Singapore is not China—and some U.S. politicians should study the difference

By Matthew D. Mitchell & Steven Globerman of The Fraser Institute.

"U.S. Senator Tom Cotton is confused about Singapore. In a recent exchange with TikTok CEO Shou Zi Chew, the Arkansas Republican repeatedly grilled Chew about his associations with China and communism.

“Have you ever been a member of the Chinese Communist Party?” asked Cotton.

“Senator,” replied Chew. “I’m Singaporean. No.”

“Have you ever been associated or affiliated with the Chinese Communist Party?”

“No Senator, again I’m Singaporean.”

“Of what nation are you a citizen?” You get the gist.

Putting aside the debate over TikTok itself and the extent of its ties to China, the irony is that Cotton and others in populist Washington could learn a thing or two from Singapore.

In just six decades as an independent country, the tiny country has grown from one of the poorest in the world to one of the wealthiest. In 1965, the average Singaporean earned about one-fifth as much as the average American (as measured by GDP per person). Today, according to the Penn World Table, the average Singaporean earns about 30 per cent more than the average American (and about 50 per cent more than the average Arkansan).

How did this happen? It wasn’t Chinese-style communism.

In fact, according to the latest Economic Freedom of the World report, Singaporeans are the most economically free people in the world (Americans are fifth). In other words, Singapore’s people make more of their own economic decisions without interference from others. This approach is increasingly out of favour in Washington, where both Democrats and Republicans seem to prefer to micromanage the economic decisions of others.

Compared with the rest of the world, Singaporeans are freer to exchange with whomever they want on whatever terms they want. They are freer to start their own businesses and run them with minimal interference from the state. They can also acquire and use property without fear that the government or other people will take it from them or diminish its value.

The report assesses economic freedom through 45 indicators gathered from each of 165 jurisdictions worldwide. According to the latest data, Singaporeans face the second-lowest regulatory burden in the world. They also face the second-lowest barriers to international trade. Because of this, Singapore’s consumers can buy products from the rest of the world without paying the sorts of tariffs that Cotton would prefer to levy on American consumers.

Singaporeans also benefit from stable and sound monetary policy, strong protection of persons and property, and a relatively low tax burden. As a per cent of the economy, the Singapore government spends about half as much as the average market-oriented democracy belonging to the OECD. Singapore’s top personal income tax rate is 22 per cent, much lower than America’s top personal income tax rate, which ranges from 37 per cent in states without the tax and up to 50.3 per cent in California.

Of course, no country is ideal. Despite its relative economic freedom, Singapore is no democracy. If one accounts for personal freedom, the country is only the world’s 44th-freest. And like Cotton and other populist politicians, Singapore’s leaders haven’t shied away from promoting some industries.

Still, as documented in a new book, industrial policy as practised in Singapore tries to avoid the main flaws of the industrial policies implemented elsewhere. Government-linked companies are expected to be efficient, internationally competitive and profitable rather than dependent on government help. In addition, industrial policy in Singapore focuses on growing the overall economic pie rather than benefiting narrow special interest groups.

Unlike America’s populists, Singapore’s policymakers understand that imposing tariffs on foreign imports impoverishes a country. Politicians who are infatuated with subsidizing their favourite U.S. industries and elbowing out foreign competition should be more knowledgeable about Singapore’s economic story. They might come to understand that populist policies will lower living standards of working Americans whose political support they court."