A Newly Independent Britain Should Follow The Singapore Model To Become Rich.
Imperial nostalgia leads Europeans to adopt the prejudice that the prosperity of a civilization depends on its ability to transform itself into a vast empire. Hence the anxious atmosphere that reigns over the United Kingdom, which has been trying for too many months to implement the exit from the European bloc decided in the referendum of June 23, 2016. Is the cult of political gigantism justified?
The history of Singapore proves the opposite.
At the end of the Second World War, Singapore was cornered as the British regained control of the island after losing it to the Japanese. Political circumstances led the British state to grant Singapore broad autonomy in 1958. The Popular Action Party (PAP) campaigned, however, to complete Singapore’s independence from the United Kingdom by joining Malaysia, reputed to be closer culturally. In 1959, the PAP won the election.
But the PAP’s victory panicked the business community. Its political elites were suspected of being too close to the socialists. Lee Kwan Yew’s rhetoric did not help matters, as it was imbued with anticapitalism. Singapore suffered a capital flight to Malaysia. This leak paradoxically reinforced the idea that a merger of the two countries would be in the interest of the former. After much political and social unrest, Singapore officially became a member of Malaysia on September 16, 1963.
However, the merger would not last long. Ethnic conflicts and politico-ideological differences (especially in terms of foreign trade) revealed a certain political incompatibility. Malaysia opted for the expulsion of Singapore, which took place on August 9, 1965.
Figures 1 and 2 allow us to grasp the demographic and economic situation of Singapore and to compare it with that Malaysia and the former British colonial metropole a year after independence was formalized.
Figure 1: Demography of Singapore, Malaysia, and the United Kingdom in 1966
Figure 2: GDP per Capita of Singapore, Malaysia, and the United Kingdom in 1966
At the time, few commentators bet on Singapore’s success. Imperial passions led to opposition to the idea that a city like Singapore could prosper in a globalized world. After all, it is a small territory devoid of natural resources. But fifty years later, the verdict is clear: not only has Singapore widened its wealth gap with Malaysia, but its GDP per capita has become twice that of the United Kingdom. It seems that demographic weight, the size of a country, and the presence of “natural resources” are not decisive factors for prosperity.
Figure 3: Demography of Singapore, Malaysia, and the United Kingdom in 2016
Figure 4: GDP per Capita of Singapore, Malaysia, and the United Kingdom in 2016
The Singaporean success is easily explained. The city has bet on fiscal attractiveness to attract foreign capital. Its influence is not limited to its immediate vicinity.
In 1972, Jean Abshire tells us, the United States was the source of 46% of foreign investment. But Singapore’s commercial policy, based on a free port, has contributed to making the city an essential place for world trade. Today Singapore is said to be one of the most liberal foreign-trade regimes thanks to this unilateral openness.
Can the Singaporean model be applied to the British case? Technically, nothing prohibits it. The detractors of this model are mainly on the political field. Unilateral free trade is said to face public-opinion and protectionist pressures from multiple interest groups, we are told. The argument is strange. We admit the effectiveness of a policy, but we give up implementing it because of electoral considerations. Another simple argument could be made against this defeatism: it may be up to experts and commentators to persuade public opinion that opening up trade is desirable.
Finally, Singapore’s history shows that anticapitalist hostilities are by no means insurmountable. Singapore’s adherence to a liberal business model is not so much the result of a cultural revolution as an instinctive realization that a small island cannot afford the luxury of self-sufficiency. For the British to succeed outside of the European Union, they will have to be both humble and daring.
Ferghane Azihari is a freelance journalist and policy analyst based in Paris. This article was originally published in French by Institut de Recherches Économiques et Fiscales, and republished at mises.org