Singapore’s economy: what can we learn from its successes?

Singapore’s economy has become a beacon of stability and economic progress, if not exactly of liberty or democracy. Should we emulate its example?

Singapore, Singapore City, city skyline at dusk, elevated view
(Image credit: Jeremy Woodhouse)

While Britain may be about to get its sixth prime minister since 2016, Lawrence Wong, a 51-year-old US-trained economist, was last month sworn in as Singapore’s fourth prime minister since 1965, when the city-state separated from Malaysia and became independent. 

Wong has been finance minister since 2021 and succeeded Lee Hsien Loong, who had led the island nation since 2004. Wong’s succession was carefully choreographed by the ruling People’s Action Party, which has governed Singapore since 1959. He’s the first PM to be born after independence, and (unlike his predecessor) is not part of the political dynasty founded by Lee Kuan Yew – the founding father of modern Singapore, who served as PM from 1959 to 1990. 

What did Lee Kuan Yew achieve for Singapore's economy?

He turned a colonial outpost with seething racial politics into a gleaming metropolis with a rapidly growing economy. Since Lee’s time, and over the past two decades led by his son, Lee Hsien Loong, Singapore has continued on its dramatic trajectory. It now boasts a GDP per capita of an “astonishing” $88,000 – more than the US (about $82,000), and far in excess of the island’s former colonial master the UK (about $49,000).

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Lee’s formula for transforming Singapore was based on openness to trade, geopolitical neutrality, the forging of a national identity based on multiracial civic nationalism, anti-corruption and meritocracy; and a strong role for long-term social and economic planning. At the same time, Lee’s vision left scant room for political dissent or free speech. Today, Singapore remains a managed quasi-democracy, with multi-party elections but only ever one winner.

Is it about strong leadership?

Yes, and also about culture: productivity and growth are seen as matters of existential importance in Singapore, says James Vitali of Policy Exchange. Singapore is a small island whose population even today is less than six million – making it an attractive place for investment was “not merely a matter of national pride but of survival, given the much larger Malaysian and Indonesian nations” right next door. 

As Vitali recounts in an essay on Engelsberg's Ideas, these ideas have deep cultural roots: on a recent visit to a Singaporean church, the writer was startled to hear the deacon leading the prayers imploring God to ensure that “Singapore remain an attractive place for foreign direct investment” and the labour force flexible. The congregation’s response: “Father – hear our prayer”. 

Does Singapore face challenges? 

Indeed. In a downbeat initial speech, the new PM warned that Singapore was grappling with a “dangerous and troubled world”, and that a 30-year era of peace in the Asia-Pacific since the end of the Cold War was now over. He cautioned that, as a small country with an open economy, Singapore would find itself buffeted by international conflicts, “geopolitical tensions, protectionism and rampant nationalism”.

Singapore has always traded on its neutrality, says The Economist. It welcomes US warships but insists it’s open to all navies. It hosts the regional HQs of Silicon Valley firms, and also those of Alibaba and ByteDance (owner of TikTok). Hence a rupture between the US and China is a big danger for the city.  

Are there other dangers for Singapore?  

Yes. An ageing population and shrinking workforce will hurt growth and send healthcare costs soaring. Singapore has always relied on immigration – both of cheap labourers and skilled foreigners – and 40% of residents are non-citizens. But unhappiness among the local population is rising, as housing and other living costs surge. 

The other big issue is climate. Singapore is a low-lying island, which is at grave risk from rising sea levels, and is investing $75bn in sea walls and other protection. Continued economic openness and resilience in the face of these challenges should help Singapore to continue thriving, says The Economist.  

What can Britain learn from Singapore? 

The most fundamental lesson, says Janan Ganesh in the Financial Times, is that economic enrichment ultimately depends on order and cohesion. Merely to note that Singapore’s per-capita income now tops that of the US is to understate the radical transformation of a “once-fractious Chinese-Malay-Indian society”. 

More broadly, though, Singapore is simply too singular and particular – too “sui generis in both its assets and liabilities” – to constitute a template for other nations to follow. Its most meaningful lesson is probably the importance of keeping an open mind and avoiding ideology in policy-making. 

This is a “libertarian nanny state”: a high-income nation where most people live in public housing; a “private-sector paradise where civil servants can earn a fortune”. Singapore’s greatest example to the world was “always inside the head” – a sort of “rational incoherence” that prizes mental agility over dogma and predictable patterns.

What can we take from Singapore's policy lessons? 

The idea of “Singapore” that is often promoted in British political debate – focusing on low tax and light-touch regulation – is too simplistic and underplays the role of a strong state underpinning a strong economy, says Richard Hyde of the Social Market Foundation

But there are specific elements of the “Singapore model” that would certainly help foster long-term economic success in the UK – an efficient legal system that robustly protects property rights, a state that minimises bureaucratic barriers to entrepreneurship and business growth and invests in education and infrastructure, promotes innovation and invests in industry, and a public administration that can devise and deliver policy effectively. 

Look at the current general election campaign in the UK and the parties’ dispiriting lack of ambition and strategic intent, and all of this might seem like a pipe dream. It needn’t be.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription. 

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.