What Is Singapore’s “Secret Sauce”?

Davis: Let me pick up on that point. And you stressed the importance of liveable neighborhoods, the fact that there may be disadvantaged people but no disadvantaged neighborhoods. You know I’ve come to Singapore many times. I’ve walked around the public-housing estates, including among people who are obviously at the lower-income echelons of society, and there’s two things that strike me. And I think they play into the liveability point you were mentioning. I’d like to draw attention to them, and ask how is it that Singapore has done them.

One is, you’re safe. I’ve never walked around a single neighborhood in Singapore where I feel a threat to my physical security, despite the fact that I’m obviously an outsider. I cannot say the same thing about walking around in a poor neighborhood in the US where I’m an outsider or many other parts of the world. The other thing, and it’s related to that: I’m impressed by the fact that public services, local public goods are provided to a tolerably high efficiency level and quality level, as far as I can tell, throughout the society. That strikes me as a remarkable achievement, and those two things together seem to go a long ways to achieving this liveability, to making it possible for harmonious interactions among different ethnic and racial and religious groups to take place to build this cohesion. First, do you agree with my assessment? And, second, how is it that Singapore achieved those things, which we don’t see in many other places around the world in terms of broad-based physical security, broad-based good performance of the local public-goods sector.

Shanmugaratnam: Well, I think there are a few dimensions to it. First, enforcement of the law has been a very important part of our strategy, and it goes back to the early days. When our first prime minister, Mr. Lee Kuan Yew, passed away a year ago, there were many emotions and memories, many reflections from a very broad range of people on what he represented to them. I found very interesting that some people spoke about things that weren’t about the economic or social achievements that are normally talked about. Some people simply said, “He got rid of the gangsters.” That’s what they remembered. He got rid of the gangsters. Not with vigilante squads mind you, but tough laws and enforcement that have in turn led to a new culture. People know that it doesn’t pay to join a gang; the penalties are tough on you, families know that, and it becomes a culture of abiding by the law, that feeds on itself. That’s another example of how we get something for free. Tough enforcement of the law creates a culture over time, a culture that keeps society safe.

The second dimension of it is what you also touched on, which we could say is about avoiding the “broken window” phenomenon. When something is broken, fix it quickly. Not just fix it, but fix it quickly, so people do not see a broken window, and it never becomes a social norm. If a lift breaks down, or if there’s a power failure, or in the rare instance where you get a major water failure, fix it quickly. And you’re held accountable if you’re not meeting the targets.

So that’s the second dimension. Look for problems and fix them, and then you create a culture where everyone gets annoyed when something goes wrong. You’ve got to get annoyed when things go wrong.

The third dimension of this is in the constant rejuvenation of our neighborhoods. Never let a neighborhood gradually fall into disrepair. Every 20 years or so, we rejuvenate each estate. It requires a budgetary outlay, but it’s worth the money. It’s worth the money because you’re keeping that culture of inclusion, and you’re keeping that home-equity appreciation across your society.

If I look at my own constituency, Taman Jurong, which is at the heart of the original Jurong Industrial Estate, where Singapore’s industrial takeoff took place. It was the first housing neighborhood there, and attracted workers and their families from around the island. The first apartment blocks were built in the early 1970s. Started off with very basic amenities. But that first generation of simple homes have now been replaced by new homes, and vastly better facilities. Parks, playgrounds, street soccer courts, activity centers for the older folk, a shopping center, a new food center and market, a community club where people take courses or volunteer to run programs that bring residents together. All publicly owned, shared facilities that make the neighborhood better for everyone.

Davis: Let me go back to the first part of your statement. You mentioned Lee Kuan Yew was beloved, and one of the things he was beloved for was getting rid of the gangsters. But my impression is that he also dealt rather harshly with persons who wanted to stoke racial, ethnic, and religious animosity—a phenomenon that we see in the US, in my view—and is that a correct assessment? And how important were speech restrictions designed to tamp down these tensions?

Shanmugaratnam: It’s a challenge that is not unique to Singapore, and it’s not just the way the Lee Kuan Yew era was. It’s the way we have to think about preserving civil liberties and making democracy work well. How do we do it? What liberties do you constrain in order to let other fundamental liberties progress? That’s a challenge we all face. How do we ensure that regardless of people’s ethnicity they can advance in life? How do we ensure that you’re free to practice your faith without feeling insult or oppression? How do we ensure that we live in a city that is safe, and not defined by its most uncivil elements? It requires some trade-offs, and we can’t be wide-eyed about it. What liberties do you constrain in order to support other liberties that matter to a broad base of people, and to preserve social trust?

That’s not an excuse for ruling governments to do anything they like, or for any draconian law to be put in place. It does not mean staying in the past. But it means we all have to think responsibly about the guardrails needed for social trust and a healthy democracy to survive.

Davis: It sounds quite challenging in practice, just in the abstract, to draw, to try to draw a line between—I’ll use my language here, you can object if you want—an inappropriate stoking of racial and religious tensions and, if you go too far in that direction, you’re going to inhibit the legitimate voicing of concerns that might impact one racial or ethnic or religious group more heavily than others. How do you draw that line in practice, or at least how has it been done in Singapore?

Shanmugaratnam: With difficulty. But you have to take responsibility. That’s the responsibility you have to take as an elected government in a representative democracy. You’ve got to make a judgment, you’ve got to explain your judgment, and you will either earn the respect of the people for making that judgment, or you dis-earn it.

I think it’s important to recognize that the way social culture evolves, the way social markets operate, they’re quite different from economic markets. In economics there’s usually some reversion to the mean, and a trend in one direction is eventually corrected by a trend in the other direction. When it comes to social norms and values, there’s no reversion to the mean. The natural workings of society can just as well lead to more and more segregation and problems getting more intractable over time.

That’s something we all know from the last 50 years, starting with the wide-eyed, unplanned experiments in multiculturalism. Social forces, social culture tends to self-perpetuate. So taking the uncomfortable decision to constrain some liberties early in the game, constraining hate speech, and intervening upstream in urban planning and education, to encourage people to mix together, allows you to keep a consensus in society, keep the middle strong, and prevent the centrifugal forces from operating.

Davis: So we’ve been looking back thus far, much of our conversation, on Singapore’s experience, how it got to where it is. I’m guessing that you and the other ministers are not planning to just rest on your laurels, but that you actually have plans to continue promoting a cohesive society, continue promoting upward mobility. Could you tell us about some of the newer policy initiatives and some of the challenges, both the old ones that persist, but maybe new or intensified challenges that you see in Singapore and elsewhere that make that a difficult enterprise?

Shanmugaratnam: Well again, the challenges that we face in Singapore are not unique. First we have to think hard about how we can sustain social mobility, because it gets more difficult in every maturing society. It means starting earlier in a child’s life, in fact even before a child is born, and continuing after a person leaves school and college. Those are the two big new enterprises in social policy. The earlier the better. [University of Chicago’s] Jim Heckman got everyone thinking about this, and it’s now a truism: the earlier the better.

And we now know from good research that the prenatal period is critical. We used to know that nutrition was important, healthy habits were important during the prenatal period, and an underweight baby or a premature baby is not just a matter of disadvantage early in life, it’s a matter of disadvantage through life. But we now know something more, which is that problems in the prenatal period that do not present themselves at birth can keep coming up through life. Air pollution, emotional stress, a variety of problems that don’t present themselves at birth, can last through the teens and well into working life.

We have to find effective ways of intervening, during the prenatal period and the earliest years of life. It’s a much more difficult game than school systems, because not everything can be institutionalized. You don't have the babies with you day and night. They’re mainly at home, and the child-parent interaction is critical. How do you intervene in a way that’s respectful and preserves the dignity of the family? It means new forms of intervention that involve local partnerships, because it can’t be just the state. It has to involve civic organizations, friendly faces in the community, and a range of professionals—educational psychologists, health-care professionals, social workers—working in a team.

We have to be honest about this. The experience of the last 50 years is that nothing has worked particularly well to overcome the lottery of birth. Nothing has worked particularly well to redress the early disadvantages that some children face. So we need to be bold, we need to be experimental, we need to pilot test new approaches, but we also need some humility about it.

Another very important challenge, and area of public policy going forward, concerns how we help people achieve their fullest potential through life, after the school years. I would say we first have to ask serious questions about the current model of the bachelor’s degree, across a range of countries. What should college education or a postsecondary education be about? How do we best develop people’s potential and enable them to earn their own success through life?

If you look at the US, just 45 percent of students who enroll in four-year colleges complete their degree within five years. Of those who graduate, if we look at recent college graduates, 45 percent of them work in jobs that don’t require a college degree. If you look at the much-talked-about college wage premium—that’s the premium of wages earned by the median college graduate compared to the median high-school graduate—it’s still quite a healthy premium and has gone up. But that’s despite the median wages of college graduates having been flat in real terms for a very long time; the premium has gone up because high-school grads are now earning less in real terms than they used to. But more importantly, we mustn’t just think about the median. If you look at the bottom quartile of college graduates, there is no premium over high-school graduates. And that’s the bottom quartile of a much larger college cohort. No premium today, and in fact no premium even if you go back over the last few decades, to the 1970s.

We’ve expanded college participation almost everywhere, but it’s a particular model of a college education, and it needs revisiting. It’s overly academic; it doesn’t have enough of the real world. That mattered less when few people went to college, but it matters greatly now. So we have to ask ourselves what the best mix of the academic and the practical is, for a broad span of each student cohort. First, what’s the best mix for ensuring that they can get good jobs and earn a good living, but second, what’s the best mix between the academic and practical, for developing human potential? People develop in different ways, through different exposures and experiences. So I think that’s a pretty fundamental question.

The Swiss are the classic example. Even today, the majority of Swiss go through a vocational route of education after age 15, including intensive learning at the workplace. But we must also address the question of how much of education we front-load into the first 20 or 22 years of a person’s life, and how much we spread throughout life, through regular injects during a person’s working life. It’s going to be necessary because skills become obsolete more quickly than they used to, and you can't expect someone to go back to that reservoir of learning that they had when they were young to find new skills. It needs regular injections through life. How do we organize it? What mix of public and private resources do we use? Who are the curators of learning, and who are the teachers and mentors? How should employers be involved, and how should universities and polytechnic, or new providers, work with industry to anticipate new skills, help deliver those regular injections of learning?

Davis: In some respects, the lifelong-learning part beyond the traditional schooling years strikes me as an even more ambitious social development than better early-childhood development. As you said, Jim Heckman and others have pointed to the potentially huge payoff of early-childhood development, but I believe Jim, among many others, also found quite discouraging results about traditional-style job-retraining programs. The narrow focus on some skill development, often after somebody’s lost his or her job, my understanding is those don’t seem to work very well. So I presume you have something else in mind—I know you have something else in mind. I believe there is a, for lack of a better term, an important psychological aspect to the skills-development initiatives in Singapore. That’s not something economists usually dwell on. Could you speak to that, what it takes to get people engaged, not just the narrow transmission of skills, but to get people to become the steward of their own life, their own skill development?

Shanmugaratnam: I have to say this is still an open space. We haven’t discovered the best way to do it. No one has a model in this regard. It’s an open space that we all have to engage in now.

It does help to empower individuals themselves, and that’s what we’re trying to do in Singapore. In January this year we started a scheme called SkillsFuture Credit. Everyone gets S$500 in a personal SkillsFuture account, to be spent only on learning, and we plan to top that up from time to time. It’s for them to decide what they want to learn and the shape of that learning. You can wait several years, wait for more credits to accumulate in your account before doing something very significant. Or you can learn in small bites over time. We leave it to individuals to decide. The whole aim is to make everyone responsible for their learning, instead of just subsidizing employers or course providers. You decide.

People develop a passion for learning at different points in their life, we know that too. Many people don’t have a passion for learning when they’re young, but it often develops later, depending on what you’re working on, or some interest or ability you discover about yourself in midlife.

A second interesting thing is that we know from the research that the brain has a lot more plasticity as people get older than we used to think it had. The brain keeps learning in response to what we do, the work you’re doing, the responsibilities you take on. What the psychologists call “crystallized intelligence” keeps developing, and doesn’t peak [until] we are well into our 60s. It offers new potential, and a new area in public policy. We should never underestimate the middle-aged and older citizens, in their ability to learn something new and apply it on the job.

Third point, a very important point you mentioned, which comes out in the work of Jim Heckman and others, is that training in isolation of work opportunities doesn’t work very well. Training that’s linked to what’s needed in the job you’ve been given tends to sink in better, and you are better motivated because it’s integrated with career development. So when we have people who are unemployed, we’ve got to get them back into jobs quickly, and work with them and their employers to train up. It’s never a perfect strategy, but it works better in practice than training someone before he or she gets a job, and hoping that an employer recognizes what they’ve been trained in.

Davis: OK, great. I’d like to open up the discussion now to the audience.

Question 1: Singapore faces an aging challenge. Now you have a new policy initiative to try to move away from heavy dependence from the foreign labor force. So how do you combine the two things together? I mean, how do you provide enough labor supply for Singapore? What is the new policy initiative?

Shanmugaratnam: It’s an important challenge. We can't avoid a future of limited manpower growth. The local labor force is slowing down dramatically, and you can’t keep adding to your labor-force growth by injecting foreign manpower because then the proportion of foreigners to local keeps growing. We’re now at a foreign-manpower share of about one-third of the workforce. We will never be a Dubai, let me be frank. This will be a place with Singaporeans at the core and in the majority, and a range of foreigners with different skills and experience.

We can’t boost labor-force growth, but we must do everything we can to boost productivity growth. How do we do it? If we leave it completely to the market, you can get stuck in mediocre growth for a long while before creative destruction finally does its work on the economy. But the old-style dirigisme or government-led industrial policies don’t work very well either. I think there’s a role for options in the middle, what I’ll call market-responsive industrial policies, and they have to be focused on the supply side, developing skills and capabilities and supporting market innovations.

How do you speed up the rate of diffusion of new techniques and ideas from the leaders in each cluster to the rest in that cluster? There’s a role for coordination among market players. There’s a role for public-private partnerships in training and in R&D. And there’s a role for industry platforms that enable small enterprises to hop on and benefit from collective learning and possibly from shared infrastructure and technologies.

So there’s a role for government in supporting the market—in developing capabilities and speeding up diffusion of new techniques. But we never predict what’s going to succeed very far in advance in Singapore. We don’t have a serious industrial policy, certainly we never had a policy like what existed in Japan or Korea in earlier decades. We just keep listening to the major players in each industry, some of whom are global leaders, understand the business strategies and plans, then ask ourselves if we can help develop the cluster, and try to speed up the acquisition of skills and rate of diffusion of knowledge within the area. That’s our approach.

Davis: Can you give a concrete example of the platform that enables small and medium-sized enterprises?

Shanmugaratnam: Let’s say aerospace. It’s a good example because we didn’t predict that we would grow an aerospace industry in Singapore. It wasn’t driven by government plans. It came out of adjacencies. Adjacencies with the electronics industry, and with precision engineering, two major existing industries with capabilities adjacent to an aerospace industry. We found that a few global firms were interested in doing something in Singapore in aerospace, taking advantage of these adjacencies. It started in a small way, then we saw it growing. So we asked what we could do to accelerate it. You need a reliable supply chain. We started helping a range of smaller enterprises, like local precision engineering SMEs, to adapt and equip themselves to service global leaders in aerospace. So we developed that SME ecosystem around aerospace.

Second, a platform of training. We introduced in our Institute of Technical Education, which is our vocational track in tertiary education, and in our polytechnics, serious training in skills required in aerospace. Third, we worked with the industry for continual training to take place. Fourth, R&D. We’re collaborating with the firms in R&D, because we think there are externalities in each of these investments and there’s a role for public policy.

So that’s an example. We didn’t have an industrial policy that said aerospace is the industry of the future. We waited for the market to tell us what was coming and what they thought they could do in Singapore, and then we sought to support capability development and speed up the development of an ecosystem that works.

Question 2: My question is on how to recruit good politicians. You started your career as an economist at MAS and you are now deputy prime minister; it is amazing for us to see such an intelligent person as the deputy prime minister, and as a country becomes rich, there’s a general tendency that young, ambitious people do not go to public service, which used to be a potential source of good politicians in Singapore. So how, going forward, how does Singapore find good politicians who guide the future course of Singapore’s economy and society?

Shanmugaratnam: It helps that we’ve had a social tradition where working in the public service, to begin with the civil service, has not been frowned upon. It has been respected. There have been many Asian countries where that had been the case. We’ve also kept that going in Singapore by getting rid of corruption, starting from our earliest years. Every time there’s a suspicion of any corruption, small or big, it’s pursued with full energy. Doesn’t matter who you are. So when you combine a profession for which there has been some social respect with a very serious and institutionalized system of keeping things clean, I think you keep in high standing the idea of working in public office.

Politics will involve new challenges. Politics is getting a lot more pluralistic in Singapore, and more contested. The population is much more educated, and there are generational differences in aspirations, in values, in preferences. It’s getting a lot more diverse than it used to be, and you have to respond to that as a politician in a way that doesn’t just play to people’s views and anxieties at any point in time, but tries to unify people and inspire thinking around the future. That’s our bias in Singapore. It’s a bias toward keeping that consensus in the middle whilst accepting that there’s diversity around it, and inspiring people in the future.

That’s frankly a challenge for all our democracies. If you can hold the middle strong, it makes it a little easier to focus on the future. Once the middle weakens and you get polarization, it’s very hard in practice to get people to focus on the future. And if we are talking about social mobility, every conceivable investment or strategy we can take on mobility, whether it’s prenatal or in the early years or injections in learning through life, every strategy takes years to pay off. Not one electoral term, not even two electoral terms. It takes years to pay off. The short-termism that comes with a weak middle in politics is an enemy of mobility.

So we have that bias in Singapore. Keep the center strong. A little conservative in some respects, and we have to allow for more diversity over time, but keep the middle strong, and keep inspiring people in the future. It also makes it easier to attract good people into politics.

Davis: Will you be able to sustain this forward-looking nature of your policy if and when Singaporean politics become more competitive?

Shanmugaratnam: Incidentally, it’s a lot more competitive than meets the eye. We have to work extremely hard to keep the vote going at our favor, believe me. I might be a minister, but I’m a member of Parliament responsible for my constituency and I can tell you I work a lot harder than any of my international counterparts that I’ve met. It’s a competitive democracy, and anything can happen. But there is a way in which the governing party has reshaped the culture of politics, so that everyone in politics is held accountable to the consequences of their policies for the future. It’s not easy to be a rabid populist in Singapore. People view you with some skepticism now, and I don’t think that came naturally. That came out of creating a political culture. So it’s another example of the more general point I’m making—how the right culture helps to sustain itself, just like the wrong culture also sustains itself. We see that everywhere.