Labour has sneered at talk of ‘Singapore-on-Thames’ as a post-Brexit economic model, while the tax-cutting wing of the Conservatives has embraced it with a passion. But neither seem to know much about how Singapore actually achieved its remarkable prosperity. Lee Kwan Yew, the country’s prime minister from 1959 to 1990 (and one of the greatest national leaders since 1945), transformed Singapore from corruption, division and poverty by moral, fiscal, social and market acts of genius which gave people a new sense of hopeful purpose.
First, the moral genius. The population of Singapore was bitterly divided by racial and ideological antagonisms that had left the country isolated from its neighbours. A decisive early act of moral courage by LKY was to jail for abuse of office the financier who had bankrolled his election campaign. By wrecking his future campaign finance, it convinced all factions that he was seriously committed to the new and attractive common purpose of achieving public sector integrity. Volodymyr Zelensky’s commitment to stay in Kyiv worked in the same way. Self-sacrifice was hardly Boris Johnson’s style, but the implication for the choice of party leader is to find someone who sacrificed preferment to remain uncontaminated by association, instead of toadying to power.
The fiscal genius included low taxes on businesses, but this was enabled by heavy stealth taxation of land appreciation. Through the power of compulsory land purchase, with compensation permanently frozen at 1973 valuations, the state gradually bought two-thirds of Singapore’s land area, reselling it to developers at much higher market prices. This reflected the sound moral and economic sense first advocated by Henry George, the vastly popular American writer. George, whose idea is now recognised as an economic theorem, recognised that the gains of land appreciation in New York were due to those who worked, not those who owned the land. The British equivalent would be to tax the capital gains on land and property in London. In contrast, since high corporate taxes are largely shifted to consumers while inducing distorting loopholes administered by tax lawyers, their recent hike made little sense and could be reversed. But tax cuts must convince voters that this offers hope to those who need it most, rather than being yet another instance of successful people feathering their own nests.
There were many social acts of genius such as cheap social housing, but a critical one was LKY’s decision to push wages, deliberately driving out the labour-intensive sectors such as textiles. Henceforth, blossoming entrepreneurship focused its energies on activities that created highly skilled jobs, while education policies equipped all young people to do them. The strategy was widely mocked by Treasury-type economists, but who is laughing now?
The market genius was to focus on exports by building good trading relationships with the key potential markets in Europe and North America. Let’s not talk about that one.
Such policies had, at their core, a profound sense of bringing people together around a new and morally worthwhile purpose. Tax reductions in Britain could have such an appeal: by helping our left-behind regions they would be socially inclusive, shore up the Red Wall seats and unleash the vast missed potential for innovation in our regional universities and entrepreneurs. But the present moment is singularly inapposite for tax cuts that benefit people who are already very fortunate. Why? In Harold Macmillan’s words: ‘Events, dear boy, events!’
Suddenly and unexpectedly, the experience of mass shortage of basic goods is upon us. The triple-whammy of Covid, Vladimir Putin and rising trade barriers has plunged the world into conditions last seen during the second world war. One of the unsung triumphs of market economies is that supply is normally continuously matched to demand – so, except for occasional episodes of panic-buying, the vast majority of people in Britain and other advanced economies have little familiarity with mass shortages of basic goods. The few old enough to recall that time have knowledge valuable to all of us, but unfortunately it is not being widely shared. Our society has become increasingly partitioned into age cohorts, classes and regions, between which there is little communication. In consequence, our collective understanding about the management of shortage is bereft of common wisdom just when it is most needed. Britain is missing a valuable opportunity to heal its bitter divisions.
At the onset of the second world war, memories of the mistakes made during the Great War were fresh. There was no repeat of what Stanley Baldwin called ‘hard-faced men who look as if they had very done well out of the war’. Those who had made a killing out of other people dying and then bought their peerages from David Lloyd George were seen as despicable. Avoiding a repeat became the lodestar of public policy. Rationing was introduced: from the King down, there were equal allocations of food and other suddenly scarce essentials such as hot water for baths. Equal shares of course implied that those at the top of society were making the largest sacrifices. Thanks to this high-visibility principle, the management of shortages swiftly brought the nation together.
Then as now, the most totemic shortage was of basic foods. During the second world war, Britain’s food rationing was successful not only in uniting people, but in its material consequences. Despite the severe curtailment of food imports, average nutrition rose. Shortages intensified in the early post-war years. Devaluation and coal shortages in 1947 were followed by the ‘Austerity Olympics’ which Britain hosted in 1948 on a shoestring budget: ‘the friendliest and least competitive of all Olympics’ in the words of one competitor.
Rationing was the right policy for those exceptional times, but within the Labour party it took on a more generic appeal as a permanent alternative to the market. The overdue ‘bonfire of controls’ which the Conservatives embraced in 1951 has, perhaps, left an equivalently misleading folk memory within the party: exaggerated respect for the miracle of the market. I trust markets to allocate most goods, but enthusiasts who want to extend them to tasks for which they are ill-suited bring markets into disrepute. A current instance is nuclear power with its tiny but existentially uninsurable risks. France made the same mistake, but Emmanuel Macron – an investment banker steeped in market philosophy – has just been forced to renationalise the industry. That forced renationalisation has revived the legitimacy of nationalisation in France as an acceptable strategy. The implication for the current choice of leader is that enthusiasts who do not understand the limitations of markets sound appealing to other enthusiasts, but they rightly scare voters.
Under Johnson, the party was briefly captured by those who admired the ‘hard-faced men’. We needed Henry George; we reverted to Lloyd and peerages for donors. That loss of a moral anchor contaminated a wider range of behaviour. As inflation surged and living standards were squeezed, many voices noisily demanded pay increases. This cacophony has provided cover for those already fortunate. Despite the tax hikes, the loophole for ‘carried interest’ is still vying with ‘Carrie’s interest’ for favours. CEO remuneration, already excessive, has taken a further leap, as have the incomes of tax lawyers. Britain’s trades union for doctors, among the highest paid medics in Europe, is asking for a rise of 30 per cent over the next five years. Such behaviour would be less offensive were these groups notable for their exceptional contributions to society.
We have forgotten the lessons of wartime rationing, and we need those few who recall them to speak out. In their absence, who are the people who have been left at the sharp end of shortages? They are the weak and the meek: the groups lacking bargaining power, and those too modest or public-spirited to scream for their own interest. The old will recall not only rationing, but the moral code in which they were raised: the weak and the meek should inherit the Earth.
LKY offered a divided people a hopeful path around which they could unite. It was ambitious yet convincing. Its economic credibility came not from a cheap and cheerful cosmetic facelift, but from a coherent multifaceted strategy of transformation. Its moral credibility came from that old answer to the questions of ‘Who should be making the sacrifices that mount the first step along that path to prosperity?’ and ‘Who should inherit its fruits?’ We need a leader with the moral authority to return us to such a sense of purpose. The revulsion against recent conduct has made that crystal clear in the minds of voters.
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