Intro

We believed in socialism, in fair shares for all. Later, we learned that personal motivation and personal rewards were essential for a productive economy. However, because people are unequal in their abilities, if performance and rewards are determined by the marketplace, there will be a few big winners, many medium winners, and a considerable number of losers. That would make for social tensions because a society's sense of fairness is offended. ...Our difficulty was to strike the right balance. ^{(95) (Page numbers listed throughout for reference)}

What happens when you give an honest, capable person absolute power?

In From Third World to First, Lee Kuan Yew, in characteristically blunt style, does his best to answer that question.

Lee Kuan Yew's politics--and by extension Singapore's, because he really did define the country--are often, I feel, mischaracterized. In We Sail Tonight For Singapore, for example, Scott Alexander characterizes it as reactionary. This is agreeable to the American left, because it's run so differently to Western liberal ideals, and agreeable to reactionaries, because Singapore is preternaturally successful by almost any metric you care to use.

The only problem is that the claim reflects almost nothing about how Lee Kuan Yew actually ran the country or who he was.

I get the impression it's a mistake to frame Singapore alongside a partisan political axis at all, because the second you do, half of what the country does will seem bizarre. Lee, personally, is open about his party's aim to claim the middle ground, opposed by "only the extreme left and right." ⁽¹¹¹⁾ With that in mind, what works best to predict Lee's choices? In his telling, he is guided continually by a sort of ruthless pragmatism. Will a policy increase the standard of living in the country? Will it make the citizens more self-sufficient, more capable, or safer? Ultimately, does it work? Oh, and does it make everybody furious?

Great, do that.

From Third World to First is the single most compelling political work I've read, and I'd like to capture as much of Lee's style and ideology as possible. He divides the book (or at least the half I'm reviewing; I'll leave his thoughts on world affairs alone because there's so much to cover as is) into sections based on specific policy problems and how he approached them. I'll focus my attention on a few:

• Citizen welfare & development

• Free speech & free press

• Approach to political opposition

• Handling of racial & cultural tensions

The first section, in my estimation, deserves more space than a joint review would permit, so I will split it off and post it before the others.

At the end, I will link to my notes in full, and those who are interested are welcome to ask for more details. Depending on interest level, I may write a follow-up review of topics I don't have space to cover here. Note especially that LKY spends huge chunks of the book praising the politicians working alongside him and emphasizing their role. Ultimately, though, the decisions for the country flowed through him and so I am comfortable approaching all these as his policies.

LKY's writing is thoroughly readable and often hilarious, so I will quote it extensively throughout.

Citizen welfare & development

I.

To even out the extreme results of free-market competition, we had to redistribute the national income through subsidies on things that improved the earning power of citizens, such as education. Housing and public health were also obviously desirable. But finding the correct solutions... was not easy. We decided each matter in a pragmatic way, always mindful of possible abuse and waste. If we over-re-distributed by higher taxation, the high performers would cease to strive. ⁽⁹⁵⁾

There are two major questions LKY had to answer when it came to developing Singapore. First, how could the country develop a strong economy? Having achieved that, how could they ensure the welfare of all citizens? Or, as he put it, he wanted to leapfrog the region and then create a "First World oasis" ^(58).

LKY's strategy for the first was simple: provide goods and services "cheaper and better than anyone else, or perish." ⁽⁵⁶⁾ He was proudly adamant about his country's refusal to beg, describing on every other page how he would go to his citizens and say things like "The world does not owe us a living." ⁽⁵³⁾ or "If we were a soft society then we would already have perished. A soft people will vote for those who promised a soft way out, when in truth there is none. There is nothing Singapore gets for free." ⁽⁵³⁾

This is one of many areas where he was adamant about rejecting conventional wisdom. In his telling, development economists and other third world leaders of the 60s described multinational corporations as "[neocolonialist] exploiters of cheap land, labor, and raw materials... but... we had a real-life problem to solve and could not afford to be conscribed by any theory or dogma." ⁽⁵⁸⁾

So, instead, he threw his country's arms open and said, "Exploit us!" Image was everything. To attract tourism, they invented the merlion symbol and scattered it through the country. Places were renamed. My favorite--"Blakang Mati" (behind death), an island formerly used by a British battalion, was reinvented as "Sentosa" (tranquillity), a tourist resort. ⁽⁵⁴⁾ To inspire confidence and demonstrate his country's discipline and reliability, LKY focused on planting trees and developing parkland in the center of the city and between the airport, his office, and hotels. For one Hewlett-Packard visit, when an elevator wasn't yet powered to take them to the sixth floor of their planned headquarters, Singaporean officials extended a cable from a nearby building to power it day-of. ⁽⁶²⁾

In the 70s, as the country's economy stabilized, that confidence manifested in other ways, as with this interaction:

When our... officer asked how much longer we had to maintain protective tariffs for the car assembly plant owned by a local company, the finance director of Mercedes-Benz said brusquely, "Forever," because our workers were not as efficient as Germans. We did not hesitate to remove the tariffs and allow the plant to close down. Soon afterward we also phased out [other protections]. ⁽⁶³⁾

The whole thing, at least from a distance, follows a pattern of initial tight control, caution, and centralized planning, followed by a slow move towards a freer economy as long as everything seemed to be working. Worried about government starting industries and running them at a loss, LKY insisted that state-run corporations stay in the black or shut down. As they succeeded, they privatized--telecommunications, the port, and public utilities all started within the government and became independent profitable companies over time. ⁽⁶⁷⁾

II.

From a Labour Party meeting in June 1966: "Lee Kuan Yew [is] as good a left-wing and democratic socialist as any in this room." ⁽³⁴⁾

I could go on for a while longer outlining Singapore's growth, and part of me wants to, because the story is fascinating. It's hardly unique, though, just the story of a well-managed economy. Everyone already knows about the growth of Singapore's economy. The work it took is worth noting, but much more compelling for me is what they did with all that new wealth. The United States had a hundred years or more to manage a jump Singapore went through in a couple decades. Growth brings all sorts of questions: How do you shift people to a new way of life? How do you get people invested in their country's success? How do you handle welfare, health care, transport? This is where Singapore excels.

Not without controversy, though, aided and abetted by Lee Kuan Yew himself. As much as I tend to appreciate his approach, his bluntness sometimes gives me pause. Here's a sampling of his thoughts on welfare:

We noted by the 1970s that when governments undertook primary responsibility for the basic duties of the head of a family, the drive in people weakened. Welfare undermined self-reliance. People did not have to work for their families' well-being. The handout became a way of life. The downward spiral was relentless as motivation and productivity went down. People lost the drive to achieve because they paid too much in taxes. They became dependent on the state for their basic needs. ⁽¹⁰⁴⁾

And:

There will always be the irresponsible or the incapable, some 5 percent of our population. They will run through any asset, whether a house or shares. We try hard to make them as independent as possible and not end up in welfare homes. More important, we try to rescue their children from repeating the feckless ways of their parents. We have arranged help but in such a way that only those who have no other choice will seek it. This is the opposite of attitudes in the West, where liberals actively encourage people to demand their entitlements with no sense of shame, causing an explosion of welfare costs. ⁽¹⁰⁶⁾

So--welfare bad. Got it. What's his alternative?

Funding Prosperity

The foundation for his strategy was laid before Singapore left colonial rule: an compulsory 5% pension fund (the CPF) with employers matching 5%. This fund became a major tool to support LKY's value of self-sufficiency. As he says, he "was determined to avoid placing the burden of the present generation's welfare costs onto the next generation" ^(97). So how did he fund welfare plans?

As Singapore's economy grew year by year, workers' wages went up. As wages rose, knowing that people would "resist any increase in their CPF contribution that would reduce their spendable money", he increased mandatory CPF contribution rates with part, but never all, of that increase. At its peak in 1984, mandatory contribution increased to 25% with full matching. Every working citizen was automatically saving at a 50% rate. This decreased to 40% over time. ⁽⁹⁷⁾

Every aspect of citizen welfare becomes easier when every worker has that large a guaranteed savings account.

Following the pattern of initial strictness, followed by expanding rights, the government expanded CPF investment options over time. One illustrative example: when they privatized bus services, they allowed citizens to spend up to S$5,000 to buy initial shares in the new transport company so "profits would go back to the workers, the regular users of public transport" ...and, as LKY adds in the same tone a moment later, to reduce incentive to demand cheap fares and government subsidies. ⁽¹⁰³⁾

This strategy repeated when they privatized Singapore Telecom, as they sold shares at half price to all adult citizens, with bonus shares every few years provided people held onto initial shares. Again, LKY describes this desire to redistribute surpluses and provide people a tangible stake in their country's success. He reports that 90% of the workforce owned Singapore Telecom shares. ⁽¹⁰³⁾

Neither the CPF fund nor HDB housing, incidentally, can be taken by creditors.

Sense of Ownership

Aside from pensions, LKY's initial major vision for the fund was a way to allow citizens to buy their own houses. He talks a lot about the value of people having a stake in their country, how a "sense of ownership [is] vital for [a] society [with] no deep roots in a common historical experience," ⁽⁹⁶⁾ the ways home ownership increases civic pride and a sense of belonging. So the government constantly bought land up, built high-rise public "HDB" housing (up to 50 stories!), and then sold apartments to citizens. At its peak, 87% of Singaporeans lived in this public housing.

Some design decisions of HDB housing are worth examining. In some, LKY asked developers "to set aside land... for clean industries which could then tap the large pool of young women and housewives whose children were already schooling" ^(98). When older housing started decaying, the government created a program to upgrade and refurbish older apartments at the cost of S$58,000 per home, charging owners S$4,500 of that cost ^(100).

It's easy to get lost in policy details: decisions, reasoning, numbers. What about the humanity behind those policies, though? What was life like on the ground for the farmers and market vendors who abruptly found themselves moving from wooden huts to modern high-rises in the middle of a rapidly developing city? There was exciting progress, yes, but much of the time it was tragic, hilarious, and absurd.

LKY highlights some of these moments. Pig farmers, nudging their pigs up staircases to raise them in high-rise apartments. A family, gating off their kitchen for a dozen chickens and ducks. People walking up long flights of stairs because they were afraid of using elevators, using kerosene instead of electric bulbs, selling miscellaneous goods from ground-floor flats. ⁽⁹⁹⁾ He grows somber as he talks about resettling older farmers, how even generous compensation money didn't matter next to losing "their pigs, ducks, chickens, fruit trees, and vegetable plots," and how many of the older farmers never really stopped resenting the change. ⁽¹⁸⁰⁾

He's quick to point out other changes, though: In riots in the 1950s and early 60s, he recalls, people joined in, breaking cars, lighting fires, reveling in chaos. Later in the decade, after home ownership started to spread, he mentions seeing people carrying scooters to safety into their HDB apartments. In his words, "I was strengthened in my resolve to give every family solid assets which I was confident they would protect and defend, especially their home."

"I was not wrong." ⁽¹⁰³⁾

I laughed when I got to that line, because I'm pretty sure this picture holds pride of place in LKY's mind. He presents this blithe sense of self-assurance throughout the book, with every controversial policy and scornful dismissal.

Health care

Speaking of blithe self-assurance and scornful dismissal, he dismisses the British National Health Service as idealistic but impractical and destined to cause ballooning costs, then takes a shot at the American system with its "wasteful and extravagant diagnostic tests paid for out of insurance." He reports that at least in Singapore, the ideal of free health care clashes with human behavior. Doctors prescribe free antibiotics, patients take them for a few days, don't feel better, and toss them out. Then they go to private doctors, pay, and take the medicine properly. ⁽¹⁰⁰⁾

The first solution was a token 50-cent fee to attend outpatient dispensaries. The full solution, and part of the reason Singapore's per capita health care costs are half the UK's and less than a quarter of the US's, once again went through the CPF pensions: 1% set aside into "Medisave" for health care costs at first, gradually increasing to 6%, capped at S$15,000. "To reinforce family solidarity and responsibility", LKY reports, accounts could be used for immediate family members as well. ⁽¹⁰¹⁾

That's not to say he wanted no subsidies. At government hospitals, patients chose wards subsidized up to 80%, moving to more comfortable and less subsidized wards as they desire. Medisave funds could be used for private hospital fees in order to compete with government hospitals and pressure them to improve, but not for outpatient clinics or private general practitioners. Why? LKY didn't want to encourage people to see doctors unnecessarily for minor ailments. ⁽¹⁰²⁾ This constant tinkering and fine-tuning around incentive systems is core to LKY's planning.

From there, Singapore added optional insurance for catastrophic cases, then added a fund from government revenue to provide total waivers for those who lacked Medisave, insurance, and immediate family. Per LKY's reporting, "no one is deprived of essential medical care, we do not have a massive drain on resources, nor long queues waiting for operations." ⁽¹⁰²⁾

Pragmatism.

Taxes

So how does this welfare structure reflect in taxes?

Every few pages in The Singapore Story, Lee Kuan Yew makes some grandiose statement about Singapore's successes, and so every few pages I would rush online to see what was exaggerated or cherry-picked and what has faded in the years since LKY's time. The tax structure was the point where this yielded the most fruit--not because of any cherry-picking, but because almost everything has gotten better in the 19 years since LKY wrote his book.

Here are some details on Singapore's tax structure, both as LKY reported and at present, in pursuit of an overall goal to shift from taxing income to taxing consumption:

• Top marginal income tax rate decreased from 55 percent in 1965 to 28 percent in 1996 (now 22 percent).

• Corporate tax rate of 40 percent reduced to 26 percent (now 17 percent)

• No capital gains tax

• 3% GST (goods and services tax, equivalent to VAT (now 7%)

• 0.4% import tariff (now duty-free)

• Inheritance/estate tax was cut from 60 percent to 5-10 percent in 1984, leading to increased revenue "as the wealthy no longer found it worthwhile to avoid estate duty" (now abolished)

In addition, they collect nontax revenue from a range of charges, aiming for "partial or total cost recovery for goods and services provided by the state" to "check over-consumption of subsidized public services and reduce distortions in the allocation of resources." ⁽¹⁰⁷⁾

How has this reflected on overall government expenditures?

At the time of LKY's book in 2000, annual budget surpluses had been recorded every year but the 1985-1987 recession. Since then, 2002-2004, 2009, 2015 also recorded deficits, but the government is still running at a comfortable surplus overall.

Here's what the budget looked like in 2016.

Ultimately, as LKY points out, his strategy relied heavily on a unique set of circumstances leading to steady growth, but they capitalized on that growth, made long-term decisions early, and set themselves up well for the foreseeable future as a result. I don't share a ton of his skepticism towards Nordic-style welfare states, particularly since they remain comfortable and successful twenty years later, but I'll admit to more than a twinge of envy when I compare Singapore's approach to welfare with that of the US.

Interlude

Having made the claim that Singapore really isn't reactionary, I'm left to defend it after a string of quotes and choices that, if not reactionary, at least seem tailor-made to pick fights with leftist thought. This is one reason I quoted the British Labour Party members at the start of section II. Lee Kuan Yew started the PAP as a socialist party, driven by trade unions, opposed to British colonialism, aligned with British progressives). Again and again throughout the book, you see LKY pause to note potential unintended consequences of a choice, to approach major decisions with caution, and to change his approach when presented with sufficient evidence, but threads of progressive ideals are persistent throughout and essential to his decision-making.

Those threads should become more apparent as I progress through more of the review, fitting naturally with Lee's overall bluntly pragmatic approach. No other section will likely be as long as this one, but I felt it would be doing Singapore's welfare structure a disservice if I didn't go in depth. Singapore is unlike any other country in the world, and while nothing done there can copy 1:1 over to different settings, there's a lot worth noticing.

Until next time.

Part two: You are free to agree

Part three: Race, language, and uncomfortable questions

Part four: The pathway to power