Understanding the U.K.’s Strange Singapore Envy – Bloomberg

A pro-Brexit argument that always makes me giggle a little is that leaving the European Union will allow the U.K. to become the new Singapore. That’s right — the land of hope and glory, home to the world’s fifth-largest economy, wants to emulate its steamy little former colony, population 5.4 million.

When you look at the per-capita income data, though, you can kind of understand it. Once-poor Singapore passed the U.K. in 2006, and the income gap has grown to almost $3,000 a year since then:

When you adjust for what a person can actually buy with that money, Singapore looks even better: 

Singapore was the world’s fifth-most affluent “country” (there are two special administrative regions of China included on the list) on a purchasing-power-parity basis in 2015. The U.S. was 11th, at $57,540 a year. The U.K.? It came in 26th place among the countries (and parts of countries) for which the World Bank has data, at just $40,900. Even the long-suffering euro area did better than that, with a PPP-adjusted income of $41,179 in 2015.

So yes, a bit of Singapore envy is in order. Still, it’s worth asking which part of Singapore’s recipe for success the U.K. would need to follow. Is it …

The New Singapore idea seems to be mainly that leaving the EU will allow the U.K. to cut taxes and roll back regulations, positioning itself as a free-market oasis just off the coast of Europe.

Now, the U.K. already has a lower tax burden and a less-regulated labor market than most of the countries across the Channel, and London has been playing a role in Europe similar to that of Singapore in Asia for decades now. Global corporations, especially financial ones, have chosen Singapore and London as operations bases where the language is more familiar and the rules more amenable than in other countries in those regions. So far, most of the attention has been focused on the risk that Brexit, by restricting access to European markets, will harm London’s status as a financial hub. But there’s enough uncertainty about this that I guess it’s impossible to dismiss the opposite argument entirely.

Peter Hargreaves, the U.K. billionaire who bankrolled the Brexit campaign and seems to have been the first to popularize the Britain-as-Singapore analogy, has couched the argument mainly in terms of giving the U.K. the freedom to make the same kind of smart choices that Lee Kuan Yew, the father of modern Singapore, made. As Hargreaves told the Guardian last year:

When he took power, Singapore was a mosquito-infested swamp with no natural resources, but he turned it into the best economy in the world. It’s a bit of a clinical place, but it shows what a small country with limited resources can do. And we are much bigger and have more resources. Britain will be far better off as an independent nation.

But can a big(gish), diverse, resource-rich, democratic nation such as Britain really follow in the path of a tiny, semi-autocratic city-state? I’ve been a fan for a while of the writings of David Skilling, a New Zealander based in Singapore who advises small countries and the corporations doing business in them on how to succeed in this big, scary world. One of his main arguments is that the success of Singapore — and other small economies such as Denmark, Ireland and Switzerland — has less to do with specific policy choices than with some core national attributes. Those small states succeed, as I paraphrased Skilling a few years ago, because:

They’re cohesive, and thus able to make policy decisions quickly and stick with them.

They tend to make good policy decisions, in part because they’re very aware of the world around them and what it takes to compete in it.

Or, as Skilling put it in an email today:

For a small economy, being very sensitive to the external environment — and responding proactively — is central. 

Being small generally means having less autonomy. You can’t shape the world; you have to adapt to it. But if you’re really good at adapting, you can sometimes run rings around big, lumbering rivals.

Cutting loose from the European Union could give the U.K. more room to maneuver. But the U.K. is a relatively large country that would be hard-pressed to maneuver like a Singapore — and it may be shooting itself in the foot by walling itself off from its neighbors.

There is a part of the U.K., though, that Skilling thinks shows promise. An independent Scotland, he wrote in his weekly note on Sunday, might just be small and cohesive and agile enough to make a go of it as a cold, windy Singapore on the moors.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net

Understanding the U.K.’s Strange Singapore Envy – Bloomberg

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