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See more videos from the Lausanne Conference
This is a transcription of Rainer Heufer’s talk at the ISIL 2013 World Conference.
Transcription edited by Kenli S.
Good morning, it’s very nice to be here, I was not able to be here yesterday because I was in another program in Berlin. I came in last night. I am very happy now to be here. Thanks a lot to ISIL for the invitation. It is always great to come to the programs of the International Society, truly International, because earlier Ken, Kenli and Cris and a few others met in Bratislava. This was only a couple of weeks ago really.
We also had the Shanghai Austrian Economic Summit over there. So, it’s really an International Society and coming to such a sleepy town here, but seeing all these international people is really just very delightful. Alphonse is here, which for me personally is very nice because when we started Think Tank MBA, Alfonse participated in the one in 2008 when we first started it. This November we have the next one.
I’m here to talk about Singapore and at the end I will do a little bit of an advertorial of the Atlas programs as well, if you don’t mind. A little bit of a commercial on the end of that.
Right now Singapore is where I have been based for the last two years. I created my company there and now that I am coming from Singapore, I always get the response, “Oh Singapore, great country isn’t it?” I am always a little surprised how often I hear that and where I hear that. So I started to wonder, do we have a case of Libertarian Orientalism actually?
Who are among the admirers of Singapore?
President Saakashvili of Georgia is very much one. When you go there, they often talk about the Singapore model. You go on and you find that the Communist Party of China really likes the Singapore model.
Well if you are in Africa, there is a big fan of Singapore over there. It is, Prime Minister Luc Adolph Tiao of Burkina Faso. And then there are the Libertarians and you wonder, whoa, how does it all go together? You look at this little website: GettingOutofAmerica.com that says that for those of the Libertarian persuasion, this tiny city-state has long represented their idea of a free market Valhalla. Whoa, big terms!
So I was really wondering how’s it all possible, and I am here to ask you what do you make out of it? You will have to give me the answers when we have the discussion later.
What libertarians see mostly are a couple of impressive facts. This is just ranking in the world, GDP per capita, 3rd out of 187 nations. Economic Freedom Ranking is 2nd out of 144. Global Competiveness Ranking is 2nd out of 144. Ease of Doing Business 1st of 185, and I don’t think libertarians look much at the Human Development Index, but if you have a quick peek at it, it would also be impressive at 18th out of 187. So that is really impressive and that makes a lot of governments look at Singapore.
See that’s what I am talking about. First of all I must say a lot of people really don’t know where Singapore actually is, so I don’t know whether everybody here knows where it is, there it is. That tiny little spot inside the yellow circle and on any reasonable map you have to circle it, otherwise it is really too small. Some images that I want to share, this is actually there at the tip of Malaysia of the Malaysians Peninsula that little island is an island actually. The merlion used to be the symbol of the city-state, now it’s really more the three towers. The Marina Bay Sands with that swimming pool on top of the roof like an arch on top and the Singapore Airlines. To those that fly a lot in the society of Singapore, I like to say it’s the preferred choice.
Okay let’s now take the bridge between Singapore and the libertarian principles. What are the libertarian principles? Quickly I believe, no, I am quoting here three principles,
- 1. Individual rights: that we have the right to live the life that we want to live, the way we want to live it, individually.
- 2. Spontaneous Order: where basically things and institutions and processes and procedures arrange themselves in a spontaneous way.
- 3. Limited Government: thirdly of course there needs to be a limited government.
I am quoting here from a speech that David Boaz once gave. I like these kinds of simplified things it helps a lot. So three simple principles: individual rights, spontaneous order, and limited government, I don’t think in this audience I need to explain on any of that.
And I thought okay then, let’s do a libertarian checklist looking at Singapore, how does it score?
Well first of all, there is no freedom of expression. Even giving this speech here I must admit, when you have a permanent residency in Singapore, you must think twice about what you say. It’s strange, but it is. You have to be careful. This is what a minister has to say, “it is important for us to ensure that Singaporeans read the right thing”. The ‘right thing’, that’s a typical statement from the government in Singapore. We want to make sure that people consume the right kind of information. He said that to the BBC.
Now, in June, they came up with a new idea. Any website that reports about Singapore and which has more than 50,000 unique visitors needs to pay a performance bond which is a $50,000 (dollar) license or in U. S. dollars a thirty nine thousand dollar ($39,000) license to be allowed to do so. This basically kills the most critical and underfunded websites that do report independently about Singaporean politics.
Not surprising then that the Freedom House would rank Singapore as only partly free, scoring 4 out of 7 on average. This basically means political rights and civil liberties are not guaranteed, especially the press in the country is not free. The newspaper there is a joke. It’s really great if you need to wrap fish or if you want clean your windows, but for anything else it’s really not really worthwhile. This you can say in Singapore because everybody thinks so.
Then there is no sex in the city or more precisely no gay sex in the city. This has been criminalized according to the laws that mutually consenting adult men cannot have sex with each other. Oral sex was prohibited and everybody was wondering which position of police would actually be in charge of checking on that? Though there was a very big demand for that job, but now they legalized it in 2007.
Actually Singapore is liberalizing because the people are fed up with this kind of government. There are changes that are happening now in Singapore as you can see now for example a gay movement the pink dot movement. This year and 2013 they had a massive uproar of people who all wore pink. You can’t make statements like you can’t wear pink and sit in a park. So that’s the pink dot movement and they were very successful this year. People are just fed up with being told what to say, what to think and what to do. The political position, well they had a lot of choices between prison and bankruptcy.
Singapore went so far that the government actually had an appointed member of opposition in the parliament because they thought that it’s quite bad the image if it’s all government. We need some opposition, so they appointed a member of the parliament to be the opposition. People thought it was also not a good idea. So, that has also changed because you can see now rallies of the opposition party which unfortunately is the workers party, have massive out pour again and if you go by the electoral vote it’s quite close for the government to actually lose power. Good outlook, so things are changing. The strong man he isn’t there anymore. Well, he is there, but he is not in power anymore. It is his son and his son is softer than Daddy.
Okay, so looking at our libertarian check list on individual rights; not really, on this one Singapore definitely failed. You can’t call that a libertarian system, oppressing individual rights, and I am only giving you some examples. I can’t give you the entire talk about everything in Singapore.
Then, let’s all look at spontaneous order. Of, course the first thing you think about in spontaneous order is can you can everyone engage in business? Can you create a company, can you do business, etc. You saw already that Singapore is ranking very well in this report and this is truly the case. Singapore ranks number one in the world in this report and already in the first indicator in starting a business. It says it takes three procedures and three days to start a company.
This is actually not quite right. I started my own company. It takes about three hours. It’s amazing, I mean you can just create you can spend your day creating companies because it’s so easy. It’s really no problem so, that is truly amazing. The only thing that takes a little while is your bank then to check whether you’re actually worthy of having a bank account. You know the usual of what the banks do it takes what about two days or something, that is the little thing that you’re waiting for to open your corporate bank account.
I am also starting a business at the moment in Indonesia and I can tell you it takes longer and it costs a lot of money. But not in Singapore that one is fantastic. So that speaks a lot for spontaneous order to have this, starting a business like this. Then if you look at the top right, the one in red, trading across borders, ranks one. So free trade definitely that’s the hallmark of Singapore and that’s why we see Singapore I think the way we look at it like a libertarian Valhalla.
Free trade is really what Singapore is all about internationally. However, I am always trying to find a hair in the soup. Here is one about enforcing contracts. Suddenly out of brilliant performance enforcing contracts isn’t as good, its only ranking 12th because it takes a lot of procedures and 150 days to enforce your contract so there seems to be something not as brilliant, but in terms of starting a business and trading across borders, Singapore definitely, excellent performance.
What I have tried to do, is I tried to look now modestly at the Economic freedom of the world report to give you some figures from the freedom to trade report. Here is where freedom to trade international as you can see Singapore in 2010 ranks 2 with a score of 8.86, so basically that underlines the same thing; free international trade, Singapore with an absolutely brilliant performance. This goes really to the philosophy and the rationale of the country.
Raffles started it saying this is a free trade spot in south East Asia when he basically took it away from the Malaysian rulers and gave it to the British Empire. He was the one who created Singapore. He has to have that little statue there that sometimes they may show him with a couple pigeons on his head. But, I try to be more respectful, no pigeons here. Raffles was the one who started the whole thing and say this was going to be a free trade place and this free trade principle has never been touched in the last 150 years.
Therefore Singapore really if you look at all those international indicators, Singapore scores extremely well; very little regulation; a foreigner can create a company; multinational companies can come in, no problem. It’s all very easy. The hair in the soup; big hair this time, we’re talking about government enterprises and investments. Here Singapore only scores 7 in the Frasier Institute report. The score of 7 meant when the government invests between 20 and 25 percent in total investments. So that is why I say it’s a big hair that is a lot of money invested by the government and not by the private sector.
Indeed Singapore is characterized by its GLC, Government Linked Companies. How do you define them for those that are not familiar with that term? They have commercial objectives and the government has a direct controlling state. Direct controlling state means the Government appoints board of directors, senior management, makes major decisions on strategy, acquisitions, and divestments, etc. You don’t need to have a 100 percent of a company to control it. There is a much smarter way and these GLCs are professional companies, commercially run, but the government has a major stake in them which also the IMF says there is a significant presence of GLCs in Singapore.
The end of the statement by the IMF would say that they are being rewarded in financial markets that they are not just treated like any other market player. Of course they have privileges. Other players in the market will sense this, so spontaneous order with giant companies dominating the Singapore markets. Not really, Singapore GLC produced 60% of the nation’s GDP. So that is not small fish, this is very big, and they are owned by the Temasek Holdings, the Holding company of the Government, with the portfolio of 173 billion in March 2013. All the major companies are basically GLC; Airlines, Tele Communications, Engineering, all the Media companies, land development, shopping mall development, the Port Authority, the Power and Salvage and the Marine and Subway and everything is GLC.
You will read a lot about privatization in the history of those companies. Privatization means the government sells 20 percent of its’ 70 percent and now owns 50 percent and still appoints all the directors and so on and so on. So about the libertarian check list I would say, yes, free trade absolutely brilliant. Speaking in terms of the GLC denomination of the economy; not so much so, spelling a mixed score on this principle of a libertarian system. Finally limited government so what about the actual government involvement in the nation and here of course you first of all look at the tax rate.
I think this is common sense, a lot of people already know about this that is actually great. If you look at it in terms of taxes there is a Valhalla and they score 10 and this is no surprise and I live there now.
I pay my income tax. I pay my corporate tax, I agree. If you look at Singapore’s personal income tax rate, you know, if you just look at, let’s say you earn one hundred and sixty thousand ($160,000) Singapore dollars in a year, that would be one hundred thousand ($100,000) Euros in a year, that is one hundred thirty thousand ($130,000) U.S. dollars a year. You pay 15% personal income tax, coming from Europe, which is quite nice that leaves a lot for you. I know we want to keep it even lower, but generally speaking, in comparison that is quite remarkable.
On top of this it’s not always just the level of tax, right. It’s also how much time and effort you spent on actually doing your taxes. When I came there and then there was the point where I had to do my tax declaration, I thought oh no, oh my god, now I have to and I have to find a day when I do this, sit down. I sat down and switched on the computer; it was all online, it took me five minutes, and I was done. That is the time when you go and have a coffee and think it’s a good place. You just put in the number you tell the Authorities that you earned, no receipts or what, you just say that’s how much I earned. Then you say whether you support parents; and there is an extra category for handicapped parents; whether you support children, slash handicapped children; whether you paying your pension fund; and then you say send. After that it says you will probably have to pay this amount of money.
By the way, for your written statement then your written statement comes, it just says the amount and you then can pay either in one go or you can pay in installments. My annual personal income tax and I am happy to share that with was seven hundred dollars ($700.00). I decided to pay in one go; absolute brilliance.
Corporate tax rate, well, not bad either. Look at all those countries in Singapore; you have roughly 17 or 18 per cent (%) corporate tax rate. If you compare that to all these other countries there, including Germany where I am from. Also very good for my company, the first two years, the first one hundred thousand revenues ($100,000) are free anyway. So far since I’m a small company, I haven’t paid taxes yet.
Right, Government consumption––so again I’m looking for that hair––scores very badly: 5.24. So I thought here I got it, not libertarian; but I must say, the hair isn’t as thick as I thought. Yes, the score is quite bad only 5.24 out of 10 and I thought well what is the actual expenditure? It’s about 10 per cent; you can see that in crisis times, of course, Government decides they know the answer. So they spent more than the GDP so it went up again and now it’s a little lower again to 10.32 percent. And I think maybe it has to do with the fact that the Government earns a whole lot of money.
I know this a little populous and a little propaganda like, but I just want you to have a look at this. The Prime Minister earns 2.2 million Singapore dollars a year. Divide that by 1.6 you come to the Euro, it’s still way past, it’s one and half million U.S. dollars, no, no, more than that it is 1.7 to 1.8 million U.S. dollars a year for the Prime Minister.
For a foreign country of five million people that is a lot of money for your leaders. And then supposedly this is not corruption. And as I have said the hair is thinner or smaller than I thought. 10.32 per cent, right, Government consumption. Look at OECD in general on the right hand side on the red one, is about 17.5 per cent. So in comparison to other OECD countries; that consumption is actually quite low, and fits to the fact that the tax payments are relatively low. So this shows other countries which don’t have a functioning Government at all and are not able to collect taxes and are not able to spend money that they are way lower Government expenditures. But OECD countries; with a fully developed bureaucracy that can actually dip into your pockets whenever they like, they all have or almost all have, higher Government expenditures than Singapore.
Right, so finally then again to something that info scores very well and that is transfers and properties. Here it scores 10 again and it has to be acknowledged. A very famous statement by former Prime Minister, Goh Chock Tong, “We were dead against the welfare state.” And that is really the rationale in Singapore. If you don’t want to kill initiative and entrepreneurship by creating a welfare state, that is really common sense. Of course other people don’t have that they don’t share that common sense, for example the Asian Development Bank, which recently just criticized Singapore for not spending enough on welfare. Those 3.5 per cent and they say that basically that this 3.5 per cent consists of that CPF system.
I would like to spend a little time, I have a few minutes I guess, to talk about the CPF system so as just hear about alternatives to what you find probably in your country. First of all it says that the principle of self-reliance is a forced savings scheme. Instead of paying in a big pot and then when somebody retires, somebody draws from a pot that everybody has paid into. Singapore has individual accounts, so I pay for my retirement, etc., but I pay it into an account that is only my account. And when I retire I draw money only from that account, nobody else has access to that account. But I also don’t really have access to that account until I retire. Unless it is for other reasons and this would be education, health, and homeownership.
So it’s a retirement system, but that also allows the person to use those funds for a few defined other purposes. And that is children’s education, healthcare, as well as private homeownership. That’s the CPF system what you do is you pay into it, you see the usual thing the employer pays a certain amount depending on the age of the employee and the employee also has to pay into this a certain amount. That’s that contribution rate that you see there and then a total contribution reaches when you are between fifty and fifty –five, 32.5 per cent. So it really reduces a little bit.
Where is the money going to? You have your own account as I said, but your own account has three subaccounts; an ordinary account, a special account and a Medisave account and then percentage wise the money you pay into your own account goes to three different subaccounts and here you see the Ministry of Manpower have it on their website, it is an essential tenet to the CPF system, for healthcare, retirement, and home ownership. And you see ordinary account you can use if you can use for housing if you buy an apartment, for certain investment purchases, but very limited and for education, a special account for retirement and Medisave is where you pay for your medical insurance premium.
That’s the system which has resulted in people being able to buy a home. Singapore’s Government has always stressed the importance of private home ownership. They were never creating a system of rent and now 93 percent of all Singaporeans own their own home. That’s remarkable, I don’t know whether this is too small on the statistics there Singapore reaches this 90 percent and the other end is Switzerland with 32 percent or something, followed closely by Germany. In Germany almost everybody rents. I mean less half the people own their own homes, most people rent. Singapore this is unthinkable. This is because they have saved their own CPF funds and they can use this to apply for a bank loan, apply for a mortgage and then buy their own home. What has to be said though be it my hairs again, 82 per cent of Singaporeans live in flats organized by the Government owned Housing Development Board.
So there is a massive Government intervention behind the whole thing, building all these apartments. But then not renting them out, selling them to the people because the Government says that if we rent them out they will look terrible after a little while. If we sell them, people will take care of them, and we have great housing state. But the whole thing on HDB is I tell you there are so many rules on HDBs. Anybody who lives there is a whole HDB culture and everybody has a door and outside they have a gates.
In HDBs you have two doors, so it does not swing too much into the corridor. It must be two smaller ones. In private condominiums the rest of the 18 per cent live in private condominiums you can choose your gate whatever you like. But not in a HDB, so it is a highly regulated the whole thing but people own it. And actually when Margaret Thatcher started her program for home ownership she learned that from Singapore. That was an inspiration coming from Singapore that you don’t want people to rent their places, you want them to own their places.
So all in all, I would give that a thumbs up in terms of Limited Government. Tiny little problems, yes, but generally speaking I would say the country scores quite well in the area of taxation and all of these things and is quite good and makes it easy for people and doesn’t put too much burden on people. So this is how I would rank it, and you have a right, no, you cannot live the life you like to, Government still thinks they know better how you should live your life.
Spontaneous order partially, but a big shadow cast by the GLCs by the Government Linked Companies, but quite a limited place. So I would say that it does not really represent that libertarian idea of a free market Valhalla. I wouldn’t believe this I think that freedom of the individual actor is also important.
Is it a case of the libertarian Orientalism? What is Orientalism?
Here is a nice quote to you by a Professor in Japan, “It’s the mis-seeing of the other through a veil of interpretations of reality which are relatively impenetrable.” So we inject something into somebody else and then we say see it works. There’s a place, it’s that way, and then a long way and there it really works. That’s why you should do it.
You have to be careful because there are people over there, they also libertarian and they struggle with their Singaporean Government and they’re really surprised when people here say look at that libertarian island over there. But it’s kind of a prejudice and there is nothing is stronger than a prejudice, so it’s quite impenetrable.
You have that for example when we talk about the holiness of the Dali Lama all the time. But there is a lot of realpolitik when it comes to the Tibetans. And I ask a lot of people who are totally pro Tibetans in Europe where Tibet is and what the history of Tibet is. And what are the actual problems over there and so on? This is one of those things where people struggle with their own society and try to break free by saying there’s an ideal somewhere and project all their dreams onto this.
So we have to be careful not to do this with Singapore. And maybe we have to do so by looking at those five indicators. 1. Size of government 2. Legal system and property rights 3. Sound money 4. Freedom to trade internationally 5. Regulations.
Sometimes we need to wonder, is it really that those five do represent a libertarian ideal or are they a good measure or do we impose weights on them, principally by selecting those indicators. Well, the guys who wrote the report say what are more important in the mobility of an automobile, wheels, or transmission? Hard to say, therefore we make no attempt to weight the components in any special way. So they just basically put them all in same weight next to each other.
If GLC is not so much the problem, in the country where they write this so maybe then they just appear as one among many, but taxes have to be there because that is a big struggle for us in European and American societies. So sometimes the selection of indicators might lead us to certain conclusion. I still totally believe in this report take as a fundamental criticism of the report, but we just always need to see whether we put a certain bias by selecting the right indicators and maybe by the weight we give to them.
This is what I have to say about Singapore, I told you at the end I have a little commercial, so don’t click into any other channel. I was introduced as also senior fellow with the Atlas Research Foundation and we do the Atlas Think Tank MBA and I just always wanted to take the opportunity to tell you please check out the Atlas Leadership Academy. For those of you who are active in organizations who want to develop libertarian think tank and initiatives, there are people who support you in many, many different ways.
You become a member in this network. Then there is think tank online training. There are freedom schools, there are certain flagship events. There are regional training programs, you don’t always have to go to the states, and you don’t always have to only stay on the internet. Sometimes you can meet in Asia, in Europe and in other places. There webinars on very practical things, either fundraising, leadership skill, strategy development, you name it. And then there are the think tank MBA two week programs. Alphonse can tell you all about it because he participated. It’s a two week program but you develop a business kind of detail business for your think tank. All of this you find on the website of the Atlas, and the Atlas Leadership Academy. I will be here for the rest of the program.
Thank you so much.
See more videos from the Lausanne Conference
This is a transcription of Rainer Heufer’s talk at the ISIL 2013 World Conference.
Transcription edited by Kenli S.