Wotka World Wide

Tuesday, December 01, 2009

Jamaica vs. Singapore. A look at the two countries over forty years, comparing the effects of government growth versus growth driven by the private sector:
[C]ontrast Jamaica and Singapore. Both are relatively tiny states, with under 5 million residents apiece. Upon Singapore’s independence in 1965—three years after Jamaica’s own establishment as a nation—the two nations were about equal in wealth: the gross domestic product (in 2006 U.S. dollars) was $2,850 per person in Jamaica, slightly higher than Singapore’s $2,650. Both nations had a centrally located port, a tradition of British colonial rule, and governments with a strong capitalist orientation. (Jamaica, in addition, had plentiful natural resources and a robust tourist industry.) But four decades later, their standing was dramatically different: Singapore had climbed to a per capita GDP of $31,400 (2006 data, in current dollars), while Jamaica’s figure was only $4,800.

What accounts for the amazing difference in growth rates? There are many explanations: soon after independence, Singapore aggressively invested in infrastructure such as its port, subsidized its system of education, maintained an open and corruption-free economy, and established sovereign wealth funds that made a wide variety of investments. It has also benefited from a strategic position on the key sea lanes heading to and from East Asia. Jamaica, meanwhile, spent many years mired in political instability, particularly the disastrous administration of Michael Manley during the 1970s. Dramatic shifts from a market economy to a socialist orientation and back again, with the attendant inflation, economic instability, crippling public debt, and violence, made the development and implementation of a consistent long-run economic policy difficult.

But in explaining Singapore's economic growth, it is hard not to give considerable credit to its policies toward entrepreneurship.

Read the whole thing.


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