Welfare states and economic growth — PM Lee Hsien Loong is wrong again

By Tan Jee Say

“Contrary to naïve interpretations of globalization, the world’s most generous welfare states have developed in societies wide open to and heavily dependent on the world market, such as Belgium, the Netherlands and Scandinavia. These welfare states, in particular the Scandinavian ones, always come at the top in managerial rankings of ‘world competitiveness’." So wrote Professor Ian Gough and Goran Therborn in their joint paper “The Global Future of Welfare States”.
 
I had the privilege of meeting LSE Prof Gough at his office in the London School of Economics on my current visit to the UK. He was amused that Singapore continues to be stuck in its outmoded view of the welfare state adversely affecting its economic competitiveness.
 
In his recent speech to the Economic Society of Singapore, PM Lee Hsien Loong poured cold water over the Nordic model. Yet their extensive social safety net has not prevented them from achieving robust economic growth. Nor has it de-motivated people from striving to give of their best despite high taxes.
 
Just look at the many world class companies and innovative thinkers they have produced. Denmark alone has at least 13 Nobel prize winners. And it is the happiest country in the world, followed by Finland, Norway and the Netherlands (according to a Gallup survey published in the World Happiness Report released in April 2012). And these are countries with extensive welfare states and high taxes!
 
There is a lot we can learn from these countries. I hope to continue my discussions with Prof Gough in the months ahead.
 
I also called on Lord Butler at the House of Lords. Some of you will recall that Lord Butler commended my 45-page essay “Creating Jobs and Enterprise in a new Singapore economy – Ideas for Change”. A summary of the essay appeared in my book “A Nation Awakes”. I presented a copy of the book to his Lordship.
 
I told Lord Butler that the essay was the subject of intense debate in Singapore’s 2011 General Election. It even elicited a spirited response from then Minister Mentor Lee Kuan Yew who commented that I had ‘no qualification’ to say what I wrote in the essay. I had replied that I studied economics at Oxford and later headed economic planning at Singapore’s Ministry of Trade and Industry, and I added that my essay was endorsed by Lord Butler who had served under 3 British Prime Ministers.
 
My reply to the Minister Mentor was voted by Yahoo as the best rebuttal of the whole GE campaign. I referred Lord Butler to the relevant passage in the book that described this episode; Lord Butler browsed through it and smiled with great amusement.
 
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