Is Confucian Capitalism Superior to Western Models?
By Nick Gier, Professor Emeritus, University of Idaho
Published July 1, 2011 (some data out of date)
People in these economies have simply studied harder,
worked harder, and saved more than people in other countries.
—World Bank report
On July 1, 1997, there was much anxiety when British authorities handed Hong Kong over to China, whose economic revival was dependent on this prosperous port city. The Communist government, while putting some controls on political freedom, has allowed the former colony an amazing amount of economic independence. With the highest income tax at 17 percent Hong Kong appears to be a libertarian’s dream. There is no sales tax, no tax on capital gains, and corporations pay 17.5 percent on their earnings.
During the Asian financial crisis of 1997-98, the Hong Kong government was forced to bail out its banks and it still holds $50 billion of their stocks. The most significant government intervention was a recent stimulus package that amounted to 5.2 percent of Gross Domestic Product (GDP), which compares to 6 percent for Obama’s stimulus.
Most people do not know that 85 percent of Hong Kongers receive their medical care from a system based on the British National Health Service. After the British system was taken over by the public Hong Kong Hospital Authority, the quality of care has increased and costs have come down.
Hong Kong’s public health system is amazing efficient in that it takes only 3 percent of the city state’s GDP. The 15 percent who pay for premium private services add, incredibly enough, another 3 percent of GDP for their medical costs. Comparable figures for the U.S. are 16 percent of GDP (highest in the world) and 10 percent for the Canadian equivalent of Medicare.
About 1600 miles south as the crane flies is the city state of Singapore, which has 6 million people compared to Hong Kong’s 7 million. Singapore gained its independence from the UK in 1963 and since that time it has been ruled by the People’s Action Party (PAP), which has won every single election since 1959. Initially styling itself an anti-Communist and Social Democratic, the PAP was expelled from the Socialist International in 1976 because it suppressed dissent and jailed opposition party leaders.
With regard to political freedom, Freedom House describes Singapore as “partially free” because of the PAP’s stranglehold on elections, press censorship, and sometimes bizarre attempts to control citizen behavior. Most people were aghast to learn that Singapore had banned chewing gum and caned a foreign tourist for breaking the law. The innocent habit is now legal as long as it is done for a medical purpose!
Hong Kong also receives the “partially free” designation, principally because of past British and now Chinese restraints on full democratic governance. My sense is that the Hong Kongers could develop a robust democracy if given a chance, but that is unlikely given the fact they are now and will always continue to be an integral part of Communist China.
Hong Kong has long had the top spot on the Economic Freedom Index, but Singapore, which takes upwards of 40 percent in taxes for health insurance and retirement, is a close second. Four social democratic countries are ranked ahead of the U.S. and Denmark closely follows in 9th place. Adjusted for purchasing power, in 2009 each Singaporean shares over $50,000 of national income compared to each American at $46,000 and each Hong Konger at $42,000. (Approximate reading from a graph in the Economist, July 17, 2010, p. 74).
Libertarian theory would predict that Singapore’s higher taxes would slow economic growth and increase unemployment, but just the opposite has happened. The economy of Singapore has grown much faster than Hong Kong’s: 7.8 percent on average from 1965-2009 compared to 5.4 percent from 1962-2006. Unemployment in Singapore averaged 3.9 percent from 1995-2006 in contrast to Hong Kong’s 5.1 percent during the same period.
Singapore spends even less on health care than Hong Kong does: only 3.7 percent of GDP vs. 6 percent for Hong Kong. The quality of care is just as high—both are popular with medical tourists– and the health statistics are impressive. For example, Singapore’s infant mortality rate is 2.3 per 1,000 births (2.1 in Hong Kong) while the U.S. rate is 6.4. Foreign workers make up 40 percent of Singapore’s population, so one cannot argue that America’s ethnic diversity is the reason for its high rate. Universal medical care at a reasonable cost is the key.
Most of children of the two city states go to public schools based on the British system, and most private schools receive government aid. These school systems produce some of the best students in the world. Singapore’s math curriculum is so successful that it is has now been adopted throughout the world. In 2007 Hong Kong 4th graders scored the highest on international math exams with an average score of 607 compared to 550 for Americans of European extraction.
Half of Hong Kong’s residents live in public housing with subsidized rents or ownership. While apartments and houses may be privately owned, all the land in Hong Kong, even before the Chinese take-over, is held by the government. This is also true for 80 percent of Singapore’s land, on which 92 percent of citizens now own their own houses or apartments. This allows the two governments to keep land values at artificially high levels and then draw huge revenues from them. Singapore charges a 12 percent land tax on all commercial lease holders.
Even though it is 54 percent government owned, Singapore Airlines is one of the most successful airlines in aviation history.Wikipedia reports that in 2009 the airline “ranked 33rd in Fortune magazine’s World’s Most Admired Companies,” and is sixth “in the world for international passengers carried.”
Singapore Airlines was the first to fly the double-decker Airbus 380, which, with its fuel efficiency and large capacity, will revolutionize long-distance air travel. The airline’s Airbus 340-500s hold the record for their 9,530-mile, non-stop flights to Newark.
Under British protection for 168 years and now part of Communist China, Hong Kong has never paid for its own defense. But one-third of Singapore’s national budget is devoted to military expenditures. Located in the strategic Straits of Malacca, the country has invested in some of the most sophisticated planes, ships, and missiles available. Singapore has 55,000 career military personnel with an additional 300,000 conscripts and reservists. The U.S. considers Singapore to be a strong ally for its interests in Southeast Asia.
On the negative side, both Hong Kong and Singapore have high rates of economic inequality. (In Singapore this may be due to the high number of foreign workers.) On the Gini Index where 100 is complete inequality and 0 is full equality, Hong Kong’s score is 54, Singapore’s is 48, the U.S. is at 45, and the Nordic countries are most equal at 27.
Generally speaking, there is a strong correlation (and arguably causal) relationship between economic inequality and many social and health problems. See my column at nfgier.com/?s=spirit+level. Hong Kong and Singapore are exceptions to this study in several categories.
Unequal countries usually have high homicide rates, but Singapore’s is comparable to the low European rates. Finland’s high murder rate correlates with it having the highest gun ownership per person, while Singapore’s low homicide rate may be because it has the world’s fewest guns.
Economically unequal countries also have the highest incarceration numbers, and Hong Kong and Singapore do have very high rates. For every 100,000 citizens the U.S. imprisons 738, Singapore locks up 350, and Hong Kong jails 168. These rates are far higher than Communist China at 118, Korea at 97, the Nordic countries at 68, and Japan the lowest at 62 citizens per 100,000 people.
Just like the U.S., Hong Kong and Singapore have a large number of drug offenders in their prisons. Hong Kong abolished capital punishment in 1993 (Beijing has not reversed their brave decision), but Singapore has the highest execution rate in the world. Over 70 percent of those hung-by-the-neck-until-dead were convicted for drug violations. Just as capital punishment does not deter murders, neither does it convince drug users in Singapore to give up their habits.
Recently Newt Gingrich was on Fox New with Bill O’Reilly, and O’Reilly said that Singapore’s tough drug policies worked “swell”—especially with regard to mandatory drug abuse treatment—but that Americans would not have the “stomach” for such draconian measures. Gingrich’s response to O’Reilly was: “Well, I think it’s time we get the stomach for that, Bill. I would try to use rehabilitation, I’d make it mandatory.”
I’m of course not suggesting that Gingrich believes that drug dealers should be executed, but his position demonstrates the lack of respect for basic human rights that one often finds among conservatives. I’m afraid that too many Americans would agree with one of Singapore’s “Outrages of Decency” laws that stipulates a two-year prison term for any male having sex with another male.
In conclusion something should be said about “Confucian” capitalism and the claim that it may be superior to Western models. (Singapore is 74 percent Chinese.) Confucian culture, strong even in Buddhist countries such as South Korea, Japan, and Vietnam, rejects Euro-American individualism atomism and focuses on family values and civic as well as personal virtues. Presumably a Confucian capitalist would make investments with long-term benefits in mind rather than just short-term gain.
Surveys, however, simply do not support the claim that the Confucian tradition has made businesses or other institutions more moral. According to the rankings at NationMaster.com, the least corrupt countries in the world are in Europe, New Zealand, and Australia with scores 9.1 and above on a 10-point scale. The exception is Singapore with a 9.4 and Hong Kong received 8.3. The other Confucian countries do poorly: Japan (7.3), Taiwan (5.9), South Korea (5), China (3.2), and Vietnam (2.6). The U.S. score is a disappointing 7.6.
Perhaps researchers at the World Bank have a simpler answer: “People in these economies have simply studied harder, worked harder, and saved more than people in other countries.” Whatever the reason we should nevertheless admire and learn from these Asian countries. It is very clear that in the 21st Century Asians from South Korea down to India and Indonesia will not only excel but dominate in economic, technological, and cultural affairs.
Nick Gier taught philosophy at the University of Idaho for 31 years.