Danyl at Dim-Post has blogged on Singapore. His argument is:
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.
Danyl gives four examples which I want to discuss and partially rebut. Danyl is correct that Singapore is no libertarian pure capitalist society. But neither do I think it is a massiviely socialist state.
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.
Danyl way over-states the importance of the port to the Government’s books. The port has a Net Profit After Tax of S$1.2b – around 2% of total Government revenue, and 0.5% of GDP.
Even Temasek Holdings overall has a mere $4.6b NPAT. Have a look at the NZ SOEs combined NPAT and they are not an order of magnitude different.
Danyl has a point that the Government has a diverse revenue base, beyond taxation. But he overlooks how massively low the tax rates are. he mentions the 17% corporate tax rate but neglected to mention that personal tax rates are even lower. If you earn S$100,000 your tax is only $5,650, so under 6%. Yes 6%!! I’d effing allow the Government to own a couple of ports if it meant my tax rate was 6%.
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.
Danyl misses the point entirely here. The money you have to pay into a compulsory savings scheme remains your money!! This is not the Government taking money off you to spend on everyone else. This is forcing you to save to pay for your own health costs, retirements costs etc. This is absolutely what many on the right want. The difference in incentives is absolutely everything. Having 35% of my salary go into my private savings is not at all a disincentive to working. It is the opposite – the more I work and earn the more I get to have to cover my health and retirement costs.
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.
Again Danyl misses the point here. It is about culture. It is shameful to rely on others before your own family. THe retention bonus not to lay people off was a temporary thing, and the level of state invovlement is not that major. Danyl overlooks that in NZ we had 200,000+ people on welfare even when unemployment was the lowest in the world. I’d take the Singapore system over the NZ system anyday.
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.
Here Danyl is on stronger ground. The permit to buy a car is bizarre. The congestion tax though is just sensible user pays. But the overall point is that the Singapore Government is not a pure free market Government. Absolutely.
But let me tell you I’d take their economic “bad” with their economic “good” anyday. And if we did, we’d be a lot better off.Tags: Dim-Post, Singapore