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From jungle to juggernaut: How Singapore pulled off its economic miracle

Lee Kuan Yew, who died on Sunday, transformed Singapore from a poor, malaria-ridden patch of Malaysian jungle into a gaudy air-conditioned showpiece of capitalism with a standard of living higher than Canada's.

So why can't other countries – such as Greece, for instance – just copy Mr. Lee's model and perform similar magic?

It's a question that demands attention as the euro zone's tough-love approach forces economic retrenchment on the nations along its southern periphery. Spain and Italy are feeling the pain, but Greece, in particular, is in turmoil as its hopes for easier financial terms smack into the united opposition of Germany and other creditor nations.

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If economic development were as simple as following Singapore's lead, Greece and Europe's other laggards would have little excuse for their shortfalls. But anyone who wants to assert that creating a high-growth economy is easy has to confront the gritty details of the Singaporean miracle.

Just to be clear: It is a miracle. Back in 1960, Greece enjoyed a gross domestic product (GDP) per capita more than 20 per cent higher than Singapore's. Both countries possessed attractive ports, but the European country seemed the clear leader in every other respect.

Singapore had little land and no natural resources. To make matters worse, it suffered from less-than-friendly neighbours, mass unemployment and a volatile ethnic mix of Chinese, Malay and Indian citizens. Greece had its issues too – notably a viciously divided political landscape – but it signed an association agreement with the European Economic Community as early as 1962 and seemed well positioned for rapid growth.

Except it didn't happen. Fast forward to today and Singaporeans, on average, are more than two-and-a-half times as wealthy as Greeks.

Why has Singapore left Greece in the dust? The city-state's chroniclers often credit its warp-speed growth to its authoritarian government, which ruthlessly squelched dissent (and chewing gum, among other pet peeves of Mr. Lee's). Perhaps, too, Singapore got an assist from the Confucian values of its majority Chinese population – notably a stress on education and social harmony.

Neither of these stories, though, really holds up as a completely satisfactory explanation for Singapore's spectacular growth. Other countries (including Greece) also had periods of right-wing authoritarian rule, but without the same economic leap forward. Confucian values, for their part, might have helped things, but they didn't save China, the Confucian homeland, from a long patch of stagnation.

Could the real growth secret be some particularly Singaporean genius for business? If so, it's not evident to economists, who account for the sources of economic growth by looking at the inputs of three key factors: labour, capital and efficiency gains (or "total factor productivity" as the economists term it).

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The consensus in economic circles is that improvements in efficiency – finding brighter, smarter ways to do things – played a relatively small role in Singapore's amazing rise. Instead, the country's growth has been largely built on putting more capital to work, by investing more in machines and infrastructure, even if that runs the risk of diminishing returns.

Singapore's success, despite its relative dearth of productivity gains, underscores the fact that economic growth can proceed from many different sources. Alwyn Young of the London School of Economics noted more than 20 years ago that Singapore's strongly interventionist policies were the complete opposite of Hong Kong's laissez faire regime, but both city-states had still managed to grow strongly.

If there is a fundamental lesson to be learned from such comparisons, it's that every country is different. Singapore's miraculous rise is a tribute to Mr. Lee's ability to create an attractive investment climate, but those looking for a one-size-fits-all prescription for economic growth are likely to find his legacy disappointing.

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About the Author

Ian McGugan is a reporter with The Globe and Mail's Report on Business and has been writing about investing, economics and business for more than 20 years. He joined the Globe and Mail in 2010. He has been executive editor of Canadian Business magazine and founding editor of MoneySense magazine. More

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