Singapore has experienced one of the most rapid capitalist transformations in Asia. From the late 1960s to the early 1980s, this was accompanied by remarkable material and social improvements for the vast bulk of Singaporeans, and sustained political support for the People’s Action Party (PAP). However, its economic model is now generating uneven social impacts, heightened social contradictions and thus new political challenges for the ruling party.
The PAP suffered a combined loss of 15% support at the 2006 and 2011 general elections, amid widespread concerns about inequalities, living costs, declining social mobility, immigration and public infrastructure. In 2011, its vote share dipped to its lowest level since independence in 1965.
In 2015, however, the PAP reversed this pattern with a 9.8% swing in its favour, following policy measures including increased social spending. But can the PAP promise of a more egalitarian Singapore be reconciled with core PAP ideologies that support the acute concentration of elite power?
This is the first of a series of four articles.
Growth and ideological claims
The PAP’s growth strategy has relied heavily on the increasing importation of labour—both high-cost “foreign talent” and low-cost unskilled labour. This in turn has generated more pressure over material and social inequalities, as well as public concerns about the social and environmental sustainability of population growth. Thus the very same sustained high growth, once pivotal to the PAP’s performance legitimacy, has recently shown the potential to erode its political support.
These political dynamics reflect struggles within Singapore over how to distribute the rewards and consequences of its capitalist development. This development has involved both multinational corporations and an extended, consolidated network of state-linked businesses (i.e. state capitalism), causing power to be greatly concentrated in the hands of technocratic elites.
Repressive state powers have protected this concentration of power from scrutiny and challenge. At the same time, certain key ideas and beliefs have been used to communicate a specific picture of technocratic elite rule under a so-called meritocracy, and legitimise it by presenting it as beneficial.
These ideas—the PAP’s ideological claims—have, until recently, tended to resonate with how Singaporeans interpreted their experiences. But there’s been more questioning of these ideas in the past decade, including of the party’s three key core ideological claims:
- First, that family responsibility for welfare is preferable to so-called “Western” welfarism and citizenship rights.
- Second, that political accountability derives from the virtue of political leaders rather than liberal and democratic institutions.
- Third, that rational problem-solving should be favoured over political competition and contestation (a “consensus” or “consultative” ideology).
Individually and collectively, these ideologies have been central to the concentration of state bureaucratic and political elite power. The PAP has therefore sought to defend and creatively adapt these claims, an effort encouraged by the 2015 election results.
It remains to be seen whether the PAP’s commitments to greater social redistribution and other policies can meet voter expectations. But even if they don’t, this may not necessarily imply any prospect of democratic change. If the PAP cannot successfully defend its core ideology, this doesn’t mean it’ll relax the legislative and other measures constraining political competition. Instead, the party may remain politically dominant, and adopt a new form of authoritarian rule, even if voters are less convinced by the ideology underpinning it.
Globalisation and state capitalism
Authoritarianism, economic globalisation and a particular variant of state capitalism have developed side-by-side over the last five decades in Singapore. Global market forces and foreign capital interests have contributed to inequalities, but they’ve done so in the context of the PAP’s political and economic interests in state capitalism. Moreover, because the PAP is so pervasive in Singapore’s economy and society, it’s difficult for the party to distance itself from concerns about inequality.
The PAP’s state capitalism has been shaped by both economic and political considerations. While the PAP embraced international capital to accelerate industrialisation and development, there were also calculated political benefits to preferring international over local private capital. In the 1960s, Lee Kuan Yew was concerned that a private domestic bourgeoisie (business owners), possibly ethnic Chinese, could provide a power base for, or alliances with, political factions, with implications for policy directions.
Meanwhile, state and ruling party effectively merged and established the base for an increasingly powerful politico-bureaucratic elite. This elite smoothed the way for international investment by suppressing labour and ensuring the appropriate physical, technical and social conditions for industrial production. It also delivered state economic and social investments which, in the 1960s and 1970s, were crucial to raising living standards and generate electoral support for the PAP.
As the economy matured in subsequent decades, the roles and powers of technocratic elites grew and strengthened. A vast array of government-linked companies (GLCs) came to dominate the upper echelons of the domestic economy and stock market. By March 2014, the government holding company, Temasek Holdings, boasted an investment portfolio of S$223 billion (about US$161 billion). Through the Government of Singapore Investment Corporation (GIC), a sovereign wealth fund established in 1981, “well over S$100 billion” of taxpayers’ money is also now invested overseas. This internationalisation of “Singapore Inc.” has increased the power and resources at the disposal of technocratic elites.
Consequently, despite the highly globalised economy, many Singaporeans are directly or indirectly dependent on the state for access to economic and social resources—including housing, employment, business contracts and personal savings. Such dependence has fostered bureaucratic and administrative techniques of political control and governance that include sophisticated forms of political co-option as well as crude intimidation. Thus, political economy relationships have helped obstruct independent domestic sources of power. This has supported political fragmentation and compartmentalisation, making it harder to establish coalitions among government opponents and critics.
Importantly, this economic model depends on foreign labour at both the most, and least, skilled ends of the economy—to the benefit of foreign multinational corporations, GLCs and small-to-medium local private companies alike. By 2010, foreign labour accounted for 1.1 million or one-third of the total workforce, helping to boost Singapore’s population by nearly 32% in just a decade from 2000.
The presence of 201,400 migrant domestic workers (MDWs) has significant implications for social policy: for example, there’s less pressure to provide public childcare facilities, because MDWs are often primary caregivers for children in middle-class families. The government also generates revenue by charging levies on employers for the visas to employ these and other migrant workers.
This marriage of economic globalisation and state capitalism initially brought rapid economic growth and widely shared material and social benefits for Singaporeans. But in recent decades, upward social mobility has slowed. The uneven effects of the highly globalised economy have intensified. Government policies have either failed to ameliorate this or contributed to widening inequalities.
In particular, unskilled and working-class Singaporeans have suffered from the absence of a minimum wage, the market impact of low-cost foreign workers, and the lack of genuinely independent and effective trade union representation. Meanwhile, the inflationary costs of housing, transport and health, driven by dramatic population growth and high professional and executive salaries, have affected many middle-class Singaporeans too.
Singapore’s income gap, as measured by the Gini coefficient, rose from 0.422 in 2000 to 0.478 in 2012. Singapore thus became the second most unequal economy, after Hong Kong, in the developed world. According to researchers at Singapore Management University’s Lien Centre, absolute poverty levels in 2011 were around 10–12% and relative poverty levels twice that figure.
Increased income inequalities and absolute poverty occurred not just because incomes for the top 10% rose much faster than for the bottom 20%, but also as part of a broader redistributive process. Wage shares of GDP (that is, the part of GDP that can be attributed to income from labour) fell from 45.9% in 2001 to 42.3% in 2012, while the GDP shares of profits and taxes rose.
These figures are particularly revealing of the continued importance to the prevailing development strategy of holding wage costs down in some sectors, despite the increasing sophistication of other sectors of the Singapore economy. Moreover, median household income grew in real terms by just 2.5% per annum in 2003–2012 compared with real GDP growth of 6.1% per annum in the same period.
Immigration and productivity
Just as mounting inequality didn’t arise by accident, neither has public disquiet about immigration. The government’s 2012 Population White Paper projected that Singaporeans—comprising 91% of the population in 1980 and 62% in 2012—would account for just 55% of the population by 2030. Immigrants and foreign labour would sustain high growth by mitigating an ageing population and falling birth rate.
On 16 February 2013, around 5,000 protesters gathered in Hong Lim Park—the only space in Singapore where citizens can demonstrate without a permit—in a rare mass demonstration to express opposition to such plans. They raised concerns about further overcrowding, rising costs and the challenges of social cohesion. Opposition parties released counter-proposals, including for slower economic growth and more emphasis on raising Singapore’s fertility rate.
The government’s 2010 Economic Strategies Committee report had already signalled a restructuring of the economy, to reduce dependence on low-skilled foreign workers in favour of greater reliance on productivity increases to drive growth. Yet, before and after the Population White Paper episode, restrictions on foreign labour only slowed the rate of intake of workers; their absolute numbers continued to grow. By December 2013, there were 100,000 more foreign workers than in 2010.
The transition to higher productivity has proved difficult for many small-to-medium enterprises (SMEs) in particular. Significantly, SMEs employ foreign workers on projects and services that GLCs generate or commission, such as in the construction industry, and conservancy and cleaning for the Housing Development Board. A substantial cutback on low-cost foreign labour would thus likely increase the cost of services to the public and/or reduce profits of GLCs—directly harming the state’s capitalist interests. As Prime Minister Lee Hsien Loong explained during the 2015 election campaign, “there are no easy choices”, declaring that slowing the inflow of cheaper overseas workers has raised business costs and slowed economic growth. Lee conceded that “[w]hichever option we choose, it will involve some pain.”
Indeed, as Manu Bhaskaran points out, a successful restructuring policy could have potentially adverse political implications for the PAP. SMEs are significant employers of many lower-middle income earners. Beyond those directly affected by the restructuring strategy, academics and professional economists have expressed concerns about its redistributive effects. Yet low wage costs cannot completely stop the hollowing out of the manufacturing sector by lower-cost production sites in China and Southeast Asia. This is why, in 2005, the PAP controversially lifted its previous ban on casinos, to diversify the economy and boost tourism. For similar reasons, the domestic housing market has gained in importance to growth, aided by migration.
Challenges ahead for the PAP
The PAP government understands that it faces serious new challenges. Accordingly, leading up to the 2015 elections, it embarked on other policy adjustments and flagged more to come, including: an S$8 billion (US$5.8 billion) commitment in the 2014/15 budget to a Pioneer Generation Package boosting healthcare subsidies for 450,000 Singaporeans 65 years or older; initial reforms in transport, housing and superannuation, including expanding subsidies for first-home buyers and substantially boosting the supply of HDB flats; increased income supplements for the bottom 20–30% of workers; and salary cuts for government leaders and ministers, who nevertheless remain among the highest paid in the world.
But these policy responses face constraints of the ruling party’s own making. The PAP aims to address public concerns without significant challenge to the economic and political system that affords considerable powers to technocratic elites. Yet, in response to policy problems, Singaporeans have been reflecting critically on the core PAP ideologies that justify technocratic authoritarian rule—not least on welfare, accountability and political representation.
The rest of the articles in this series will examine the challenges—and the PAP’s defence—for each of these core ideologies.
Article: Garry Rodan
Photographs: Tom White
With a still formidable 60% support, the ruling party retained all but six of the 87 seats in parliament in 2011 due to the combined effects of the first-past-the-post voting system and electoral gerrymandering. Netina Tan, “Manipulating electoral laws in Singapore”, Electoral Studies, 32 (2013): 632–643.
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