Is development easy? The Singapore Story

Singapore’s economy grew. A lot.

It’s pretty hard to argue with the claim that Singapore’s post-independence economic development is an astounding success. Per capita GDP in the country grew from $6,506 (inflation-adjusted 2010 USD) in 1970 (57th among all countries) to $46,569 in 2010 (18th among all countries) (“Constant GDP Per Capita for Singapore”) (“List of Countries by Past and Projected GDP (Nominal) Per Capita” 2018). This represents an average annual real growth rate of 5.04% . For comparison, the real growth rates of China and the US over the same period of time were 7.78%¹ and 1.84% respectively (“Constant GDP Per Capita for China”) (“Constant GDP Per Capita for the United States”).

Alas, broader measures of progress over that time period aren’t readily available. The UN’s Human Development Index, for example, only goes back to 1990. Thus, for want of a better measure, we’ll have to rely on GDP to support our claim that things really did change radically in Singapore after independence.

What’s so hard about growth? Just stop making bad decisions and start making good ones.

A book club I recently attended read Lee Kuan Yew’s (the prime minister of Singapore from independence in 1965 to 1990) memoir, The Singapore Story (Yew 2012). My friend’s first reaction to the book was, “He makes it sound so easy!”, and I can’t disagree. My overwhelming impression of the book is that of proficient nonchalance.

Some examples from the text which I hope convey that feeling:

• I had many pressing concerns: first, to get international recognition for Singapore’s independence, including our membership of the United Nations. I chose Sinnathamby Rajaratnam (affectionately called Raja by all of us) as foreign minister. […] He was to be much liked and respected by all those he worked with at home and abroad. As messages of recognition flowed in, Toh Chin Chye, the deputy prime minister, and Raja as foreign minister set off to New York to take our seat at the UN that September of 1965.

• Mordecai Kidron, the Israeli ambassador in Bangkok […] had approached me several times in 1962–63 to ask for an Israeli consulate in Singapore. […] I replied that it … [might] create an issue that would excite the Malay Muslim grassroots and upset my plans […].

[…]

• Seah Mui Kok, a union leader and PAP MP, another old friend from my time with the unions, objected to the wide latitude given to employers to hire and fire, but accepted the need for unions to be less confrontational to create a better climate for foreign investments. I included safeguards against misuse of these powers.

• We suffered a reverse in the Asian financial crisis of 1997: unemployment increased to 3.2 per cent in 1998. To regain our competitiveness, the unions and government agreed and implemented a package of measures that reduced wages and other costs by 15 per cent […]

• From 1955 to 1968 the CPF contribution had remained unchanged. I raised it in stages from 5 per cent to 25 per cent in 1984, making a total [compulsory] savings rate of 50 per cent of wages. This was later reduced to 40 per cent.

Am I out of touch? No, it’s Lee Kuan Yew that is wrong.

The proposition that growth and governance are easy is—to say the least—contrary to my impression. I’m not prepared to make a rigorous argument for the claim that ‘development is hard’ but some fragments which I think inform my intuition:

• The middling-at-best success with respect to the Millenium Development Goals

• The persistence of the Africa dummy:

  In his landmark empirical study of economic growth, Barro […] acknowledged that “there appear to be adverse effects on growth from being in Sub-Saharan Africa” which his model could not explain despite controlling for the level of investments, government consumption, school enrollments and political instability. In fact, the dummy variable which he used to assess whether a country was African—the “Africa dummy”—was significantly associated with an annual decline in per capita GDP of as much as 1.14% during 1960–85." (Englebert 2000)

• The mixed success of post-Soviet transition:

  The results of the first years of transition were uneven. All countries suffered high inflation and major recessions as prices were freed and old economic linkages broke down. But the scale of output losses and the time taken for growth to return and inflation to be brought under control varied widely. (Roaf et al. 2014)

• The Iron Law of Evaluation: “The expected value of any net impact assessment of any large scale social program is zero.” (Rossi 1987)

• Or even just the knowledge that debate about relatively simple questions of economic policy like the minimum wage seems interminable. For example, in a 2013 IGM Forum poll of academic economists 32% agreed and 34% disagreed with the statement, “Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment.” (“Minimum Wage” 2013)

Alternatives

I’ll pretend that list was a tour de force and you’re now on my side. If The Singapore Story indeed makes things sound easy though they’re in actual fact brutally difficult, we’re left with a puzzle. Some potential solutions include:

1. Development isn’t easy in general but is if you’re Lee Kuan Yew.
2. Development isn’t easy in general but is if [some other special circumstance].
3. Development isn’t easy. Lee Kuan Yew deceived himself. Singapore just got lucky and when we look to it as an exemplar we’re falling prey to selection bias.
4. Development isn’t easy. Lee Kuan Yew deceived us. The version of events he presents in the memoir is sanitized, simplified, summarized or otherwise filtered in a way that makes it seem easier than it actually was.

There will surely be some solution 4 in whatever mix we ultimately decide on, but it’s hard to know how much without reading other sources. And that’s a bridge too far. Also, it seems plausible that there are no other widely available sources to contradict or corroborate many of the key claims in the memoir.

In future posts, we’ll examine solution 1 and solution 3 using the text itself. If I’m feeling brash, I might also offer baseless speculation on 2 in some future post.