In the foreword to “Lee Kwan Yew: The Grand Master’s Insights on China, the United States, and the World”, Henry Kissinger said “I have had the privilege of meeting many world leaders over the past half-century; none, however, has taught me more than Lee Kwan Yew.” Often referred to as the founding father of Singapore, Lee Kwan Yew has led the small, backward fishing village with virtually no natural resource into a first-world nation in a single generation, earning himself a reputation as “the man who saw tomorrow.” Mr. Lee has served both as mentor to Chinese leaders and counselor to American presidents. However, his views and insights are far from diplomatic. In fact, his frankness often draws controversial views and opinions. Among this was Mr. Lee’s self-claimed pragmatic approach to governance.
In August 2007, Leonard M. Apcar, deputy managing editor of the International Herald Tribune had an interview with Mr. Lee. The interview focused on understanding the Singapore’s extraordinary growth and also Mr. Lee’s assessment of the broader political landscape, China, Southeast Asia, Japan and the United States. Excerpts of this interview can be found in the following link (Credit: The New York Times). http://www.nytimes.com/2007/08/29/world/asia/29iht-lee-excerpts.html?pagewanted=all&_r=0
While debates have been going on about the superiority of the Western democracy versus the Eastern communism and authoritarian, and discussions have been speculating about the possible future of a more liberal democratic Singapore, what stood out to me is Mr. Lee’s outright pragmatism when talking about Singapore’s growth and its future. In the interview, Mr. Lee agreed to the importance of marketplace stimulus to the growth of the economy, however, he also stressed the importance of pragmatism towards opening up of society, loosening of the press, of free speech, of political competition.
In addressing free speech, Mr. Lee said “For the top 20 percent of the population, there are no constraints there. They’re educated abroad, at university. So, they know the wide world and they are on the Internet and they’ve got friends, they e-mail them. They travel. Every year, about 50 percent of Singaporeans travel by air. So, this is not a closed society. But at the same time, we try to maintain a certain balance with the people who are not finding it so comfortable to suddenly find the world changed, their world, their sense of place, their sense of position in society. We call them the heartlanders…”
I see this practical approach making a lot more sense for developing economies as a transition model rather than a direct Eastern communism/authoritarian or a Western democracy. Studying the case of Special Economic Zones in India by Laura Alfaro and Laksmi Iyer, while the SEZs are important stimulus to India’s economic growth, the democratic government met with strong resistance from its people. The case of public purpose versus property right hinted at the apparent gap between the level of development of the country’s political liberty and the level of education and openess of a population with over 1 billion people. Successful cases of implementing SEZs have also been seen in economies where the government could take more assertive actions overriding individual’s interest i.e. China, South Korea and Singapore.
In the discussion paper “Which capitalism? Lessons from the East Asian Crisis”, Raghuram G. Rajan and Luigi Zingales talked about the differences between a relationship-based system versus an arm’s length system. One of the conclusions was the importance of establishing a strong contractibility system to support to influx of capital, otherwise a high capital with low contractibility could lead to what we’ve seen at the 1997 Asian financial crisis. This study highlighted the importance of maintaining control (in this case, of capital inflow) while closing the gap of internal infrastructure development.
While Mr. Lee has attributed much of his approach to governance to understanding the Asian values, I see his governance as a pragmatic approach maintained through strong government control. For developing economies where the level of education of its population lags behind that of developed nations, a strong government is important to take the lead and direct economic policies that are vital to the public purpose at large. Where internal infrastructures are still being put into place, a strong government is important to moderate the opening up of the economies to prevent an influx beyond what it can sustain.
However, we must also recognize that this is a transition model. There would be that tipping point where the government needs to slowly let go of its control and empower its more educated generation, placing trust in the developed internal infrastructures to keep the development in place. As in the case with South Korea, the model of using large conglomerates to lead the industrial development was important when the government needed strong business leaders to lead the economy. However, 1997 Asian financial crisis was a tipping point where over-reliance on these conglomerates could do harm to the economy. A transition of power and control to the rest of the population is important to sustainable economic growth.
Which Capitalism? Lessons from the East Asian Crisis – Raghuram G. Rajan and Luigi Zingales, University of Chicago
Special Economic Zones in India: Public Purpose and Private Property – Laura Alfaro and Lakshmi Iyer (Harvard Business School case)
Daewoo and Korean Chaebols – Elyssa Tran (Centre for Asian Business Cases)