hfavr@mtuxo.UUCP (a.reed) (10/27/85)
I am writing this note in response to Larry Kolodney's and Jan Wasilewski's notes on the economy of Singapore, in particular a tax called Central Provident Fund, based on Wall Street Journal, Oct 21, page 25. I have visited Singapore recently, so what I'm writing below is based on first-hand observation rather than academic analysis. My impressions are as follows: 1. The political economy of Singapore is not an instance of Laissez-Faire Capitalism as conceptualized by Objectivists, Libertarians, or Classical Liberals. This is because the majority party in Singapore is not guided by Objectivists, Libertarians, or Classical Liberals, but rather by Social Darwinists. Thus, the government does not try to avoid all intervention in the economy, but rather tries to accomplish its social policy objectives with the least invasive means it can find. 2. The government of Singapore has been very good at finding minimally invasive ways to accomplish its social policy objectives. The resulting state of affairs is closer to Laissez Faire than what exists anywhere else on earth, today or at any time since the Nazis invaded Czechoslovakia and put an end to its Classical Liberal - Austrian School policies. Relative to North America today, I would put Singapore at about one-third of the way to pure Laissez-Faire (and I think that's remarkable, given the proclivity of the rest of the "Third World" for the opposite direction). 3. The WSJ article on the CPF omits several relevant facts about its scope and objectives. The CPF is one of several attempts to carry out a smooth transition out of the paternalistic tradition Singapore inherited from the British and into a maximally competitive society. Its transitional function is to provide "Social Security" for widows, orphans, retirees and the disabled, while encouraging individuals and employers to move in the direction of securing this goal through private investment. A key feature is that one can opt for a private provident investment scheme in place of the Central Fund, with the hope that such private investment schemes will ultimately displace the CPF and make it redundant. The most popular of these private investment alternatives to the CPF has been co-operative housing, so that much of Singapore now looks like a tropical version of New York's "Co-op City". Since 40% of even the lowest income is enough to provide adequate housing, there is no "need" for "public housing projects". 4. Except for the fiction of 50% employer contributions, Singapore's compulsory investment program bears little resemblance to the Ponzi scheme known in the United States as the Social Security Tax. Whether an individual chooses a private investment medium or CPF, he or she becomes the actual owner of the investment, much as in the case of a North American IRA. This investment can be sold or cashed in by the owner on disability or retirement, or by the children or surviving spouse in case of premature death. The CPF's investment mandate is to maximize income and growth like any other institutional investor. The "infrastructure investment" myth comes from the fact that much of Singapore's "infrastructure" is run by private for-profit companies, such as the one that owns and runs Singapore's airport. The CPF has the same role in those companies as any other investor in any profit-making enterprise. 5. The one objectionable feature of all this is that it coerces individuals to invest, instead of leaving it to their own responsibility. However, the level of investment it requires is roughly equal to what a rational individual would put aside anyway to secure a comfortable retirement in a Laissez-Faire society. The Singaporean government claims that the coercion is necessary to wean people away from their previous dependence on a paternalistic government, and will be eliminated when adequate investment becomes customary. In the meantime, what Singapore has is clearly not Capitalism - but the approximation to Capitalism that it does have is definitely worth experiencing by anyone with an interest in political economy. Adam Reed (ihnp4!mtuxo!npois!adam)