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From Third World to First

Lee Kuan Yew

In 1965, when LKY is 42, Singapore leaves the Federation of Malaysia. It’s an extremely tough time. Unemployment at 14%. Many pundits predict Singapore’s demise. LKY faced challenges including: multi-ethnic religious tensions, hostile neighbours, building national identity, and having to write all policies (industrial, diplomatic, healthcare, education, criminal, etc) from scratch. He did not have clear confidence in his success and felt gloomy at times.
He would play nine-holes of golf each day to get a break from the grind of papers and minutes.

Building an army from scratch

One of his first priorities is building up the military. He asks his able finance minister, Keng Swee, to take on Home Affairs and Defence. He appoints Kim San to fill Keng Swee’s spot in Finance, knowing the two could work without friction, thus allowing Keng Swee to contribute informally to finance from his new post. Interesting how Keng Swee could be trusted not to interfere too much in Finance. Such interference could have begun an internecine power struggle that would have been damaging.
“I concluded an island city-state in Southeast Asia could not be ordinary if it was to survive. We had to make extraordinary efforts to become a tightly knit, rugged, and adaptable people who could do things better and cheaper than our neighbours… Our greatest asset was the trust and confidence of the people.”
On taking power, Singapore has no independent armed forces. Malaysia has about 700 men stationed there and can easily mount a coup. LKY has to build up the armed forces to protect a newly independent Singapore. Keng Swee discovers that 80% of recruits are ethnic Malays. He orders recruitment frozen, the order is misinterpreted and in-post Malays are fired, leading to a riot at the recruiting station that could escalate into a full-blown race riot. LKY goes down himself, calms them by clarifying the position (on Singapore citizens are allowed to stay in the armed forces). He then arrests a few ringleaders but allows the others to go home. He asks the press to report on it tactfully and not fan racial tensions (not sure they would acquiesce in the UK…).
Keng Swee writes a paper to the Defence Council on the value of the armed forces as a deterrent: “The war-making potential of a small, vigorous, well-educated and highly motivated population should never be underestimated.” The plan took inspiration from Israel, “We thought it important for people in and outside of Singapore to now that despite our small population, we could mobilize a large fighting force at short notice.”
Resistance to soldiering is quite strong in the population. LKY and Keng Swee have to employ a series of measures to make it seem a prestigious and worthwhile career. One such measure is given enlistees in the Singapore Armed Forces (SAF) guaranteed full-time jobs. They only take the top 10% of those who register though to ward off duds who would sandbag once in. The program is expanded later with top candidates being sent to top universities in Britain and the US.
In 1968, two Indonesian commandos set off a bomb in Singapore, killing three citizens. They are sentenced to hanging. Suharto intervenes directly to have the sentence changed to imprisonment. LKY’s view: “If we yielded, then the rule of law not only within Singapore but between our neighbours and Singapore would become meaningless as we would always be open to pressure.”
The SAF engage the Israelis as consultants but they are disguised as ‘Mexican’ advisors due to the Muslim populations within Indonesia, Malaysia and Singapore itself. The Israeli Defence Force (IDF) trainers emphasise military skills and motivations over parade and tattoo.
National Service has helped unify the people. They learn to live and work closely with each other, regardless of race, language, or religion. Food taboos of Muslims and Hindus are respected, as are all religious rites.

Surviving without a hinterland

The British leave in 1971 as part of their withdrawal from “East of Suez.”
Winsemius, the economic advisor, gives LKY a report in 1961 stressing two points: eliminate the communists, don’t remove the statue of Stamford Raffles. This latter is because it is symbolic of British institutions such as rule of law. Not having it would spook investors.
Singapore had survived as an entrepot trading outpost. After independence they determined they’d have to industrialise. Another suggestion was tourism, because it was labour intensive and required little capital. The Singapore Tourist Promotion Board was formed with Runme Shaw, a film magnate, appointed to run it. The logic was that since he was in films, he knew all about selling sights and sounds.
Losing the British was a 20% knock to GDP. LKY was determined not to accept aid. He recounts a tale from Malta:

“The Suez Canal had been closed… hence the dockyard in Malta was closed, but dockworkers on full pay were playing water polo in the dry dock which they had filled with water! I was shaken by their aid dependency. The British had given fairly generous redundancy payments… This nurtured a sense of dependency, not a spirit of self-reliance.”

After much trial and error, LKY comes up with a two-pronged strategy. The first prong is influenced by Israel. Faced with a more hostile environment than Singapore’s, they managed to leap over their Arab neighbours who boycotted them, to trade with Europe and America. Hence Singapore had to bypass Malaysia and Indonesia (which were boycotting them) and open up trade with America, Europe and Japan by attracting their MNCs.
“The accepted wisdom of development economists at the time was that MNCs were exploiters of cheap land, labour and materials… MNCs controlled technology and consumer preferences and formed alliances with their host governments to exploit the people and keep them down. Third World leaders believed this theory of neocolonialist exploitation, but Keng Swee and I were not impressed. We had a real life problem to solve and could not afford to be conscribed by any theory or dogma.”
The second prong of the strategy is to create a First World oasis in a Third World region. “If Singapore could establish First World standards in public and personal security, health, education, telecommunications, transportation, and services, it would become a base camp for entrepreneurs, engineers, managers, and other professionals who had business to do in the region. This meant we had to train our people and equip them to provide First World standard of service.”
They establish the Economic Development Board (EDB) in 1961. Winsemius recommended a one-stop agency so that an investor need not deal with a large number of departments and ministries. This agency would sort out all an investor’s requirements whether relating to land, power, water, or environmental and work safety.
Wooing MNCs required clearly demonstrating that Singapore was clean, competent and organised. Some examples:

“While HP negotiated to acquire a site, it decided to lease the top two floors of a six-story building. The elevator to lift the heavy machinery needed a big transformer for electricity, but there was none in place in time for the visit of Mr. Hewlett… Rather than have him walk up six flights of stairs, the EDB got a gigantic cable extended from a neighbouring building, and on the day of the visit the elevator worked. Hewlett invested.”

“Visting CEOs used to call on me before they made their investment decisions. I thought the best way to convince them was to ensure that the roads from the airport to their hotel and to my office were neat and spruce… When they drove to the Istana domain, the would see right in the heart of the city a green oasis… Without a word being said, they would know that Singaporeans were competent, disciplined and reliable… American investments soon overtook those of the British, Dutch and Japanese.”

The Finance Director of Mercedez-Benz tells the EDB they will need to keep protective tariffs for a local car-assembly plant in forever to be competitive. “We did not hesitate to remove the tariffs and allow the plant to close down. Soon afterward we had also phased out protection for the assembly of most consumer electrical products.”

They respond to the oil shock of 1972 by urging people to conserve energy and reducing the consumption of fuel and electricity. By this time unemployment has gone from 14% to 4.5%!
“By the late 1970s, we had left our old problems of unemployment and lack of investments behind us. The new problem was improving the quality of new investments and whit it the education and skill level of our workers.” Relentless!
They launch a few national enterprises such as a shipping line (NOL) and Singapore Airways. They staff them with the top graduates from each year’s school leavers, who they ship off to overseas universities. Keng Swee gives clear instructions that the enterprises had to be profitable or shut down. Unlike so many other nationalised businesses. When the projects were successful, they were spun out as independent entities, free from ministerial control. “The key to success was the quality of people in charge.”
“If I have to choose one word to explain why Singapore succeeded, it is confidence… within days of the oil crisis of 1973, I decided to give a clear signal to the oil companies that we did not claim any special privilege over the stocks of oil they held in their Singapore refineries… this decision increased international confidence in the Singapore government.”

Creating a financial center

“We made a modest start with an offshore Asian dollar market. In 1997 it exceed $500bn, nearly three times the size of our domestic banking market. The growth was stupendous because it filled a market need. From 1968-1985 we had the field to ourselves. We attracted international financial institution by abolishing withholding tax on interest income earned by nonresident depositors.”
“The foundations for our financial center were the rule of law, an independent judiciary, and a stable, competent and honest government.”
When they discover that Jim Slater was manipulating a Singapore listed corporate, they decide to prosecute, despite the risk of damaging relationships with London. “I decided that we had to if we were to maintain our standing as a well-managed stock exchange.” Relentlessly focused on second-order effects.
The Monetary Authority of Singapore (MAS) refuses licenses to any organisations it deems dodgy. BCCI is one example, which goes down in 1991 to the tune of $11bn of unpaid claims.
Critics said Singapore was too tightly regulated compared to HK and as a result, they were leaving growth on the table. LKY resisted interfering, waiting to establish standing and reputation ahead of wild-west growth.
When the 1997 Asian financial crisis blows up, the transparency and competence of the MAS Singapore consolidates its position as a financial center.

Winning over the unions

There’s an incentive to indulge unions to rebuff the threat of communism. The British bring in Jack Brazier in the 60s from the TUC. “These advisers taught them all the bad habits and practices of how to squeeze employers for more pay and benefits regardless of the consequences to the company. At a meeting in July 1966… I urged them to abandon these British union practices which had ruined Britain’s economy. For example, triple pay on public holidays that led to sanitation workers deliberately allowing garbage to accumulate before public holidays to ensure that they would have to work on these holidays.” Incentives!!
“Each year 30k school leavers sought work. Our union practices… were forcing employers to become capital-intensive, investing in expensive machines to get the work done with the minimum amount of workers, as in Britain. This had created a small group of privileged unionized workers getting high pay and a growing band of underpaid and underemployed workers.”
In an early battle in which 2.4k sanitation workers go on strike: “The police arrested and charged Suppiah and 14 other leaders with calling an illegal strike. The registrar of trade unions issued notices to the union and the federation to show cause why they should not be deregistered. At the same time, the ministry of health declared that the strikers had sacked themselves; those who wished to be reemployed could apply the next day. This coordinated firmness panicked the strikers. Ninety percent of them applied for reemployment. This strike was a turning point in Singapore’s industrial history. The way the government met it head-on won the support of the public. It triggered a change in union culture, from a defiant flouting of the law to reasonable give-and-take.”
They set up the National Wages Council (NWC) in 1972 with broad representation from management, unions and government. “From its early years, all parties agreed on the principle that wage increases must not exceed productivity increases.”
On trying to match Japan’s productivity, LKY asks a MD of a Japanese company why his local workers are less productive than his Japanese ones. His reply: “Japanese workers were more skilled, more multiskilled, more flexible… Singapore group leaders and supervisors were unwilling to undertake work that would soil their hands. In contrast, their Japanese counterparts considered themselves not as white or blue-collar, but grey collar; they would readily help operate and maintain machines and so better understand the problems of workers.”

A fair, not welfare society

“We believed in socialism, in fair shares for all. Later we learned that personal motivation and personal rewards were essential for a productive economy. However, because people are unequal in their abilities, if performance and rewards are determined by the marketplace, there will be a few big winners, many medium winners, and a considerable number of losers. That would make for social tensions because a society’s sense of fairness is offended.”
“A competitive, winner-takes-all society, like colonial Hong Kong in the 60s, would not be acceptable in Singapore. A colonial government did not face elections every five years; the Singapore government did.”
“My primary occupation was to give every citizen a stake in the country and its future. I wanted a home-owning society. I had seen the contrast between blocks of low-cost rental apartments, badly misused and poorly maintained, and those house-proud owners, and was convinced that if every family owned its home, the country would be more stable. My other motive was to give all parents whose sons would have to do national service a stake in the Singapore their sons had to defend. If the soldier’s family did not own their home, he would soon conclude he would be fighting to protect the properties of the wealthy. I believed this sense of ownership was vital for our new society which had no deep roots in a common historical experience.” The Housing Development Board (HDB) is set up in 1960 with various incentives to help first-time home owners.
The Central Provident Fund (CPF) is established by the old colonial government as a pension scheme. LKY sticks with it but increases contributions from wages, at one point going up to 25% in 1984. He gets pressure from the minister of labour to lower it so people had more take-home. LKY resists: “I was determined to avoid placing hte burden of the present generation’s welfare costs onto the next generation.”
A fire destroys a squatter settlement in 1961. 16k families made homeless. LKY amends the law to allow the government to purchase it cheap (as if the land still had squatters on it). “It is heinous in the extreme to allow any profit to be made out of this fire. In fact, if any profit is allowed to be made, then it will only be an inducement to arson by those who possess land with squatters on it.” Incentives!!!
He amends the law to give the government power to acquire land for public purposes at its value on a date then fixed at 30 Nov 1973. “I saw no reason why private landowners should profit from an increase in land value brought about by economic development and the infrastructure paid for with public funds.”
As new apartments are built LKY sends a mission abroad to study how the old ones can be refurbished with residents in situ. They spend S$58k doing upgrades but charge owners only S$4.5k. This is to prevent the old ones looking like slums and therefore becoming slums.
On the NHS: “Their belief that all people were equal and no one should be denied the best of medical services was idealistic but impractical and led to ballooning costs. American-style medical insurance schemes are expensive, with high premiums because of wasteful and extravagant diagnostic tests paid for out of insurance. We had to find our own solution.”
“The ideal of free medical services collided against the reality of human behaviour, certainly in Singapore. My first lesson came from government hospitals. When doctors prescribed free antibiotics, patients took their tablets or capsules for two days, did not feel better, and threw away the balance. They then consulted private doctors, paid for their antibiotics, completed the course, and recovered. I decided to impose a charge of S$0.50 for each attendance at outpatient dispensaries. This fee was gradually increased over the years to keep pace with rising incomes and inflation.”
Medisave is implemented in 1984. Monthly CPF contributions to Medisave are 6% of wages, capped at S$15k in 1986 (subsequently increased at regular intervals). Savings above the limit are transferred to a member’s general CPF account account which could be used for home mortgage payments or other investments. Medisave accounts could be used to pay medical costs for a member’s immediate family: grandparents, parents, spouse or children.
Co-payments did prevent waste. Subsidies vary depending on ward type. lower-cost wards have highest subsidies. They consider a means test to determine wards but find it hard to implement. Instead people self-administer means test by choosing which ward to go to. Rising incomes resulting in high Medisave savings made people feel wealthy enough to choose better wards.
“We allowed the use of Medisave for private hospitals, subject to price limits. This competition put pressure on government hospitals to improve their service quality. But we disallowed the use of Medisave for visits to outpatient clinics or private GPs. We believe more people would see a doctor unnecessarily for minor ailments if they could pay form Medisave than if they had to pay from their monthly budget.”
For retirement payments, they allow CPF contributions to go towards investments. The first experiment was Singapore Bus Services, which they floated. Wide share ownership allowed the profits to go back to workers through their use of public transport. There would be less incentive to demand cheaper bus fares and government subsidies for public transport if they owned it. Large amounts of Singapore Telecom shares are offered half price to CPF holders. “We wanted our people to hold shares in a major Singapore company and have a tangible stake in the country’s success.
“We chose to redistribute wealth by asset enhancement, not by subsidies for consumption. those who are not winners of top prizes in the free market will still get valuable consolation prizes for competing in the marathon of life. At his or her death, the balance of a worker’s CPF savings will be paid according to the worker’s written wishes without the delays and formality of applying to court.”
“Watching the ever-increasing costs of the welfare state in Britain and Sweden, we decided to avoid this debilitating system. We noted by the 1970s that when governments undertook primary responsibility for the basic duties of the head of a family, the drive in people weakened. Welfare undermined self-reliance. The handout became a way of life. The downward spiral was relentless as motivation and productivity went down. People lost the drive to achieve because they paid too much in income taxes. The became dependent on the state for their basic needs… The CPF has made for a different society. People who have substantial savings and assets have a different attitude to life… they take responsibility for themselves and their families. They are not attracted to the “buffet syndrome” where, after paying a health insurance premium, you consume as much in medical investigations and procedures as your doctor can think of.”
“To ensure a member’s savings will be enough for his retirement, neither his CPF balance nor his assets bought with CPF money can be levied upon or attached for any debt or claim. Nor is his HDB apartment bought with CPF money available to his creditors. Only the HDB can execute against an owner for mortgage installments unpaid on the home.”
“To work a social security system like the CPF, an economy needs to have low inflation and interest rates above inflation rates.”
“There will always be the irresponsible or the incapable, some 5% of our population. They will run through any asset, whether a house or shares. We try hard to make them as independent as possible and not end up in welfare homes. More important, we try to rescue their children from repeating the feckless ways of their parents. This is the opposite of attitudes in the West, where liberals actively encourage people to demand their entitlements with no sense of shame, causing an explosion in welfare costs.”
“We moved from taxing income to taxing consumption. The top marginal income tax rate for individuals was reduced from 55% in 1965 to 28% in 1996.”
“Initially we had punishing rates of estate duty, based on the British socialist philosophy of soaking the rich. But good tax lawyers and accountants left little for the tax collector. We cut it from 60% to between 5-10%… We collected more revenue as the wealthy no longer found it worthwhile to avoid estate duty.”
LKY acknowledges that this works so long as growth is steady and the population is comparatively young. As growth slows and folks age, costs could expand. To counter this the old will need larger Medisave savings and the country must attract educated and skilled immigrants to increase the talent pool and therefore GDP + revenue.

The communists self-destruct

The communists had been a growing force in Singaporean politics when the People’s Action Party (PAP) came to power. A series of setbacks in the mid 60’s removed them as a political force. The blunders included refusing to stand in the 1968 general election, allowing the PAP to win all seats unopposed. LKY after winning: “I set out to widen our support in order to straddle as broad a middle ground as possible. I intended to leave the opposition only the extreme left and right. We had to be careful not to abuse the absolute power we had been given. I was sure that if we remained honest and kept faith with the people, we would be able to carry them with us, however tough and unpalatable our policies.”
On detaining Chia Thye Poh for alleged membership of the MCP (Malaysian Communist Party): “He continued to deny his communist links, playing on the human rights sentiments of the Western media. His detention, in spite of Western media pressure, served to discourage other communist cadres from reactivating their cause under cover of exercising their democratic rights. They were formidable opponents. We had to be as resolute and unyielding in this contest of wills.”

Straddling the middle ground

“Present-day opposition leaders go on walkabouts to decide where they will do well, based on the way people respond to them… I have never believed in this… I learned that while overall sentiment and mood do matter, the crucial factors are institutional and organizational networks to muster support.”
On being slandered by political opponents and suing: “Western liberal critics argue that my reputation is so unassailable that nobody will believe the outrageous things that are said about me, so I should ignore them… outrageous statements are only disbelieved because they are vigorously refuted.”

Nurturing and attracting talent

Talent is a country’s most precious asset.
LKY encourages educated men and women to marry on each other’s level to bring the overall stock of talent up in future generations. It causes outrage!

Many tongues, one language

“I was dismayed at the apathy, self-centeredness, and lack of self-confidence of the English-educated students. The crux of the problem was that in our multiracial and multilingual society, English was the only acceptable neutral language, besides being the language that would make us relevant to the world. But it did seem to deculturalize our students and make them apathetic.”

Keeping the government clean

“When the PAP took office in 1959, we set out to have a clean administration. We were sickened by the greed, corruption, and decadence of many Asian leaders. Fighters for freedom for their oppressed peoples had become plunderers of their wealth.”
“Petty power invested in men who cannot live on their salaries is an invitation to misuse that power.”
LKY reinforces the Corrupt Practices Investigation Bureau (CPIB), using them to go after big takers. “For smaller fish we set out to simplify procedures and remove discretion by having clear published guidelines.”
They change to corruption laws in 1960. “The most effective change we made in 1960 was to allow the courts to treat proof that an accused was living beyond his or her means or had property his or her income could not explain as corroborating evidence that the accused had accepted or obtained a bribe.”
“In 1963, we made it compulsory for witnesses summoned by the CPIB to present themselves to give information. In 1989, we increased the maximum fine for corruption from S$10k to S$100k.
“Human ingenuity is infinite when translating power and discretion into personal gain.”
“It is easy to start off with high moral standards, strong convictions, and determination to beat down corruption. But it is difficult to live up to these good intentions unless the leaders are strong and determined enough to deal with all transgressors, and without exceptions.”
Transparency International placed Singapore 5th in 2022 for absence of corruption. Only Asian country in the top 10.
Singapore has avoided the use of money to win elections. As leader of the opposition, I had persuaded Lim Yew Hock in 1959 to make voting compulsory and prohibit the practice of using cars to take voters to the polls.”
The knock on effects of inexpensive election cycles is that there is no need to ‘replenish coffers’ after elections, and between elections there are no gifts for voters. “We got them to vote for us again and again by providing jobs, building schools, hospitals, community centers, and, most important of all, homes which they owned. These are substantial benefits that changed their lives and convinced them that their children’s future lay with the PAP.”
“Western liberals have argued that a completely unfettered press will expose corruption and make for clean, honest government. Yet uninhibited and freewhelling press and tv in India, the Philippines, Thailand, Taiwan, South Korea, and Japan have not stopped the pervasive and deeply embedded corruption in these countries.”
“Singapore will remain clean and honest only if honest and able men are willing to fight elections and assume office. They must be paid a wage commensurate with what men of their ability and integrity are earning for managing a big corporation or a successful legal or other professional practice.”
“Underpaid ministers and public officials have ruined many governments in Asia. Adequate remuneration is vital for high standards of probity in political leaders and high officials.”
“The needs for popular support makes governments who have to be elected into office, as a rule, underpay ministers in their official salaries. But semihidden perks in housing, an expense account, a car, travel, children’s education, and other allowances often make up more than their salaries.
“In the United States, highly paid persons from the private sector are appointed by the president for brief periods of one or two terms. Then they return to their private sector occupations… with enhanced value because they now enjoy easy access to key people in the administration. I thought this ‘revolving door’ system undesirable.”
In 1995 the salaries of ministers, judges and top civil servants were linked to income tax receipts from the private sector. “People had for so long been accustomed to having public servants paid modest salaries that the idea that ministers not only exercised power but were also paid in accordance with the importance of the job upset their sense of propriety… I was able to help the prime minister justify this change and rebut the arguments that minsters were more than adequately compensated by the honour of high office and the power they wielded… I believed this high-minded approach was unrealistic and the surest way to make ministers serve only briefly, whereas continuity in office and the experience thus gained have been a great advantage and strength in the Singapore government. Our ministers have provided the experience and judgment the government has shown in its decisions, the result of their ability to think and plan long-term.”

Greening Singapore

LKY was unable to effect many of the ‘greening’ policies that reduced pirate taxis, street food hawking etc until enough jobs had been created. This was by ~1971. The lesson here is that behaviour change was only possible when the basic needs of the population had been met.
“We licensed the cooked food hawkers and moved them from the roads and pavements to properly constructed nearby hawker centers, with piped water, sewers, and garbage disposal… Pirate taxi drivers were banished from the roads only after we had reorganized bus services and could provide them with alternative employment.”
Some people were grazing their cows on roadsides and the Esplanade: “I called a meeting of public health officers and spelt out an action plan to solve this problem. We gave owners of cows and goats a grace period until 31 January 1965 (it was Nov 64 at the time), after which all such stray animals would be taken to the slaughterhouses and the meat given to welfare homes. By December 1965, we had seized and slaughtered 53 cows. Very quickly, all cattle and goats were back in their sheds.”
“I had visited almost 50 countries and stayed in nearly as many official guesthouses. What impressed me was not the size of the buildings but the standard of their maintenance. I knew when a country and its administrators were demoralized from the way the buildings had been neglected.”
“Every time I drive along East Coast Parkway from the airport into the city, my spirits rise. Greening is the most cost-effective project I have launched.”
They cleaned up the Singapore River and Kallang Basin. This involved lots of resettlement and accompanying resentment from the resettled farmers, fishermen, hawkers etc. Dedicated resettlement units and MPs from the constituencies negotiated and worked to limit political fallout. Farmers, despite payouts, did not know how else to live and resent the PAP to this day. “Clean rivers made possible a different quality of life. The value and use of land rose significantly… for those who remember the Singapore River when it was a sewer, it is a dream to walk along the banks.”
From the 1970’s, to save the young from a nasty and dangerous addiction, we banned all advertising for cigarettes. Progressively, we banned smoking from all public places… The Americans were far behind because their tobacco lobby was too powerful.”
LKY stops smoking in 1957. “Since I could not keep my addiction within limits, I stopped smoking altogether.”
They ban chewing gum in 1992.
“Foreign correspondents in Singapore have no big scandals of corruption or grave wrongdoings to report. Instead they reported on the fervor and frequency of these ‘do good’ campaigns, ridiculing Singapore as a ‘nanny state’. They laughed at us. But I was confident that we would have the last laugh. We would have been a grosser, ruder, cruder society had we not made these efforts to persuade our people to change their ways.”

Managing the media

“The Chinese and Malay press do not model themselves on newspapers in the West. Their cultural practice is for constructive support of policies they agree with, and criticism in measured terms when they do not.”
“Chinese-educated readers do not have the same political and social values as the English-educated. They place greater emphasis on the interests of the group than those of the individual.”
“My early experiences… shaped my views about the claim of the press to be the defender of truth and freedom of speech. The freedom of the press was the freedom of its owners to advance their personal and class interests.”
In the context of a battle with the British owned Straits-times, who LKY felt was stirring up political trouble to sell papers, which was only okay if the owners lived in Singapore and suffered the consequences: “It was our declared policy that newspapers should not be owned by foreigners.”
LKY is invited to the International Press Institute (IPI) conference to talk. They ask him not to cancel the license of the Singapore Herald, which LKY viewed as a foreign-funded paper whose aim was to stir up dissent in Singapore. He cancels the license and attends anyway: “Had I not attended, the assembly would have passed resolutions condemning Singapore in my absence. I stated my position on the role of the media in a new and young country like Singapore… I recounted how, with Singapore’s different races, languages, cultures, and religions, press reports and photographs had caused riots with loss of lives… I said I did not accept that newspaper owners had the right to print whatever they liked. Unlike Singapore’s ministers, they and their journalists were not elected.”
“I do not subscribe to the Western practice that allows a wealthy press baron to decide what voters should read day after day.”
LKY is sceptical of this: “When the media are free, the marketplace of ideas sorts the irresponsible from the responsible and rewards the latter.”

Conductor of an orchestra

On building Changi: “I had flown over Boston’s Logan Airport and been impressed that the noise footprint of planes landing and taking off was over water. A second runway at Paya Lebar would take aircraft right over the heart of Singapore city.” LKY commissions a British report, an American report, and a committee of senior Singaporean officials to investigate where to build a new airport. They all opt for Paya Lebar. LKY is sure Changi could be better. He asks for another reappraisal and puts together a top level committee chaired by Howe Yoon Chong, the chairman of the Port of Singapore. This reappraisal finds in favour of Changi and LKY gives the green light. The construction should have taken 10 years, they do it in 6.
“I learned that if I wanted to get an important proposal accepted at all levels, I should first float my ideas with my ministers, who would then discuss them with the permanent secretaries and officials. After I got their reactions, I would have the proposal discussed among those who had to make it work.”
After trying various measures to combat congestion, they end up opting for electronic road pricing, which is more effective than the ‘Certificates of Entitlement’ approach.
Race proportion limits are introduced to public housing complexes to prevent the three races agglomerating and setting back the good relations between them that LKY sought to foster.
LKY abolishes the jury system for murder trials on the basis that superstition and a reluctance to take responsibility for severe punishments can lead to miscarriages of justice.
“After what I had seen of human conduct in the years of deprivation and harshness of Japanese occupation, I did not accept the theory that a criminal is a victim of society. Punishment then was so severe that even in 1944-1945, when many did not have enough to eat, there were no burglaries and people could leave their front doors unlocked, day or night. The deterrent was effective.”
On caning Michael Fay in face of American criticism: “If we did not cane this boy because he was American, how could we cane our own offenders?”
Yong Pung How’s court reforms link.
“Singapore had an antilong hair campaign in 1971 as we did not want our young to adopt the hippie look. Men with long hair were attended to last at government counters and at all entry points.”

Part II

On the 1997-1999 Asian crisis: “Corruption, nepotism, and cronyism in Asia were condemned by the Western critics as proof of the fundamental weakness of “Asian values.” There are many different value systems in Asia - Hindu, Muslim, Buddhist, Confucianist.”
Lee gives a speech on Commonwealth cooperation in 1969 and post-colonial countries’ issues:

“To rally their people in their quest for freedom, the first-generation anticolonial nationalist leaders had held out visions of prosperity that they could not realise. A population explosion had increased the burden on resources. Interethnic peace, which had been enforced by the colonial overlord, was difficult to maintain after independence with power in the hands of an ethnic majority. The elite who had commanded popular support before independence had to demonstrate their continuing legitimacy, and in competing against other parties, they had been unable to resist the temptation of appeals to ethnic, linguistic, and religious loyalties. The countries suffered as their ethnic minorities, mostly Indians in Africa, were squeezed out by rioting or legislation… The layer of trained people was too thin and new states reverted back to type as soft societies without the firm hand of an overlord and a strong framework of administration. Corruption set in and became a way of life. Military coups made things worse. But most of all, most governments had favoured economic planning and controls which stifled free enterprise.”

“All first-generation independence leaders were charismatic speakers, but their administrators seldom followed up with the implementation.”

New bonds with Britain

“Welfarism introduced by the Labour Party in the 1940s, and sustained by the Conservatives in a bipartisan consensus, had blunted the people’s motivation to exert themselves and excel, at the expense of the economy. Most leaders in both main parties, and even in the Liberal party, were aware of the debilitating effects of welfarism. But no one tackled this problem until Maggie.”
A speech he gives for Maggie:

“For nearly four decades since the war, successive British governments seemed to assume that the creation of wealth came about naturally, and that what needed government attention and ingenuity was the redistribution of wealth. So governments devised ingenious ways to transfer incomes from the successful to the less successful. In this climate, it requires a prime minister with very strong nerves to tell voters the truth, that creators of wealth are precious members of a society who deserve honour plus the right to keep a better part of their rewards… We have used to our advantage what Britain left behind: the English language, the legal system, parliamentary government and impartial administration. However, we have studiously avoided the practices of the welfare state. We saw how a great people reduced themselves to mediocrity by levelling down.

“In 1985 Singapore’s per capita GDP was $6.5k vs Britain’s $8.2k. By 1995 Singapore’s was $26k and the UK’s $19.7k. Our workers earned more than the British workers. They also owned their own homes and had more savings (in CPF ans POSbank accounts) than the British workers.”
On Maggie: “I thought she offered the best hope for Britain. Her strengths were her passionate belief in her country and her iron will to turn it around. She was convinced that free enterprise and the free market led to a free society. Her basic political instincts were sound though she tended to be too self-confident and self-righteous.”
“I lived under Pax Britannica; Loong’s generation has to cope under Pax Americana.”

South Asia’s Legends and Leaders

“Indira Gandhi was the toughest woman prime minister I have met. She was feminine but there was nothing soft about her. She was a more determined and ruthless political leader than Maggie, Mrs. Bandaranaike, or Benazir Bhutto.”
On the IAS: “Populist pressures had lowered standards of recruitment and had also led to poorer communications within the service.”
“The greatest mistake Jayewardene made was over the distribution of reclaimed land in the dry zone. With foreign aid, he revived an ancient irrigation scheme… Unfortunately, he gave the reclaimed land to the Sinhalese, not the Tamils who had historically been the farmers of this dry zone. Dispossessed and squeezed, they launched the Tamil Tigers.”

Following Britain into Europe

“I discussed how to avoid manufacturing those products that the EEC countries would find sensitive because of persistent high unemployment. I discovered to my dismay that the list was unlimited. Any member country with any influence over Brussels, feeling the slightest pain, could appeal to Brussels for protection and would invariably get it.”
“The British held endless meetings over new airports around London including Stansted and Gatwick, all leading to nothing, as planning authorities were stymied by local interests determined to preserve their amenities at the price of the nation’s progress. Even after the Thatcher years, Heathrow still stands as an ancient monument to symbolize a lack of dare and dash.”
“In November 1995, Kohl visited Singapore again and repeated his concern over Russia. His European partners did not understand that Russia was crucial to peace in Europe. They had to help Russia become stronger and more democratic and not go back to dictatorship and expansionism. Europe would need Russia as a balance against China.”
“Kohl showed that he placed little weight on form and much on substance when we traveled around Speyer, all six of us, not in Mercedes Limousines, but in a Volkswagen people mover. When I gave him lunch in Singapore, he arrived in a tour coach, in order, he told me, to have a better and more comfortable view of the city.”

The Soviet Union: An empire implodes

On Gorbachev: “He was uncertain what his next steps should be to solve almost insoluble problems. I thought to myself that he had made a fatal mistake going for glasnost (openness) before perestroika (restructuring), that Deng Xiaoping had been wiser doing it the other way around… As we walked out of the Kremlin, I marveled that such a decent man could reach the top of so evil a system. A lesser leader would have sought to resolve the Soviet Union’s problems by using its huge military.”
“In my discussions with China’s leaders, I discovered their totally different view of Gorbachev as a superpower leader who had listened to the siren calls of his enemies. He should have been on guard when his enemies’ media praised him. Instead, he followed their exhortations and by glasnost brought about the disintegration of his country, exactly what his foes wanted.”
“When I visited the Soviet Union that September of 1970 and met Premier Kosygin at his holiday dacha on the Black Sea, the Soviet leaders were expansive and assertive, confident that the future belonged to them. To watch this massive, tightly controlled empire shudder, become ungovernable, and then break up, was an awesome spectacle. Something like this must have happened to China in the last decades of the Qing dynasty. The difference is that Russia still has nuclear capability, an ultimate deterrent against any predator out to dismember it. And anyone who believes that the Russians are finished as a powerful people should remember the nuclear and space scientists, chess grandmasters, and Olympic champions they nurtured despite a crippling centrally planned economy. Unlike their communist system, the Russians are not a people to be consigned to the dustbin of history.”

America: the anticommunist anchorman

On American foreign policy blunders: “Many American leaders believed that racial, religious, and linguistic hatreds, rivalries, and hostilities, and feuds down the millenia could be solved if sufficient resources were expended on them.”
On a few years out a Harvard: “They were too politically correct. Harvard was determinedly liberal. No scholar was prepared to say or admit that there were any inherent differences between races or cultures or religions. They held that human beings were equal and a society only needed correct economic policies and institutions of government to succeed. They were so bright I found it difficult to believe that they sincerely held these views they felt compelled to espouse.”
To Nixon on China-US relations: “As far as we could make out, Mao wanted to remake China. Like the first Chinese emperor, Qin Shihuang, who had burnt all the books of the time to wipe out what had gone before, Mao wanted to erase the old China and paint a new one. But Mao was painting on an old Chinese picture imbedded in mosaic; the rains would come, Mao’s paint would be washed off, and the mosaic would reappear. Mao had only one lifetime and did not have the time or power to erase over 4,000 years of Chinese history, tradition, culture, and literature. Even if all the books were burnt, the proverbs and sayings would survive in the folk memory of the people. Mao was doomed to fail. (Years later, in his retirement, Nixon quoted what I had said in a book. He also quoted me on the Japanese, that they had the drive and the ability to be more than just makers and sellers of transistor radios. Only then did I learn that, like me, Nixon had the habit of making notes after a serious discussion.) Asked about U.S.-China enmity, I said there was no natural or abiding source of enmity between China and the United States. China’s natural enemy was the Soviet Union with whom it shared a 4,000-mile boundary which had been shifted to China’s disadvantage only in the last 100 years. There were old scores to settle. The boundary between America and China was an artificial one drawn on water across the Straits of Taiwan. It was ephemeral and would pass with time.”
“Nixon’s style was different. He shook every hand with enthusiasm and the appropriate greeting: “Glad to see you again.” “How nice to see you.” “How good of you.” In between he would insert a few words of praise or comment on particular guests as I shook hands with them. In the midst of all this, he said in an aside, “Never use the wrong expression, like ‘How do you do.’ You may have met the man before. It will show you did not recognize him and he will be offended. Always use a neutral phrase like ‘How nice to see you.’ ‘How good to see you. It is good to see you. And if you recognize him, Ah, it is a long time since we last met. How good to see you again.‘”
LKY thinks that the Vietnam War allowed the noncommunist countries of SE Asia to put their houses in order. “Had there been no U.S. intervention, the will of these countries to resiste them would have melted and Southeast Asia would most likely have gone communist. The prosperous market economies of Asean were nurtured during the Vietnam War years.”

Strategic accord with the United States

Jimmy Carter comes in and switches US attention to Africa. This unsettles ASEAN governments.
On meeting Reagan: “I left Washington feeling more confident that when Carter was president. Reagan had a natural optimism that infused all those around him with the same ‘can do’ spirit. He looked on the sunny side of ever issue and was prepared to stand up for his beliefs… He knew what he wanted and set out to achieve it by surrounding himself with able people who shared his thinking and were successful their chosen fields. The eight years of the Reagan presidency were good years for America and the world. His “Star Wars” program confronted President Gorbachev and tie Soviet Union with a challenge they could not hope to meet. That helped to dismantle the Soviet Union.”

America’s new agenda

On being challenged by the US over detention without trial: “Singapore was a Confucianist society which placed the interests of the community above those of the individual. My primary responsibility was the well-being of the people. I had to deal with communist subversives, against whom it was not possible to get witnesses to testify in open court. If I followed her prescription, Singapore would come to grief. What could the United States do to rescue Singapore more than they were doing for the boat people of South Vietnam, who were then sailing out into the perils of pirates and the weather in the South China Sea? If the United States would give Singapore the status of a Puerto Rico and underwrite Singapore’s future, I would follow her prescription. Then the United States would have to pick up the pieces if Singapore failed.”
“The issues that Americans put at the top of their agenda in the 1990s were human rights and democracy, and Western versus Eastern values… I said it was 50 years since the British and French first gave independence with Western-type constitutions to over 40 former British colonies and 25 former French colonies. Unfortunately, both in Asia and Africa the results have been poor. Even America had not succeeded in leaving a successful democracy in the Philippines, a former colony it freed in 1945 after nearly 50 years’ tutelage. I suggested that a people must have reached a high level of education and economic development, must have a sizeable middle class, and life must no longer be a fight for basic survival, before that society could work such a democratic political system.”
“There is no Asian model as such, but there are fundamental differences between East Asian Confucian and Western liberal societies. Confucian societies believe that the individual exists in the context of the family, extended family, friends, and wider society, and that the government cannot and should not take over the role of the family. Many in the West believe that the government is capable of fulfilling the obligations of the family when it fails, as with single mothers. East Asians shy away from this approach. Singapore depends on the strength and influence of the family to keep society orderly and maintain a culture of thrift, hard work, filial piety, and respect for elders and for scholarship and learning.
“Man needs a moral sense of right and wrong. There is such a thing as evil, and men are not evil just because they are victims of society. I said in Foreign Affairs that many of the social problems in the United States were the result of the erosion of the moral underpinnings of society and the diminution of personal responsibility.”
Way off: “Harvard political science professor, Samuel Huntington, in an address in Taipei in August 1995, contrasted the Singapore model with the democratic model in Taiwan. He quoted a New York Times headline which summed up the difference between “clean and mean” Singapore and “filthy and free” Taiwan. He concluded, ‘The freedom and creativity that President Lee has introduced here in Taiwan will survive him. The honesty and efficiency that Senior Minister Lee has brought to Singapore are likely to follow him to his grave. In some circumstances, authoritarianism may do well in the short term, but experience clearly shows that only democracy produces good government over the long haul.‘”
“Americans and Europeans were justifiably triumphant and exultant after their success in helping to dissolve the Soviet Union by pressing for human rights and democracy under the Helsinki Accords. But they were unrealistic in hoping to repeat the process in China. Unlike the Russians, the Chinese did not accept the cultural norms of the West as superior and to be emulated.”
“One evening over dinner in Singapore in March 1992, former German Chancellor Helmut Schmidt asked me whether China could become democratic and observe human rights like the West. Choo, who sat next to Schmidt, laughed outright at the idea of 1.2 billion Chinese, 30 percent of them illiterate, voting for a president. Schmidt noted this was her spontaneous reaction to the absurdity of it. I replied that China’s history of over 4,000 years was one of dynastic rulers, interspersed with anarchy, foreign conquerors, warlords, and dictators. The Chinese people had never experienced a government based on counting heads instead of chopping off heads. Any evolution toward representative government would be gradual. Nearly all Third World countries were former colonies that, after decades of colonial rule without either elections or democracy, received democratic constitutions fashioned after those of their former rulers. But the British, French, Belgian, Portuguese, Dutch, and U.S. democratic institutions had taken hundreds of years to evolve.”
On Americans trying to transplant democracy into Haiti (passage from Bob Shacochis): “Haitian democracy, born prematurely, will not survive without a genuine multiparty system, which won’t exist without a secure middle class, which can’t evolve without a viable economy, which won’t exist without credible leadership strong and wise enough to wrench the country out of its tailspin.” LKY - “Because the American administration did not publicly acknowledge this failure and its reasons, this will not be the last time it makes this mistake.”
“The Chinese people have a deep and abiding fear of luan (chaos). Because of their country’s immense size, their leaders are extra-cautious, and will carefully test, adjust and adapt before incorporating new features into their system.”
“After the collapse of the Soviet Union, Americans have become as dogmatic and evangelical as the communists were. They want to promote democracy and human rights everywhere, except where it would hurt themselves as in the oil-rich Arabian peninsula. Even so, the United States is still the most benign of all the great powers, certainly less heavy-handed than any emerging great power.”
“American friends keep reminding me that their foreign policy is often driven not by considerations of strategic national interest, but by their media.”

Japan: Asia’s first miracle

On the Japanese surrender in 1945: “Unexpectedly, on 15 August 1945, came the emperor’s order to surrender. From being our lords and masters, the Japanese transformed themselves into model prisoners of war, conscientious and hardworking, cleaning up the city, applying themselves to their changed role seriously and diligently. Then they disappeared from the scene. I read of their distant hardships as they rebuilt Japan.”
On Zenko Suzuki: “He would set aside $100m for a training center in each Asean contry, and one in Okinawa. The key to a modern economy, he said, was through training, not grants and soft loans.”

Lessons from Japan

A reason given by a MD of a Japanese company about why Singapore worker productivity was lower: “There was a clear division in Singapore between the rank and file and the officer cadre, which was the British system, where a polytechnic or university graduate came straight into the officer grade. This was not so in Japan.”
LKY visits the Yokohama shipyards of IHI to meet the vice-president:

“He was an outstanding engineer. Like the other workers, he wore his company’s uniform. He wore rubber boots and a hard hat and provided me with the same before we toured the dockyard. He knew every inch of it and gave a running commentary in English. The Japanese workers were disciplined, hardworking, united, and efficient.

Back in his office, over a working lunch, he explained the difference between British and Japanese managements. Japanese executives and engineers start work on the factory floor. They had to understand the low-level workers before they could rise from the ranks to lead them effectively. The British dockyard executive sat in his carpeted office and did not visit the workers on the shop floor or in the dockyards. That was bad for morale and productivity.

Later that year, I visited Swan Hunter’s shipyards on the Tyneside. Sir John Hunter took me through his dockyard. The contrast was stark. Sir John wore a beautifully tailored suit with highly polished shoes. We drove up together in a Rolls Royce. When we walked through the greasy shop floor the muck stuck to our shoes. I had not noticed such grease at the IHI dockyards in Yokohama. As we were about to enter the Rolls, I hesitated. Sir John did not. He scraped the soles of his shoes against the floor and went into the car where he wiped the remaining grease on to the thick beige carpet. I was invited to do the same. I must have looked surprised for he said, ‘They will shampoo it.’ We were driven off, not to an office working lunch but to the Gosforth Hotel, where we had an excellent meal before playing 18 holes of golf. The British executive lived in style.”

Korea: at the crossroads

“As in Japan, the whole Korean domestic economy, especially the high savings fo their workers, provided the base for chaebols to get capital at low interest rates and target specific industries.”

Hong Kong’s transition

Comparing Singaporean vs Hong Konger outlooks:

“In Hong Kong when people fail, they blame themselves or their bad luck, pick themselves up, and try again, hoping their luck will change. Singaporeans have different attitudes to government and to life. They prefer job security and freedom from worry. When they do not succeed, they blame the government since they assume its duty is to ensure that their lives get better. They expect the government not only to arrange a level playing field but, at the end of the race, to give prizes even to those who have not done so well. Singaporeans vote for their MPs and ministers and expect them to distribute whatever prizes there are.

A Hong Kong entrepreneur who settled in Singapore summed it up for me succinctly. When he established textile and garment factories in Singapore in the early 1970s, he brought his Hong Kong managers with him and hired several more Singaporeans. The Singaporean managers were still working for him in 1994, while his Hong Kong managers had set up their own businesses and were competing against him.”

Deng Xiaoping’s China

“He was the most impressive leader I had met. He was a five-footer, but a giant among men. At 74, when faced with an unpleasant truth, he was prepared to change his mind.”
“Every province of China is different in geography, economy, education, and standard of efficiency. The preoccupations of their governans are different.”
“I had assumed the communist system made for completed unified central control. This never was so in China… five words (The mountains are high, the emperor is far away), express the cynicism and skepticism of generations of the disaffected who have short changed the local authorities.”
“The quality of the people in charge of China is impressive… They have capacious minds, analytical and quick on the uptake.”
“Japan did not have nuclear capability, but it was possible that Japan would go it alone if the United States proved no longer dependable. In that case, the threat to all countries in Southeast Asia would increase.”
“Toward the end of the two weeks, Jiang had looked Ng Pock Too in the eye and said, ‘You have not told me everything. You must have a secret. China has cheaper land, cheaper water, cheaper power, cheaper labour. Yet you get so many investments and we don’t. What is the secret formula?’ Nonplussed, Ng explained the key importance of political confidence and economic productivity. He pulled out his copy of the Business Environment Risk Index (BERI) report, and pointed out Singapore’s rating as 1A on a scale of 1A down to 3C. China was not even included in the rating.”

Rich China

“I met Xu at the end of his visit. He told me he was interested in how we had used the free market to achieve rapid economic growth; how we had blended Western and Eastern culture as we absorbed Western science and technology; and, most important, how we maintained racial harmony. His delegation was responsible for ideology and wanted to learn how to eradicate social vices.

We were candid about the problems we could not solve. Vices such as prostitution, gambling, drug addiction, and alcoholism could only be controlled, not eradicated. Singapore’s history as a seaport meant prostitution had to be managed and confined to certain areas of the city where the women were given regular health checks. Gambling was impossible to - suppress. It was an addiction Chinese migrants had carried with them wherever they settled. But we had eliminated the triads or secret societies and broken up organized crime.”
“we set out to eradicate such weaknesses as nepotism, favoritism, and corruption, which were the dark side of Chinese Confucianism - the obligation to help one’s family. Singapore is a compact society and its leaders had to set the example in honesty and upright conduct. We considered it vital that the people feel confident the government would not cheat or harm them. Then, however unpopular government policies might be, the people accepted that they were not the result of immorality, nepotism, or corruption.”
Interesting bit about how hard it is to eliminate corruption in China’s ‘grey economy’ because of the power of guanxi (personal connections).
“China has repeatedly stated that it will never become a hegemon. It is in everyone’s interest that before that moment of choice arrives, China be given every incentive to choose international cooperation, which will absorb its energies constructively for another 50 to 100 years. This means China must have the economic opportunities to do this peacefully, without having to push its way to get resources like oil, or to have access to markets for its goods and services. There are fair and equitable rules in multilateral organizations like the WTO for a free exchange of goods and services so that each country can stay within its borders and improve its people’s well-being through trade, investments, and other exchanges.

This was the way the Germans and the Japanese were able to rebuild after World War II. Their territories shrank even as they had to accept their nationals expelled from territories they had occupied and colonized. Despite smaller territories and reduced natural resources, both flourished as never before because they had access to markets through the IMF and GATT. If such a route is not open to China, the world must live with a pushy China. In that event, the United States will not be alone in being concerned about what China will do when it is able to contest the present world order settled by America and its partners in Europe.”
“The single decisive factor that made for Singapore’s development was the ability of its ministers and the high quality of the civil servants who supported them. Whenever I had a lesser minister in charge, I invariably had to push and prod him, and later to review problems and clear roadblocks for him. The end result was never what could have been achieved. When I had the right man in charge, a burden was off my shoulders. I needed only to make clear the objectives to be achieved, the time frame within which he must try to do it, and he would find a way to get it done.”
“I must place Singapore in competent hands before retiring. To do this I had to find and get into office a group of men to provide Singapore with effective and creative leadership. Had I left it to chance, depending on activists coming forward to join us, I would never have succeeded. We set out to recruit the best into government. The problem was to persuade them to enter politics, get themselves elected, and learn how to move and win people over to their side. It was a slow and difficult process with a high attrition rate. Successful, capable professionals and - executives are not natural political leaders, able to argue, cajole, and demolish the arguments of opponents at mass rallies, on television, and in Parliament.”
“The new MPs, bright young men who had won scholarships to renowned universities… were taking over key jobs within 3-4 years of joining the PAP. The veterans felt they should not have such an easy path to office, but should learn and wait. I did not think young and talented men would sit and wait; either they were going to make it or they would move on.”