· Publisher: Universal Books, Melbourne
· Date of publishing: August 2005
· Hardcover: 470 pages
· ISBN: 0-9758014-0-6
· Author: Chan Heng Kong, PhD, NSW
· S$132, free postage within ASEAN, plus S$33 postage worldwide
· Sole Distributor: Universal Books
· Contact: universalbooksau@yahoo.com
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TABLES OF CONTENTS
Chapter One: The State in the Political Economy: Theoretical Foundations 1
1.1 Introduction 1 1.2 Theorisation on the Role of the State in the Political Economy 5 1.3 A New Paradigm in Economic Theorisation 14 1.4 Overview of Literature on Singapore’s Political Economy 20 The Singapore School 22 The Management of Economic Success 23 Revisiting Economic Development 26 Assessment of the Singapore School 27 The Singapore Critique 35 The Domination of Foreign Capital in Singapore’s Economy 37 The Domination of the PAP State in Singapore’s Domestic Economy 41 An Appraisal of the Singapore Critique 49 An Overview of the Literature on Social Institutions 56 1.5 Theoretical Foundation of Singapore’s Political Economy 68 1.6 Structure of the Book 73 1.7 Conclusion 76
Chapter Two: Singaporean Dualism and the Political Economy 78
2.1 Colonisation and Formation of the Mainstream Economy 79 Pre-British Malay Sultanate Singapore 79 Mercantile Expansion in South-East Asia 81 Financing the Free Port Settlement 87 Straits Settlements 90 Development of an Entrepôt Economy 93 Dualism in the Economic Coalition 96 2.2 Chinese Clanship and the Advent of the Informal Economy 101 Political Foundations of the Informal Economy 101 Informal Chinese Business Networks in a Dualism Economy 103 Economics of Informal Chinese Institutions 106 Chinese Culture as an Informal Institution 108 Economics of Guanxi and Xinyong 112 2.3 Economic Coalitions of Resource Owners 115 Opium Economy 116 Timber Economy 118 Coolie Economy 121 Rubber Economy 126 2.4 Conclusion 134
Chapter Three: Singapore’s Post-war Political Transformation 137
3.1 Post-war Singapore Politics 137 Dawn of Singapore Politics 137 Malayan Union and Malay Politics 140 Communists in Singaporean Politics 143 Malayan Politics in Singapore 145 Manipulation in Singapore Politics 147 3.2 Singapore’s Local Governments 150 The Rendel Constitution and Chinese Politics 150 The Battle for Political Power in the 1950s 153 David Marshall and the First Constitutional Talks 156 Lim Yew Hock and the Second Constitutional Talks 158 3.3 People’s Action Party Politics 161 Political Coalition 161 The British Factor and PAP Politics 163 Ascendance of the Lee Faction in the PAP 167 3.4 The Battle for Singapore’s Political Leadership in the 1960s 169 Power Struggle in the Lee Faction 169 Malay Politics in Singapore 171 Barisan Sosialis 173 3.5 Arithmetic of PAP Politics 176 Right-Wing Chinese Voters 176 Chinese Voting Patterns 178 Changed Political Alliances 181 Emergence of a Single Dominant Party 184 3.6 Singapore in Malaysian Politics 189 New Political Alliance 189 Merger Referendum 192 Merger Debacle 197 3.7 Conclusion 202
Chapter Four: The State in Social Engineering: Reconstitution, Resettlement and Socialisation 205
4.1 PAP Supremacy 208 4.2 Reconstitution 211 New Institutional Environment 211 The Executive and the Legislature 215 Legislators and Bureaucrats 219 The Judiciary 223 The Bureaucracy 228 The New Electoral System 233 4.3 Resettlement 239 New Physical Environment 239 Redefining the Relations between the State and the People in Public Housing 241 Creditor and Debtor Relations 242 Landlord and Tenant Relations 248 4.4 Socialisation 254 New Social Environment 254 Political Ideology in Socialisation 256 Ideology of Survival 257 Ideology of Pragmatism 261 Ideology of Meritocracy 263 Asian Values in Socialisation 265 Shared Values in Socialisation 273 4.5 Conclusion 278
Chapter Five: The State in the Market Economy: Nationalisation, Industrialisation and Privatisation 280
5.1 Nationalisation 280 The Land Factor in the Economy 283 The Labour Factor in the Economy 288 The Domestic Capital Factor in the Economy 296 5.2 Industrialisation 304 Manufacturing Economy in Historical Perspective 309 Structural Change and Economic Development 311 Dismantling the Domestic Private Economy 316 Bugis Junction – A Case Study of Resettlement 317 Credit Crunch – A Case Study of Market Failure 325 Public Transport – A Case Study of State Intervention 331 The Newspaper Industry – A Case Study of Politics in the Economy 336 Activist Role of the State in the SOE Economy 342 Origin and Types of SOE Economy 343 Nature of the SOE Economy 346 Hidden Costs in the SOE Economy 348 5.3 Privatisation 350 Ersatz Privatisation 351 Echt Privatisation 357 5.4 Conclusion 361
Chapter Six: A Predatory State: Present and Future 364
6.1 Nature and Characteristics of the PAP State 368 The Some-Men-No-Vote Election System 368 Technical and Dependent Judiciary 372 The PAP as a National Movement 374 Lee’s Law as the Supreme Informal Institution 375 Rational Ignorance of the Citizenry 378 Procedural Rationality in Standardisation of Social Behaviour 380 Forfeit of Common Property Rights 382 Forced Consumption in Personal Finance 384 User-Pays Society 386 6.2 The State as Stationary Bandit 389 6.3 Remaking Singapore: Crisis and Opportunity 392 The Crisis of Distributional Coalition 394 The Crisis of Institutional Sclerosis 398 Reformation and Opportunity 401 Political Reforms 401 Credible Information in the Public Domain 404 The Role of the State in the Economy 405 Development Funds 406 The Chinese Business Network 4076.4 Conclusion 408
Chapter Seven: Conclusions 410
Lee’s Law in Singapore’s Political Economy 410
Appendix: The Yi on Singapore’s Future Viability as a Nation-State 422
Bibliography 428
Index 456
An overview from the abstracts:
Chapter One:
P2: ‘Singapore political economy is characterised not only by the presence of a division between formal mainstream and informal domestic economies but also by the existence of activist state planning in the market economy.’
P4: ‘without an understanding of changes over time of the inner working mechanisms … past institutions cannot be properly understood, present developments cannot be adequately appraised, and Singapore’s future directions cannot be accurately anticipated.’
P12: ‘Singapore … unusual experience in industrialisation … state intervention prevented the emergence of a private indigenous manufacturing economy … the state … as a major economic actor in … the domestic economy …’
P29: ‘Singapore School is conventionally apolitical and ahistorical … potentially misleading … shift from import substitution to an exported-oriented economy … (was) an outcome of political failure to establish a common market with Malaysia … (in) Asian Currency Unit … Bank of America was the agent of change in the financial market evolution while the state’s role was mainly as facilitator.’
P34: ‘Singapore’s seaport economy saw the birth of the Neptune Orient Line, and its airport economy propelled Singapore Airlines, the market failure of the construction industry is puzzling … SOE and not private economy have benefited from the state’s policy … the economic relationship between policy and the private economy is not yet properly understood.’
P61: ‘there is a need of a ‘Lah! Factor’ … ‘characteristically Singaporean’ experiences to decipher the real substance from the pervasive ‘ersatz-ism’ … it requires intimate indigenous expertise to navigate the disinformation as the truth is hidden in half-truths.’
P76: ‘the PAP political supremacy has forced the retreat of the formal institutions and caused their role to be supplanted by informal institutions as the regulating mechanism in all social exchanges. Chapter Two: P79: ‘Long Ya Men was not Singapore but a twin-peak mountain on Lingga Island … southwest of Palembang … the centre of the kingdom of Srivijayan’ P80: ‘Singapura, a Malay name likely to have been derived from Singkat Pulau, which in Malay means the Stopover Island.’ P90: ‘Singapore’s free port status was not an ex ante economic contemplation but rather an ex post political outcome ... the British inability to exercise control, and their apathy, were misread as a laissez-faire policy.’ P98: ‘in an informal environment where the rule of law was absent and predatory business practices were pervasive … necessitated the need to rely on Chinese traders as middlemen ... in the absence of property protection, the informal Chinese business network played a significant role in enabling the regional trade economy.’ P103: ‘clan association as a nexus of personal structures … repeated dealings dispensed with the need for complete information in social interactions ... in a close-knit community there is little incentive for members not to fulfil contractual obligation.’ P107: ‘informal Chinese institutions constrained anti-social behaviour of adverse selection and moral hazard … in the imperfect native market.’
P112: ‘Guanxi as an informal institution is a quantifiable personal relationship … tantamount to ‘club good’ … strictly exclusive and preserved only for the privileged club member … the economic function of guanxi rests in its mechanism as a personalised non-price allocation of resources …’
P113: ‘Xinyong facilitates economic coordination and cooperation within the informal network … helps reduce the costs of negotiation, contracting, measuring and enforcement in economic exchange … it diminishes ex ante cheating and ex post shirking in transactions … provides an assurance of performance in economic exchange …’
Chapter Three:
P137: ‘the isolation of Singapore and the political containment of the Chinese were the two political forces that conditioned post-war political developments … this chapter investigates the dependent and interdependent relationships between colonialist politics, Malay politics and Chinese politics in Singapore, and also the collusion between British and Malay politicians in subordinating Singapore to Malaya.’
P139: ‘confrontations in ethnic politics guaranteed an influential role to the British in balancing the political relations between Malays and Chinese ... a political space was created that allowed the British to manipulate domestic politics in Malaya and Singapore, as well as politics between Malays and Chinese inside Singapore.’
P163: ‘Lee faction aimed to replace the British as the ruler of Singapore while Lim faction aimed to end colonialism … their political objectives were similar but not the same … both factions succeeded ... Lim Chin Siong ended colonialism and Lee Kuan Yew became Singapore’s longest-serving political leader.’
P169: ‘the British factor was critical in deciding domestic political outcomes ... the conventional wisdom that the PAP rode on the back of the communist tiger to attain power is a myth …’
P184: ‘emergence of a single dominant party in Singapore politics was an intended policy outcome rather than an unintended election consequence ... it was political policy that brought about the emergence of a single dominant party … the election merely served to reaffirm this intended political outcome …’
P192: ‘common market, which the PAP claimed to be critical … was not the focus of the merger discussions … the concept contradicted Malaya’s own economic ambitions.’
P193: ‘the UMNO clearly wanted only a subordinate Singapore ... the referendum was skilfully crafted to guarantee a subordinate Singapore in Malaysia.’
P201: ‘separation was not a surprise … Singapore in Malaysia without a common market would discredit the PAP and benefit the Malay Alliance ... the PAP faced the real risk of being outmanoeuvred by the MCA in Singapore’s economy … separation was thus a defensive measure to protect the PAP’s power base on their home turf.’
Chapter Four:
P205: ‘the role of the state in social engineering was aimed at the destruction … of the old social structure and its replacement with a new society defined by the PAP … (the informal rule or) Lee’s Law is the political glue that holds together the whole of Singapore’s political economy ... without it, there is little to explicate the working mechanism of Singapore’s domestic politics and economic development …’
P208: ‘the PAP’s political objective of supremacy became the pre-eminent guiding force in transforming most, if not all, institutions that shape social relations ... this unambiguous objective became the overriding factor in all PAP political contemplations … Singapore’s political economy can only be properly understood in the light of this political ambition.’
P212: ‘reconstitution focused on establishing new structural relations between the three state agencies of the Executive, the Legislature, and the Judiciary ... and its agents in the bureaucracy ... in the process, Lee’s Law defined the political hierarchy and ensured its absolute protection that resulted in the extreme centralisation of decision-making authority within the PAP’s innermost circle.’
P240: ‘the demolition of the old settlements inevitably eradicated the long-established informal rule ... the state instituted new rules to fill the void in the regulation of relations between the state and the people … paternalism has replaced nonchalance.’
P242: ‘the creditor–debtor relationship is the single most important institutional relation between the state and the people ... the political outcome of public housing policy …’
P253: ‘public housing is not a private asset because it fails to meet the definition of private property as understood in the context of property rights economics …’
P254: ‘socialisation is to legitimise the new institutional environment and the new physical environment … a process whereby the PAP’s world view has been introduced and indoctrinated into people’s mental model to decipher information and to make personal decisions ... the intention is to inculcate a sense that state policy is fair and equitable because such a perception encourages compliance.’
P267: ‘the unintended outcome … was the birth of ‘Singlish’ … the motivation to use Singlish is very strong because it is a realm where people enjoy absolute freedom of expression … the presence of Singlish is politically significant …’
P279: ‘the hostage relations of creditor and debtor in public housing also carry a high social cost ... society becomes risk-averse and evolves into a society of employees that is lacking in entrepreneurship.’
Chapter Five:
P281: ‘the forfeiture of private economic property rights … resultant redistribution of economic resources from the private economy to the state … the state’s absolute authority in resource allocation has diminished the role of the market mechanisms in pricing the factors of production … through economic redistribution and under-pricing the factors of production … the state plays a central role in the ownership and reallocation of scarce resources.’
P304: ‘Singapore’s inherent structural relations with the world capitalist system conditioned the industrialisation program because of path dependency ... international capital was given a more prominent role in the mainstream economy … instead of promoting the indigenous economy … pragmatism traded nationalism for the realism of economic benefits.’
P316: ‘in the case of Singapore … foreign direct investment was not attracted by a better-designed economic policy … economic policy is necessary … but is insufficient …’
P347: ‘Singapore’s SOE economy is efficient only so long as the marginal cost and marginal revenue of economic coordination is about equal … the bigger the SOE economy, the higher the information cost and the lesser the benefit of the state’s role in coordination ... in the longer term, an efficient SOE economy can only be achieved under the free market mechanism.’
P351: ‘Singapore’s privatisation was motivated neither by withdrawal of big government nor a reduction of state ownership in the economy … the dynamic for Singapore’s privatisation was more politically than economically driven, although the latter reinforced the former.’
P357: ‘privatisation in Singapore is effectively the corporatisation of public service providers, and the commercialisation of public goods and services ... the rolling back of the state ... is the creation of a user-pays society …’
Chapter Six:
P354: ‘the inner working mechanisms of a state as designed by the vested interests determine the nature and characteristic of institutions in the society, and their embedded incentives or disincentives in turn impact on economic changes … the type of politics of a nation-state influences economic development.’
P366: ‘the conception of a stationary bandit which reconciles the existence of incentives in what is nevertheless an involuntary economic transaction. … Singapore’s experiences considered together with China’s experiences of a market economy with a socialist flavour could perhaps offer yet a new Asian economic model of fettered market economy that reconciles the market mechanism with an activist state role in the economy.’
P395: ‘distributional coalition … the cause of national decline … the longer the society enjoys political stability, the more likely it is for members to develop powerful coalitions … such a coalition reduces efficiency and aggregate income … thus diminishing economic growth.’
P398: ‘incremental institutional change is imperative for sustained economic growth … a society with prolonged stability without political rivalry creates institutional rigidity that is likely to retard economic development …’
P400: ‘absence of continuous institutional change at the margin carries high social costs … it invites discontinuous institutional change at the source ... when motivated enterprise players, both political and economic, are genuinely aiming to make gains but cannot seek change within the existing regulation to enhance their chances of winning, they have strong incentives to revolt against the ruling authority.’
P401: ‘the threat to PAP removal, and thus Singapore’s viability (given the conflation of party and state), need not come from opposition politicians … the inherent system has practically denied a political change to a non-PAP government ... changes of ruling authority are, therefore more likely to be from within the party.’
P402: ‘Changes in Singapore’s political institutions are inevitable … the dynamic of change is likely to be externally driven because of Singapore’s open economy in the world capitalist system ... in the face of globalisation, the imperative for economic efficiency will dictate the nature and extent of recontracting in the political economy ... the imperative for political retreat in the economy could lay the foundation for power sharing between rival PAP factions.’
Conclusions:
P420: ‘in Singapore, while state predatory behaviour is pervasive … nonetheless a fettered market mechanism exists to enable transactions across the market ... an economic model with a predatory instinct is potentially devastating … is detrimental to Singapore’s future as a viable nation-state ... PAP political supremacy and absolutism in resource allocation is not without social costs ... accordingly, this study identified the two major crises – distributional coalition and institutional sclerosis – …’
P421: ‘a Remaking Singapore movement … is an opportunity to release the entrapped human resources and creative energy in society ... a political transformation is essential for Singapore’s next phase of nation building ... this study envisages the necessities of the separation of powers in the state machinery … and the free flow of information as an effective check and balance on Singapore’s wealth ... in the economic realm, there are potential gains in the revival of the Chinese business network as a low-transaction-cost environment for wealth creation and accumulation … there is reason to be optimistic about the outcomes of the Remaking Singapore movement ... historically, Singapore has survived many challenges, and there is no reason why Singapore cannot continue to prosper.’
What is the Role of the State in Political Economy?
This book is an investigation of the inner working mechanisms of Singapore’s polity. The research did not start out as a defined proposition with an embedded specific ideological disposition, intending to endorse or challenge a pre-determined political position. The development towards the theorisation of Singapore’s political economy is, to a great extent, guided by the methodology of the new institutional economics, and the research conclusions were natural derivations from these theoretical foundations.
The research investigates social cost that focuses on the harmful effects of state policy. The incorporation of social cost in economic analysis entails a balanced view on Singapore’s social policy, which, to other developing economies, is often touted as a paragon.
History matters in institutional analysis. Accordingly this research is structured into three building blocks: the past, the present, and the future of Singapore’s political economy. As there is not yet any theory in Western social science that could offer an informed view on the probable outcomes of chosen political decisions on a nation’s future viability. This book explores the possibility of applying the philosophy of Yi (Book of Changes), a Chinese metaphysic that theorises changes to analyse the probable outcomes of political decisions.
Chan Heng Kong, PhD Politics, NSW. Chan is an independent researcher with years of experiences in corporate and merchant banking. His research interests include the roles of informal institution in economic development, the property rights in an informal Chinese economy, and the theorisation of a fettered market in the statist economy in South-East Asia countries.
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