TR EMERITUS

I remember discussing Singapore’s development strategy with my Economics Director of Studies at Cambridge University, Professor Ajit Singh, in 1983. He said Singapore had pursued a similar strategy to Ireland, though he thought rather less successfully. I have made the same comparison many times in my blog. Both countries have sought to attract multinational investment and the relocation of corporate HQs to their countries through a low corporate tax rate and sweetheart deals with new investors.

Economists, have pointed out for some time that because of its pivotal role in the tax avoidance strategies of many, particularly US, MNCs, Ireland’s GDP is not an accurate reflection of the real size of the Irish economy. Neither are its growth rates. Ireland’s GDP shot up by 24.5% in 2015, which led Paul Krugman to famously call it “leprechaun economics.” It shot up a further 15% in 2021 when the growth rate in the Eurozone of which Ireland is a member was only 5.9%.

A recent Economist article discussed the current thinking about what amendments might need to be made to better reflect the true size of Ireland’s economy. In the past looking at Gross National Income (GNI), which excludes income due to foreigners but includes income from abroad, might have been sufficient. But this no longer works because now so many US MNCs have moved their legal headquarters to Ireland. They say a crude solution might be just to exclude sectors of the economy that are dominated by large multinationals. But this would be too radical as these sectors do contribute something to output and employment. They suggest two alternatives.

The first is domestic demand-consumer and government spending as well as investment, but excluding exports and imports. This is called Modified Domestic Demand and is already reported. But this has drawbacks, not least the exclusion of international trade.

A second and better measure according to The Economist would be a modified version of GNI called GNI*. This excludes the retained earnings of firms that have moved their HQ to Ireland but includes international trade. Using GNI* as a measure the Irish economy’s size is only £249 billion while in terms of GDP it is worth £475 billion.

The PAP Government follows much the same strategy as Ireland to use low corporate taxes and sweetheart deals with individual MNCs to attract investment and persuade companies to put regional HQs in Singapore. Economic growth, like Ireland’s has also been very rapid in certain years, like 2010 and 2011 when the economy grew by 10% and 6% respectively. The Statistics Department already calculates GNI and publishes the statistic on a per capita basis. It’s about 84% of the GDP level. However it would be interesting if the Statistics Department were to calculate GNI* for Singapore. The real size of the Irish economy on this measure is only slightly over half of that measured by GDP. It’s entirely possible that a calculation of Singapore’s GNI* would yield similar results.

This would destroy the PAP’s triumphalist narrative which has always touted the size of Singapore’s GDP as a counter to any criticisms of its repressive rule. However, while they might feel pride in hearing that Singapore’s GDP has significantly surpassed Malaysia’s, a country with 6 times the population, most Singaporeans know that they are not six times as rich. In fact a UBS survey of global cities back in 2011 placed the purchasing power of Singaporean median wages as on a par with those in KL and it would not surprise me if they were still fairly similar today. Rather than looking at misleading measures of GDP per capita on a purchasing-power-parity basis which place Singapore first or second in the world, Singaporeans should look at the reality of wages per hour worked which for many are well below minimum wages in other countries which rank much lower in the table and median wages which range between a half to a quarter of those in cities in North America and northern Europe. At election time it would be better if they remembered the latter fact rather than being bamboozled by PAP disinformation.

Kenneth Jeyaretnam

About the author: I’m a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That’s why I’ve never been sued in any civil or criminal court no matter how hard hitting my criticism. I’m quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don’t work. The Right and the Conservatives hate me because I’m a liberal. I’m not sure what the middle think of me. I don’t think there are more than a handful of people in the middle, here in Singapore. I’m a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I’m not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean.

14 Responses to “Is a Realistic Measure of the Size of Singapore’s Economy Only About Half What the PAP Government Says It Is?”