Under the leadership of Lee Kwan Yew, and those with whom he worked, Singapore became the only country in Asia to achieve a higher per capita GDP than the US by every measure.
Calculated at current exchange rates by 2013, the latest World Bank data, Singapore’s per capita GDP was 104% of the US. Calculated at Parity Purchasing Powers (PPPs) Singapore’s GDP was 148% of the US.
Emphasis has been given to Lee Kwan Yew’s ‘authoritarian’ politics but what was the fundamental basis of his economic success? What lesson can be drawn from Singapore’s ‘economic miracle’?
Every major study shows that Singapore’s development was based overwhelmingly on accumulation of capital and labour - with only a tiny contribution coming from productivity growth (technically from Total Factor Productivity - TFP).
This was first found in the 1990s by the UK based economist Alwyn Young.1 This finding has been repeated by every major study since. The latest, by Vu Minh Khuong of the Lee Kwan Yew School of Public Policy of the National University of Singapore is shown in the chart. It found that of Singapore’s economic growth 59% came from capital accumulation, 34% from growth of labour inputs, and only 8% from productivity (TFP) increases. 2
In short every major study finds that Singapore achieving the highest level of economic development in Asia, a higher level of per capita GDP than the US, was based on massive accumulation first of capital, and second of labour, with productivity (TFP) growth playing a tiny, almost no, role.
To put it in blunt but accurate terms, Lee Kwan Yew showed by Singapore’s economic development that in achieving a higher level of per capita GDP than the US quantity was far more important than quality.
1. Young, A. (1995, August). The tyranny of numbers: confronting the statistical reality of the East Asian growth experience. Quarterly Journal of Economics, 110, 641-680.
2. Vu, K. M. (2013). The Dynamics of Economic Growth - Policy Insights from Comparative Analyses in Asia. Cheltenham, UK and Northampton, M.A., US: Edward Elgar.