Monday, March 23, 2015


Here are a couple of bits about Singapore that are relevant for this semester.

1) We have a student, JB, who did an exchange program in Singapore. So we have inside information.

2) Lee Kuan Yew passed away this weekend. He was prime minister of Singapore from 1959 to 1990. Singapore has a one party political system, so this position was akin to CEO. He then took another position, more advisory, less day-to-day, that might be regarded as something like a corporate president, which he held until 2004. After that he took an emeritus position for 7 more years. Anyway, he's such a big deal that his obituary is on the front page of today's issue of The New York Times (they do that once or twice each month). In the annals of developing countries, Lee Kuan Yew is the ne plus ultra of effective leaders: Singapore was a developing country when he took over, and was a developed country when he stepped down. No one else has done that. If you're ever in a discussion of the success, or lack thereof, of developing countries, you'd better have him in the mix.

3) This is a good time to bring up an observation, based on a descriptive growth model (that we'll be covering over the next month), of how we explain high growth rates in some East Asian countries. This is based on an article entitled "The Myth of Asia's Miracle", written by Paul Krugman, and published in Foreign Affairs in 1994. Krugman's position is that the common understanding that growth in East Asian countries is a symptom that they are doing something special that should be emulated elsewhere ... is an urban myth.
[This conclusion is] called into question by the simple observation that the remarkable record of East Asian growth has been matched by input growth so rapid that Asian economic growth, incredibly, ceases to be a mystery. [quote corrected after class]
Essentially, Krugman is saying that other countries don't match the growth in East Asia because they do not have societies or governments that are capable of marshalling capital as readily.

Krugman's position has been widely influential. But there's also a cautionary tale. Simple simulations of descriptive growth models show that output growth derived from capital growth is fairly limited, and that developed countries are as rich as they are because they transitioned from capital growth to technological growth. He cautioned that Singapore has not matched the growth numbers of Hong Kong because it is primarily a technology importer rather than a technology innovator. This argument carries over to contemporary China: a lot of discussion in developed countries that China's growth rates are not sustainable relates back to the continued absence of technology driven increases in growth rates.

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