The fallacy of “growth at all costs” (Part One)
Monday, 11 May 2009, 10:11 am
Rajiv Chaudhry / Writer
In this four-part series, Rajiv contends that Singapore’s current economic model of high growth, which has served the nation well in the past, is unsustainable for the future as it will undermine Singapore’s track record of providing a high standard of living.
It is widely known that growth is associated with development and that developing countries continually strive for growth because they wish to move forward along the scale in the development continuum.
But growth comes with costs.
Does there come a point in time when “growth at all costs” can be challenged, when continual growth is no longer leads to unlimited benefits for a country’s citizens? Does the equation “growth equals development” always hold?
My answer is an unequivocal No.
The equation does not hold when a country is small, has limited resources and land size, and has achieved near developed country status. To continue to seek unlimited growth under these circumstances when a tipping point has been reached will result in a slow but sure decline
I suggest that that point has now been reached in Singapore. It is time to review the “growth at all costs” model, with a view of better understanding the implications and costs and thereafter moderating and managing the process of controlled growth to ensure a sustained quality of life for our citizens.History has proven that Singapore’s economic and political decisions in the past were “right”. Our leadership has propelled Singapore forward and upward from Third World to First, to borrow the title of Minister Mentor Lee Kuan Yew’s second volume of memoirs – all in one generation.
But just because something has worked well in the past does not necessarily mean that it will continue to work well in the future. Circumstances change and with them, thinking must adapt to new frameworks and concepts, with a view to sustaining a viable future for the citizens of our country.
Growth under limited circumstances
The Singapore Tourism Board (STB) bills the country as “Uniquely Singapore”. Singapore is certainly unique, though perhaps not in the sense the STB means. There is no other country with a relatively large economy but extremely limited natural resources.
Singapore has a land area of 710 sq km and a GDP of $257 billion supporting a population of 4.84 million people.
The only other country that comes close in terms of land area, GDP and population is Hong Kong which covers an area of 1,108 sq km and supports a population of 7 million. Its GDP in 2008 was US$207 billion (S$310 billion).
Due to its physical constraints, the leading question for policymakers becomes: how can Singapore grow under such limitations? The answer, it seems, has already been implemented.
A high-growth strategy served Singapore well in the first 25 years of independence. It is well-documented that when Singapore separated from Malaysia in 1965, both its economy and infrastructure were fragile. The departure of the British forces soon afterwards exacerbated the situation and it was necessary for Singapore to go out to the world on a war footing to market itself as a destination for MNC investments.
Singapore has been singularly successful in this quest.
Between 1965 and 1990, Singapore’s annual GDP ballooned from S$4.3 billion to S$96 billion or by a factor of 22 times. Between 1990 and 2008, the economy mushroomed further to US$257 billion, or by a factor of nearly 4 times – impressive growth by any standards.
Yet, this growth comes at a price. But more on this later.
Besides the constraint of space, Singapore faces another limitation: Manpower, or the lack of it. When the nation-state attained independence, population size stood at 1.88 million. By 1990 the population had increased to 3 million, of which some 10% or 311,000 were foreigners. By 2008, the population had increased further to 4.84 million, with 478,000 Permanent Residents and 1.2 million foreigners. Citizens now comprise some 65% of the population, down from 90% in 1990.
To accommodate the 61% increase in the total population since 1990, there has been a frantic pace of construction. The steady influx of people into the country has kept up the pressure on rentals and property values, thus creating wealth on paper.
People basked in the warm afterglow, knowing that their savings, invested mostly in property, are not only safe but, like warm baker’s dough, are steadily rising.
There are consequences, though, to the relatively rapid and sudden increase in population on a land-limited island like Singapore. These outcomes will be discussed in my next article.
End of part one.
Rajiv Chaudhry is self-employed. He is concerned about where S’pore is headed and hopes to share his views with Singaporeans.
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