The Locke Luminary Vol. I, No. 1 (Summer 1998) Part 3
Edited by Amanda J. Owens, Director of Legal Studies, and Dr. Charles K. Rowley, General Director
Singapore and Authoritarian Capitalism
by Christopher Lingle, Visiting Associate Professor, Case Western Reserve University
Despite the impressive growth rates in the region, there are some serious questions about the policies and institutions in the high performing East Asian economies. Indeed, several of the traditional institutions can be expected to impose a binding constraint upon the continuation of the rapid economic growth in Singapore and in other countries in the region.
In particular, many of these institutions militate against individuality and individual rights and freedoms. In turn, "authoritarian capitalism" describes the operational elements of this particular development model. On one hand, authoritarian-capitalist regimes place a limited and selective set of persistent policy interventions into market activities. On the other hand, these same regimes impose heavy restrictions on political activity. Whereas, Soviet economies contrived to have an economy without prices, authoritarian capitalism presides over markets without the guarantee of individual freedoms or rights. As a result, there are conflicting and misleading signals about a relatively free economy whereas political freedoms are repressed within an authoritarian- based government. Singapore's single-party regime offers a model of authoritarian capitalism that may be followed by other single-party regimes in the region.
Although this economic development model bears strong similarities to "authoritarian socialism," authoritarian capitalism has been so far immune to the criticisms of their shared potential for failure. Apparently, the strong economic performance has led many observers to ignore the ill effects and the long run costs associated with authoritarian capitalism.
Acceptance of authoritarian capitalism as a viable and exportable model for development depends upon an understanding that economic and political liberties are not interdependent. However, similar faulty reasoning induced promoters of authoritarian socialism (communism) to overlook its most fatal contradiction. The collapse of communism provides evidence that repression of political freedoms will eventually undermine the activities that support economic growth. While authoritarianism can be consistent with short run economic gains, there are logical and economic limits to these results.
On the economic side, authoritarian capitalism involves the politicization of commerce and the commercialization of politics. Commerce is politicized when the profitability of economic actors depends more heavily upon relationships with the ruling party than the efficient use of scarce resources. Commercial politics describes the actions by ruling parties to develop their own sources of revenues through business transactions to decrease their dependency upon the electorate. These activities are likely to involve privileged, insider access to economic data that benefit the party and also allow party functionaries to enjoy private gains.
Despite the impressions to the contrary, authoritarian capitalist regimes employ extensive, if not always deep, interventions in the economy. Most of them have highly interventionist foreign exchange policies. These are implemented in support of industrial policies that target specific industries as leaders in their export-orientated industrialization (EOI) strategies. Investment funds and subsidies are directed toward selective areas of economic activity and, conversely, are diverted from use in other areas. Many of those countries applying EOI policies tend to be highly dependent upon foreign investment funds or technology or both, as well as access to foreign markets for their exports. This dependency on outsiders is exacerabated by the institutionalized restrictions upon the formations of domestic entrepreneurs to provide an indigenous source of economic growth.
An equally problematic issue relating to Singapore's growth is that it can be explained in large measure by the massive increases in input of labor and capital instead of from increases in efficiency or productivity. Most economists readily recognize that such input-driven growth will be limited by the law of diminishing returns. Following this logic, East Asia's "miracle economies" mirror the early stages of growth in the Soviet Union that obviously proved to be unsustainable. In all events, the necessary sources of increases in productivity are inventiveness and free thinking. Unfortunately, policies under authoritarian capitalism suppresses individualism and intellectual freedom and will greatly impair the formation of entrepreneurs.
There are few signs that regimes such as Singapore's are willing or able to undertake the necessary changes to modify their policies and institutions that have generated the conditions of "parasite economies" where they depend upon the financial capital or the creativity and inventiveness of other countries. In the long run, the economic arrangements associated with East Asian authoritarian capitalism are unlikely to sustain the levels of high performance recorded in recent years.
Singapore's authoritarian-capitalist regime has its own peculiar political arrangements that mesh with its economic policies. By combining a sense of national insecurity and dread of the unknown with the fear of government retribution, Singapore's ruling party has implemented a special form of "Asian democracy" that can be identified as phobocracy. The rule-by-fear government of the People's Action Party (PAP) regime judiciously combines a western democratic vocabulary with a particular set of traditional values that it claims are unique to Asia.
In order to maintain a disciplined and docile electorate, the PAP rulers rely upon a beguiling combination of reason and force. However, their idea of reasoning is limited to an unbalanced insistence upon only the advantages of communitarian arrangements and the necessity of consensus building. Their ability to construct these incomplete images of political utopia is supported by a subservient domestic media and a cowed international media. The passivity of the media results from legislative and judicial actions that operate at the behest of the PAP-controlled executive branch. In sum, the regime exercises obsessive and complete control over all branches of government and media as well as other elements of civil society. In turn, there are few limits to the amount of force that can be wielded as reprisal against critics or political rivals.
Singapore's regime practices a form of "soft authoritarianism" without political murders or disappearances. Nonetheless, executive control over the judiciary and the legislature means that law follows the whims of the regime. One element of the illusion of the legal system is the scrupulous application of justice in cases that involve commerce, particularly when it affects the interests of multinational corporations. The resulting system is one of rule by and for rulers in place of the rule of law. The compliance of the courts leads to "lawless order" and is a conspicuous contradiction of the reputation for Singapore's corruption-free government.
The criminalization of politics and politicization of crime represent several of the other institutional arrangements associated with Singapore's authoritarian capitalism. Politics in Singapore is criminalized in the evident pattern whereby opponents of the regime are sued for criminal defamation after criticizing the actions of the ruling party. Moreover, the authorities in Singapore use crime as a political weapon. One aspect of this involves the manipulation of perceptions and the apparent masking of crime statistics to provide the illusion of a crime-free environment. Another aspect is to place the blame for much of the crime that does occur on westerners and their decadent influences.
Blindness to the shortcomings of the intricate and extensive elements of their development strategies has left the PAP open to a potentially serious crisis. It may not be the forces of modernization, per se, that prompts political change in Singapore. A failure in their economic structures may come first. A serious long run challenge that must be faced is how to escape the entrenched dependencies with the developed economies. However, the incentive structures associated with authoritarian capitalism work against the necessary emergence of local talent to serve either as entrepreneurs or as researchers capable of doing original research.
Of more immediate concern is the stability of Singapore's economy that exhibits the classic symptoms of a property and stock market bubble. There is no reason to expect that the record of centuries of the collapse of bubbles can be changed even by Singapore's famously efficient bureaucrats or its supposedly squeaky clean rulers. The question of the bursting or deflating of the speculative bubble is a matter of when, not if.
Happily, there is no doubt that the next century will witness a continuation in the rising fortunes and growing political importance of East Asia. Even so, it may be premature to anticipate that a simplistic extrapolation of the recent economic performance in the region will be an accurate harbinger of its post-millennial achievements. It may be just as likely that the authoritarian-capitalist regimes will set another record. Perhaps they will match their rapid pace of economic development by consigning themselves to the dustbin of history more quickly than was their predecessor, authoritarian socialism.
Dr Christopher Lingle is an economist and Visiting Associate Professor, Case Western Reserve University, United States. His book, Singapore's Authoritarian Capitalism, was recently published by The Locke Institute. © The Locke Institute 1998.