‘Singapore on Thames’ has become a pejorative term in certain circles, but there is much that Britain and the rest of the world can learn from the city-state’s economic miracle.
Wealth is hard to create and easy to destroy, and during the pandemic most governments seem bent on tearing down what it has taken so long to build up. Singapore represents a wonderful example of the opposite. In 1965 it had an economy roughly equivalent to Tangiers, now it’s a global powerhouse whose citizens enjoy a standard of living far in excess of many European countries. It’s also fared remarkably well during the pandemic, with only 28 deaths so far.
As the world continues to struggle with Covid-19, governments are becoming ever more indebted and the importance of stimulating real and rapid private sector growth is becoming ever more urgent. A new report from the Global Economic Neural Network (GENN), which I chair, analyses its success and considers what lessons can be drawn from Singapore’s rapid growth.
A key recommendation – backed by the findings of Bim Afolami’s Unlocking Britain Commission, on which I also served – is that basic trade, economic and regulatory frameworks are essential for stimulating private sector growth.
Singapore embraced open trading regimes, open and competitive markets, property rights protection and the rule of law. In doing so it put massive regulatory distance between itself and its neighbours, and became a magnet for global capital.
This was the result of deliberate choices made by political leaders, in particular Lee Kuan Yew, who, as Prime Minister from 1959 to 1990, embedded English common law. Having returned from Cambridge, he was impressed by the power of the common law to support business and encourage investment by balancing the competing rights of market participants in a flexible and yet certain way. By contrast civil law, which operates on the basis of statutes rather than precedents, can be rigid and legalistic – often privileging form over substance.
It is no coincidence that the most powerful economy of the 18th and 19th centuries and the most powerful economy of the 20th and 21st centuries are both use the common law. But there are no guarantees that the UK and the US will continue to succeed. Common law countries are adopting more and more legal code, statutes and statutory instruments. In the US, the number of executive orders issued by the US President has skyrocketed since the 1990s, from 970 executive orders and proclamations under Bill Clinton, to 1504 under Obama with Trump continuing at a similar rate. The tension between the executive and the legislature, often held up as an example of western failure, is actually necessary for holding the rights and obligations of all economic actors in balance. In the case of the UK, the tradition that treaties are only valid once enacted by domestic law has been eroded by the EU’s principle of direct effect. Brexit is a golden opportunity for the UK courts to reclaim supremacy.
While Singapore is often held up as an example of an autocratic state with no democratic controls, this misunderstands the fact that it operates more like a corporation with a strong CEO than a country. Those who claim it is not democratic should ask where is economic agency strongest, in Singapore or in a western democracy where people have less and less economic control of their lives. When we talk about democracy it is important to tease out how countries do on economic democracy. Are individual people economically empowered? Much of that turns on whether rights and obligations are held in a consumer welfare enhancing equilibrium. What Lee Kuan Yew saw as a student at Cambridge is what we in the UK and US take for granted – that the common law is uniquely able to deliver that balance. This was perhaps his greatest single insight, and on that the whole edifice of Singaporean success is built.
There are many other unexpected places that have embraced English common law, such as the UAE, the Dubai International Financial Centre (which even has English judges) and the Abu Dhabi Global Market – and these will be examined in future GENN reports.
The second key recommendation of this GENN report is the need for openness. Singapore is one of a premier league of hubs that are becoming progressively more connected by ‘trade superhighways’. This trend will likely be accelerated by the pandemic – which has exposed the need for much more resilient supply chains. This will have a major impact on free trade zones like the EU, and represents a huge opportunity for the UK as it leaves. Opening up business corridors to both goods and people will be crucial to the recovery, and yet countries are moving in the opposite direction with pointless quarantines that have little impact on Covid cases.
For all the natural advantages we enjoy in the west, empires have risen and fallen in the past. Learning from emerging powers like Singapore can help us renew our economic democracy and ensure our future prosperity.
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