Like Singapore

I agree with the general argument made in this Herald article by Chris Worthington, namely that the economies of modern nation-states are incredibly complex systems and they need incremental change via evidence based policy, not one crackpot experiment after another.

I do want to pick up on one point he makes, that I’ve been meaning to write about for a while:

Right-leaning parties previously looked to Ireland’s model of low corporate taxes and openness to foreign direct investment, but, mysteriously, not so much lately. Singapore is the new free-market darling, with ultra-low income taxes, a minimal public sector and fast economic growth.

Singapore is the darling of free-market, right-wing parties. Which is strange, because Singapore is the world’s ultimate nanny-state: not just culturally in the sense that the government controls the media and all forms of entertainment, but in the sense that it’s essentially a massive socialist state in which the government micro-manages the whole economy.

Let’s look at a few examples:

• The right likes Singapore because they enjoy a low corporate tax rate. It’s currently at 17%. Pretty low. In New Zealand it’s 28%. But in Singapore the government owns the Ports of Singapore, the busiest port in the world, which is the key income earner for the entire economy. Our economy could be ‘like Singapore’ if we nationalised Fonterra and all of our dairy farms, because this would provide a revenue stream comparable to that of Singapore’s port. Then we could have a really low corporate tax rate and finance the government through the revenue from its capital assets, like they do.
• Singapore also has low income taxes. But Singapore ALSO has a compulsory savings scheme in which you pay 20% of your income into a private savings account, and your employers are compelled to pay 15%. This pays for your healthcare and retirement. It’s not a tax in the technical sense in that you don’t pay it to the government – but you can classify it as such for net income purposes, and if you do then taxation in Singapore is higher than it is for the majority of New Zealanders.
• Next right-wing canard: there’s no welfare in Singapore, therefore unemployment is very low. Welfare in Singapore is pretty basic. And unemployment IS low. There are a few reasons for this: the state pays employers a retention bonus not to lay people off. And if someone does lose their job they go into a mandatory job-placement and re-training scheme. And if overall unemployment increases then the government launches a new development and soaks up the jobless. There isn’t a lot of free-market magic operating in there – it’s all intensive micro-management by the state.
• There’s a lot of other non-free market aspects to Singapore’s economy – like the fact that almost all business and residential property is owned by the state, either directly or via its sovereign wealth fund, or that you have to pay the state about $16,000 for a permit to buy a car, and then a daily congestion tax to use it.

My point is that the right – notoriously Don Brash – endlessly insist that we need to ‘be like Singapore’. But what they actually mean is that we need to be completely unlike Singapore in almost every way imaginable, with the exception of a tiny number of policy areas that massively benefit the rich and harm the poor. This is a zero-credibility argument. If Labour or the Greens announced that New Zealand should be ‘like Norway’ and have a gigantic sovereign wealth fund that paid for everyone’s retirement, but no idea how to fund it then they’d be laughed at. But the fantasy-Singapore worship on the right is even more absurd.