The world is again caught in a state of flux and many changes which
are beyond our wildest expectations are taking shape. From ISIS to
Brexit, there is a looming picture of gloom and the impacts in
socio-political-economic terms are wide and extensive. In the tiny state
of Singapore, these tumultuous occurrences taking place in the middle
east and Europe are far away from the minds of ordinary Singaporeans.
Their immediate worries are about bread and butter issues.
The
economic slowdown does not seem to recover anytime soon and
retrenchment exercises are back. In the early 60's when Singapore was
emerging as a developing nation, the state took control of economic
development and charted a course which had state-owned enterprises
taking the lead in opening up new industries. State capitalism
intensified even after Singapore ascended the ranks and became a
developed nation in the 80's. In the next 3 decades, the state continued
to expand and acquire substantial business interests either directly
under its statutory boards or indirectly through state-linked
companies. Today, it has become the
biggest landlord and business owner. It is also the biggest employer in
Singapore and a major international investor with an enviable sovereign
wealth fund.
When every citizen is
gainfully employed and is able to afford a roof over their head, no one
really cares too much about who owns what and how much money is made by
the businesses and their management. In the minds of a people deeply
accustomed to letting the state take the lead in almost everything, the
business of running our economy, including what investments to make
overseas, belongs to the state and not the people or even private
enterprises. However, as at every critical point in our growth as a
nation, past solutions invite serious questions when they no longer
appear to be effective in dealing with present day problems. Ever-rising
rents and costs of doing business, increasing unemployment,
retrenchments and slower economic growth have become recurrent topics in
our daily news. When state capitalism in our past as an emerging
economy could create jobs, homes, higher incomes and hopes for a better
future, these times are considered hard times. A fundamental question
relating to market economics has to be asked. Is a state-owned and
controlled economy, with its current breadth and depth, still a viable
solution for the challenges that Singapore faces, given that the
dynamics of doing business today requires greater innovation and
creativity?
It is not suggested that state
capitalism per se is undesirable. For instance, state capitalism in
China has brought sterling economic growth for the Chinese economy in
the last 20 years and it would be hard to find any no pure free market
economy in the world today. The state
is always involved in some economically strategic matters, such as
regulating the banking system and lending activities and ownership of
what are considered important national assets. However, to the extent
that state capitalism is essential in order to protect its people from a
wayward economy, the logic falls short when it goes beyond that.
Heavy-handed state intervention in free market forces creates serious
distortions of the market, generating misinformation and unrealistic
expectations. Extensive business interests of the state also unwittingly
compromises good political governance when the state chooses to protect
its business interests over the rights of the people . Unfair
competition may also breed disenchantment and stifle entrepreneurship in
areas seen to be dominated by state-linked businesses .
Is
it time for our economy to be driven more by real private enterprises
than by state-owned businesses? If so, how can we achieve a better
balance between state capitalism and free capitalism? These are
questions that need a rethink at higher levels.