The Legatum Institute recently published its widely followed Prosperity Index which has 89 variables grouped into 8 sub-indices: Economy, Entrepreneurship & Opportunity, Governance, Education, Health, Safety & Security, Personal Freedom and Social Capital. The 2014 ranking (2010 in brackets) is provided below, together with some useful qualitative and quantitative measurements.
|Ranked by Prosperity Index||Competitive Ranking||Median Wages||Net Income Gini (a)||Market Gini (b)||GDP Growth||Deficit to GDP||Credit Rating|
|1. (1) Norway||11||59,308||0.25||0.423||+1.3%||+13.2%||AAA|
|2. (8) Switzerland||1||61,171||0.289||0.368||+1.9%||+ 0.2%||AAA|
|3. (5) New Zealand||17||28,526||0.323||0.453||+2.0%||– 2.4%||AA|
|4. (2) Denmark||13||41,948||0.253||0.431||+0.6%||– 2.6%||AAA|
|5. (7) Canada||15||36,873||0.316||0.438||+2.4%||– 1.1%||AAA|
|6. (6) Sweden||10||37,359||0.273||0.435||+3.0%||– 0.2%||AAA|
|7. (4) Australia||22||47,796||0.324||0.46||+2.6%||– 3.3%||AAA|
|8. (3) Finland||4||32,886||0.261||0.486||+1.0%||– 1.6%||AA+|
|9. (9) Netherlands||8||28,652||0.278||0.424||+0.1%||– 4.1%||AA+|
|10. (10) USA||3||30,932||0.389||0.506||+2.3%||– 8.4%||AA+|
|11. (12) Iceland||30||29,346||0.251||0.406||+0.9%||– 6.7%||BBB-|
|12. (11) Ireland||25||29,240||0.302||0.568||+0.3%||– 16.4%||A-|
|13. (13) UK||9||26,020||0.344||0.525||+1.2%||– 8.5%||AAA|
|14. (15) Germany||5||28,000||0.293||0.506||+2.1%||– 1.4%||AAA|
|15. (14) Austria||21||33,575||0.282||0.496||+1.5%||– 2.8%||AA+|
|16. (na) Luxembourg||19||51,129||0.276||0.48||+1.7%||– 0.6%||AAA|
|17. (16) Belgium||18||29,206||0.264||0.483||+1.1%||– 3.8%||AA|
|18. (17) Singapore||2||31,190||0.412||0.463||+6.9%||+ 6.8%||AAA|
|19. (18) Japan||6||26,671||0.336||0.488||+1.8%||– 7.6%||AA-|
|20. (20) Hong Kong||7||na||+4.0%||AAA|
(a) Net Income Gini is the Gini co-efficient after tax and social transfer. It is used for comparison because it accounts for different tax rates and for subsidies and benefits received.
(b) Market Gini is before tax and social transfer from which Net Income Gini is derived.
(c) GDP and deficit data from World Bank, average since 2010.
Sub-index rankings for 2014 and 2010 (in brackets) for Singapore given below.
|Economy||Entrepreneurship & Opportunity||Governance||Education||Health||Safety & Security||Personal Freedom||Social Capital|
|2 (6)||12 (8)||13 (11)||22 (30)||18 (24)||14 (5)||40 (36)||45 (54)|
Other than the obvious conclusion that Singapore has nowhere achieved Swiss standards, here are some perspectives on the PAP’s economic management:
- The PAP likes to repeat ad nauseam about competitiveness. But it can be observed that there is hardly much of a correlation between competitiveness and prosperity. Singapore scores high in the former but poorer in the latter. This point to a bias for quantitative rather than qualitative results which can be observed by high scores in easily quantified sub-index rankings such as Economy and Entrepreneurship but middle to poor ranking for qualitative aspect of prosperity such as Personal Freedom and Social Capital.
- What about Singapore’s unassailable fiscal position due to its vast reserves? Clearly, neither the lack of persistent budget surpluses nor large fiscal deficits obstacles to achieving AAA rating. Moreover, prosperity and competitiveness are harmed neither by fiscal deficits nor less than stellar credit rating. The writer suggest the blowback of its persistent surplus causes Singapore’s inability to climb the Prosperity Index especially since those surpluses cause financial burdens to citizens due to poor returns on savings, elevated HDB prices, insufficient social spending.
- Indeed Singapore has achieved the strongest GDP growth by far among the top 20. Yet its ranking has not budged since 2010 even though many of its peers suffered far more from the Global Financial Crisis. This strongly suggests the government has not delivered the aggregate improvements to citizens’ lives despite the glittering GDP numbers.
- The PAP likes to warn redistributive social spending harms competitiveness. However, observe the huge difference between the two Gini coefficients which show how much redistributive social spending has lessen income inequality and yet did no harm to most nations’ competitiveness and prosperity.
- The PAP likes to drive the point that education and skills are essential to GDP growth. But is it enough to lessen inequality and increase prosperity? The most prosperous nations have the most educated and highly skilled workforce. Yet before tax and social transfers, the (Market) Gini coefficient shows that economic outcomes are very unequal. Fundamentally GDP growth and technological advancements by themselves cannot resolve inequality because there will always be a mix of highly and lowly paid jobs. Redistributive social spending is the price paid to allow the lowly paid lead bearable lives and thus achieve a more equal outcome for the population in aggregate. Poor social capital is the result of not paying that price.
- On the government’s mantra that Singapore lacks natural resources. Among the top 10 most prosperous, only 4 (Norway, Canada, Australia and USA) can be considered as resource rich. Besides Singapore has consistent sunlight which is hardly utilised and few weather-related impact on the economy. Most of the prosperous nations have severe winters which cause certain economic activities such as construction to cease and disruptions to transportation due to heavy snows in winter, floods in spring and storms in summer.
The ministers derision of Singapore peers’ slower growth and high deficits and their anti-social spending rhetoric, should be seen as nothing more than twisting the facts to fit the ideology of GDP growth maximisation.
The slower growth rates of the prosperous nations are the price paid for higher quality, more equitable economic outcomes. This is a fundamental trade-off in economics: quantity does not necessarily equate to quality even if in the catch-up phase, quantity had a quality of its own.
But Singapore is well past this phase as indicated by its inability to climb the Prosperity Index despite the strong GDP growth. Surely the minister’s GDP growth aligned remuneration results in the singular obsession with growth rates at the expense of quality. For quantity is easily measured and achieved, simply throw cheap labour and cheap savings at it. But really what is the PAP than a very well paid one-trick pony?
* Chris K holds a senior position in a global financial centre bigger than Singapore. He writes mostly on economic and financial matters to highlight misconceptions of economic policy in Singapore.