Being the second freest economy in the world – What does it mean to Singaporeans?
January 27th, 2010 | 
Author: By Damon Yeo
For 2010, the Singapore economy has been named as second freest economy in the world, after Hong Kong by the Heritage Foundation. Since 2000, our economy has consistently scored about 87 by the foundation, a considerably high score according to this index.
So, what does this study mean for the average working class Singaporean? If you do not have time to finish reading the article, here is the answer: very little.
Well to be fair to the study, which had been carried out annually since 1995, it was not set out to measure the overall well-being of an average citizen in any given economy. Instead it just specifically measures how freely an individual can work, produce and consume as well as how freely the government allows labour, capital and goods to move around. It does not measure how much an individual has to start with.
The index measures ten separate broad areas of economic freedom and a maximum score is 100 for every area.
Government Spending
One area to determine economic freedom is by looking at how much the government spends. The concept is that the less the government spends, the less economic distortions there will be in the market. In this benchmark, an economy where the government spends nothing at all will get a score of 100.
Compared to other economies in the world, Singapore is ranked second. Only Myanmar has a ‘better’ score (possibly due to corruption). As expected, Scandinavian economies with generous welfare benefits are heavily penalised in this area – Sweden is ranked third last and Denmark fifth last.
Quite clearly, this benchmark illustrates the inverse relationship between (the lack of) government spending and economic freedom.
However, bear in mind that low level of spending by the Singapore government does not necessarily indicate neglect of provision of public goods – it could also represent the lack of unemployment benefit payouts and efficiency.
Labour Freedom
Our economy also ranks number one in the Labour Freedom benchmark. This benchmark measures six different factors, including hindrance to hiring additional workers, difficulty of firing redundant employees and mandatory severance pay. Broadly speaking, if companies in an economy can hire additional workers easily, fire redundant workers easily and pay very little (or no) severance pay, this economy is defined as free.
This benchmark obviously measures economic freedom from the perspective of the corporations and not the workers.
A previous article has already discussed this extensively. This report, which is done independent of World Economic Forum’s report on Competitiveness, reaffirms the fact that corporations are “well-treated” in Singapore, at the expense of workers themselves. This particular benchmark will be uncomfortable reading for many Singaporeans who lost their jobs during the current recession.
This labour freedom is likely achieved by the tripartite relationship (government, unions and workers), which had been often championed as a comparative advantage of our economy.
Monetary Freedom
This particular benchmark in the study measures price stability and level of price controls in an economy. The study deems that If prices are stable (ie low inflation) and the government does little to interfere with market prices, the economy is free.
Singapore is ranked relatively high at ninth for this benchmark, behind economic powerhouses like Japan, Hong Kong and Switzerland.
However, the overall level of government involvement in Singapore’s economy is very different from that of the rest of these countries. More than 80% of Singaporeans own properties sold to them by the government and through Temasek Holdings, the government has significant interests in a large number of companies listed on the Straits Times Index. In a nutshell, the Singapore government can impose much more effective price controls than most other developed economies.
Despite its ability to, the study has shown that the Singapore government has done little to control prices in Singapore. This somewhat explains the exponential increase in prices of HDB flats in Singapore.
There will be debate on whether price controls have desirable effects on the society (not economy) in general, but it is clear from here that our government has chosen not to control prices.
All in all, this report from the Heritage Foundation tells us very little what we don’t already know. For many a years now, the Singapore economy has been a great role model for all other countries in the world, but the bigger question is – how much had that benefitted workers in Singapore?
Other articles by Damon Yeo:
>> GIC’s investment in Stuyvesant Town: Unraveling the mystery
>> The demise of Dubai: How the mighty have fallen
>> The minimum wage: pros and cons
>> HDB’s 2 billion dollar deficit: More questions than answers
>> DBS and a series of ‘unfortunate events’
>> Sale of Chartered – An Anatomy
>> 3rd most competitive nation in the world and what it means to the average worker
About the Author:
Damon is a proud graduate of Nanyang Technological University in 2004 with a degree in Accountancy. He is currently working in the finance department of a UK Bank
Posted in 31 Responses to “Being the second freest economy in the world – What does it mean to Singaporeans?”
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Great thou Singapore. 2nd in the world! Again INDEPEDENT adjudicators.
We can expect those countries down the line to be worse off if not bad.
“Government Spending”? In the first place, governments must have the money before they can even talk about spending. Right?
How did the money come about in the first place.
Oh . . . grow from trees.
Now we know why most of the countries around the world are livng in abject poverty.
We in Singapore “mmm chye see”.
Wah second best also kena condemned.
Like tat second last worst lor.
Can please people these days.
Being the second freest economy in the world – What does it mean to Singaporeans?
You want an honest answer?
Nothing!
The answer is: NOTHING!
It means nothing to me. And I am a Singaporean.
We can have the world’s highest GDP or GNP or whatever, it will also mean NOTHING to me as I did not benefit directly from it. My salary is not tacked to the GDP or GNP or whatever.
was it a great model?
who copied us?
dunbeanidiot, your salary is linked to the gdp per capita you freaking idiot.
salaries rise on the whole when gdp per capita rises. unless you are uneducated and unskilled washing dishes then yes your salary will not rise much.
singapore has the second freeiest economoy in the world but one of the most unfree society and politics in the developed world.
lol
To singapore,
I am sure my salary is not tacked to GDP per capita.
Because how much my salary increases depends on my bosses’ mood and if there are any FTs currently willing to work for cheaper wages and at the same time can ‘bao’ more things than me w/o any complaints.
And no, I am not an uneducated and unskilled dishwasher.
I happen to be a learned person with integrity and honesty.
SG very free for any foreigner to come here to take our jobs and mow down pedestrians and allowed to leave without any consequences.
dunbeanidiot,
if you are “learned” as you claim you are…then you should know that the higher the gdp per capita, the higher the average level of wealth in society and the higher the average wages..
feel free to work in thailand (gdp per capita 5k) or norway (gdp per capita 90k) to check out my theory.
if you are “learned” you should know better than to bitch about your boss’s mood online and expect the government to give you a better boss
and if you are educated, please refrain from typing in singlish or any of that crap. use standard english please. thank you.
You all don’t like corporations ah? Where you all work? Fishing at river?
“feel free to work in thailand”
That’s funny, I am pretty sure that a few Norwegians working in Thailand or for that matter Singapore earn more than what they do back home.
Btw has Singapore’s GDP per capita (including PR and FT) increased or decreased in the past year?
What does this mean to me?
If Me is an employer, it means more revenue from cost savings on labor. But no guarantee on productivity or quality of work since cheapest or cheaper does not guarantee the best.
If Me is a employee, it means i ask for CHANGE.
If Me is Elite, i not affected if at all or by much.
Hi – I believe by and large, GDP per Capita is a direct reflection of wage levels, BUT, general well-being can only be measured when other information like PPP, income inequality and disposable income are taken into consideration.
If a job in Bangkok pays $5k per annum but things are cheap and affordable, it may not be a bad deal if compared to $90k per annum in Olso with 60% tax and extremely high cost of living.
WOOOO
WAHHHH
YPAP gang full force in TR now after the Eric How and Sear (suay) hock rong fiasco? LOL
We’ll vote in an ANIMAL if its possible than vote ANY PAP. Spoil votes = vote for PAP. VOTE FOR ANY ONE EXCEPT PAP.
PAP = Thieves, steal from the people through the manipulation of laws which they control.
PAP = agreeing we should have ‘elites’ to rule over us. What makes them an ‘elite’? Same as what made china emperors long time ago, born in the right family. Singaporeans you can accept that?
PAP = Communism with superficial actions that DO NOT wane their overall authority on singaporeans.
PAP = accepting Ho Ching to lose billions without accountability, to blame singaporeans for their failures without accountability, to lose a terrorist in its highest security prison without any accountability, to be the highest paid government in the WHOLE WORLD without need of accountability.
PAP = people like sear hock rong and eric low (one wif merc benz avatar) to look down on you coz of our forefathers, who think they know everything, who ends up in NTUC, Sembcorp, keppel and then losing BILLIONS in China, Dubai etc. They only know how to bully Singaporeans and earn our money, outside in the real world, they lose OUR money.
To continue to be associated with PAP = you are materialistic and hoping for a leg up in the material world. To be a hypocrite. To fraud and scam commoners who have lesser education than you. PAP = THIEF.
And all thieves will be punished. Not by the Singapore Kangaroo court, but by the PEOPLE’S COURT of JUSTICE. If like LKY you will pass away first, than a higher being will judge you and your punishment MORE SEVERE than you can imagine.
On a pay day while the master is giving out $$ to the servant….
Master : hey lee, by the way, can you do this for me and make the house tidy?
Servant : what, go do it yourselves lar, you have become lazy since I come here.
Master : but you are supposed to do the chore, that’s why we choose you to be our servant.
Servant give a tight slap on the master face and said : who asked you to choose me, stupid, if you want me to really work, please pay me high high, I am a talent very hard to find one, without me, you can not survive lar. You go back to your workplace, work harder, smarter and faster to earn more money to pay me, otherwise no water for u to drink, no sand for your flower pot (HDB), your neighbors come disturb u, gangster (terrorist) come bash u. I tell u your house got no resources still ya ya, without me, you die.
Servant said and followed by a kick to the master abdomen.
Since the servant is the one and the only one got talent, bo bian, the master still have to smile to the servant and said : yes yes yes, I shall do what you said, you are the best. Some more I shall extend your contract for another term. By the way, I shall ask all my family member to go and pia day and night so that our household income(GDP) is high enough to pay you, in addition, if you are short handed, I shall employ more senior servant, servant mentor, deputy servant (more foreign talent) to help you out.
Servant : very good, at least you are grateful…. remember ah, without me, you die.
政府本是人民公仆，如今人民却变成政府的奴隶
WOW , this country so free .
1 ) free to increase GST as you like
2 ) free to go back to romania as you like
3 ) free to take up citizensship as you like ( FTs )
4 ) free to use CPF as you like ( billions lost by Temasek & GIC )
5 ) free to charge the citizen whatever as you like
6 ) free to implement policies to protect Papaya as you like
7 ) free to divide GRC wards as you like
8 ) free to sue oppositions as you like
9 ) free to cover up your shits in media and TV as you like
10 ) free to change political policies to protect your shit party as you like
11 ) free to work until 88 as you like
Clement tan,
why not take the next plane out to thailand then since you seem to think wages there are higher than singapore?
people like you are retarded. fools. idiots. and idiots always sprout nonsense.
Give me a monkey anytime.
nothing special.
@Singapore, you’re the one pretending to be learned and sprouting nonsense.
GDP per capita is not a measurement of the standard of living in an economy. However, it is often used as such an indicator, on the rationale that all citizens would benefit from their country’s increased economic production. Similarly, GDP per capita is not a measure of personal income. GDP may increase while incomes for the majority of a country’s citizens may even decrease or change disproportionally. For example, in the US from 1990 to 2006 the earnings (adjusted for inflation) of individual workers, in private industry and services, increased by less than 0.5% per year while GDP (adjusted for inflation) increased about 3.6% per year over the same period. Arguably the same situation is happening in Singapore where wage levels have not kept up with the rising standard of living. GDP also does not take disparity in incomes between the rich and poor into account.
Singapore’s GDP PPP at US$50K is above that of Switzerland US$41K. Who will say we have higher standard of living than the Swiss? Bermuda has a higher GDP than Singapore. However, that doesn’t mean they have a better standard of living than Singapore as implied by your theory
i’m only surprised that Singapore is not in the top place! of course, singapore has a damned free economy.
take a look at the selection criteria – to be free largely means pro business.
put in labour unions that genuinely protect workers’ interest, and the score will come down. put in a “tripartite” union that looks after the interests of big business as well, the score goes up.
absolutely good if you’re a businessman, and not an employee. i’m glad the msm is trumpeting this accolade – singaporeans can see how exploited they are.
Free for the wealthy to continue to be richer. What is there for the middle class? Nothing. You still need to work your butt out to pay your bills, for an overpriced ’subsidized’ flat etc. After years of slogging, you are still barely surviving. Comes retirement, you have little to live on. That’s life in Singapore. I rather have a less free economy like the Scandinavian countries and live life to the fullest with little to worry about.
I tell what what I think it means: it’s just a piece of news that’s to be shared to ensure Singapore’s FDI remains high. What does it mean for the average Singaporean Joe and Jills? NOTHING.
And oh, please give your ministers a pay raise for doing a job well done.
@ to be free,
I am not pretending to be learned. I never said I was an economist.
It is common sense the higher the gdp per capita (NOMINAL NOT PPP) the higher the average wages.
Singapore’s NOMINAL gdp is lower than the Swiss therefore their workers are paid more. GDP per capita PPP is skewed because it is adjusted to the cost of living.
Bermuda average wage is indeed a lot higher than Singapore. Some checks on Google shows that average wage in Bermuda is USD 4.5k a month. In Sg, i recall the last census showed that average wage is around 4k SGD a month. So yes, Bermuda’s average wage is indeed higher. 4.5k USD (6+k SGD) vs 4k SGD.
Standard of living wise, Bermuda is also better. Bermuda has democracy, no one party rule, freedom of peaceful assemblies, no prosecution of opposition politicians, no detaining opposition politicians without trial, no jailing of opposition politicians for just gathering to give out flyers. Bermuda is also less crowded than Singapore. People are not dogs who live in fear. People also speak proper English (transatlantic accented English). Life is much more relaxed and not a rat race city kind of life you lead in Singapore. The laws in Bermuda are also more liberal and punishments actually fit the crime.
So yes, Bermuda’s standard of life is indeed better than Singapore.
The government would like you to think that as GDP per capita goes up, the average wages go up, and the standard of life goes up. Therefore the Merry men in white peg their own pay to GDP growth.
Two problems here. The first is, “average” means if 10% of the population are millionaires (read Indonesian PRs) and the rest of 90% living on poverty line, the “average” GDP per capita is still very high.
A better measure would have been the MEDIAN pay of SINGAPOREANS.
The other problem is GDP per capita may not be correlated to living standard. Even if you bring home a huge salary, if the cost of living is high, your standard of living will be lower.
Recently there have been many reports to show that the cost of living in Singapore is the second highest in Asia, that Singaporeans need to work the longest to be able to buy the same stuff compared to workers in other parts of the world, etc etc.
Read it up, Singapore is a Scam.
Got many use median meh? Everyone see per capita what. They got 2 – PPP and real.
“1 ) free to increase GST as you like
2 ) free to go back to romania as you like
3 ) free to take up citizensship as you like ( FTs )
4 ) free to use CPF as you like ( billions lost by Temasek & GIC )
5 ) free to charge the citizen whatever as you like
6 ) free to implement policies to protect Papaya as you like
7 ) free to divide GRC wards as you like
8 ) free to sue oppositions as you like
9 ) free to cover up your shits in media and TV as you like
10 ) free to change political policies to protect your shit party as you like
11 ) free to work until 88 as you like”
IN addition,
12) allow compulsory but ‘free’ stay in Changi Prison
for those you dislike.
just to add a little. countries, to illustrate the rich poor divide, are at least honest enough to provide a “median” income number. I don’t what’s that for SG, I would imagine that to be pretty low.
//Ah Hock
Your govt just said that it has not done as much as the Taiwanese and South Korean govt.
//#Linda L
The govt never wanted the middle class to grow to stop them from challenging the pigs@parliament politically.
In SG, the median income is about $2,000.
Let’s hope Opposition make the points you are making at GE.
Sylvia seems to raising her game, if debate with Alvin Yeo is a gd guide.
And RP know econs.