On The Economist’s latest crony capitalism index, published on Saturday (March 12) Singapore is ranked third, behind Russia (first) and Malaysia (second).
In 2016, the last time The Economist published its index, Singapore had been ranked fourth. Previous to this, when The Economist first started the index, it had been in the 5th spot on the list.
The Economist’s index measures the percentage of a country’s wealth that belongs to its billionaires.
In the latest list, Singapore now ranks above the Philippines, where the term “crony capitalism” was first popularized due to rampant practices under the dictatorship of President Ferdinand Marcos in the 1980s at the expense of the poor.
In a Facebook post on Sunday (March 13), entrepreneur Kumaran Pillai warned of Singapore’s rise on the index: “This does not augur too well for Singapore as a nation.”
What is crony capitalism?
Crony capitalism is a system based on the close relationships between the state and business people, where companies flourish not necessarily because of free enterprise but because of connections with government officials.
“If you think about it, corporate Singapore is just one big happy family,” wrote Mr Pillai, but questioned why the government is reluctant to have a more progressive taxation system.
“What we have instead is a perpetual increase in prices. A can of coke used to be a $1.30 just last year, now, we’re paying from $1.50 to $1.80 for it in a coffeeshop.
Our ministers say that if we tax the rich, they’ll run away to another tax jurisdiction. Maybe we need to compile a list of fly-by-night rich fellas here,” he added.
The Economist says that the amount of wealth that cronies hold around the globe is declining, but the practice of crony capitalism still remains strong in countries such as Malaysia, India, and the Philippines.
The index is based on 25 years of data concerning the annual stock-take of the world’s billionaire from Forbes.
Last year, there were 2,755 people on Forbes’ wealthiest list, with a total wealth of approximately US$13 trillion (S$17.8 trillion).
Each nation’s wealth was divided by The Economist into crony and non-crony sectors.
Crony sectors are referred to as “rent-seeking businesses.”
“This is the term economists use when the owners of an input of production—land, labour, machines, capital—extract more profit than they would get in a competitive market,” The Economist explained in 2016. Some examples of these sectors are banking, casinos, defence, extractive industries and construction.
In 2014, then-Workers’ Party Non-Constituency Member of Parliament Gerald Giam brought up Singapore’s rank on The Economist’s index, saying that the country should be on guard against companies or individuals who would try “to make more money without producing more for customers,” such as those who want to form cartels or lobby for regulatory changes that would benefit a company to the disadvantage of consumers. /TISG
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Blind men and the elephant: Chua Mui Hoong describes crony capitalism in Singapore