the # of car competition between LKY and indonesian leader; also, the rejection of ideology by LKY, following his own intuition]

Review – From Third World To First: The Singapore Story

From Third World to First: The Singapore Story, 1965-2000

by Lee Kuan Yew, published 2000

Extended Introduction

This book has two parts (well, really, three, but the third part is about 20 pages and isn’t as significant as the other two parts), the first of which is about how Lee Kuan Yew describes the building of political institutions and the development of the economy of Singapore under the leadership of himself and his People’s Action Party over almost four decades, the second of which is a country-by-country exploration of Singapore’s foreign relations or what might best be called the exercise of Lee Kuan Yew’s political power abroad. I have an essay planned which will cover the first part of the book separately, focusing on the economic development of Singapore “from Third World to First” and the related political issues with specific emphasis on the myth of Singapore as an example of free market economics at work. Confusingly for some readers, I will argue both that according to Lee Kuan Yew himself Singapore was not a free market and was not intended to be one, and that despite this most of the credit for Singapore’s amazing economic development over the forty year period observed still belongs to the workings of the free market and not to intelligent central planning and wise stewardship of the economy by protectionist politicians.

Therefore, this review will only cover part of the book, but a still substantial one (pg. 225-660) and one which touches upon enough issues that will be raised in the upcoming essay that the reader should be able to get most of the story. I also plan in this review to meander quite a bit and talk about the things I found most interesting or meaningful, rather than summarizing the themes. I took extensive notes on the used copy I bought, annotating almost every other page. There’s a lot to chew on here and I probably won’t cover it all even between this review and the later essay, but might come back to it and comment on individual issues as my thoughts or interest allow. For those who are so inclined, you may wish to read some personal observations and experiences I had during a recent trip to Singapore, as well as some of the comments I made about Singapore’s history and political story, by reading the earlier posts tagged about Singapore. They may add meaningful context.

The Role of International Affairs in Little Singapore

Imagine I described to you a tiny, natural resourceless island nation situated strategically along a major shipping lane, whose historical role was one of trade entrepot and for whom fluid commercial volumes with every people and country possible were key to its economic survival. What kind of foreign policy would you imagine such a country would conduct? Do you imagine it’d have a standing army, or rely on the goodwill of other nations for its existence? What do you think it’s chief executive would spend most of his time doing and where would he most frequently be found?

According to LKY’s memoirs, though a small country dependent upon trade and commerce, Singapore nonetheless had a big role to play in international politics and was not above taking hostile stances even toward other southeast Asian nations (and even looked on approvingly at various wars in the Middle East!). Establishing a robust Singapore Armed Forces was one of the first priorities of LKY when independence was gained in 1965, reportedly to ward off threats from Malaysia and even Indonesia. And during my reading, I lost count of the number of times various chapters and paragraphs began with LKY meeting with other political and academic elites outside of Singapore.

Rather than adopting a strict foreign policy of peace and goodwill towards all nations, LKY comes across as almost bloodthirsty in his description of Singapore’s role in the Vietnam War, describing American intervention as good and necessary, claiming the Vietnamese regime deserved to be “punished”, first in a cross-border skirmish with China and then by continuing sanctions and non-normalized trade and diplomatic relations between Vietnam and Singapore even a decade after the conflict ended and even going so far as to throw his lot in with the Khmer Rouge to counterbalance the Vietnamese puppet government in Cambodia, describing the decision as one arrived at after having “no choice”! If choice doesn’t play a role in designing policy, what need have we of great leaders like LKY?

And then there is Singapore’s role as arms merchant at various times in various conflicts…

And why was it so important to LKY to get agreements with other countries to host SAF detachments for training in unusual environments? Though we are told that the SAF was created to defend tiny Singapore, the desire to train in environments alien to the tiny tropical island seem to lead logically to one place– interventionism. I doubt LKY planned to militarily dominate the globe, but surely he hoped to have his forces participate in struggles that had nothing to do with the direct defense of the island.

While many of the political tours were related to commitments imposed by being part of the British Commonwealth and its former colonial possessions, there seem to be just too many instances of LKY as a global jetsetter to excuse. Why was this man hobnobbing seemingly everywhere but Singapore?

I don’t know what the meaningful difference is between a currency board and a central bank, but assuming there is one, LKY said that Singapore did not have a central bank because,

a central bank is an easy way out for a finance minister who likes to juggle [his figures] when he has a deficit in his budget. I do not think we should put such a temptation before the finance minister in Singapore.

And yet, we witness numerous examples throughout the book, including episodes in Indonesia, Malaysia, Thailand and the Asian Financial Crisis during which Singapore attempts to “defend” the value of other countries’ exchange rates through currency intervention in Singapore. Why? What excuse could their possibly be for this behavior other than trying to be a “player” in world affairs?

But it’s not all baffling. The book has its charming moments, too, including many glimpses into how world political figures really think and what they say about their regimes and records of governance behind the scenes. Take, for instance, this phallic competition between Indonesia’s Sukarno and Lee Kuan Yew:

[Sukarno] asked, “How big is your population?” “One and a half million,” I replied. He had 100 million. “How many cars do you have?” “About 10,000,” I said. Jakarta had 50,000. I was puzzled but readily conceded that he occupied first place in Southeast Asia in terms of size.

Or, the behavior of Indian officials in the face of new golf balls:

It was a gradual slide in quality of a once elite service [Indian Civil Service], now caught up in the throes of a social and economic revolution which had reduced living standards… they could not buy good (i.e., imported) golf balls because their import was forbidden… Our high commission had advised me to bring several boxes of golf balls to distribute to the committee members of the club. It was depressing to see top brass and civil servants breaking up the packages and taking fistfuls of golf balls to stuff into their golf bags.

Indeed, golf balls were so precious that caddies would dash into any house or rough to find them. Once, at the former Bombay Royal Golf Course in 1965, I sliced my ball into a squatter area [what is a squatter area doing within driving distance of a Royal Golf Course?] and heard the loud clatter as it fell on a zinc roof. My caddie dashed off, I thought to find out who was hurt. But no– a little boy emerged with the golf ball, not to complain of injury but to bargain over the price of the ball.

We also learn of the need to be street-wise when dealing with foreign communist dictatorships looking to play a little development scam on a credulous leader:

In February 1994, I signed the Suzhou Agreement with Vice Premier Li Lanqing in Beijing, witnessed by Premier Li Peng and Prime Minister Goh… the essence of the project was to transfer our knowledge of how to plan, build and administer a comprehensive industrial, commercial and residential park that could attract high-quality foreign investors… Instead of giving SIP their full attention and cooperation as was promised, they used their association with Singapore to promote their own industrial estate, Suzhou New District (SND), undercutting SIP in land and infrastructure costs, which they controlled… It was a chastening experience… For the Suzhou authorities, a signed agreement is an expression of serious and sincere intent, but one that is not necessarily comprehensive and can be altered or reinterpreted with changing circumstances… China has an immensely complex government.

But LKY was something of a shakedown scam artist himself as Singapore was seen as a “developing” but not “developed” economy for some time. After catching some American personnel spying in Singapore,

I told the British commissioner, Lord Selkirk, that we would release these men and their stupidity would not be made public if the Americans gave a hundred million U.S. dollars to the Singapore government for economic development. They offered US$1 million, not to the Singapore government, but to the PAP [LKY’s political party]– an unbelievable insult.

He engineered something similar with Japan,

The only important business I raised with Prime Minister Hayato Ikeda was the “blood debt”, a request for compensation for their wartime atrocities… We eventually settled this “blood debt” after independence, in October 1966, for $50 million [serious money for small Singapore when the dollar was worth something!], half in grants and half in loans. I wanted to establish good relations to encourage their industrialists to invest in Singapore.

American race-baiters like Jesse Jackson and Al Sharpton couldn’t have worked a better deal with calls for reparation that would just end up in their own pockets! He even tried the same scam on different terms with the Japanese at a later date, this time playing “Godfather” over a shipping lane:

To get the Japanese to help us, for example, in investing in a petrochemical plant, we had to remind them that their ships passing through the Straits of Malacca would have problems with toll collectors if Singapore were to join the other littoral states, Indonesia and Malaysia.

“Nice open sea lane you got there, it would be a shame if something happened to it,” said in a thick, Germanic Robber Baron accent. The shakedown later continued with “soft loan” subsidies available only to developing nations:

I protested to Fukuda that his officials had spoken of Singapore not as a developing country but as an industrialized one not entitled to soft loans from Japan… We would lose our General Scheme of Preferences (GSP) [like affirmative action for international trading partners who are non-developed countries] and other advantages before we could compete on equal terms.

“Soft loans” are a form of fraud where one entity makes loans to another entity that they never intend to be repaid and usually forgive entirely. It is an outstanding source of graft, especially in corrupt political regimes where outright bribery is outlawed by the lender nation’s laws.

When he isn’t reflecting on his own actions, LKY proves to be a biting and incisive critic and a truthful observer of laws and conditions in other people’s countries. Here he is on the European Economic Community, the predecessor to the EU:

With the other commissioners, I discussed how to avoid manufacturing those products that EEC countries would find sensitive because of persistent high unemployment. I discovered to my dismay that the list was unlimited. Any member country with any influence on Brussels, feeling the slightest pain, could appeal to Brussels for protection and would invariably get it.

This brief anecdote proves three things simultaneously– (1) contrary to propaganda, the EU is a protectionist trading bloc, not a free trading society, (2) there appears to be no nation on Earth that is led by politicians who understand the benefits of free trade, even unilateral free trade and (3) not even trade-dependent Singapore is able to gain a competitive advantage by being a true free trader because it was led by a Keynesian planner-mindset politician-in-chief, LKY, who had his own worries about managing unemployment in his country to risk upsetting bureaucrats in Brussels! Now that is global political power projection for you!!

Here’s another honest and insightful observation from LKY, this time about a faux pas made by an inept American president:

When I was leaving, he gave me a green leather-bound copy of his campaign autobiography [aw gee, what a nice gift, a hastily produced, ghost-written volume of propaganda], Why Not the Best? He had already inscribed it, “To my good friend Lee Kuan Yew. Jimmy Carter.” I was flattered but surprised by my elevation to “good friend” even before he had met me. This must have been a standard practice during his election campaign.

It makes you wonder if Jimmy Cahtah even bothered to sign it himself. If you’re going to piss off a foreign leader on a cheap gesture, spare no expense!

The book is rife with such charming episodes, I could fill the blog up with them. Instead, it’s worth saying something about Lee Kuan Yew’s somewhat confusing and arbitrary arguments for polylogist legal theorizing and the explanations he gave for the success of Singapore’s economic and national development since 1965.

As a polylogist, LKY is a skeptic of the idea of simply importing “progressive” legal principles from one population to another:

the are fundamental differences between East Asian Confucian and Western liberal societies. Confucian societies believe that the individual exists in the context of the family, extended family, friends and wider society, and that the government cannot and should not take over the role of the family. Many in the West believe that the government is capable of fulfilling the obligations of the family when it fails, as with single mothers… freedom could only exist in an orderly state, not when there was contention or anarchy. In Eastern societies, the main objective is to have a well-ordered society so that everyone can enjoy freedom to the maximum [even better if they’re ruled by people like LKY!]… Democracy works where the people have that culture of accommodation and tolerance which makes a minority accept the majority’s right to have its way until the next election, and wait patiently and peacefully for its turn to become the government by persuading more voters to support its views.

And yet, he encouraged China to join as a member of the law-abiding community of nations! How can China, whose authoritarian legal system is ostensibly appropriate for the culture and values of the Chinese, join the law-abiding international community whose laws and customs are foreign and antagonistic to the culture and values of the Chinese? One potential solution is that there exist in every society a set of elite individuals who are not beholden to local political bigotry and historical traditions but can instead transcend them and tap into a more universal logic. But if they can do this for their countries at an international level, why can’t they do this at the “local” level of their domestic politics?

This seems to present some problems for the polylogist approach of LKY, although I think there’s a perfectly simple, but embarrassingly revealing, answer that has something to do with the reality of power and how and why it is exercised in any society which the thoughtful reader can probably surmise with a bit of their own consideration.

I am not a polylogist. I believe there is one, universal human logic that all mature, physically functioning adult minds can understand and employ in their own thinking and communications. That being said, I think LKY is absolutely correct that it is absurd to believe one can foist political principles that were developed over hundreds or thousands of years of combined cultural history onto a population that has never utilized them before, such as using military Keynesianism to deploy democracy in Afghanistan and Iraq, particularly when in so doing the existing political arrangements and power structures are rapidly collapsed or, worse, ignored as if they’re unimpactful.

But more importantly, I think it is naive to expect any political principle, foreign or domestic, to work miracles. For example, believing the process of revealing voter preferences through democratic elections can somehow obviate the need for working within the confines of economic scarcity. Or, to use another example, instituting a vicious socialist dictatorship which doesn’t give a damn about anyone’s preferences, and expecting it to spit out the highest standard of living in the world for its people. So, there is some truth to what LKY is saying on this subject, just not much how he said it.

And how did LKY explain Singapore’s success?

the basic principles that have helped us progress: social cohesion through sharing the benefits of progress, equal opportunities for all, and meritocracy, with the best man or woman for the job, especially as leaders in government

I’d call this a bit of self-aggrandizing delusion. When LKY says “sharing the benefits of progress”, he means that he doesn’t believe the outcomes in a market society are anything but random (he makes this claim in an early section of the book), and that the wealth should be spread around by politicians through things like government housing projects and forced savings accounts. Of course, getting to hand out welfare goodies after an election is a good strategy for winning future elections– some might call this building “social cohesion” to a particular party’s cause, such as LKY’s People’s Action Party.

Similarly, it is pure fudge to claim that you provided equal opportunities for all while running a meritocracy. A meritocracy implies an inequality of opportunity– opportunity goes to those who show merit, having performed well with other opportunities. To give everyone equality of opportunity is not just wasteful, it’s impossible. Does everyone in Singapore have an equal opportunity to be Prime Minister like LKY, or just those who control a well-oiled electoral wealth redistribution machine like the PAP? The double fudge is insisting that government leaders themselves are examples of this meritocracy. Nobody wants to lose their subsidized housing for questioning the merits of their political leaders!

That being said, I don’t think LKY played NO part in the Singapore success story. There is something to be said for a stable political regime with predictable laws and regulations over a 40+ year period, especially one which tended more toward laissez-faire than most. And clearly, looking around the neighborhood (Malaysia, Indonesia, Vietnam, Cambodia… China) Singapore could’ve had worse political management than it experienced. I just think that the credit due is negative– it’s what LKY and his team didn’t do, that made Singapore great, not what they did do. That, and what they didn’t do relative to what the more eager regimes in neighboring jurisdictions did do over the time period observed. With racial tension in Malaysia, military government in Indonesia, socialist science experiments in India, a devastating civil war in Vietnam and the Great Leap Forward and Cultural Revolution in China, you didn’t have to be all that fast to win this footrace.

By just not getting out of bed and ordering an atrocity each day, LKY virtually guaranteed the investment, development and progress would come to his tiny island nation unimpeded for decades, just like it did. But since there’s no way to run a truly controlled experiment here, there’s no way to know for sure what might’ve happened under a different set of policies, so ultimately it’s Lee Kuan Yew’s word against mine.

The Singapore Success Story

At the National Museum of Singapore, we learned about the islands history from the time of the Melaka Empire to European colonialism, Japanese occupation and finally independence. The story goes that because Singapore was an island country with no natural resources to speak of, it needed visionary guidance from the “Founding Fathers” (this is actually what they’re referred to as here) of the People’s Action Party led by Lee Kuan Yew and his English and American educated Peranakan technocrats to develop it’s economy and provide all the people with a first world standard of living.

I find this myth fascinating, mostly because everyone believes it, but also because of two related observations:

In mainland China right around the time Singapore was struggling for independence and then climbing to first world status, the idea of economic guidance by benevolent central planners was being tried and failing miserably. There, the excuse was that China had been exploited by a series of colonial and external players not to mention left purposefully backwards by the Qing rulers so a strong central government was needed to push a modernization effort.

Why did this fail in China but succeed wonderfully in Singapore?

Here’s my other observation. The town where I come from is not economically self-sufficient and is also on the ocean. We too do not have an abundance of natural resources and must trade with others to survive.

But no one used that as an excuse for establishing sovereignty or central planning by a one-party state.

So what makes us different if a lack of abundant natural resources is not the issue?