Can Democracy Solve Singapore’s and Hong Kong’s Economic Problems? (Part I)

Is democracy the precondition for economic prosperity? Does freedom create wealth? Is the market a self-regulating entity that, if left alone, will ensure that people make money and that wealth is distributed fairly?

These are the central questions of our age. The way people answered these questions in the past have shaped the world we live in. The answers we will give to them today will shape our future.

The interdependence of freedom and economic prosperity is the cornerstone of what we may call ‘Neoliberalism‘, an ideology based on the assumption that the market is a self-regulating entity and that ‘big governments’ disrupt the market’s ‘natural functioning’. 

In a recent interview Chee Soon Juan (徐顺全/徐順全; pinyin: Xú Shùnquán), the current leader of the Singapore Democratic Party (SDP), drew a parallel between Hong Kong’s and Singapore’s struggle for democratisation.

According to Chee, both societies need democracy in order to solve one of their most pressing issue: income inequality.

“Democratisation is essential in Hong Kong and Singapore to overcome income inequality. To reduce income inequality, we have to have an opposition voice,” he said. “Without democracy, policies in both cities have been skewed to benefit those at the top of the food chain, leaving the middle and lower classes to struggle. Without democracy, there can be no workers’ rights. Extreme income inequality does not induce a society’s well-being.”

The ‘economic argument’ has often been used by advocates of democracy in order to promote their ideals of freedom and human rights. However, I shall argue that proponents of this concept not only fail to acknowledge basic facts, but that they are actually damaging democracy. 

“Free To Choose”: Democracy and Capitalism

In his seminal work Free to Choose: A Personal Statement, Milton Friedman, the guru of Neoliberalism, expounded his view of capitalism. ‘Freedom’ is the cornerstone of his worldview. According to him, in order to prosper a society needs political freedom (democracy) and economic freedom (‘free market’). The combination of these two elements allows people to pursue their self-interest and thrive. Since individuals’ self-interests coincide, if they are free from government control they will maximise their wealth, which will ultimately benefit the whole society. The embodiment of the ideal of freedom is the United States. Friedman wrote:

Ever Since the first settlement of Europeans in the New World America has been a magnet for people seeking adventure, fleeing from tyranny, or simply trying to make a better life for themselves and their children … When they arrived, they did not find streets paved with gold, they did not find an easy life. They did find freedom and an opportunity to make the most of their talents. Through hard work, ingenuity, thrift, and luck, most of them succeeded. 

Friedman believed that the American ‘miracle’ had been made possible by two sets of ideas: Adam Smith‘s The Wealth of Nations and the US Constitution, both published in 1776. The first propagated economic freedom, the second political freedom. As Friedman explains, Adam Smith analyzed in his work

the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field .. [B]oth parties to an exchange can benefit and … so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit. 

This is, of course, a nice and reassuring concept. Human beings are rational beings, society is by nature harmonious; leave people alone, and they will create harmony, wealth, and happiness. These ideas told Westerners, and especially Americans, that they had prospered because they were hard-working people who had made the best of their freedom. This theory assured them that democracy was the highest form of civilisation. 

But is this true? Is there and has there ever been such thing as a ‘free market’? Are prosperous societies ‘free’ societies with minimal government controls? Is there really a contradiction between government intervention and market efficiency? And lastly: should economic development be the chief argument against authoritarian rule? 

In the next posts I will try to give my own answers to these questions.  


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