Paradigm shift in focus required – from economic growth to economic development

By Ney Reed

 

When developing nations during the post world war and/or independence era started to build their economies, they attempted to resolve problems of poverty, unemployment, low incomes and other forms of under-development through pure pursuit of economic growth.

 

Singapore, too, joined their ranks. Up till today the focus of the Singapore Government has been on achieving not just growth but high growth.

 

Emphasis has been placed in recent times on the importance of development and policy actions to pursue development. But there is much greater emphasis on pursuing growth than development.

 

Development vs growth

 

We need to appreciate why pursuing development is more important than pursuing growth. This has been a major topic of debate amongst economists and will never cease to attract attention as the world continually changes.

 

Economic growth, which is both universally and generally accepted to be growth of per capita Gross Domestic Product (GDP), is considered to be a component of economic development. Hence, making pursuit of economic growth the central focus will produce a far fewer desired economic outcomes than the pursuit of economic development.

 

This is evident in Singapore ‘s experience from 1959.

 

In the last four decades the government has consistently, except for very brief periods, achieved high rates of per capita GDP growth. In fact the high rates of per capita GDP growth is an impressive record.

 

However That is all what one can expect from the pure pursuit of economic growth alone which had been Singapore’s strategy till recently or from the current pursuit of economic growth as the primary strategy and economic development as a secondary strategy. In other words one cannot expect to find to many other desired economic outcomes for instance developed world literacy standards.

 

Singapore’s literacy rate hovers around 93-95% only recently and even in the 1990s it was lower than that whereas the literacy rates of developed world are between 98-100%. That is because in Singapore our education policy has been geared towards supporting our ultimate objective which is high growth rate.

 

We will have achieved 98%-100% literacy rate only if we had pursued strategic economic development policies instead of economic growth policies that can bring about such high literacy rates.

 

Even the outcomes of Singapore’s high economic growth policies, which include high growth rates and high average income, cannot be taken too seriously at face value. They are only desirable in a general sense and are not an ends in themselves. For instance, the high average income in Singapore, which is due to the pursuit of economic growth, is not only high but higher than some developed countries.

 

However, this means little as average income level does not represent the income levels of the majority of population.

 

Singapore‘s income gap is not only big but growing significantly. This is because pursuing economic growth alone failed to produce strong redistribution policies required for economic development.

 

This experience is not confined to Singapore alone.

 

Our primary economic agenda

 

Evidence shows that, despite sustained economic growth, poverty and income inequalities have increased in many developing countries.

 

It was only recently that the government had adopted some strong redistribution policies but they remain far fewer than what is needed.

 

In some areas, such as public housing, sanitation, water, transportation, and communication, Singapore has achieved great success despite its focus on economic growth. However, that is because the policies pursued in these areas coincidentally in Singapore’s experience would have been the same even if it had pursued economic development.

 

Naturally the coincidental areas are few and instead there are several areas where desired outcomes can only be achieved through strategic economic development policies and the reason why we have not been able to achieve them till today is because we are still making high economic growth as our primary economic agenda.

 

For instance, today there are many Singaporean graduates returning from abroad or graduates of local universities with degrees in the social sciences such as psychology, sociology, economics, specialized areas of engineering, or advanced areas of mathematics and pure sciences.

 

However, jobs remain limited in these areas. There is also an idiosyncratic attitude that they are not professionals and theirs are not professional disciplines. The prevailing benign attitude amongst employers, civil servants, politicians and many others is that you are not a professional unless you are a doctor, engineer, accountant, lawyer, financial expert, pharmacist or IT expert.

 

Hence these “professionals” are preferred in the hiring process even though the job may require the expertise of the “professionals who are not-recognized-by-Singaporeans as professionals”.

 

Skills mismatch

 

This skills mismatch has caused and also contributed to the economy’s broadening at a much slower rate than literacy.

 

Today we still see in Singapore engineers doing the work of pricing or banking, and accountants handling such duties as taxation whereas such work would be handled by economists in mature economies. This is due to the blind pursuit of economic growth over economic development. In every corner of matured economies and developed world, one will not find this to be a general phenomenon, unlike here.

 

Another outcome of focusing primarily on economic development instead of economic growth is the ability build a strong knowledge base diverse economy which can move in new directions. Because of our failure to focus on economic development, we have been handicapped in our ability to steer steadily and smoothly towards new directions with a largely domestic labour.

 

Our experiences in infocomm and the life sciences have demonstrated that when we first tried to steer towards such new horizons, we did not have sufficient domestic skilled labour while Singaporeans with such skills who are abroad are hesitant to return from places where they are guaranteed more opportunities and job security in their specialized fields.

 

Had the focus over the last four decades been on economic development, there would have been a much broader set of education policies. Opportunities for learning, developing skills, retraining, and employment will have been much broadly defined.

 

Critical masses of skills will have evolved. That could then have given us sufficient local labour for those new areas or sufficient local labour that could be quickly retrained, or greater confidence among skilled expatriate Singaporeans to return.

 

 

Moving in new directions

 

Our narrowly defined economy has also much impact on growth of other sectors.

 

For instance, in a mature economy the controlling and critical aspects of the administration and management of the health sector would be in the hands of a wide variety of experts trained in administration, economics, law, psychology, sociology etc; one might find that those trained in the field of medicine being just one group amongst them in equal proportion to any other group.

 

In Singapore the controlling and critical management of the health sector is largely centred in the hands of those from the discipline of medicine due to the economic environment having been shaped to be largely an elitist one.

 

This raises questions of how is one who is trained to close wounds be able to close deficits, and one trained to evaluate the condition of a human body be able to evaluate the health of an organization.

 

This explains why the local health sector, though far more advanced than that of developing countries, is far behind the health sectors of mature economies.

 

The fundamental reason why we are in this state begs us to look at the way we behave and think.

 

Singaporeans love to imagine, especially nowadays, that they make decisions based on evidence, examples and so on.

 

Many a time, if one is truthful, one would discover that much of the decision making processes here are dictated by arbitrariness, perceptions, biases, attitudes, stereotypes, pre-conceptions and idiosyncrasies.

 

What is really required for Singapore to make a paradigm shift from its focus on economic growth to economic development is a change in mindset. Until that happens we can never expect the outcomes promised by economic development which, even if it results under current policies of economic growth, would then not be mere coincidences.