STATISM IS THE WINNING IDEOLOGY FOR ECONOMIC SUCCESS OF SINGAPORE, JAPAN, CHINA, S KOREA & TAIWAN

Mention statism and it evokes a picture of big fat authoritatative menacing governments extracting every penny out of everyone, choking all oxygen out of the room. In political science the term simply means a recognition that the state has legal authority. It is a doctrine of state over individuals. Individuals serve the state. This is diametrically opposed to anarchism which is individual rights are sovereign over state.

The general perception of statism is a Leninist-que regime  In reality, statism spans a wide spectrum from minimalist 'night-watchman state' to maximalist full-bloom totalitatrian state. Night watchman state is where a government provides only the security services such as military, police, fire department, the courts, prisons, etc and stay out of everyone's way. A welfare state is where the government provides heavily free or subsidised education, health, housing, transport etc. An authoritarian state is one where the government regulates strongly the individuals' domain of free speech, religion, and other cultural aspects. A totalitarian state is one where you own nothing and be happy. 

From the political perspective, every country in the world is a statist by definition, it's just a matter of which part of the spectrum. 

In economics, statism is a way of governance where the state directs major aspects of the economy, either directly through state-owned enterprises and economic planning of production, or indirectly through economic interventionism and macro-economic regulation.

From the economics perspective, statism is present in every country in the world as governments plan and make economic policies and regulations. It is a question of the span that governments' direct involvement covers.

In general discussion, the label of statism is applied to a country that has characteristics of significantly high political controls and government involvement in economic planning, distribution of resources and production.

The perception of statism is in the mould of the Lenin era with their failed model of collectivism. Hardly anyone associates such states with economic success. However, what seems to have gone unnoticed, is several Asian countries that had seen unprecedented economic achievements, namely Japan, South Korea, Taiwan, Singapore and China, were statist regimes when they achieved economic miracles. Some of them remain statists today.. 

Japan:

Japan's government was authoritative during key phases of its industrialization. In 1868 the Tokugawa shogunate was replaced by the Meiji government with the emperor at its head. The new Meiji government was highly centralized and authoritarian. It tried to modernize Japan rapidly to prevent colonization by Western powers. During the 1930s Japan became militaristic and very authoritarian. After WWII Japan transitioned to a democratic government with universal suffrage and pluralism of political parties. However, for a long period of 1955-1993, Japan politics was dominated by the Liberal Democratic Party much like the PAP in Singapore.

Japan's modernisation and industrialisation started early in late 1800's during the Meiji Restoration. It's development speeded up tremendously after WWII, taking advantage of US assistance in the post-war reconstruction. The government played a critical role in economic planning and industrial policy. Japan's famed MITI (Ministry of International Trade and Industry) guided economic development which concentrated on heavy manufacturing and technology innovation. Government support spawned the development of the uniquely Japanese Keirutsu business groups like Sumitomo, Mitsui, Mitsubishi etc  This state-led model was responsible for Japan’s rapid industrialization, leading to the development of key industries such as automotive, electronics, and steel. Japan's economy boomed in 1950s to 1980s when it become one of the world’s largest economies.

South Korea:

Coming out of the Korean War, Sokor was under military dictatorship during it's industrialisation growth. These regimes implemented economic policies with a strong hand, often suppressing political dissent. Their economic growth in the 1960s to 1980s under authoritative regimes came at the expense of political freedoms and labor rights.

Sokor government used the same Japanese model where the government played a central role in economic planning and development, particularly under the leadership of Park Chung-hee in the 1960s and 1970s. The state directed resources into strategic industries and supported the growth of large family-owned conglomerates known as chaebols such as Samsung, Hyundai, Hanjin etc. This led to rapid industrialisation and transformation into a high-income economy. The country built a strong manufacturing base particularly in shipbuilding and electronic and electrical goods. 

Taiwan:

During the time of its rapid industrial growth 1950-1980s, Taiwan was under authoritative regime. From 1948-1987 was a period known as "White Terror" when the island republic was under Marshall Law. That was a period under a single party rule. The Kuomintang Party banned all political parties. Political dissent was crushed. There was extensive surveillance, censorship, and persecution of perceived political opponents.

The economy was state-led with the government directing investments into strategic sectors, promoted export-oriented industrialization, and established science and technology parks. These policies helped Taiwan develop a strong industrial base, particularly in electronics and information technology. Taiwan became a major player in the global semiconductor industry, contributing to its economic prosperity.

China:

In current times, China is the quintessential authoritative state. The CCP (Chinese Communist Part) is the sole ruling political party. There is no universal suffrage. Although there once was democratic selection of leadership within the party, the Constitution has been changed to allow President Xi unlimited term tenor. There are some for-show political parties who play no role in the government, and political opposition is not permitted. The internet is heavily censored. Foreign websites and social media platforms are blocked by the "Great Firewall" and domestic internet services are heavily monitored and controlled. China is a "Surveillance State" with extensive surveillance network capabilities using advanced facial recognition technology, data monitoring, and the Social Credit System, which tracks and credit scores citizens' behavior. China has a low score on human rights. Activists and human rights lawyers are often detained, imprisoned, or placed under house arrest. NGOs are strictly regulated, and quickly shut down when they step out of line. Religion is a no-no. There are still many controls over the movement of capital.

China's attempt at industrial development during the Mao era were abysmal failures. In 1978 Deng Xiaoping initiated economic reforms with the "Open Door Policy" which shifted China from a central planned economy to a socialist market economy and has never looked back. The Chinese structural reforms transformed the country from a poor, agrarian society into the world's second-largest economy, characterized by rapid industrialization, urbanization, and integration into the global economy.

China's economic model is essentially state capitalism with economic policies planned at central level and implemented at local levels. Market mechanisms and private enterprises are allowed. State-owned conglomerates helped drive huge infrastructure development and key strategic industries, particularly government financial institutions that funded private efforts. State capitalism was also directed towards Chinese objective of building influence in various parts of the world, notably via the Belt & Road Initiative. In one generation, the Chinese model took 800m people out of poverty through incredible drastic societal and economic restructuring under a relatively stable political backdrop, except for the failed Tiananmen Square uprising at its inception.

Singapore:

Singapore is generally considered an authoritative state due to a single-party dominance. The PAP (Peoples' Action Party) has been in power since 1959. Although opposition parties have made some inroad in recent decades, the over-powering presence of PAP in every facet of Singaporean life has created a public perception that PAP and government are synonymous. By and large the government has delivered on much of its promises for which has earned for itself a franchise with the guts to implement non-popular measures in the interest of the bigger good.

Singapore is very much a nanny state from provision of public apartment buildings to micro-management of housing allocation according to demographics, from nurseries to universities, from government run clinics to complicated medical subsidy schemes, etc. The over-dependence on government led initiatives have bred a level of fear of missing out, or denial of service, for participation in activism and advocacies that officialdom abhors, 

Singapore is a case where the unstoppable force always meets a moveable object. There is universal suffrage but an Eastern mindset has seen a public willingly accept government intrusion into individuals' spaces in exchange for the security of political and economic stability. Western abstracts of liberalism is not much of a deal to a public concerned mainly with bread and butter issues and getting their government built HDB apartments. The occasional government creep into freedom of expression and association has met with no outcry, such as the POFMA (protection from online falsehoods and manipulation) legislation and the amendment to the Constitution with retroactive effect to allow an illegally elected President to stay in office. The failed government-controlled media, Straits Times Group, was not allowed to be sold by private bidding, but has become full-fledged states media operating with taxpayer money in financial state grants.

The Singapore economic model is somewhat  like China's. Or perhaps the Chinese replicated Singapore's model scaled up. Deng Xiaoping had once instructed his Communist cadres to junk their Mao jackets and learn from foreign countries, especially Singapore. The Lion City is an open and free economy with state capitalism existing side by side and the government taking highly interventionist approach to managing the economy.. GLCs (government-linked companies) were set up to spear-head key industries where heavy capitalisation and expertise is lacking for the local business community to take the leap. It was a community of mercantile traders whose path to wealth accumulation is real estate. The key sectors the government planned for GLCs were a national airline and maritime carrier as well as in ship-building. It had tremendous success with SIA, NOL, Sembawang and Keppel. The notable private enterprise-driven sector was in the disc drive industry where for a time, Singapore was the number one producer in the world.

The government did the central planning for economic development and the Economic Development Board played a crucial role in attracting foreign investment. Singapore’s strategic state-led development policies transformed it from a low-income country to a global financial and trade hub with a significant ship-building base. Its extremely healthy fiscal position allowed Singapore to capture substantial share of FDI with a slew of enticements like tax holidays, grants, financial assistance packages, partnership with sovereign wealth fund for investment seed capital and lax immigration policies to ensure an adequate supply of foreign workers to augment the labour force. The government's deep involvement in economic development has seen the country cope and move with the times of new challenges which has seen restructuring and transformation from export-oriented to high-value economy, and currently into AI technology. 

Two other factors have contributed significantly to Singapore's economic development that none, or at best a few countries, have. Firstly is political continuity. PAP has been the ruling party since independence in 1965. This continuity has meant economic plans had a chance to play out, unlike other countries where changes in governments interrupt the paths taken. Secondly, Singapore is the only country in the world where the government owns 90% of the land. This has facilitated the government in planning and allocation of a crucial resource.

The Asian Tigers:

The economic miracles achieved in the 60s/70s/80s by Taiwan, Sokor, Singapore and Hong Kong led the quartet to be dubbed the Asia Tigers. Japan was not included as it achieved industrialisation much earlier. The Asian Tigers rose to economic preeminence on the back of export-driven industry. Of the four, only Hong Kong is not considered a statist regime. Prior to British handover to China in 1997, Hong Kong had one of the most laissez-faire economic policies and minimum government intervention in business.

Why these statist regimes succeeded:
Contrary to the notion that statist authortarian regimes all fail at economic development. Japan, Sokor, Taiwan, China and Singapore had rapid industrialisation and achieved economic miracles. Do Asian statists make a difference? There are a few commonalities that can account for their success where others have failed. 

Although they have been authoritarian, with massive government involvement in economic  planning and intervention, and even imposing certain restrictions, all the five governments worked towards a market-driven economy. 

They all invested heavily in the infrastructure needed to spur the economy.

More importantly, they were all equally invested in education. Coming out of the Mao era, China had lost one generation of scientists. Deng Xiaoping pushed for hundreds of thousands of scholars overseas. However, returnees to the motherland were disappointing. It was only after the economic success that the number of returnee scholars picked up. China had by then, built up their modern educational institutions. These countries consistently scored well in the world education index.

In economies where government funds private enterprises, or state-owned enterprises participate in the market with profit objectives, corruption and rent-seeking motivation is a big issue. There were massive financial scandals in Sokor, Japan and China. Systemic corruption is a scourge of many developing countries that seriously stymie their economic development. All these five countries have been serious in combating corruption and have been relatively successful at that.

Conclusion:

Contrary to a general notion of economic failures of authoritative states with overbearing presence of government in the market place, these five Asian countries have shown the advantages of economic statism can drive economic development provided there is political commitment.

The effectiveness of statism in promoting economic development depends on quality of governance to manage the upsides and mitigate the downsides. Statism can provide strategic direction, stability, and social equity, it also carries risks of inefficiency, corruption, and stifling private sector growth.

 

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