How Singapore Got Crazy Rich, Crazy Fast

this video includes an advert for better help this is Singapore an island country off the tip of Malaysia slightly smaller than New York City and home to 5.6 million people despite its tiny size and modest Manpower the country has an economic output of almost half a trillion US Dollars making it the 33rd largest economy in the world bidding out much larger countries like the UAE Vietnam and even Malaysia the country directly to its North that has more manpower more land mass and even more natural resources but it wasn't always like this Singapore just five short decades ago was a desperately poor country still suffering from a long history of occupation the concentrated success that this small island has been able to achieve in such a short amount of time is why so many economists and commentators are excited about the idea of other countries replicating that success and becoming the Singapore of their respective regions the Singapore of South America the Singapore of Africa and even the Singapore of Asia are all titles at several countries around the world have been given for trying to replicate the success of this city-state although they probably didn't think that last one through anyway if a poor island avoid of resources and Global political Capital can go on to become one of the wealthiest economies in the world then it stands to reason that just about any economy could achieve the same thing unfortunately the success of Singapore is going to be extremely hard to replicate and the exact combination of factors that the country had going for basically just doesn't exist anywhere else in the world what this means is that there is never going to be another Singapore of some other region another common misunderstanding is that Singapore's success has hinged off glamorous Industries taking place in glass skyscrapers it's easy to see why with pictures of Marina Bay stories about billionaires from around the world making it their home and even depictions in modern movies but the reality is far from that and even most economists ignore what truly made Singapore a success to begin with so what can regular economies learn from the rapid development of Singapore and could it be applied to their own countries what was it that made Singapore so successful and finally why is it almost impossible to replicate the success in other countries around the world once we have done all of that we can put Singapore on the economics explained National leaderboard even if you live in a country that is doing as well as Singapore economically life isn't all about money and almost everyone will have times in their lives when they struggle whether that's motivation or more serious low points that's why this video is sponsored by betterhelp the modern world has become so complex that finding meaning in our place in it is harder than ever before I use therapy not because I think there's anything fundamentally wrong with me but because I want to feel my best self every day and work through problems that I don't want to be constantly bothering my friends and family with Better Health therapists are all licensed and qualified and they have the knowledge and training to help support you and your mental well-being with this online platform you don't have to travel far to an unfamiliar setting it's more cost effective and it can be tailored to your timetables so you can always make time for self-improvement you'll be paired with a therapist after answering a few questions and you can effortlessly and freely switch if you want to seek a better connection with another therapist by using the link in the description to register you'll receive not only a 10 discount on your first month with better help but you'll also be supporting this Channel at no additional expense to you so visit betterhelp.com ee to be paired with a skilled therapist to improve your daily sense of well-being and peace the start of Singapore's history as an independent nation was quite unusual while a lot of countries around the world had to fight bitterly to claim Independence or in the best case scenario were able to negotiate it with the country they were claiming it from Independence was kind of forced on Singapore the tiny Island was once a state of Malaysia and throughout its history was used as a trade Port by colonial empires this led to the region becoming very diverse but also very tense between all the groups that call it home in the aftermath of the second world war following a better occupation by Japanese forces Singapore had to be rebuilt practically from scratch for the decades following it was basically just a city-sized slum with most residents living in complete poverty sensing the tensions that could arise from such a diverse group of people living in such an unforgiving environment Singapore was cast out from Malaysia in 1965. the first thing that the new country had going for it was a unique brand of benign authoritarianism the new government knew that for the country to have any hope of fixing its issues it would need a strong decisive hand and that's exactly what they got one of the first things the government did after coming to power was to reclaim vast trucks of land from private ownership at below Market rates to build affordable public housing when people argue that their economy should be run like Singapore they normally overlook this detail any policy at this scale in any advanced economy around the world today would basically be political suicide housing is still highly controlled in the country to this day with a unique blend of central planning and hardcore free market mechanics income taxes in Singapore are famously very low as of this year income tax rates top out at 24 that's only for people earning more than one million Singaporean dollars per year or roughly 750 000 US Dollars that's the free market side with minimal government intervention but at the same time 20 of workers salaries are still mandatorily taken by the government but instead of going to fund government spending it's put into a large communal investment fund that people can then use to put a deposit on a subsidized house in addition to this 20 and additional 16 is provided by the workers employer as contributions towards the same fund which is also used to fund retirement and health care this means that at minimum people in Singapore are saving at least 36 percent of their income which is double the average savings rate of the USA Singapore also has very diligent Savers even outside of these Force savings measures with the average resident keeping 54.6 percent of their earnings now a high savings rate means very little of the people of the country are not earning much so the next thing the government had to do was attract industries that made sense in the tiny island nation early on the country had very few advantages over its larger Regional peers they had more people more resources and more land to set up operations but Singapore still had a few tricks up its sleeve perhaps the country's greatest Global Advantage is its amazing Geographic position at the tip of the Malacca Straits which is the single busiest shipping Lane in the world the reason the country existed as a trading Port back in the colonial days were for exactly the same reasons but now the people of the country have an opportunity to benefit from that position for themselves one of Singapore's biggest industries today is a far cry from the glamor of global Finance it's basically a gas station for the world's cargo ships as Asia developed as a center of low-cost Manufacturing in countries around the world started trading more intensely with one another Singapore set up major oil facilities to bring in oil from countries in the South Pacific and the Persian Gulf and sell it to all the ships passing through the natural bottleneck of the Malacca Straits given its location and because crude oil freighters are passing through the area anyway it's home to the world's largest bunkering port offering prices even lower than the Gulf States themselves Singapore does produce some oil for itself but it's only around 20 000 barrels per day which is a tiny tiny fraction of the total oil volume move through the country to make itself even more of a One-Stop shop for shipping needs it has developed the Region's largest Commodities exchange where companies and speculators can secure prices for resources that get traded all over Asia the government unique blend of authority and freewheeling capitalism was again instrumental in getting this industry off the ground the oil industry requires major capital investment to be globally competitive but the impoverished country of Singapore in the mid-1970s would not have been able to make that investment itself it needed to attract multinational oil companies to set up the industry for it in exchange for sharing the profits into the future when investing in a foreign country especially one as new and potentially unstable as Singapore International companies are going to want a compelling reason to be there since Singapore had few oil reserves of its own that wasn't going to be enough by itself the potential for its Geographic position was understood but economists have argued that what really made it a logical Choice was the freedoms that foreign oil companies were given to operate in the country and the security that they were given from an effectively one-party state that could guarantee consistency of policy another benefit that Singapore had was that it adopted an English common law legal system from its previous colonizers which is a well-regarded and widely understood system for selling in commercial disputes which was much more attractive to International companies than alternative systems in the region being in the right place at the right time and having the right authority to make the right deals was the foundation of Singapore's economic success it's unfair to call it all luck because it did capitalize on this early success by reinvesting into its people and its Industries but had it been located anywhere else in the world apart from at the corner of what would go on to be the epicenter of global trade it probably wouldn't have been anything nearly as remarkable as it is today another problem with assuming that with the right policies other countries can follow in the footsteps of Singapore is that most of the time people are learning the wrong lessons Singapore is often used as a poster child for what can happen when taxes and business restrictions are low the idea is that companies set up their operations there and contribute back to the economy in other ways the reality is that Singapore does have taxes and they're not even particularly great on corporations either 17 is on the low end of average for countries around the world and individuals can find a lot of places to live with zero income taxes that's not to mention the other taxes that Singapore has as well including some of the highest property taxes in the world and the insane costs associated with registering and driving a car the average person and the average company operating in Singapore is going to end up handing just about as much over to the government as they would in most other advanced economies they're just not going to do it in the same way government revenue in Singapore is roughly 18 of GDP which is almost exactly in line with the USA Singapore also has the advantage of being physically tiny so things like infrastructure and services are much cheaper and easier to administer since they only have to service what is effect actively just one mid-sized City instead of the third largest country on the planet so if anything the Singaporean government probably takes more than its fair share it also kind of cheats a little bit about 10 of its Workforce commutes from Malaysia every single day considering its extremely close proximity to the much larger country these workers produce value in the economy contributing to economic output but they are not counted in the country's population this means when economists put together GDP per capita figures they are including the output of the workers up here in the numerator but not adding them to the denominator giving this figure an unfair Advantage When comparing it to regular economies that don't have this daily cross-border Workforce this is similar to another economic outlier Luxembourg that is a very wealthy country in its own right but is also helped by this unique glitch of economic arithmetic we explore this issue in depth in our video on that country so I don't want to repeat too much else here by the way slashing taxes was not the key to Singapore's success it was instead the combination of factors that we explored in this video If a country found itself game Independence in a region that would quickly develop into the center of global trade and it gave power to a government that could make practically unchallenged decisions that impinged on the freedoms of their people and the government didn't abuse that power to enrich themselves and there were no better Alternatives available until world-leading industries were established then yeah sure the country could be the next Singapore of its region but that's a lot of ifs and as tempting as it may be to try and become an economy as prosperous as Singapore is there are better examples to follow which will likely yield much better results for the dozens of countries around the world now going through their own periods of Rapid development okay now it's time to put Singapore on the economics explained a national leaderboard starting as always with size Singapore has a GDP of 466 billion dollars making it the 33rd largest economy in the world beating out Regional Rivals like Bangladesh Vietnam the Philippines and Malaysia Singapore gets an 8 out of 10. that impressive GDP is spread out over a population of less than 5.5 million people meaning the country has a GDP per capita of 73 000 putting it in line with the most productive countries on the planet but behind the usual micronation outliers even still it gets a 9 out of 10. stability and confidence is interesting the country is in theory a multi-party democracy but in practice it's been ruled by a single party since its independence for the most part that's just because the party is very popular and it's allowed the country to offer a degree of economic consistency that is hard to match or while mostly avoiding the pitfalls that comes from unchallenged political power given its reputation as a safe haven in the region for trade and business it gets a 9 out of 10 but misses out on a perfect score because of the complications that could eventually arise from this system of leadership growth has been incredibly strong obviously it had to be to get from where it was 50 years ago to where it is today but even in the last two decades the economy has quadrupled in size and has only ever really been slowed down by the Asian fine natural crisis the GFC and covid and even then it didn't slow down for long the country gets a 10 out of 10. finally industry the country is today home to a number of extremely valuable Industries it's one of the largest oil traders in the world despite not having much oil of its own it has a surprisingly robust and Technical manufacturing industry and of course there is still its role as a Global Financial Hub it's not a world leader in any of these industries by itself and it hasn't really developed any domestic companies that compete on the world stage but it still gets an 8 out of 10. altogether back of Singapore an average score of 8.8 out of 10 which is incredibly impressive and puts it all the way up here on the leaderboard if you like this video you'll also like the one that we produced recently on another major country in this region Indonesia which could soon be one of the world's most powerful economies you should be able to click to that video on your screen now thanks for watching mate bye foreign

Channel: Economics Explained

Views: 710,301

Keywords: economics, economics explained, economy explained, singapore economy, singapore economy explained, lee kuan yew, singapore economic success, the economy of singapore, economy of singapore, singapore economics, why is singapore so rich, history of singapore, singapore rich, singapore’s economy, singapore history

Id: KB1vxqD0uPE

Length: 13min 48sec (828 seconds)

Published: Sun Aug 27 2023