The Singapore economic miracle and what we can learn from it

For economists, anthropologists, sociologists, and political scientists, Singapore represents a veritable laboratory of conundrums waiting to be analysed.

In the pre-colonial era, this island of marsh and swamps served as a trading settlement, thanks to its relative proximity to the Malacca Strait. Traders from India and China passed through, with some deciding to stay and put down roots. Later, traders from the Netherlands and Portugal arrived. And then, the British came and brought laborers from India, Sri Lanka, and East Asia.

The mystique of Singapore extends even to its name. When the Buddhist prince Sang Nila Utama arrived in the late thirteenth century and founded a kingdom, he claimed to have seen a lion – he also claimed to be a descendant of Alexander the Great – and he named his domain Singapura, which in Sanskrit means “lion city.” Given that lions are not native to the region, the origin of the lion that Utama claimed to have seen remained a mystery until scholars realized that what he had seen was probably a civet, also known as musang, a distant cousin of the fox.

Singapore as we know it today was born on August 9, 1965, when the Malaysian parliament voted to expel the troublesome island, and an independent city-state was established. With a per capita income of barely $500, it was abysmally poor, similar to other newly independent, underdeveloped countries across Asia and Africa. Twenty years later, however, this tiny island with no natural resources was already one of the richest countries in Asia. Today, its GDP per capita, at just under $85,000, is higher than that of the United States.

What drove Singapore’s economic miracle? Some right-wing groups claim its success proves that authoritarianism works. But correlation, as we know, does not imply causation. The British econometrician David Hendry once observed that, according to this logic, one could argue that inflation in the United Kingdom was “caused” by an outbreak of E. coli in Scotland.

In reality, Singapore’s rapid growth has more to do with its high savings and investment rates, first-rate education system, and intelligent policymaking. The intelligent policymaking can come from an authoritarian leader, but there is no causal link there. In fact, more often than not, authoritarianism is a step toward cronyism and a banana republic.

Kaushik Basu, a former chief economist of the World Bank and chief economic adviser to the Government of India, is Professor of Economics at Cornell University and a non-resident senior fellow at the Brookings Institution.