Why is Singapore So Rich?

Why is Singapore So Rich?

If you live somewhere that’s relatively wealthy and successful, following world news can be uncomfortable. As you see countries sunk in poverty, war, or injustice you may wonder why the world is so unfair. And you probably also ask whether there’s a solution—whether there’s a way for other countries to flourish.

On the surface, Singapore seems like it offers hope. In the early 1960’s, it was poorer than Mexico. 25 years later, it was three times as rich. Today, the average Singaporean earns more than the average person in virtually every other country. They do better than people in Germany and Japan.

Singapore has done extremely well. Its government has made savvy decisions, and their achievements demand respect. However, it’s not a great model for other countries to follow. Singapore has a set of advantages that most places don’t. Plus, there’s an uglier underside to the shining success story, which we’ll return to at the end.

Singapore is an island. A very small one: it’s about half the size of London or Los Angeles. However, it has two natural advantages that make it one of the most strategic pieces of real estate on the planet.

The first is its harbour. A great harbour needs to be sheltered from the ocean and deep enough for large boats to pull right up to the shore. Nature gave Singapore both, and when the empire building British found it they knew they’d just struck geographical gold.

Singapore’s second big, natural advantage is its location. If you want to trade between East Asia and India, Africa, Europe, or the Middle East, you pretty much have to travel through the Strait of Malacca—which runs right past Singapore. That has been an asset for Singapore for centuries, especially after global trade expanded with the opening of the Suez Canal in 1869 (which linked the Indian Ocean to the Mediterranean Sea) and then exploded after the Second World War.

So, telling Peru or Mali they should copy Singapore is pointless. Singapore is a little like one of those freakishly gifted athletes at school who could do everything well because of natural gifting. Some other kids, some other countries, just can’t compete.

However, just as people with natural gifts still have to develop them, so with Singapore. There were several early attempts to exploit the island’s advantages, but it would be the British who really succeeded after their arrival in 1819. Britain was the world’s leading economic power and they saw the island’s strategic value. Over the course of several decades they turned Singapore into a major trading port. Every year, hundreds of ships passed through the harbour. Tin, rubber, and petroleum were the primary cargo.

By 1900, Singapore was a large, modern city. By the time it won its independence from Britain in 1959 it had become a formidable player in the region, providing not only a good location for trade but key connections with producers, financial services, and firms to process and market the commodities.

As Singapore grew, it gained one further edge. When the British arrived, the island had almost no inhabitants. They needed people to develop their new colony, so they encouraged people to immigrate. The great majority came from China, and many of them were ambitious types wanting to make a go of it in an increasingly dynamic commercial centre. Most countries have to deal with a less educated, less skilled rural population, which can act as a brake on growth. Not Singapore.

So, when Singapore began life as an independent state in 1959 it had a host of advantages. Its new leaders made the most of them. To begin with, they decided that their island could make things as well as ship them. Singapore soon became a leader in the production of electronics. Foreign companies did most of the manufacturing, but Singapore profited. The fact that the Chinese migrants had learned English made international deals even easier.

Next, Singapore became a global financial centre. Again, many of the key players were foreign—American banks opened dozens of branches in Singapore. However, highly educated Singaporeans filled key positions in each one. Finance made Singapore richer still. This was a different route to prosperity from the one followed by other Asian success stories such as Japan and South Korea, which relied less on foreigners and finance and built major corporations of their own, such as Toyota, Sony, and Samsung.

So—a prime location, a population of immigrants, the English language, a great education system, and good relationships with foreigners. Singapore had a very good hand and played it with great skill. Most other countries have less to work with. Holding up Singapore as an example for others is hardly fair.

But there’s an additional explanation for Singapore’s success, which other countries could follow but hopefully won’t. Singapore is an authoritarian country. There are restrictions on free speech. Workers aren’t free to protest. Fewer than 20 opposition politicians have been elected since 1965. Lee Kuan Yew, who led Singapore from 1959 to 1990, said “Asian values” were better than “the disruptive individualism of the West.” Singapore had economic freedom, but political freedom—not so much.

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