Quora Answer: What Form of Economic System Best Defines Singapore?

The following is my answer to a Quora question: “What form of economic system best defines Singapore?” 

Singapore is a hybrid planned economy and capitalist economy.  It is a capitalist economy in that there is free enterprise and private ownership.  It is a planned economy in that the government owns a substantial portion of many enterprises, and heavily regulates the economy.  The Singapore system could be categorised as a form of collective capitalism.  This system was defined by Dr. Gardiner Coit Means, American economist from Harvard University.  There, he met Adolf Augustus Berle Jr., lawyer, educator, author, and diplomat.  They formed a formidable partnership, and wrote The Modern Corporation & Private Property, one of the most influential works of corporate governance.  This formed the basis for Dr. Means’ ideas on economic policy. 

Adam Smith, the Scottish economist, pioneered political economy.  He proposed that the market has an invisible hand that corrects major imbalances in the market.  That concept is largely discredited.  The market, left to itself, is a garden unattended and the weeds of deregulation, predatory capitalism, kleptocracy and self-interest leads to an increasing cycle of boom and bust that eventually destroys the economy. 

Dr. Means served as economic adviser to President Franklin Delano Roosevelt and his Vice-President, Henry Agard Wallace.  He was instrumental in the New Deal, which dragged the United States out of the Great Depression after Smith’s “invisible hand” failed. 

It is this lesson that shaped part of Singapore’s economic philosophy.  The capitalist market is a means; it is not a god.  It is a beast of burden to be used and controlled, and that requires centralised planning to make the most efficient use of scarce resources.  John Edward Acton, the 1^st Baron, allegedly said, “Power tends to corrupt; absolute power corrupts absolutely.”  That power to shape the economy of a nation should never be left to the market.  It must be regulated.  Thus, while there is an encouragement of free enterprise, there is regulation, and government-linked corporations have a heavy market presence. 

An example of this hybrid system is how Singapore manages its public housing.  The intent is to create wealth through property ownership.  Property ownership also means that the populace is invested in the continued growth and prosperity of the nation, an appeal to self-interest.  The people can buy and sell that property, at prices dictated by the market.  However, there are ethnic quotas to prevent the formation of ethnic enclaves, which would be a threat to national unity.  There are also limits on ownership to prevent people from buying up the housing at the expense of the less fortunate, artificially raising rents and prices.  This sort of control would be anathema to a libertarian economy.  However, the sale and purchase of housing on the open market would be contrary to a traditional planned economy.  China has studied and borrowed the same system.  China is no longer Communist, and has not been so for a long time.  It is a one-party state practicing a limited form of capitalism.