Secrets of Singapore

By James Bartholomew, The Spectator, 3 Mar 2012

They learned from us – now we need to learn from them

The last time I visited Singapore, I stayed at the charmingly run-down, distinctly colonial Raffles Hotel. I drank a Singapore Sling in the Long Bar, contemplated a well-fed cockroach in my room and fancied myself to be following in the footsteps of Somerset Maugham. It was more than 30 years ago. I felt like Milord Anglais, making my tour around the still pretty exotic Far East.

Well, that’s all gone. Visiting again earlier this month I found a Singapore so prosperous that any possible sense of effortless and, of course, undeserved superiority has been replaced by something close to the opposite. The place is so successful, in so many ways, that I felt like a visitor from a decadent old country on a trip to one that had surged ahead.

I can’t afford the Raffles any more. It has been spruced up and is out of my league. I stayed in a hotel slightly away from the best part of town and still winced at the cost.

Just flying across the country gives you the first indication of what has happened. The port is now enormous, with hundreds of stacks of containers across a vast area that look like part of some computer game: Build-a-port, perhaps. Singapore is one of the three biggest ports in the world, vying with Rotterdam and Shanghai.

Its GDP per capita has overtaken that of Britain according to the World Bank, the IMF and the CIA World Factbook, each of which has a different way of measuring. Yet still it grows. Last year it was up another 5 per cent. Meanwhile Britain desperately tries to avoid a double-dip recession. The contrast is stark.

And here is a newspaper headline that you won’t see in Britain any time soon. Every country is suffering from dreadful economic conditions, right? Here’s the headline: ‘Jobless rate falls to 14-year low’. It was in the Straits Times earlier this month. The latest fall in unemployment brings the proportion out of a job down to 2 per cent. Meanwhile the average salary of Singaporeans has risen by 6 per cent in the past year.

Keynesians — in the corrupted sense of ‘those who believe in yet more deficit financing whenever there is an economic problem’ — may well assume that the government has splurged to achieve this remarkable result. Not at all. Here is another headline from the Straits Times: ‘Government surplus “to exceed forecast”.’

So how does Singapore do it?

Well, opinions will differ but since we have ruled out deficit financing as a possible explanation, we might try considering balanced budgets as a possible factor. Singapore has balanced its budget over the past 15 years. The deputy prime minister, Tharman Shanmugaratnam, who is also the minister of finance, told me that it had been made part of the constitution. Following the 2008 crisis, he had been obliged to apply for special permission to run a temporary deficit but this has already been paid back. Obviously having no burden of massive net public debt means that there is no net interest to pay and no need to raise taxes to pay it.

On the subject of taxes, here is another big difference: if you are on average earnings, you pay no income tax. That’s right: none. Which brings the advantage that the average person and, of course, all those on lower incomes, receive every cent that an employer pays them. This is in stark contrast to Britain, where there is a big wedge between the cost of employing someone and the money the employee actually receives after tax and national insurance. That sort of wedge probably contributes to our considerably higher unemployment.

And here is another thing which probably helps. There is no minimum wage. So, yes, there are some people on low wages. But — to put it the other way round — there is nobody in Singapore who wants to work and is offered a job who is prevented by the government from taking it. The labour market is flexible and, surprise, surprise, it works as markets often do if they are not interfered with. There is surely a case for saying that a low-paid job is better than living on ­benefits.

Singapore is second only to Hong Kong in the world index of economic freedom composed by the Heritage Foundation. Britain, in case you are wondering, comes 14th — which at least is better than France.

Instead of having national insurance, Singapore has compulsory saving. Rather frustratingly, they got this system from us. It now takes the form of payments into the Central Provident Fund. Employers and employees both pay into the accounts for each individual. This is a personal fund and one gets statements showing how much is in one’s fund. The saving is matched by investments. So it is very different from the British system where you pay your national insurance but you have no personal fund. You are also not imposing a burden on the next generation.

One of the advantages is that when money is taken out of your earnings for your pension, you feel it actually remains yours — even though you can’t spend it straight away. It does not feel like money down the drain

•••

The approach to education is rather more realistic than in Britain. Here we have had the politically convenient fantasy that all young people should do A-levels and half of them should go to university. More farcically still, many politicians appeared to believe that by more people going to university and reading, say, English literature, the economic performance of the country would be improved. But Singapore, like another country with low unemployment, Switzerland, embraces vocational education. At the age of 16 or 17, many teenagers — instead of preparing for university — start at educational establishments designed to lead to a job. There are polytechnics and institutes of technology. Polytechnics, of course, are another kind of institution which Singapore got from the British.

So, too, are O-levels. They still take them. For younger readers who have never heard of the things, they are the exams that people used to take in Britain before they were replaced by the less exacting GCSEs.

I visited one of the primary schools. I am afraid I was a bit late. That is particularly bad manners in Singapore as there is a good chance that a reception committee is waiting for you. I was ashamed to find that there were about five teachers who had been clicking their heels along with 40 children who proceeded to sing me a medley of songs. The children were in three neat rows and sang well. They take part in international competitions. And lest you think this was an elite school, it was not. It was a ‘neighbourhood’ school with 20 per cent of the children receiving free meals. Above their heads in the dining room hung boards with qualities they were encouraged to aim to be: ‘RESILIENT’, ‘STRIVING’ and ‘AMBITIOUS’.

Perhaps that sounds a bit Big Brother-ish. Yes, Singapore certainly is that. I visited one of the older generation of housing estates. As I wandered around two tower blocks for over an hour, I could not discover a single piece of graffiti or, indeed, rubbish. I asked someone later whether this was because of pride of ownership or fear. ‘Fear,’ he replied. The ultimate punishment for graffiti is the cane. Incidentally, that is another thing we in Britain used to have. But there is surely some pride of ownership, too. The majority of Singaporeans do not rent their social housing. They buy it. Acquiring a home is one of the things that you can do with your compulsory savings ahead of retirement. Consequently, Singapore has the highest rate of home ownership in the world. It is argued that it gives people a stake in society and assets of their own. The system is one of compulsory self-reliance which may well be better than the British system — for the bottom strata of society — of compulsory dependency.

Of course, the place is not perfect. It takes some bravery to be openly in opposition to the People’s Action Party, which has governed for over 50 years. If there is anything you can possibly be charged with, you probably will be. One person I interviewed told me that he was followed and that if he went into politics he would be arrested. The press is very tame. If you think that the British press is awful in the way it makes things up, harries individuals and invades privacy, you might nevertheless think it even worse to have a press which dutifully toes the government line.

There is no way that I recommend the kind of control exercised by the PAP. Yet it must be acknowledged that its control is just beginning to be slackened a little. The opposition did better than ever before in last year’s elections. Also the PAP government has become somewhat softer than before — both in its policies and its treatment of opponents. It must be admitted that its control has in many ways been benign. The big question for the long term is whether the extremely successful economic policies the government has pursued will survive the eventual arrival of a full, rambunctious democracy. Frankly it seems unlikely.

The question for us here in Britain is whether we can learn from the things that work in Singapore. In the end it will depend on what we really want. Is it to maintain the illusion that the consensus we live in is pretty sensible or to admit we got some things wrong — to admit that permanent mass unemployment is socially as well as economically damaging, for example. Singapore shows that there is another way. It is to go, instead, for low unemployment, higher growth and, through that, greater wealth and well-being for us all.