Singapore: Communitarian Capitalism

Just how "free" is Singapore's free market?


Free market economists should not need reminding that the market is but a means to ends beyond material gratification (personal liberty and intellectual freedom among them). But recent surveys of Singapore by the Heritage Foundation (1996 Index of Economic Freedom) and the Fraser Institute, in cooperation with other think tanks, (Economic Freedom of the World, 1975-1995) have praised the island nation's economic policies as ends in themselves. After crunching numbers meant to quantify government economic intervention, each ranked Singapore number two in the world.

Singapore's material success–it has generated a foreign exchange surplus of nearly $100 billion–has beguiled many. Indeed, observers of all stripes applaud Singapore and cite it as validating their favorite theories: Its industrial policies have been highly praised by left-wing academics, while others have described it as a triumph of communitarian democracy. The data, it seems, provide verification for disparate ideological positions.

My experience as a student of Asia, a foreign resident in Singapore, an employee of the regime's university, and finally as a defendant in a well-publicized trial there have led me to a different conclusion: The regime in Singapore has developed an insidious new form of authoritarianism.

Let's get my personal dispute with the regime out of the way first. In October 1994, while a senior fellow at the National University of Singapore, I wrote an essay for the International Herald Tribune reflecting on the so-called Asian model–a vague set of values that include, communitarian collectivism, esteem for authority, and consensus instead of competition–as the source of East Asia's success. In the piece, I noted such defects as the repression of individual and political rights. Without naming names, I wrote that some Asian regimes "ran over unarmed students with tanks," while others relied upon "a compliant judiciary to bankrupt opposition politicians."

I was soon being investigated and, the following January, was found guilty in absentia of making statements that scandalized Singapore's judicial system. To prove that my comments were directed at Singapore, the prosecution cited 11 cases where members of the ruling party had sued opposition politicians, many of whom were bankrupted. It thus demonstrated both its case and mine. Lee Kuan Yew, the strongman-ruler and former prime minister, sued me for libel. Unsurprisingly, he obtained a judgment against me (again in absentia) in the High Court. The judge set the damages based upon a separate out-of-court settlement reached by the plaintiff with the International Herald Tribune.

Singapore's apologists may choose to regard my criticism as personal ax grinding. But the fact is that Singapore's actions against me did not lead to my criticism; it was the other way around.

There are numerous reasons to question both the results and the methodology of the Heritage and Fraser studies. For example, their characterization of government intervention is based on Cold War-era thinking: Among the variables they measure is the presence or absence of black markets and other symptoms of socialism and its left-wing variants. But while socialism is by now neither viable nor credible, the struggle against authoritarianism is far from over. To propose Singapore as a model of economic development is to propound an emergent form of autocracy.

To see what Heritage's and Fraser's approach misses, consider just a few of the institutional interventions imposed on Singapore's domestic economy that limit economic freedom in very real ways.

The Monetary Authority of Singapore has consistently intervened in foreign exchange markets to control the exchange rate and to influence interest rates and inflation. Thus, one measure of intervention–inflation–is low due to another form of intervention. Furthermore, many of the largest players in the stock market are government-owned or -controlled enterprises.

The illusion of Singapore's free market economy is enhanced by the fact that multinationals there are mostly exempt from interference. But this observation ignores an important restriction that restrains the operation of international banks: the prohibition against the acceptance of deposits from locals.

Speaking of locals, most citizens live in publicly provided housing. Indeed, the government still owns the bulk of developed and undeveloped property. There is also a requirement for the annual renewal of local business licenses–a subtle way to ensure that business owners toe the government line. Perhaps the most notable element of government control over the economy is in the mandatory pension scheme (Central Provident Fund or CPF), which places about 40 percent of total labor earnings into the hands of government managers.

Singapore has held trials to prosecute journalists for revealing economic data, and to intimidate other reporters. Similarly, civil servants and university administrators endeavor to mute honest inquiry. If there is so much to be praised and so much to be proud of, why does the government not allow independent corroboration of its statistics? If such numbers are carefully collected and honestly reported, there should be nothing to hide. There are serious questions about an understanding of economic freedom in the presence of such extensive controls over information. Investigative journalists and their supporting publications who attempt to push the margins too far have been sacked or closed down if local; censored, banned, fined, or sued if foreign.

Actually, the regime's self-serving propaganda and its control over information make it difficult to know what is really happening. Its apologists frequently boast, for example, that Singapore is free of crime or corruption. But while there may be fewer reports of personal assaults, a recent United Nations report revealed that the rate of violent crime in Singapore exceeds that of Australia and even Malaysia. Official statistics on crime, however, are jealously guarded.

Similarly, it is nearly impossible for researchers to confirm or deny claims for an "honest administration" and non-corrupt bureaucracy. True, compared to some of its neighbors, Singapore is not particularly corrupt; there are in fact strong checks against financial corruption. But there is an overriding moral corruption in the administration of "justice" by jurists who are only too eager to carry out the bidding of the ruling People's Action Party.

There is also a shameless distribution of government largesse to sycophants. Government officials make it clear that constituencies that do not give an adequate level of electoral support to the regime can expect cuts in public services.

Despite its Western, democratic vocabulary, the regime exercises obsessive control of all branches of government and the media, as well as other elements of civil society. In turn, there are few limits to the amount of force that can be wielded as reprisal against critics or political rivals. In fairness, Singapore's regime practices a form of "soft" authoritarianism that has not relied upon political murders or disappearances. Nonetheless, the control over the judiciary and the legislature means that law follows the whims of the regime.

Singapore's leaders deserve credit for having implemented a set of "capital friendly" institutions. But that was yesterday. The next round of international competition will demand flexible economic, political, and social institutions, and a new breed of lateral- thinking entrepreneurs. Aside from the instinct to "buy low, sell high," the success of entrepreneurs depends upon a strong sense of individualism that induces them to challenge the status quo.

Yet these characteristics appear to conflict with the authority-esteeming and consensual "Asian values" promoted by the regime and its apologists. Singapore and other economies in the region will have to go beyond their "parasitic" stage of development to create products and markets on their own, shedding their heavy dependency on outside capital and often pirated ideas.

Despite claims that "Asian values" provide a culturally specific impetus for growth, there are indications that some traditional Asian institutions may eventually impose constraints on growth. For example, "saving face" and guanxi (institutionalized crony networking) result in zero-sum exchanges that could inhibit the efficient use of scarce economic resources.

In sum, Singapore's regime has implemented a system that governs by intimidation, that depends upon a form of crony capitalism, that relies upon the professionalized corruption of a highly trained technocracy, and that operates in the context of a "parasite" economy. In all this it has been successful in co-opting the emergent middle class, thereby distracting it from demanding political liberalization.

But blindness to the shortcomings of its development strategies has left PAP open to a potentially serious crisis. It may not be the forces of modernization that prompt political change in Singapore: A failure in the economic structures may come first. Singapore's economy exhibits the classic symptoms of a property and stock market bubble; the bursting of that speculative bubble is a question of when, not if. When the property and stock markets deflate, other domestic institutions will be forced to contract. One of the most exposed institutions is the mandatory pension accounts controlled by the government, which could be used by the regime to cover shortfalls or to serve its own purposes.

Singapore may have one of the world's highest rates of consumption of Mercedes-Benzes or French cognac, but its regime's legitimacy can be expected to disappear with the first whiff of stagnation. Eventually, citizens will realize that economic power granted by a government can be withdrawn at its whim.

Christopher Lingle (CLingle@msn.com) is a visiting scholar in the department of economics at Emory University. His book, Singapore's Authoritarian Capitalism, is available from the Locke Institute in Fairfax, Virginia.