Bryan Cheang reflects on the invocation of the ‘Singapore model’ in UK politics and policy and compares the Singapore and Hong Kong economies to highlight that the reality is much more nuanced.
Over the years, numerous voices in UK politics and public policy have looked to the ‘Singapore model’. This has especially been the case since Brexit, and it is said that Singapore’s low taxes, minimal state regulation, and generally free market policies will help turbocharge the UK’s economic growth. The ‘Singapore-on-Thames’ narrative has become increasingly familiar in UK politics.
The UK has a growth problem, and it is reasonable to suggest that an environment of economic freedom is essential for generating said growth.
But many market-orientated economists hold up Singapore as a ‘free-market success story’ when the reality is in fact far more nuanced.
Contrary to the claims made by many market-oriented economists, East Asia’s development occurred under the backdrop of heavy government intrusion, especially through industrial policy and restructuring. Economic freedom statistics, which consistently rank Hong Kong and Singapore as the two freest economies in the world, are misleading, because they do not account for the state-driven hybrid model in Singapore, which stands in contrast to Hong Kong’s liberal entrepreneurial capitalism.
There is a sharp divergence between the political economies of Hong Kong and Singapore. While both are generally trade-oriented open economies, the Singaporean state intervenes in the industrial structure, capital, and labour markets in ways that the Hong Kong colonial state never even considered.
This is an important distinction to make, because it challenges the assumption that economic freedom necessarily contributes to or at least occurs in tandem with political liberalism. The fact that Singapore achieved rapid growth under more authoritarian institutions than is usually acknowledged is a phenomenon that anyone who cares about liberalism should find at least puzzling.
This more interventionist and coercive model allows elites to trump special interest groups and what has been called the ‘anti-growth coalition’. In Singapore, such interest groups are of little concern to the developmental state. In fact, former Minister Mentor and First Prime Minister Lee Kuan Yew famously articulated the elitist and technocratic nature of Singapore’s policymaking as such:
“If all the 300 (top civil servants and political elite) were to crash in one jumbo jet, then Singapore will disintegrate.”
In other words, what the elites decide, goes. Build more houses? Done.
Once we note that Singapore’s development has occurred along more authoritarian lines than traditionally assumed, another country comes to mind: China, which has over the years become more capitalist, but not more liberal. Asian studies experts have found that many of China’s authoritarian political leaders have sought to emulate Singapore, for it seems to have balanced an open economy with a closed political system. The great irony therefore is that many market liberals, who condemn China but hold up Singapore as a model, may not realise the parallels between the nations.
Singapore and Hong Kong achieved broadly similar economic performance on a macro-level. But a deeper look reveals structural weaknesses in the former owing to its directive, top-down approach.
The amazing feat of Hong Kong’s development was that it was achieved in the total absence of an ‘industrial strategy’ – a popular buzzword in Western circles today – and was in fact kickstarted by migrants in the 1960s. These migrant entrepreneurs in turn facilitated industrialisation from the bottom-up, contributing to a dynamic and adaptive economy.
The edge that Hong Kong had over Singapore has always been in the realm of economic culture. Significantly, Hong Kongers are more likely to become entrepreneurs than Singaporeans, who prefer less risky occupations. Hong Kong, and in fact most other East Asian nations, have vibrant creative sectors – but Singapore has struggled on this front despite high levels of government funding. Hong Kong, for example, has a history of ‘Cantopop’ and its film industry has been the third largest in the world at various points.
When it comes to higher order aspects of development like innovation and entrepreneurship, the structural weaknesses of the Singapore model become clear. Much of its entrepreneurial and innovation activity is concentrated in the state and foreign sector, and local enterprises are generally crowded out. More significantly, most of the R&D spending and patents registered in Singapore are concentrated in the state-linked and foreign sectors, rather than accruing from local entrepreneurs. Additionally, the top-down nature of Singapore’s innovation policy means that it exhibits a comparatively lower level of economic efficiency.
What should we take away from this? For one thing, it is important to be familiar with the nuances of specific countries and regions when they are invoked as policy exemplars. When UK commentators reference the Singapore ‘free market’ model, what they have in mind is closer to what is actually practised in Hong Kong, especially in terms of its entrepreneurialism and liberal culture.
If the UK is looking for inspiration it should recognise that at present it lacks the state capacity that was crucial to the ‘Singapore miracle’ but, at the same time, it has struggled to pursue a market-based deregulatory agenda of the kind that proved successful in Hong Kong. It might, therefore, prove more fruitful to examine the domestic causes for this, rather than look in hope to often-misunderstood models from elsewhere.
By Dr Bryan Cheang, Assistant Director and a Research Fellow, the Centre for the Study of Governance and Society, King’s College London.
He is the author of a recent book Economic Liberalism and the Developmental State: Comparing Hong Kong and Singapore’s Post-War Development published by Palgrave Macmillan.