There are special circumstances, but Singapore’s growth is still pretty incredible

And in some ways, it’s the incredible growth that makes you wonder whether in fact it has all that many useful lessons for other Asian countries.

Earlier today Tom Pepinsky posted a rather curious bit on Singapore’s economic development history. Pepinsky argues that  Singapore was not too poor by the standards  of the time, showing a graph that ranks countries by the per capita real GDP and converts this into a percentile score. Pepinsky asserts that ‘by the 1970s, Singaporean GDP per capita actually exceeded that of the UK’. As Pseudoerasmus pointed out on Twitter, that sounds kind of odd: the Maddison series of historical GDP data seems to suggest that Singapore’s per capita GDP exceeded the UK’s in 1994, not in the 1970s:

singapore

 

Ranking the economies as Pepinsky does also seems a bit odd to me, especially since he’s using countries that were independent in each year: so, for example, when Malaysia and Singapore split off, Singapore was richer than the rest of Malaysia. Mathematically, the effect of this is would be to push Singapore higher in the rankings than the old Malaysia was and the ‘new’ Malaysia lower, even though their income per person hasn’t changed at all. I’m also not sure that the conclusion that Singapore was high up in country rankings when it became independent (1965) is necessarily robust to different geopolitical definitions either: when I rank all currently existing countries for which there are historical data in 1965 (note that some of them were not independent in 1965) I obtain that Singapore had the 62nd highest per capita GDP out of 146: a bit above the median, certainly, but not stellar either.

I’m also a bit puzzled by the suggestion in Pepinsky’s last paragraph, that suggests that the Singapore/Malaysia growth gap suddenly opened up dramatically when Mahathir Mohammed retired in 2003. Presumably he’s looking at the difference in percentile ranks between Singapore and Malaysia, but when I plot the simple arithmetical difference between Malaysian and Singaporean real GDP per capita it’s hard to see a structural break in the early 2000s.

gap

Looking at a ratio of Malaysian GDP to Singaporean GDP (both per capita) it looks as though the real deterioration happened early on with Singaporean high growth:

ratio

And since a ratio contains both a numerator and a denominator, let’s look at Singapore and Malaysia separately but using the same denominator for both – the ‘technological frontier’ of the US. Singapore has certainly caught up to the frontier in the past few decades or so, which is even more remarkable given that they departed from almost the same starting point in the 1960s relative to the US.frontier

Insofar as he gets odd results, I think Pepinsky’s conclusions are his (in my opinion not well-justified) decision to use income rank rather than absolute or relative income. Assume there are three countries: Black, Grey and White, with per capita incomes of $10, $1000 and $1,000,000 respectively. If Grey increases its per capita income to $500,000 in 10 years while the Black and White per capita income figures don’t change, then Grey hasn’t changed its rank at all but has grown at over 100 per cent per year, a pretty amazing economic feat. Surely it’s the latter that’s interesting, not the former?

Going back to the point about the definition of a country (does it matter if it’s independent?) and riffing on a point Pseudoerasmus brought up — namely, that Singapore is a maritime city state without a poor agrarian hinterland that might weigh down its economic performance — I think it’s worth considering that national boundaries are very arbitrary and so a national per capita GDP figure that averages over a vast number of people may not be the best indicator of economy prosperity. Your idea about whether China is a rich country will depend a lot on whether you’re in Tianjin province or in Guizhuo. As Ian McLean asks in his economic history of Australia, does it make all that much sense to call Australia the most prosperous country on per capita GDP terms in the late nineteenth century, given that it was certainly less rich on average that some parts of the United States?

prosperityAs an example of what I mean, consider what Malaysia’s GDP per capita would have been like if Singapore had never split off but had still grown at the same rate as it did historically. (Perhaps a more meaningful way of considering this hypothetical is to imagine if Malaysia annexed Singapore or Singapore decided to join back with Malaysia for some reason today.)

malaysia

 

The middle dark blue line is just each countries’ per capita GDP weighted by its population. If you didn’t know its particular circumstances, you’d say: hey, good on you, but you’ve got a way to go yet, United Malaysia.

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One Comment on “There are special circumstances, but Singapore’s growth is still pretty incredible”

  1. I like the chart of weighted-average GDP/pc of the Malaysian Fed.

    The city-state issue and the data problem are the least of the problem. The whole exercise that Pepinsky performs is conceptually misguided. (“I then normalize these to a percentile scale”.)

    It’s absurd to say that because Singapore’s ranking in 1965 was above the median, its trajectory to the present has been from middle income to high income rather than from 3rd to 1st world. The distance actually travelled by Singapore in terms of unconditional convergence is from ~20% of US GDPpc to almost parity. Singapore in 1965 was as distant from the technological frontier (the USA) as many countries at the bottom 30% in 2010 are today. More concretely, Singapore’s GDP per capita in 1965 was roughly equivalent to that of Pakistan, Mozambique, or Cambodia in 2010; and less than that of Bolivia, El Salvador, the Philippines, or Kyrgyzstan in 2010.


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