In 1963, when it became independent from the British Empire and after its economy was devastated
by the Japanese occupation during the Second World War, Singapore was nothing more than
an agglomeration of shanties.
A place where every bathroom and kitchen was shared by several families .
Things at the economic and social level were hard, and they weren’t very different at
the political level either.
The truth is that Singapore’s beginnings weren’t at all promising:
See, at first, Singapore united with Malaysia, but the romance didn’t last long.
Just two years later, in 1965, and after several political and ethnic clashes with the aristocratic
and extractive Malaysian government, Singapore was expelled from the Malay Federation and
was de facto forced to declare itself independent.
Folks, the challenge that this small territory faced was huge:
Singapore was poor, it had less than two million inhabitants, and it lacked any natural resources.
It wasn’t even self-sufficient in terms of food and water!
But just a second, because the story we all know is a bit different, don’t you think?
Today, just five decades later Singapore is an independent country, and this city-state
is one of the capitals of the world and one of the richest territories on the planet.
Check out the following graph.
Folks, take a seat: since 1960, Singapore's economy has grown by more than 7.5 percent
per year.
We’re talking about a huge growth rate that has allowed Singapore to experience the fastest
development process in the history of mankind.
Today this city’s per capita income is much higher than that of the United States, it
is more than twice that of middle-income countries like Spain, and almost four times that of
Chile, which is considered the most prosperous Latin American country.
Don’t tell me that isn’t amazing.
Now, the question we can all ask ourselves is, how did this tiny city-state achieve such
a huge amount of economic growth?
Well, let's see.
(TAKE-OFF)
Folks, this entire story has one clear protagonist: Lee Kuan Yew the autocratic Prime Minister
who governed Singapore between 1959 and 1990.
Now, few people would’ve bet that this country would end up having a bright future.
And, folks, Lee Kuan Yew’s first years leading Singapore didn’t bode well.
As Secretary-General of the Popular Action Party, a party that belonged to the socialist
international party, this Prime Minister initially flirted with so-called import substitution
industrialization policies.
A political approach that blindly commits to protectionism as a way to achieve development.
Something that was particularly popular throughout the 20th century in Latin America.
Well, actually, in a way, it still is.
Really, in his first years of government, Lee Kuan Yew was closer to Argentine politicians
than to anyone who supported the free market and globalization.
However, folks, unlike what happened in Latin America, in Singapore, they soon realized
that this type of policy was by no means the best way to escape poverty.
That's why, starting in 1965, a very different approach was launched-- a political and economic
commitment that transformed Singapore completely:
Opening up to the global market.
“When most Third World countries denounced the exploitation of Western multinationals,
in Singapore we invited them.
That’s how we achieved growth, technologies and the know-how that boosted our productivity
more than any other economic policy could’ve done.”
Lee Kuan Yew)
Now, Singapore hasn’t been anything close to a prototype of an orthodox libertarian
state, where the government doesn’t interfere in any economic activity.
On the contrary, the Singaporean government has played, and still plays a very important
role.
But before you attack me, let's say they did it in a very different way than we’re used
to, for example, in old Europe.
“Things are changing quickly and we’re having to adjust and keep up; due to technology,
globalization, we’ve had to anticipate what’s happening, we have to help companies and workers
to adapt.”
Lee Hsien Loong)
In Singapore, the government didn’t try to take over the larger sections of the economy;
nor did they attempt to regulate everything down to the smallest detail;
nor, of course, did they try to expand public spending and taxes.
Quite the opposite.
In Singapore’s case, we can basically think of it as a state-company or, better yet, a
city-company.
That is, Lee Kuan Yew understood that Singapore needed to attract capital and professionals
so that the country could grow and develop; And within an imperfect competitive environment
between economies, and the heavy intervention that exists in the countries we live in, the
state can play a key role.
And it can do so with policies that always favor competitiveness, investment, and the
attraction of companies, instead of bureaucracy or welfare.
That’s why the Singaporean authorities developed institutions to guarantee legal security and
efficient management of the city; they promoted economic sectors through public-private
collaboration, drew up an ambitious productive infrastructure program and, most importantly,
promoted savings.
And that’s not all, all policies were designed within a strict budget stability framework
and always, always with the mindset of integrating them with private agents, something that rarely
happens in countries like Spain, Italy or, of course, Argentina.
All right, allow me to explain.
It isn’t as much about expanding a port or a road but being able to integrate an attractive
institutional framework with services that cause companies to settle in a country, and
to invest in order to increase their productivity.
Let’s put it another way: How do companies compete in the market?
By offering better conditions than the competition, right?
Well Lee Kuan Yew understood that in our world competition between countries isn’t very
different.
Therefore, perhaps the best way to see and understand the keys to Singapore's success
is to view this city-state not as a country to be used, but as a service provider in a
competitive industry.
In Singapore, the government understood that the community itself, the city itself, was
an asset and that, well managed, it could become a competitive advantage.
But to understand this better, let’s take a look at some concrete examples of the policies
that Lee Kuan Yew set on the table:
First objective: despite having a city with a very high population density, turn it into
a non-chaotic, unnoisy, and unpolluted place.
To do this, the government imposed traffic taxes in 1975, so today traffic in the city
is subject to tolls that are charged electronically to all users on the road-- that is, to all
vehicles.
That way, they managed to impute the streets’ maintenance costs to the real road users,
managed to avoid traffic jams, and avoided a big cause of pollution.
The result of this approach has been that today Singapore, despite having a very high
population density and being one of the economic engines of the world, has very fluid traffic
and, in addition, imposes maintenance costs based on each driver’s use of the road.
That is, if the benefit you gain isn’t greater than your toll, which is the maintenance cost
of the road itself, then you leave the car at home.
And if your benefit is greater, then you have roads through which you can move quickly.
Smart, isn’t it?
Of course, to make all this possible, Singapore developed a fantastic, very efficient and
affordable public transportation system.
Another much more controversial measure due to its paternalism, is forcing all workers
to invest a quarter of their salary into a rigid national savings plan that’s also
managed by a state organization.
With this program, the island’s government gets workers to accumulate savings with which
they can pay for health services, educational services and their own retirement.
And while that happens, the state gets the capital it needs to invest in projects, in
and out of the country, that are understood as essential for the city’s competitiveness.
In a certain way, workers don’t only become users but also investors in this city-company.
. Of course these types of “interventions”
where the state maintains clear leadership, are complemented by a policy that favors free
enterprise and one of the freest regulations in the world in terms of capital, goods, and
worker circulation.
Folks, in Singapore, taxes are low – for example, someone with a 60 thousand dollar
income pays 5 percent income tax -; tariffs are practically non-existent,
there’s no minimum wage; public expenditure accounts for approximately
18% of the GDP, and if all that weren’t enough, Singapore’s economy is considered
to be the second freest in the world!
“See, in the world we live in today, being peripheral or being central doesn’t depend
on your country’s physical location, it depends on whether or not you have a room
and an economy of knowledge.
It depends on technology, it’s the only thing that can explain why countries like
Singapore have a much better education than us.”
Albert Rivera, MP of Spain)
The result of all this is that a country that, until a few decades ago, was very poor, is
now one of the richest countries in the world.
And don’t think that it’s just a matter of economic numbers.
Singapore also has some of the best universities, with students at the forefront of subjects
like science and mathematics, their healthcare system is considered excellent, there’s
no unemployment, there’s no crime, and their expectations for the future are extraordinary.
For example, in the Human Development Index produced by the United Nations, Singapore
occupies the tenth place, above countries like Sweden, Iceland, France, and Finland.
The negative side--and there is one--is concentrated in its political system, which, although it’s
evolving, is still very restrictive of civil liberties.
In Singapore, prison sentences are very high, censorship is a normal part of life, and different
behaviors aren’t usually well-seen.
We’ll talk about this and more in future videos, because, of course, Singapore is one
of the most fascinating countries in the world and a real magnet for professionals from all
over
the globe.