The Economics of Modernization and Other Essays

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THE ECONOMICS - OF MODERNIZATION AND OTHER ESSAYS

us g

THE ECONOMICS OF MODERNIZATION AND OTHER ESSAYS GOH KENG SWEE

SEASIA BB paciric ©” PRESS

published 1972 by Asia

Times

Pacific

House,

Press,

River Valley Road,

Singapore

© Goh Keng Swee Printed in Singapore by Shing Loong Press Pte. Ltd

Contents

Preface

The Economics of Modernization Cities as Modernizers Some Delusions of the Decade of Development Abolition of Poverty Making Compatible Choices Man and Economic Development Social, Political and Institutional Aspects of Development Planning A Management in the Developing Society >

Workers in Developing Countries

)

Labour and the Co-operative Movement in Singapore 11 Differences in Economic Development Prob-

lems as between Singapore and Other Asian Countries

12 13 14 15 16 17 18

Regional Co-operation in Southeast Asia Foreign Big Business in Singapore Singapore's Monetary System, 1969 Education Reform Population Control

Voluntary Social Work 150 Years of Singapore

103

113 120 129 135 145 150 155 163

19 20 21 22 23 24 25

Jurong Bird Park The Hippie Threat Government and Society Industrial Growth and Political Stability Parasite States Socialism in Singapore The Nature and Appeals of Communism Non-Communist Asian Countries 26 Aftercare of Ex-Detainees 27 Creating an Officer Corps 28 Hard and Soft Armies 29 Singapore's First Decade of Development 30 Facing the Future Index

vi

169 172 180 188 196 209 in 216 237 242 248 255 280 290

Preface

My colleagues

and I of the People's

Action

Party

(PAP)

Government of Singapore may be the few remaining members of a vanishing breed of political leaders. We write our own speeches. We have our ideas as to how societies should be structured and how governments should be managed. We prefer to express these ideas our way. This habit of self-expression we formed during our undergraduate days, when Singapore was governed by the British and the underground communist party was the dominant political force. Indeed, but for the intensity of our convictions, we would hardly have been moved to take what in retrospect was a reckless and foolhardy course of action — to engage the two ina three-cornered political struggle. That we eventually emerged unscathed and victorious was as much due to our good fortune as to our capacity for crisis management. The essays in this bookare a selection of speeches which I made from 1959 to 1971, in the course of my tenure

“as a minister

of the

Singapore

Government. During

this

“period, I served in the Ministry of Finance and the Mi~-nistry of Defence. Most of these speeches were addressed to lay audiences, only a few were directed to gatherings of specialists. Understandably there are few on defence matters. vii

Singapore Government leaders address their citizens on matters of public policy more often than is usual in most countries. A foreign scholar made this observation: 'The

PAP

inaugurated a policy of information saturation to edu-

cate, convert, give shape to, and guide public opinion. This emphasis on political communication, which has acceler-

ated over the years, evinces an abiding belief in the efficacy of information, argumentation, and reason to establish and This policy confirm popular support for the government. also manifests a PAP conviction that the common man possesses a substantial rational streak which will generally rt lead him to suppo which can be presented a policy and defended as factually and logically correct. This conviction is integralto PAP thinking,'* Such a policy is necessary for several reasons. Singapore lacks established tradition and its people are of several ethnic origins. Social and political processes do not necessarily lead to a working consensus on important matters. Quite the contrary, there is probably an in-built trend towards division and discord as citizens compete for jobs, university places, housing and business licences. Another reason lies in the rapidity of political and economic changes which Singapore experienced in the past decade. Some of these changes took on crisis proportions and were accompanied by violence or organized acts of lawlessness. The Singaporean, an irrepressible optimist by nature, is apt to forget in his recently acquired period of tranquillity, the riotous episodes of the past two decades. The vicissitudes of fortune which we experienced in our quest for a decent living in a none too hospitable environment bears resemblance to the biblical journeys of the children of Israel

*Thomas J. Bellows, The People’s Action Party of Singapore: Emergence of a Dominant Party System, Yale University, Southeast Asia Studies, 1970, pp. 46-7. The author went on to observe: Such an assumption is an interesting contrast to the supposedly more developed political systems of the West. These systems, with their long tradition of popular support, tend to adopt strategies which reinforce existing, often nonrational political dispositions of the electorate. Vili

in their search for the promised land. And like Moses, we had to explain, exhort, encourage, inform, educate, advise —and to denounce false prophets. The essays form part of theinformation effort of the PAP Government.

As

I had

said

earlier,

they were

addressed

mostly to a lay audience. This circumstance makes for brevity and colour in presentation, a minimum of technical jargon and an absence of footnotes. If, sometimes, I make unqualified assertions with a confidence hardly justified by the evidence adduced, would the reader bear in mind that time did not allow me to do the research needed, nor did the type of audience encourage a pedantic approach. The careful reader will detect inconsistencies in some of the views expressed in these essays. The simple reason is that I have held different opinions at different times. This, I hope, is the result of learning from experience. I have left the inconsistencies alone rather than super-impose consis-

tency by post hoc editing. Some readers may consider unduly harsh my strictures on the economic policies of developing nations. A detached observer can take a cosmic view of the development process and accept with equanimity shortcomings in performance or vagaries of conduct observed in the Third World. But those of us who take part in the great Asian drama —as Gunnar Myrdal aptly calls it—cannot escape feelings of anguish. I do not want to leave the impression that the policies we

found effective-in-Singapore-can-be “where.

Our

situation

contains

reproduced several

in toto else-

unique

elements.

“Nevertheless we did succeed in getting the economy to grow at a fast rate under difficult conditions — the past three years saw_the GNP grow at rather more thann 13 per cent a year at constant prices. If our experience can be used as a general guide to policy in other developing nations, the lesson is that the free enterprise system, correctly nurtured and adroitly handled, can serve as a powerful and versatile instrument of economic growth. One of the tragic illusions that many countries of the Third World entertain is the notion that politicians and civil servants can successfully perform entrepreneurial functions. It is curious that, in the

face

of

overwhelming

evidence ix

to

the

contrary,

the

belief persists. And soin the nameof socialism, equality and justice, millions are denied the escape from age-old poverty which rapid economic growth can provide.

Goh Keng Swee Ministry of Defence, Singapore May, 1972

The Economics

of Modernization

|

The subject of the seminar, ‘Modernization of Southeast Asia', is one that is exercising the minds of many people, in academia, in government and among leaders in many walks of public life. The subject of modernization is rightly draw“ing increasing attention, not only in Southeast Asia, not only in the lesser-developed countries of the world, but also in the modern states. For the difficulties experienced in this field in the contemporary political scene appear intractable. And many people have expressed the fear that as a consequence, the growing disparity of wealth between rich and poor nations, between the modern states and those aspiring to be modern, may reach critical and explosive dimensions in the course of this century. I will not try todefine the terms 'modernization' and 'modernity'. The subject is one which straddles several disciplines of learning and it is unlikely that any definition will secure general acceptance. It is more likely to give rise to sterile controversy. I shall take the robust position that modernization is like the elephant, difficult to define but easy to recognize when one sees the beast. Speech at the opening of the seminar on 'Modernization in Southeast Asia' organized by the Institute of Southeast Asian Studies at the University of Singapore on 17 January 1971. Published by courtesy of the Institute of Southeast Asian Studies and Oxford University Press,

Singapore.

|

Probably three disciplines of learning are most intimately concerned with the subject —economics, political science and sociology. My experience with the subject is that of a practitioner in Singapore. My specialization is economics and it isfrom this standpoint that I will discuss the modernization process. In so doing, I do not decry the importance of other disciplines. Indeed, it would be clear from what I shall say that it is not possible tounderstand the modernization process purely in terms of economic principles. Furthermore, it is dangerous to execute an economic development plan which has reference only to economic variables, important though these are. Economists do not have a special theory of moderniza-

tion. The process itself is subsumed under the general principles of economic development. In practice, however, in the field of applied economics, a vast literature has proliferated on economic development of the Third World countries. There is now clear recognition among economists that economic growth involves more than economic variables. Gunnar Myrdal's monumental Asian Drama makes the most thorough and explicit study of non-economic factors which have a bearing on economic growth. However, Myrdal's plea for a new set of economic principles applicable to the situation in less developed countries has largely been ignored. The economist stands fast by his principle of doctrinal purity. While admitting that non-economic factors have a bearing on economic growth, he claims that these fall within the provinces of other specialists, upon which he is reluctant to encroach, In order to achieve adeeper comprehension of the subject, I was obliged to do some reading in the other disciplines. While this study has provided me with new and useful insights, I am afraid I discovered that the performance of specialists in these other fields, political scientists and sociologists, is no better than that of the economists. There seems tobe a state of mutual lack of comprehension between writers in these various disciplines. Each is interested in developing a consistent, logical and self-contained set of principles within its own domain with but scant regard and 2

superficial

understanding of knowledge in other disciplines.

It is a depressing

state of affairs,

but I cannot presume

to

offer any solution, I think I can best spend my time by setting out the problems of modernization as I see it from the point of view of a practising economist in one developing country, and as a keen observer of the fortunes of other developing countries. It is unavoidable that I see the modernizing process in terms of economic growth with economic variables playing the dominant factor. But I will raise a number of non-economic issues

which seem to be imperfectly understood

at this stage,

at least by practitioners in the field. Although the study of modernization and economic development received widespread attention since the end of World War II with the emergence of many newly independent states, the process of modernization itself, so far as it affects the countries of Asia, goes back several centuries. Indeed, if we wish to identify its genesis and nominate a

birthday, I believe 27 May 1498 has a special claim. That was the day Vasco da Gama arrived at the port of Calicut in south-west India. For it was the arrival of the European in Asia which set in train the process of social change which we today call 'modernization'. However, it was not until several

centuries

after

Vasco

da

Gama's

arrival

that the

European presence began to make an enduring impact on the Asian scene. As K.M. Pannikar said, 'If by an act of God, the relations of Europe with Asia had ceased all of a sudden in 1748, little would have been left to show for two anda half centuries of furious activity.' It is important to distinguish between the European impact before andafter the second half of the eighteenth century. In the earlier period, the Europeans went there as traders. Their trading outposts existed by leave and licence of local rulers. They bought goods available in the East which they wanted, such as spices and sandalwood from Indonesia, silks and horses from Iran, cotton and spices from India. They paid for these by gold and silver and only to a negligible extent by manufactures as was to be the general practice in the later period. Apart from these traders, supplemented occasionally by zealous missionaries anxious to save heathen

3

©

from eternal damnation, Asian societies were left souls very much to themselves. In the latter half of the eighteenth century, and particularly in the nineteenth century, the pace of modernization of Europe itself gained momentum through the great technological and social changes we now call the Industrial Revolution. As a result, the nature of European interest in their trading outposts in the East underwent a profound change. The growing industries of Europe, supported by a rapidly advancing science and technology, required new types of raw materials on an increasing scale. They took the form of minerals as well as agricultural produce in tropical and sub-tropical areas of the East. Political rivalry between European powers, which their growing wealth encouraged, accelerated the drive for empire. Relationship between East and West took a different form: no longer as between equal trading parties, but as between overlord and subjects. Unlike the early period when European traders bought goods already available, in this period new industrial crops were introduced on a largescale, plantation basis and new mines developed by modern methods. So we have a whole series of new products grown or mined in the colonies

of European countries

— tea, coffee,

rubber, sugar cane, jute, oil palm, tin, copper, oil and petroleum products and so on. To establish such a varied range of products as a large-scale business, it was necessary to invest substantial amounts of capital. And of course to support all these activities, the colonial government had to introduce a wide range of infrastructure services such as seaports, roads, railways, telegraph and other means of communications.

So seaports

of these

lands

were

established

could

be shipped to feed the burgeoning in-

through which the produce

dustries of Europe. From these seaports radiated a network of railways and roads to take out the produce of the hinterland. Cities of substantial size grew at the site of these seaports and communication centres. For the efficient conduct of business on modern lines, it was necessary to establish administrative and legal systems which would ensure the two requisites of orderly business —

4

first, public

security,

law

and order;

second,

the enforce-

ment of contracts — for investments in mines and plantations have a long gestation period, and the investor must be able to plan several years ahead with assurance. ile the top management of the communication systems as well as the administrative and legal apparatus could be manned by personnel sent out from the metropolitan country, these have .to be supported by an army of lower-level man-

agement, clerical and technical personnel. It would be wasteful, given the primitive systems of communication by sea in those days, to bring these out from the homeland. So an education system modelled more or less after the metropolitan country, teaching in the language of that country was introduced, sometimes by missionary effort and sometimes by the colonial government. In course of time, universities and technical teaching institutions were founded. And as local residents benefited from the economic growth resulting from this infusion of Western capital and technology, they wanted their children to take full advantage of modern education not only in the local universities but also in universities in the metropolitan country. So we see the seeds of modernization planted during this age of colonization in three principal fields. The first was in the establishment of plantations and mines supported by a modern.communication system — seaports, railways, transportation, telegraph — leading to the growth of cities, Second, the introduction of modern administrative and legal systems. Third, the introduction and development of modern education systems. While all this was going on, it should not be forgotten that this modernizing process was confined to certain geographical areas. I mentioned the seaports, the lines of communications and the administrative centres. We could also include hinterland areas opened up to cultivation of new cash crops as well as the new mining enterprises. For the rest of the country, the colonial government in general refrained as a matter of deliberate policy from upsetting the traditional social structure and reduced interference with local customs and institutions to the barest minimum. To be sure, the process of acculturation initiated in the

5

*

cities was bound to affect the countryside, but this was by way of side effects and not by government design. The result was

that

subsistence

agriculture,

mainly

food crops, which was the most common

the

production of

occupation of coun-

tries inAsia before the advent of the West, remained outside the mainstream of development. There were exceptions to this

rule

such

as,

for

instance,

the

'Culture System',

in-

troduced by van den Bosch in Indonesia in 1830. The object was to compel peasants in the subsistence sector in Java to grow cash crops. Initially a large number of crops was attempted:

pepper,

cinchona,

cotton,

indigo,

etc.

But

only

three, coffee, tea and sugar, survived. However, this was an exception to the general rule. Subsistence peasant cultivation was of little economic value or commercial interest to the industrial West. No doubt peasants benefited from improved communication systems and possibly from agricultural extension services that were introduced here and there. They certainly felt the effect of improved public health measures which diminished the effect of Malthusian checks on population growth. But the technique of production and the social system of village community life remained largely undisturbed by colonial

governments, except when the need to increase revenue led to changes in the system of land tenure. A case in point was the Permanent Settlement introduced by Carnwallis in Bengal. As

with

van

den

Bosch,

revenue

not

development

was

the motivating force. The general picture then in colonies at that time was one of coexistence of modernity and tradition, with growing modern cities in the midst of 4 sea of rural traditional subsistence agriculture. This picture still remains true today. The role of Asian colonies as providers of industrial raw materials and markets for manufactures is so well known that people may think it too trite and commonplace an observation to-merit attention. Yet it is worthwhile examining this role in some detail because the subject is much misunderstood and its true implications have sometimes been missed, This, as I shall show later, has had unfortunate consequences in the development plans of Asian countries in their post-independence era.

We can regard investment of Western capital and the application of technology in Asian countries, to produce raw materials needed by European industries, as creating 'surplus value' in the Marxist sense of the term. These economic activities employing indigenous labour produced a surplus value over and above what was required to maintain workers at subsistence level. Not only this, but this surplus value was translated into foreign exchange as the products were exported to the West. It is this fund of surplus value embodied in foreign exchange earnings that enabled payments to be made on imports of goods and imports of capital equipment needed for modernizing the economy, as well as for remittance of profits earned by these foreign enter-

prises, It would be wrong to conclude that the whole benefit of these activities accrued to foreigners, though they were undoubtedly the principal beneficiaries. Apart from workers engaged in these enterprises, there was often a substantial spill-over to local entrepreneurs and others who engaged in similar activities. For instance, rubber estates in Malaysia were introduced by foreign enterprises. In course of time, local residents entered the field; these were not all capitalists. The peasant population also benefited, growing rubber in smallholdings as a supplement to their traditional activity. When Asian countries achieved their independence after

World War II, the leaders who headed the governments of these states inherited both the modern and the traditional societies.

But whereas

colonial authorities,

in general,

had

little reason to disturb the traditional order of things outside the modern money exchange economy, the local ruling elite were exposed to considerable pressure to improve the wellbeing of all their citizens, those in the cities as wellas those in the countryside. Great expectations were raised that with the end of colonial rule a liberated people would achieve not only a status of dignity in the world but also sufficient material advance for all their citizens. In this way, they put an end to the harsh poverty so many had to endure for so long. Economic development plans were drawn up, sometimes with the help of foreign experts but usually by indigenous a

effort, for the universities and the administrations of past decades and centuries had produced sufficient expertise. An economic development plan is basically a programme of allotting capital investment among various sectors of the economy — agriculture, transportation, social services, manufacturing

industries,

mining,

electric

power,

irriga-

tion and so on. Planners have to lay down a strategy of development if they are to make good and consistent decisions on resource allocation. Funds are limited; the demand for funds exceeds available supply many times over. Economic planners have to draw up criteria on which decisions on allocations can be made. And these criteria embody the strategy which planners believe to be the best way of achieving economic growth. It is extremely dangerous to generalize on strategies adopted by countries with such varying backgrounds of historical experience and economic potential. However, I believe it is true that, in general, the position taken by Asian economists was as follows. First, they believed that since resources were limited in relation to demand, to spread resources evenly over all the sectors of the economy would not produce the best results. They believed that it was better to identify the crucial sectors of the economy whose development would stimulate general growth of the economy. It was there that the main effort should be mounted. To use the jargon, planners preferred the strategy of encouraging the leading sector to the strategy of balanced growth. The leading sector was identified as manufacturing industry. It was here that they pinned their hope. They believed that it was the progress of manufacturing activities in the West and its near absence in the East that explained the disparity in wealth. The expansion of industry was expected to introduce new technology, new social attitudes, raise levels of existing skills, provide employment for the large numbers of unemployed or underemployed citizens. In short, industry would modernize and enrich. The general raising of the technological level of the countries, the spread of modern systems of production and management, all these, in the calculations of the planners, would not only generate

8

economic growth but also help to bring about a rapid transformation of social attitudes to those more consistent with the needs of modernizing societies. The second common position taken by Asian economic planners of the early years was that they regarded the relationship of their country —as a provider of raw materials and market for finished goods — with the West during the colonial period as an unequal and unsatisfactory one. It symbolized colonial exploitation and inequality between rich and poor nations. Why not convert these raw materials themselves into manufactured goods? Why not produce those goods traditionally imported from the West, and in this way save foreign exchange for more productive use? All these

different

considerations,

the

decision

to take

the manufacturing industry as the leading sector, the policy of manufacturing goods that were formerly imported — import substitution in the jargon —the political stigma of dependence on Western industries, all these combined to support the policy of industrialization based on supplying the domestic market as well as processing raw materials formerly exported. This course of action seemed to be in accord with the national aspirations of developing nations. This policy seemed consistent with common sense and in accordance with the logic of economic development. Yet, with hardly any exception, those countries which embarked on this line of development ran into serious trouble before long. Instead of saving foreign exchange as they substituted domestic manufactures for imported manufactures, they spent more foreign exchange than they earned. In the process, they ran into chronic balance of payments trouble and increased the load of foreign debt to dangerous limits. The exceptions were those laggard countries which, while paying lip service to this policy, in practice did little to implement it. The trouble experienced by developing countries in this respect is best illustrated by data on external public debts. This means foreign credits and loans which governments of these countries had borrowed and had to repay in foreign exchange. It excludes foreign credits and loans to private 9

enterprise. By the end of 1969, total external public debts of developing countries amounted to US$60 billion. Over the last fifteen years foreign debts had grown at a compound rate of almost 15 per cent a year; that is, debts owed by poor countries to the rich doubled every five years. Debt servicing, the payment of interest and repayment of capital, has been growing at the rate of more than 12 per cent a year. This is twice the rate of growth of exports of developing countries, and nearly three times the rate of growth of their GNP. Servicing of foreign debts assumes an increasing proportion of export earnings of developing countries, and in many instances has passed the danger limit. There are no hard and fast rules which determine the safe proportion of debt servicing to export earnings. The World Bank has laid down a rule of thumb limit at 6 to 7 per cent. Several countries have already passed the 20 percent limit, a good number fall in the 10 to 20 per cent range. The general average for all developing countries was above 9 per cent at a count made some years ago, and is probably well over 10 per cent now. What went wrong? There is no one simple reason. Part of the trouble stemmed from sheer bad luck, such as crop failure due to droughts and floods, making it necessary to import large quantities of food thus dissipating foreign exchange resources. Another reason is the decline of prices of primary export commodities in relation to manufactured goods over the last decade or two. A third is deliberate trade discrimination by some wealthy countries against certain products of poor countries, for instance, textiles. But I believe that even allowing for these adverse factors beyond the control of developing countries, their performance could have been better if they had not embarked on the type of industrialization strategy that they did. Industrialization based on import substitution had proved a double-edged weapon. As a means of saving foreign exchange it had been self-defeating. The reason is that machinery and equipment needed to establish these industries had to be imported from abroad. In many, probably most, instances the value of the output consumed at home, repre-

10

senting the maximum saving on foreign exchange, is less than the amount needed to pay for interest and instalment payments on machinery as well as for current purchases of spare parts needed for maintenance. This is particularly true of capital-intensive industries such as steel production, oil refineries, heavy chemical plants and other so-called basic industries which seem to have'a fatal attraction for economic planners. In addition to this, because countries are poor, the effective demand for these products is small, even in countries with large populations. It is therefore necessary to intro-

duce some kind of licensing system for new industries in order to avoid over-capacity. The result has generally been the emergence of monopolistic practices, a lowering of efficency, an increase in cost, with damaging effect on the economy. Practices such as padding of the labour force and executive personnel, which would not have happened under free market competition, became common. One economic effect of this kind of industrialization is that consumers have to pay more than if goods were imported. But this is probably less harmful than the noneconomic effects. For one of the objectives of the leading sector strategy of development planning is to spread new social attitudes appropriate to modern societies. These include

respect

system

of personnel selection and advancement,

striving

for

for

hard

greater

work,

efficiency,

innovation, in

short,

a meritocratic

continuous

achievement-

orientation. With the feather-bedding and monopolistic practices made possible under high tariff protection of domestic markets, the drive to efficiency is blunted. Quite often business success depends on obtaining official permits and licences not on efficient production and management. The balance of payments difficulties which afflicted most developing countries had other unfavourable side effects. I said earlier that foreign exchange earnings resulting from the export of raw materials and other goods from developing countries represent a claim on the goods produced by the industrial West. In countries without balance of payments problems, exchange controls are either non-existent or lenient. Those who have local currencies are able to use

am

these to buy imported goods from any country. When foreign exchange difficulties arise, it is necessary to introduce exchange controls, that is to ration foreign exchange through a system of permits. The result of this is that the govern-

ment

becomes

the sole arbiter

of what goods may

be im-

ported, who may import them, in what amounts and under what conditions. This control endows contemporary governments of Asian states with a power of patronage of immeasurably greater range and variety than were possessed by the wealthiest monarchs of ancient civilizations. While the riches owned by these were confined to personal ornaments,

household entourage and such like, exchange control decides who will have access to the whole range of goods and services produced by modern states, including foreign education and foreign travel. The wealth of ancient kings derived from taxes imposed on a peasant society, and this has a built-in limit, for beyond a certain level of exaction the kings risked a popular revolt. But because foreign exchange earnings originate in the modern sector, the disposal of foreign exchange resources in any way that the government thinks fit has but marginal effect on the peasant subsistence economy. Contemporary governments' powers of patronage are therefore less circumscribed by the risk of peasant revolt. The risk here, however, is less in a general election where democratic constitutions operate. ‘However, this does not necessarily encourage rational use of foreign exchange resources to promote economic growth. Other short-term purposes, such as strengthening the bond of loyalty and cohesion in the rank of the governing party or creating shortterm economic euphoria, have obvious appeal. Even where democratic elections do not operate, those in power are also obliged to pay heed to the loyalties of supporters of their regime, that is, the soldiery. It is, of course, not unknown for prime ministers and presidents of modern states to phase the rhythm of monetary and fiscal policies in a manner most favourable to their electoral

chances.

However,

the

industrial

economies

of

the West can withstand such temporary departures from financial rectitude. The economies of developing countries are too fragile.

12

It is here that the interaction of economic, political and sociological elements interact in a crucial way. Economic difficulties inhibit the full spread of modernizing attitudes and place severe strains on the political system. The political leadership in office is obliged to take defensive action to secure its power positions. In this way they are obliged to depart from rational economic policies which would give them the best long-term chances but which may compound their immediate troubles because these call for unpopular measures. Once things go wrong, events in the economic, social and political fields interact in a cumulative way. Unless arrested at some stage the process reduces the whole system into a pathological condition. Despite the general picture of disarray in developing countries and increasing gloom evident in the literature about their future prospects, I remain fairly optimistic. I am, of course, taking the long view. The economic strategy adopted by Asian economists, which I described, and which had led them into serious trouble, is in my opinion basically sound. Except in special cases, of which Malaysia is one, the strategy of favouring the leading sector —that is, the manufacturing industry —is the correct one. It is here that the

surplus value,

is most quickly generated,

both in terms

of domestic production and foreign exchange earnings. The fact that many countries made mistakes in their selection of industry does not invalidate the soundness of this approach. This is but a technical error resulting from faulty calculation of production and foreign exchange consequences. The remedy is to concentrate on export-oriented industries and on the development of minerals and to export primary produce, which had tended to be neglected in the immediate post-independence era when such economic activities bore the taint of colonialism. Also, the jet age brings into the developing countries a source of foreign exchange earnings which they can tap with but little effort. This is the tourist trade. For a lucky few, there is the dazzling prospect of striking oil. If economic variables were to be the decisive factor, there is every reason for optimism. The creation of wealth, which is what economic development is about, is basically

13

All it requires is the application of mod-

a simple process. ern

science

and

technology

to production,

whether

in agri-

culture, mining or industry. The knowledge for this has been built up over the past two hundred years and is easily accessible. It only needs a moderate intelligence to absorb this knowledge and to apply it productively. What is more difficult to achieve is a social and political order that enables development to take place. Where a stable political system is achieved, progress can be spectacular, as the examples

of South

Korea,

Taiwan

and

Hong

Kong

demon-

strate. These have growth rates in the region of 15 per cent a year. Let me draw together the threads of my argument before I go to the next stage. I will summarize as follows: i) The modernization process in Asian countries began several centuries ago under the impact of European colonization. ii) Because colonies fulfilled special roles in relation to the metropolitan

power,

such

modernization

as

took

place

was generally confined to the seaports, administrative and communication centres as well as hinterlands developed to produce raw materials. iii) The result was a coexistence of modernity in the midst of a traditional agrarian society, by far the larger segment of society in most countries. iv) Newly independent regimes were under pressure to accelerate the modernization process, and chose as their principal instrument economic development plans in which the main effort was generally placed on industrial expansion based on import substitution.

v) For a variety of reasons, these development plans encountered serious trouble, as a result of which economic and political troubles compounded each other. vi) Despite the prevailing mood of pessimism, it is likely developing countries will eventually achieve a breakthrough, adopting a modified form of the general economic strategy now in use. It is, however, unlikely that this time will arrive until they have established political

institutions of sufficient strength and durability that will support the economic effort. 14

If we view the modernizing process in terms of a historical panorama, the development efforts in the postindependence age are but a continuation of processes which have their origins more than two hundred years ago. Economic development in the age of imperialism had limited objectives. It proceeded within a strong framework of stable government, enabling these limited objectives to be reached with apparent ease. The post-war development plans had larger objectives and aimed at more ambitious rates of progress. Despite this, they are nomore than a major variation of a theme, and not a fundamental change of course as some people erroneously believe. But the greater effort which these larger objectives demanded did not have the support of the sturdy frame of political and administrative institutions of the colonial era, It is not surprising that the stresses and strains that they imposed on contemporary socialand political systems resulted in the weaknesses which I had described. The course of political development differed from that of economic development. There was a major and abrupt discontinuity in the political process on decolonization. How can the other disciplines participate in what Myrdal called the great Asian drama other than as observers and chroniclers of events? Here I must speak with some diffidence as I am approaching an area in which I have no spe-

cialist knowledge. It is certainly easier to say what should not be done than to say what should be done and Iwill start from here. In the course of my reading of sociological and other literature

in the

preparation

of this address,

I came across

this observation: 'Efficiency and thrift, those two great Western virtues, are not such in the eyes of the peasant in Uttar Pradesh.' At the risk of being unkind and unfair to the author, may I suggest that the ethos and psyche of the peasant in Uttar Pradesh are of no great moment. Nor should thought be given as to how he could be modernized. If, by an act of God, all the peasants in Uttar Pradesh were suddenly to be modernized,

gated disaster tions,

including

the

result

would

for that state. the

so-called

15

probably be an unmiti-

I believe that social institutraditional

beliefs

of man,

are part of the total ecological environment. They keep man at peace with himself and in adequate harmony with his fellowmen, and enable him to endure a life which otherwise would be intolerable. To remove all these and introduce alien values and institutions would be to perpetrate a reckless act of cruelty, unless it is possible in this instance to give the peasant what he would require for self-fulfilment — twenty to thirty times the land area he now possesses as well as access to tractors and all the paraphernalia of modern farming systems. The time will no doubt come when peasants in Uttar Pradesh will be able to acquire these. But this will be the result of successful industrialization, the growth of cities and industrial concentrations, drawing into their systems an everincreasing labour supply from the countryside. This happened in Europe over the last two and a half centuries; it happened in Japan and doubtless it will happen in other developing countries in course of time. It is better to leave the peasant and his quaint ways to the anthropologist. For those who are interested in the modernization process, the crucial area of study lies in the cities. It is here that the transformation is taking place and the interaction between old cultural systems and values and new ones takes on their most acute form. It is here that the development plans of economists place their greatest hopes. It will be here that the breakthrough to modernity for the whole nation will take place through the accumulation of wealth and the earning of surplus value on an ever-increasing scale by the application of modern science and technology. There are great problems of social adjustment of people brought up under a pre-industrial culture who have been

drawn into the city to work under the hard discipline of wage employment, At all levels of the social ladder, conflict takes place between traditional customs andusage and the requirements of efficiency of modern economic institutions, be they private firms, public utility, a government department or whatever. All this isfamiliar stuff but it looks to me, standing outside

the

specialization,

16

that the applied research

on

these subjects needs to be supplemented by theoretical principles which will give coherence toan apparently bewildering array of experience. Take another as an example. The system of education in developing countries will play adecisive role in the successful modernization of these societies. So will the mass media. These are the means whereby new values may be inculcated among those who will play leading roles in their societies. I may be unfair to the education authorities of developing nations, including that of my own, but I get the distinct impression that the principles that guide them in making practical decisions as to curriculum content, and indeed their

understanding

of the purpose

of education, all these seem

to be derived from the theories and practices of Western teaching institutions. Because Western societies do not experience the kind of culture and value conflicts common in modernizing societies, their education systems need not prepare pupils for such conflicts. As a result, the Asian intellectual is often a confused person and the process of education can be a traumatic experience. Asian university students in the humanities are often accused by Western critics of lacking independence of thought, a critical faculty, and an ability to relate what he learns to his environment. I suggest that it is this hiatus between what he learns and the real world around him that explains this shortcoming. I suspect that it is this lack of comprehension of contemporary social processes, this absence of adequate prepara-

tion which should have been given in school that contributes to the fragility of political institutions in the new states, especially those which are based on democratic elections. And unless we prepare the young adequately, it is unlikely that we shall achieve that durability and resilience of political institutions which have to underpin the economic development

effort.

Hitherto

there

has

been

a blithe

assumption

that the process of counting heads is sufficient to secure the kind of leadership that can successfully see modernizing societies through their difficult transition stage. There is not much in contemporary history to support such optimism. Nor is there much to rejoice over in other systems of

ite

leadership selection, such as the counting of guns instead of heads. Here I am touching on some basic issues now largely ignored in Europe and America because of their irrelevance, but which agitated men's minds in the troubled days of antiquity. Plato and Confucius in the fifth century B.C., independently of each other, were concerned with the process by which societies chose their governments and the qualities ruling elites should possess. I suggest that the issues which they discussed are of deep relevance to the new states and that the disciplines of political science and sociology in these countries could usefully devote attention in this area and seek solutions in the modern context.

18

Cities as Modernizers

The subject of the seminar centres around problems of urbanization. This is a problem that has been exercising the minds of many people in Western countries. They are appalled at the vast urban sprawl which has come about in their countries with apparently very little control or direction, as a result of which acute social problems and manifest deficiencies have been brought to light. Some of these are painfully visible, for instance the breakdown of the transport system. Others are less obvious but more damaging in their long-term effects. For some reason or other, large numbers of people living in big cities feel unhappy and badly adjusted. It may not be the fault of the persons themselves. They may have come from strange environments in search of a better life. They may be employed in poor occupations and may even be unemployed. They may have broken down under the stress of city life and developed neurotic habits of one kind or another. All cities have their problem families. But problem families apart, there is acceptance of the

fact that, despite all the many amenities which a concentration of population could give rise to, such as theatres, opera houses, libraries, museums and other places of Speech at the inauguration of the World Assembly of Youth (WAY) Asian regional seminar on 'Urbanization' at the National Trades Union Congress Hall on 16 April 1967. Published by courtesy of the World Assembly

of Youth,

Brussels,

19

Belgium.

delight, the city dweller

remains,

on the whole,

an uncul-

_ tured and uncaring individual, often with standards of civic behaviour which leave much to be desired. Now I am not going into these matters which are properly the subjects of the workshops and plenary sessions into which this seminar will be organized. These are matters

for experts in their respective fields to deal with. I do not want,

nor

am

I qualified,

to venture

into their

domains.

What I want to discuss today is the background to the whole problem of urbanization in Asia. Put in another way, I want to ask the question: What is the role of the city in Asia? By 'role' I mean not merely in terms of providing the comforts of good living to its inhabitants, but the relation of the city to the other parts of the country. We must not forget that unlike the developed West, some eighty per cent of Asians live in villages. The city inhabitant, in other words, is the exceptional person. What I want to ask is: How have cities come about in Asia? What functions are they now fulfilling? What functions should they fulfil but are not fulfilling in relation to the rest of the national community ? I think these are not matters which will be touched upon in the course of your study sessions, but it will be useful to inquire into them so that when you form your conat length

clusions about the problems of urbanization and how they affect youths living in cities, you will have some notion of how they fit into the larger problems confronting the developing nations of Asia. Many of the modern cities in most Asian countries— though not in all—owe their origin and their development into their present size and importance to the fact that they were historically the beach-heads of Western imperialism. During the period of the expansion of Europe from the seventeenth

to the

nineteenth

century,

European traders,

invar-

iably backed by naval and military power, had at some stage or other established trading outposts in many Asian countries. At first their primary purpose was not political but monetary: they wanted to make money and grow rich. So 'factories',

as they

were

then called,

were

established,

for

instance at Surat near modern Bombay, in Hong Kong and by the Singapore River in this island.

20

When the Europeans first came to Asia they were moved not by the lust for power but by the lust for money. Their motives were merely ignoble, not heinous; after all it is not a crime to make money. But it soon dawned upon them that they could make more money if their political influence over the territory were stronger than what they as traders could establish. So the flag followed the trade, and gunboats,

battalions and missionaries came after thetraders. All these groups were to ensure that the business of money-making would not only be more profitable but would also be more secure and that the whole enterprise would be carried out with the blessing of the Almighty. Let us not forget that Europeans in those days were highly devout and religious people, and if, in some instances, they murdered and plundered the countries of their conquest as Francisco Pizarro and his conquistadors did to the Incas of Peru, it was always with the loftiest religious motives. In the course of time cities grew and expanded. Because of the considerations which led to their founding, cities were founded at convenient trade centres, and as such they were usually sited on the junctions of lines of communications by sea, river or land. So today we find that most of the cities

fulfil the functions of the market town for the surrounding hinterland. In addition, of course, in the course of time, they acquired importance as administrative and communication centres, as manufacturing centres, and even as military bases. Now, however much we may deplore the depredations of the

imperialists

during

the

past

centuries,

we

must never

forget that they were, though doubtless quite unintentionally, the standard-bearers of modernization. It was the Western trader and the Western administrator who introduced modern ideas, modern systems of government, modern education and modern techniques of communications and production into traditional Asia. No doubt, they did this to make more money and acquire larger empires, but nevertheless their

positive contribution to the process of modernizing Asia is not to be denied. So it is in the cities of Asia that we find the amenities of modern civilization. The best schools are there. Power, pipe-water, modern sanitation, modern buildings

21

and offices, roads, motor vehicles, railways, television, ports, factories, universities and all the other physical and intellectual paraphernalia of the twentieth century technological civilization are to be found in the cities. By contrast, in the traditional villages people live very much as they did

over the past thousands of years. They grow food for themselves and the little extra they have they sell or barter for the things that they need. They believe in the ancient gods, in evil spirits and practise the most benighted superstitions which had been handed down to them over the ages. What I want to put to you is this. It is the role of the cities in Asian countries, established and developed as beach-heads of Western imperialism, to transform themselves under their independent national governments into beach-heads of a dynamic modernization process to transform the countryside. The imperialists did not bother to do this as there was no money in it. Independent Asian countries can hardly be satisfied with the definite continuation of backwardness in the countryside. It is in the process of transforming the countryside and its traditional societies that the Asian city has a vital role to perform. It is about this role that I want to say a few words. First, since Singapore is a city-state, a few words about our situation can hardly be avoided. But I must warn you that Singapore is completely untypical of Asian cities. The simple reason is that the hinterland of Singapore lies in other national states and not within the territorial boundaries of the Republic of Singapore. We are the natural trading centre for a part of Malaysia — the southern and eastern states of West Malaysia and much of the two states of East Malaysia —and we

are

also

the natural entrepot

trading

centre

for the In-

donesian islands of Sumatra and Kalimantan. This role was foreseen 150 years ago by the great imperialist, Stamford Raffles, the founder of modern Singapore. But because we are a separate nation-state from the others, the natural course of economic forces may be hindered — and indeed in the past have been hindered — by political action on the part of the governments in our two neighbouring states. Apart from this, of course, we can hardly take upon ourselves the role of modernizing the populations of our economic hinter-

22

land, So what we do instead is follow a good-neighbour policy towards our two neighbours and accommodate their wishes as far as this is possible and continue to provide efficient services by way of trade relations, finance, insurance, shipping, communications, banking and development capital. It is regrettably too often forgotten that a great deal of development in our economic hinterland was financed by Singapore capital and nurtured by Singapore management skills. It is within the rights of these governments to dispense with our services if they so desire and if they wish to pay the price for providing their own services. If they want to by-pass Singapore in their trade relations, there is nothing we can do to stop it. The only deterrent is the cost of establishing and maintaining their own services. This cost is not only the money cost of building port installations and a complex business and financial infrastructure. There is also the cost in terms of losses caused by less efficient services. The magnitude of this cost becomes apparent only after it has been tried as did happen in our recent history. On that occasion it was discovered by painful experience that the damage to the hinterland was greater than the damage to Singapore. While we will do everything possible to retain our trade links with our hinterland, we will only be prudent if we try to broaden our external economic ties by attempting to provide services and goods to countries outside the immediate region. In fact, the economic policy which we have to adopt on our independence is to bring about a reorientation of our external trade network. The opportunities are not inconsiderable,

though many difficulties and obstacles have to be overcome. We broaden our service and export base in several ways. The first and most obvious is tourism, and that is providing services to tourists from Europe and America who want to see the Orient. So our Tourist Promotion Board promises tourists who come to Singapore an experience of what they call the 'Instant Orient’. There seems to be a good future in this, and noless than five first-class tourist hotels are now under construction which, when completed, will provide tourists with more than 1,300 rooms and employ-

ment for several thousand citizens. 23

Then,

of course,

there

is the search for export markets

in goods which we have an economic advantage to produce. This mainly depends on the expertise of skilled manual work. The third field in which we can broaden our external base is in ship-repairing and shipbuilding, and a great deal of effort is now being put into this. Finally, there is the sea. Seventy per cent of the earth's surface is covered by oceans and the opportunities that this offers to a large seaport like Singapore are very obvious. So we are planning to establish more shipping lines to more distant countries. We are also trying to establish a modern fishing industry. As I have said, our position is not typical and, apart from a few freak situations such as Hong Kong with south China as its hinterland and possibly Beirut in the Middle East, there are probably no other cities situated as we are. In most Asian countries, the hinterland served by a city is part of the same national territory. Hence the relationship of city to hinterland and the role that the city plays in the advancement of the countryside all belong to matters falling under the same national government, If we study the experience in China in this matter, I think we might find more valuable lessons to learn from it than from our own city-state. A number of extraordinary illusions have been held in the past about China and its people. At present, the country is going through what the Chinese call the 'great proletarian cultural of which is obscure to most people in several ways by so-called China none of the explanations which they at least to me,

revolution’, the meaning and has been interpreted watchers. Unfortunately, have offered make sense,

One of the widely held misconceptions about the communist regime in China is that it came to power as a result of the conquest of cities by the countryside. Many of you have read the famous article by Marshal Lin Piao published in September 1965 entitled 'Long Live the Victory of the People's War'. In this

article,

the

Marshal

explained

how

the countryside

can be organized as a revolutionary force. In extending Chinese experience to the international plane, Marshal Lin likens the poor countries of Asia, Africa and Latin America

24

j MAD ¢

AVC I6O/A4 estes ae

Bp

SS

to the countryside and the rich states of the West, including of course the Soviet Union, as the cities of the world. The long-term revolutionary strategy of the 'people's war'is to kindle revolutions in the underdeveloped countries and in this way envelop and conquer the developed industrial nations. I myself think that this analogy is fanciful and farfetched. But in any event, what needs to be corrected is not so much Marshal Lin's thesis about the future — for in these matters his guess is as good as mine or anybody else's — but the popular notion that the communists rose to power

as a result of the conquest of the city by the countryside. I believe that it is the reverse which is true. I believe that the Chinese communists come to power through the conquest of the countryside by the city. Let me explain what I mean. I will not draw you into a intricate discourse on the MarxistLeninist doctrine of proletarian revolution. It will be sufficient for me tomake the point that in the orthodox communist doctrine

of revolution,

it is the urban working class led by

the Communist Party that seizes power through an urban insurrection. That was the way Lenin's Bolsheviks won power in 1917. It was also the way in which the Chinese Communist Party attempted to win power during the period 1928 to 1930. The Chinese Communist Party mounted a series of urban insurrections according to orthodox Marxist-Leninist theory. Unfortunately for them, these insurrections were speedily suppressed by the Kuomintang authorities. It was almost by accident that the Chinese Communist Party hit upon the correct route to revolutionary success. In 1928, a young, obscure and relatively unimportant communist leader had collected a small rag-tag and bob-tail army of defeated insurrectionists and marched them off to the Ching Kang moun-

tains on the Hunan-Kiangsi

border.

Among

the weapons of

this fugitive army were spears, swords, bows and arrows, It was in this remote mountain fastness that this man established a guerrilla base. It was there that he worked out the outlines of the strategic doctrines that were to win for the communists, in less than two decades, mastery over the whole of China. The young man's name was Mao Tse-tung. It was Mao who first propounded the heresy of using peasants as revolutionary material and of discarding the urban

25

proletariat as the cutting edge of the revolution. Needless to say, this heresy was strongly opposed by the then leaders of the Chinese Communist Party. It was not until the communists had started on the Long March away from the Ching Kang mountains that Mao Tse-tung won ascendancy for his strategic doctrine of protracted guerrilla war. It was said — and I do not know with what truth —that Mao's ascendancy in the party was hastened by his posting of tiresome opposition party cadres to dangerous front-line units from which they did not return. Whatever the truth is, you must remember that Mao Tsetung, Liu Shao-chi, Chou En-lai, Lin Piao, Chu Teh, Teng Hsiao-ping,

country of China

and

all the

bumpkins. trained,

other

communist

leaders

were

not

They belonged to the urban intelligentsia if not brought up,

in the cities and educa-

ted in the high schools and universities of Chinese cities. It was they who conquered the countryside and created out of the rural peasantry a revolutionary weapon of enormous power and resilience.

the Kuomintang, group, remained

On the other hand,

their adversaries,

intellectual elite as the history of China shows, was the principal reason for their defeat. The urban intelligentsia in the Chinese communist leadership conquered the countryside by a strategy that seems almost ridiculously simple. They treated the peasants as human beings. That was all they did. Yet, this was sufficient for them to win the support of the entire countryside which they found vital for their extensive guerrilla operations. They were able to achieve this effect because China was in a state of virtually total social collapse. An ancient civilization and its political apparatus, the Confucian state, had crumbled under the impact of confrontation with the modern world. In the ensuing chaos, law and order disappeared in most parts of China and the peasant in the countryside was completely at the mercy of whoever commanded the gun in his area—be they the troops of the provincial warlord, or the Kuomintang, or, in later years, the Japanese army of occupation. Unspeakable misery and terror reigned for many decades. On 5 January 1930 Mao Tse-tung wrote these pro-

phetic words:

also mainly in the cities

'All China

an urban and this,

is littered with dry faggots which 26

will soon be aflame.' At that time, the Chinese communists were taking a terrific beating on all fronts from the Kuomintang and most of the leaders whosurvived were extremely demoralized. But Mao never lost his confidence in ultimate victory and he saw the role that the despised peasant was to play in its achievement. And sowhen the communists treated the peasants like human beings, cared for them, gave them education and medical treatment, protected them from landlords, and in many ways lightened their burdens, and, above all, gave them a feeling of dignity, the response of the Chinese peasants was overwhelming. They worked for and supported and were prepared to die for the communist Eighth Route Army, whose exploits became legendary throughout China, The People's Government of China is nowtrying to take the country through the difficult stages of modernization and it is doing it by its own method—the Chinese communist method. We have heard many horror stories about China. We have heard accounts of economic collapse, extensive mismanagement,

dislocation,

chaos and disaster.

No doubt,

some of these accounts are true. No doubt, the communist leaders have made serious mistakes. But they have the apparatus and the social system and the discipline to take this huge country forward. Much of the stories you now hear about Chinese economic failures sound remarkably similar to former accounts of Russian bungling and mismanagement, Everybody believed them until one day the Russians put up a Sputnik into orbit before anyone else. All talk of Russian inherent clumsiness or Soviet technological backwardness stopped. The Russians had arrived. The great problem posed by China is not, in my opinion, the risk of military aggression by way of direct invasion of neighbouring states. I do not believe that the Chinese Government seriously contemplate sending their armies across their borders other than in special circumstances, as, for instance, in the event of the uncontrolled expansion of the Vietnam

war,

or in the event of an American

nuclear attack

against China. The great problem that China poses and to which in Asia we have yet to find a solution is this. If, by the 1990s or in

27

the early decades of the twenty-first century, the communist system in China were to produce a modern industrial state equipped with all the technological advances, what will happen to the rest of Asia if it fails to achieve similar progress?

The

apart from

present

picture of disarray in Asian countries,

Japan, Taiwan

and one or two other countries,

is

hardly one that inspires confidence in the ability of noncommunist Asian countries to bring about successfully the modernization of their societies and economies. The main reason is not so much that they do not have sufficient capital, for vast amounts of capital have been available to them from richer countries. Some countries have in fact borrowed more than they can spend! The problem is not even one of misallocation of capital and other resources, for errors of resource allocation in planning will be revealed in the course of implementation and experience. These errors can then be remedied. I think the failure of Asian countries to achieve a dynamic, self-sustaining and forward thrust is due to the fact that the modern

sector,

that is the cities of Asia,

has

been

leading by and large a self-contained and isolated existence. Here we see progress. Here we see advancement. New industries are built and universities expand both in the range of faculties and the number of students. But there has been no serious attempt to get the countryside into the grip of a dynamic modernizing process. So the peasants live and work as they have done throughout the past millenia. So they remain poor, dispirited, superstitious and backward. It is this which constitutes the real failure in Asian economic development —the failure of the city to fulfil its function of taking the modernization process to the countryside. Nor did the cities go scot-freefor their neglect. The cities are punished with food shortages, which have not only increased the discomfort of living in cities but have also imperilled their entire national development plans. Why has this state of affairs come about? I think there are two main reasons. The first is the absence of a conscious strategic doctrine on how to set about extending the urban beach-heads outwards to the backward countryside as part of a national modernizing process. Whatever thinking

28

has been done on this is limited mainly tc theories of economic development. For instance, there is the theory of the leading sector whereby it is assumed —I repeat, assumed — that the establishment of modern industry in the city would automatically bring about a spontaneous chain reaction of modernization in the the example

following

countryside. The Asian economists, of their Western counterparts, con-

fine their attention to the conventional economic variables. They have discovered that this isn't enough to serve their objective of rapid growth and that there are more things in heaven and earth than are dreamt of in their philosophy. The second set of reasons relate to institutional factors. City life is more comfortable than village life, whatever town planners and others may say to the contrary. The result is that an intelligent administrator findsa way of remaining in the headquarters of the city and the second-raters are posted to the villages in what are virtually considered penal appointments. Then there are the barriers to modernization in villages whose traditional societies cling stubbornly to ancient beliefs which form a virtually impenetrable barrier to modern ideas, Last but by no means least, there are the limitations imposed by the democratic system. When the supreme purpose of political activity,

including the running of government,

is

to obtain the maximum number of votes at the next general elections, it will take either a reckless or a foolish person to upset the strongly held sensitivities of a traditional society. And, of course, without upsetting these sensitivities, you cannot hope totransform a traditional society into a modern one. That is one great limitation from which democracy suffers in Asia. Nor is the position any better if the democratic system is abolished. When this happens, it has usually been succeeded not by a communist dictatorship but by military rule. The achievements of military governments inAsia, with one possible exception, have not been impressive. Although some Western intellectuals have assigned to military leaders an important role in the modernizing process, I myself remain sceptical as to whether the soldiers can or will do the things their modernizing role has conferred upon them. Although I have drawn what may appear to you to bea

29

bleak outlook for non-communist Asian countries, I would not like to leave you with the impression that all is lost. That is manifestly not true. In the first place it is by no means

certain that China will

emerge into modernity before other Asian non-communist countries. If the communists cannot rid themselves of the present absurd obsession with doctrinal purity —or the thoughts of Mao Tse-tung as they call it —they will not be able to develop and nurture in their universities and technical institutes the top-level scientists for the type of intellectual activity demanded of them. The ablest minds will choose to be ideologues rather than scientists. On the other hand, if they make a determined attempt to create a corps of scientists and technicians in the same systematic way as the Russians did, there is no reason to doubt that they will create a modern technological society in course of time. And it is this development which, if unmatched by performance in other Asian countries, will constitute the real long-term challenge of communism in Asia. That is why it is imperative that we all bend our energies to this task of modernizing our societies. The present condition of Asia is unsatisfactory — modernity and progress in the city, while the countryside, the real Asia, remains a vast stronghold of obscurantism and backwardness. The result is a kind of schizophrenia both in the thinking of Asian leaders and in the policies of their governments. Can Asia modernize without recourse tothe methods used by the com-

munists? The Japanese have succeeded in establishing a modern state in every sense of the word while preserving all that is precious in their cultural heritage and discarding what is not consonant with progress. This then is the backdrop to the seminar

on problems of urbanization in Asia —a sombre backdrop to be sure. If the subject were to be discussed against a Western setting, attention need be paid only to the technicalities of the problem, be they sociological, architectural, economic,

town-planning

or health, But against the Asian setting thereis this modernizing role of the city which has to be taken into account, a role which is only vaguely understood at present but whose importance will grow in the course of time. 30

Some Delusions of the Decade of Development

In savage

societies

when

a man

falls ill, the belief is that

he has been possessed of evil spirits. The remedy is sought from a witch doctor, who through rituals, spells and magic incantation drives away these evil spirits and restores his patient to health. The belief in the omnipresence of evil spirits is so widespread among primitive people that even in ordinary con-

versation certain words and expressions are forbidden. They believe that these taboo words will attract the unwelcome attention of dread evil spirits. The accounts of ethnologists and anthropologists are full of examples of these quaint and often diverting customs. We moderns expect — and rightly so — that all our citizens will conduct their lives on a rational basis and not succumb to primitive superstitition. And yet in the conduct of affairs of state in backward countries, the approach to basic problems, in particular to problems of economic development, resembles the mental Speech at the tenth anniversary Society on 24 July 1966.

dinner

31

of the Malayan Economic

approach with which the primitive tribesman tries to overcome his private misfortunes. The literature of international conferences on economic development is replete with examples of sorcery, magic incantation and the avoidance of taboo words. Let me give you a few examples. I have attended many international conferences concerned with economic development over the years and in not a single address or paper have I come across an instance where the poor and backward countries of Asia andAfrica are described as such, that is, poorand backward. These words are clearly taboo. Instead euphemisms are resorted to; at one time in the 1950s, backward countries were called 'underdeveloped'. In the sixties, more hopefully, the term 'developing' is used. An example of magic incantation is the often-used phrase now debased into a cliche — 'the revolution of rising expectations'. I will deal with this revolution in more detail later. Then there is another phrase which by now has surely ac-

quired the status

of a magic incantation — 'the take-off into

craft trundling down a runway at an accelerating pace and eventually taking off into graceful and effortless flight. It suggests to the uninitiated audience that what is really required for self-sustaining economic growth is the acquisition of gadgetry of the right type and on a sufficiently large scale.

It is therefore

small wonder,

given such naive,

not to

say primitive, public attitudes towards problems of economic growth, the Decade of Development so confidently launched by the United Nations in 1960 now threatens to be the Decade of Disenchantment. All over the vast stretches of Asia and Africa, not only has there been a general absence of significant economic growth, there has been in many places serious retrogression. Indeed, the position in many places threatens ominously to be like that of medieval Europe in its darkest age after the collapse of the Roman empire. The roads and cities, the viaducts and the amphitheatres which the Romans built slowly crumbled in decay, and the institutions of law and order and of stable government were submerged beneath the rising tide of barbarism. 32

To be sure, the picture is not one of unrelieved universal gloom. Countries with ancient cultures do not risk any reversion

to

barbarism,

and

there

are

isolated

areas,

our

own for instance, where real progress is being achieved. But I think it as true as any generalization can be about so diverse an entity as the Afro-Asian world, that the attempts to modernize their societies and their economies have generally been a sorry performance. The real trouble is that the difficulties encountered are not those of an ephemeral or

technical-economic

nature

such

as,

for instance,

the

worsening of the terms of trade vis-d-vis the industrial West, bad though the effects have been. There is awareness now that underlying the purely economic troubles such as inflation, balance of payments difficulties, slow rate of capital accumulation and general economic stagnation, there is a deeper underlying malaise whose real nature has not been properly understood. What has gone wrong? How could matters be set right so that the backward countries of Asia and Africa can catch up with the industrial West? NowI would be an exceedingly bold and foolish man if Iwere toattempt to answer these questions in any definitive form. I have addressed my mind to this subject for many years, and the more I ponder over the problem and the more I read the literature, the more intricate and complex and indeed intractable of solution it appears to be. So tonight I will content myself to discuss only some of the things that went wrong. In part, the politicians are to blame for a great deal of the misfortune that has overtaken their countries. But in defence of the politician, it can be said that the country gets the government it deserves, though this gives comfort to nobody. Nor are the professionals and the economists and the staff planners and the executives of the development ministries entirely free from blame. Let me first deal with the responsibility of the politician. In the immediate post-independence years there was, quite naturally, a general air of euphoria generated by the belief that once the colonial and exploiting power is removed, nothing stands in the way of rapid advance towards the millennium. For when political power is vested innational leaders,

393

then the wealth that was believed to be formerly appropriated by the metropolitan power can be diverted into productive use in the development of the economy. As one famous African ex-leader said, 'Seek ye first the political kingdom and all these things shall be added unto you.' The redeemer came a cropper but even before that people were wiser and the first flush of euphoria had long since vanished. But in its place, there unfortunately have been very few instances where the political leadership has acquired a complete grasp of the hard facts of economic growth. They do not generally understand that in the history of advanced industrial nations of today, except the fortunate few wellendowed with natural resources such as the United States and New Zealand, the first stage of economic development had been a harsh and cruel phase. It meant the destruction of traditional institutions and the imposition of terrible sacrifices on the vast majority of the population. In most instances the first stage of economic growth represented a traumatic experience. It was possible to drag the country through it only within a strong political framework. Such was the experience of Britain and Western Europe during the Industrial Revolution, and Japan too during the Meiji Restoration. Such alsowas the experience of the Soviet Union during the Stalinist period when both the worker and the peasant were sweated to the bone to provide the surplus needed for the accumulation of capital. At the helm of the affairs of these nations during this period were men of iron resolve who were determined to set their countries on the path of modernization as rapidly as possible, regardless of the cost in human suffering. What do we have today in the backward countries of Asia and Africa outside the communist bloc? In some countries some form of military dictatorship has been installed after the ignominous failure of representative government. Many of these dictatorships are obscurantist and reactionary, more concerned with their own survival than the advancement of their country. Where democratic institutions still survive, political leaders, instead of arousing and inspiring their society for the strenuous exertions that lie ahead, are caught in the toils of a system which seems to inhibit

34

effective action. Politicking takes the place of leadership and statesmanship. Modern ideas of liberalism, egalitarian ideals, welfare state concepts —all these are appropriate in an affluent society but are largely irrelevant to a nation struggling to escape age-old poverty. These concepts encourage a propensity to laziness and inaction, inculcate a belief that society owes every man a comfortable living, and proliferate trade unions whose main purpose is to get more pay for less work. It is not at all surprising that under such conditions, the intense effort that was needed never had a chance of coming into fruition. I do not know whether or not this state of affairs could have been avoided. But it is worthy of note that Western Europe, the Soviet Union and Japan, during the time they achieved their economic breakthrough, did not have universal franchise. Franchise was severely restricted in Western Europe. As for the Soviet Union and Japan, the political leadership remained under the tight control of the ruling elite. Hence it was possible to exact from the general population sacrifices which no popularly elected government today would dare even to contemplate. Does it mean then that the backward countries of Asia and Africa will never be able to achieve a modern industrial society through democratic processes as they are practised today? On the evidence of the performance to date, the answer would appear to be a clear, unequivocal 'No, they will not be able to'. I believe that unless democratic backward countries can create new institutions and promote new values which can galvanize, inspire, cajole, induce and, in the last resort, compel men into action, they will not be able to lift themselves out of the present state of stagnation and poverty. There is now an increasing acceptance of the view that the non-economic factors are the decisive determinants of economic growth. But there has been little study to ascertain exactly what these non-economic factors are and even less understanding of how they operate. The economists refuse to enter into this domain of study possibly in the fear that it will turn out to be a morass from which they cannot emerge. The sociologists and others who have made some attempts in this direction have been unimpressive in their achievements. 35

Some of you may point to Malaysia and Singapore, which are developing at a fair rate and which may, in a few decades, achieve the same standards of living as Western Europe today, as a refutation of the view that democracy is incompatible with fast development in backward countries. I believe, however, that suchan argument misses the real point.In Malaya*and Singapore, the primary accumulation of capital on which subsequent growth was mounted took place during the colonial era about the turn of the century. This process produced conditions as abominableas those in Western Europe, the Soviet Union and Japan during the first stages of their industrial revolution. It was capital and know-how imported from Britain, labour from south China and India that opened up the jungles of the Malay peninsula and developed the port of Singapore. That part of our common economic history was no more attractivein its social aspects than British social conditions as depictedinthe novels of Dickens. We do not have our own Dickens, but those who care to lookinto the official records, for instance the law relating to indentured labour or the reports of the two Opium Commissions, 1909 and 1921, will getan understanding of the dreadful conditions under which men were put to work. For instance, it was said in defence of opium-smoking that it was necessary for survival of labourers engagedin opening up the jungles. Since they lived in complete isolation, it was their only form of relaxation. Further, the odour of opium smoke inlabour lines kept mosquitoes away and thus ensured immunity from malaria. This was seriously advanced as a defence of the colonial government's policy of selling opium to the general population. Incidentally, revenue from the sale of opium and licensing fees of gambling farms constituted the main source of government revenue in those palmy colonial days. I believe that unlike most countries of Asia and Africa, Singapore and Malaya have gone through the initial birth pangs of economic development. This is why we are able to continue our development with much less of the shock and trauma which our less fortunate African and Asian countries have yet to undergo. However, let us not be complacent. *now known as West Malaysia

36

While we are off the launching pad, we are and, if we become negligent, we may yet down in an ignominous descent. Apart from the lethargy of action induced systems of backward countries, a number of

not yet in orbit come crashing

worse

because

by the political misconceptions prevail which bedevil an already difficult situation. These misconceptions are largely the result of the shortcomings of professionals —the economists and staff planners who advise governments and carry out their policies. Even the academicians are not entirely free of blame, for they should have seen the danger signals many years ago and should have warned those in charge of affairs that they were moving down a blind alley. Take, for instance, the so-called revolution of rising expectations to which I referred earlier. Many educated people believe that there is an upsurge of desire throughout the length and breadth of Asia and Africa for a better life, for greater freedom and dignity. This is one of the great delusions of the decade, usually on the part of the urban intelligentsia who have not ventured beyond the route between their suburban homes and their city offices. Field studies of actual situations point to a different state of affairs. I take the case of India, not because it is any than

other

backward

countries,

but

it has

been studied in greater depth and volume than other countries. Studies of the Indian peasant suggest that far from entertaining any rising expectation, he is an exceedingly contented

individual.

immediately or

floods.

That

is,

of course,

when

he

is not

faced with natural calamities such as droughts One

university

intellectual,

who

made a field

study of the attitudes of the Indian peasant, concluded that what the Indian peasant needed is not an economist to teach him how to save, nor an agronomist toteach him to increase

his crop yield, but a psychiatrist to explain to him why he should be discontented with the appallingly wretched conditions under which he lives. I am not saying, of course, that nobody in Afro-Asia entertains rising expectations. Obviously the ambitious city political elite who were engaged in the anti-colonial struggle did entertain rising expectations. However, on coming into office in many instances these expectations were easily and 37

rapidly fulfilled by practices which will not bear close Treasury examination. But may I come to a more basic aspect of the economic policies which backward countries pursue which have resulted in stagnation rather than growth. I believe that among many high government circles concerned with economic development the curious notion is held that a high rate of growth of the national income can be brought about by a high rate of capital investment. Accordingly, governments try to maximize the rate of capital investment in both the public and private sectors. This exercise in increasing the rate of capital investment or the gross domestic capital formation, as it is grandly called, is dignified by the name of economic planning, Deluded by the notion that if only they can increase their rate of capital investment they will increase their growth of national income, development planning authorities in backward countries try to beg, borrow or steal the capital they believe they need. In course of time the governments accumulated enormous

debts and find, to their surprise and dis-

may, that far from being richer they have in fact become poorer. Any small-time grocer in Chinatown can tell you that if you borrow money, unless you intend to abscond, it is prudent to put it into some use which will yield sufficient income to enable you to repay the loan with interest. Somehow or other, this elementary precept of prudence has been considered to be beneath the dignity of economic planners. I find it difficult tounderstand howthis notion — that more capital investment creates faster growth of income — came into being. I can think of any number of capital investment projects which if undertaken in a backward country is guaranteed to bring it into complete ruin. Indeed many Asian leaders, without prompting from anybody, have been engaging in just this kind of activity. If you read the literature carefully, you will notice that the academicians are very careful in phrasing the relationship between capital investment and the growthof income. They refer to an association or correlation between these two elements, but have refrained from asserting a causal relationship between the one and the other.

38

It is refreshing to come across an authority like Professor Caincross, who stated that it is as justifiable to say that a high rate of growth brings about a high rate of capital investment

as the

other

way

round,

that is,

a high rate

of

capital investment brings about a high rate of economic growth. But this has not deterred economic planners from fiddling around with capital-output ratios which set out just how much increase in the national income will result from how much increase in investment. I suspect that the econometricians are to blame for this. They always set out their equations in terms of AY (a change in income) as some

mathematical function of AI (a change in investment), income being regarded as the dependent variable. As for the capital-output ratio, the defence for its use is its observed empirical stability. I suspect that if a study is made of growth rates in various countries, it will be possible to establish a close relation between growth rates and per capita consumption of bananas. It is even possible that the ratio between the two rates will show stable performance. It will then be regarded as logical to come to the conclusion that the consumption of bananas brings about a high rate of economic growth. It would not be beyond the ingenuity of any self-respecting economist to establish a causal relationship between consumption of bananas and good economic performance. The banana theory of economic growth can then be put into a theoretical framework no less fanciful than, say, the sun spot theory of the trade cycle. If the banana theory of economic growth comes to receive

universal

acclaim, there would

be at least one blessing to

backward countries. When a wretched minister of finance is called upon by acreditor government toexplain the poor performance of his country, he can come back with a crushing reply, 'Yes, we have no bananas,' This belief that capital investment is the source and foundation of economic growth has resulted in the lack of attention to the questions of what kindof economic policies will best promote opportunities for economic growth, what kind of incentives should be offered to enable people to take advantage of these opportunities, and what kind of new 39

institutions should be created to give effect to growth policies of the government. So, in many backward

countries we see the curious spec-

tacle of the scarcest and most valuable of all factors of production — management skill — being used, not to create more wealth, but tocontrol, from the commanding heights of a vast, intricate bureaucracy, the efforts of other people who are engaged in creating new wealth and, in the process, often inhibiting the creation of such wealth. All this is done in the name of economic planning and even in the name of socialism. The irony is that while the communist countries are learning the folly of centralized planning and control over the economy, backward Asian and African countries whose government machinery lacks the extensive powers which communist bureaucracies have continue to proliferate controls,

licensing

systems

and

direction

and

decrees

in an

ever-increasing torrent. Backward countries in inheriting or creating the political institutions of modern states have found some of these totally inappropriate to their situation. In like manner they have

absorbed the economic ideas of modern countries but without realizing how inappropriate they are to their own situation. We must not forget that Keynes's General Theory, which underlies all this business about the capital-output ratio, is really concerned with short-term fluctuations of income and not with the problems of long-term secular economic growth which is the real issue facing backward countries. If I may be so presumptuous as to give advice to others (having been freed from the burdens of the Finance Ministry, I can look at this problem with a detachment that was not possible before), I would ask them to throw away all the books published on economic growth since World War I. I would advise them instead to read the essays of Samuel Smiles —his exhortations to thrift, industry, ambition, honesty, perseverence, etc. No doubt, to people who have been brought up in the sophisticated twentieth century —an era which has grown to accept Beatles and beatniks —this may be an intolerable imposition, for Samuel Smiles must appear a singularly odious Victorian character. Yet what else is

40

there to do? The economic planners have manifestly failed in their job simply because, I suspect, they have not realized that at the stage of development of their country, the injunctions of Samuel Smiles, however offensively sanctimonious they may be, are more in keeping with the needs of their times and their countries than all the stuff that the econometricians are producing. In this respect, what is remarkable about the way Communist China is carrying out its task is the tremendous amount of moralizing that is going on, and much of it along the lines which the great Victorians would certainly have approved of. I am led by this as well as by other evidence to the conclusion that Communist China will reach the point of Rostow's self-sustaining growth well ahead of other backward countries, unless these wake up in time.

41

Abolition of Poverty

I shall speak about some general problems which Asian countries are facing. It is dangerous to generalize about Asia with its wide variety of societies and their different history and culture. But apart from Japan, Asia shares one problem in common. This is how to abolish poverty, which has been the lot of the common people, and how to attain a decent standard of living for them in the not-too-distant future. This is what all Asian countries are trying to do with varying measures of success. In the post-war years, as one state after another emerged into independence, this attack on the age-old problem of poverty was launched with vigour and enthusiasm. No selfrespecting government worked without a five-year economic development plan and there was widespread expectation that, by aseries of such development plans, Asian countries would succeed in the conquest of poverty. We were, and had to be, in a hurry. These development plans were comprehensive and required considerable preparation and thought. They provided for new construction in various ways —the building or extension of ports, construction of power stations, railways, setting up of new industries, construction of irrigation dams, A radio talk on the Australian Broadcasting Commission network ‘Guest of Honour' programme on 30 January 1967.

42

new roads and so on. All this required large sums of money. Much of the capital equipment had to be brought from abroad and this meant the use of foreign exchange. I think it is fair to say that with the exception of a few countries the main emphasis in these development plans was on industrial growth — how to bring it about and how to sustain it. Asian planners were influenced by a belief that industry had a potential for generating side effects. They, of course, realized that modern industry does not constitute the whole of a modern economic system, After all there are wealthy countries based on agriculture, for instance Denmark and New Zealand, but they thought that they would get not only the direct benefits but also the indirect ones. This would consist of the extension of skills created by industry into other fields. They hoped that those engaged in modern industry would speed up the process of breaking down tradition and help in the spread of modern ideas. In a word, industry was considered to be the leading sector of the economy and once this expands it was hoped that the industrial sector will drag other laggard sectors in parallel advance. Unfortunately, things have not worked out in that way, and the present state of affairs is one of dismay and confusion. To be sure, many impressive achievements have been registered. For instance, India has a substantial modern steel industry and produces jet planes, tanks, machine tools and a vast range of products which she never produced before independence. Yet the fact remains that she, like many other Asian countries, is in dire trouble today. The main reason is that problems of agriculture — and eighty per cent of Asians are peasants — proved more in-

tractable than were thought. Farming still went on in much the same old-fashioned way, and although progress was made in certain places —for instance the Punjab in India — in general, food production barely kept pace with population growth. The slightest adversity in weather brought about dire consequences. It is clear that the performance

of industry as a sector leading all others had been a sluggish one and the demonstration effect which it was hoped that industry would produce on backward sections of society did not take place — at

43

least not at the speed that would have produced visible results. In fact, as we have seen from the recent agitation in India against the slaughter of the cows, the traditional forces of society proved to have far greater resilience than the modernizers had thought. All activity, including economic activity, was tied to centuries of social tradition. It was necessary not only to introduce new skills but also to bring

about a change of attitudes which would be receptive to these new skills. What was involved was a way of living, not merely a way of working, and the weight of history was heavy. We may ask ourselves why this has come about, that is, the failure of modern industry to serve as a transmission belt of the modernizing process, on which great hopes had been placed. Some people may say that Asian countries went about it the wrong way by making government responsible for creating and managing these industries instead of leaving this job to private enterprise. It can be claimed that if private enterprise were to run modern industries, this would have had agreater catalytic effect on society. For one thing, civil servants, especially those brought up in the British tradition, are by nature timid and desire no more than to lead a quiet unostentatious life. They are not fitted to the role of innovation by example, and this role is best performed by people who are less inhibited by government regulations and the civil service outlook. There may be something in this argument. But the arguments for and against government ownership and management of industry are complex and I do not think I need go into that now except to say in some Asian countries indigenous private enterprise is often backward. I think, however, it is not wholly true to say that the establishment and management of new industries as state enterprises was the whole reason for the failure to achieve a general economic take-off. I suspect that there are social processes operating here about which we know very little. For instance, in Malaysia and Singapore, where government ownership and management of industry are minimal, the extension of new attitudes generated by private enterprise has also come up against traditional barriers, though of a

44

different kind. Here it is the Chinese people who are the modernizers. Uprooted from their societies in China, which themselves had been in a state of turmoil for more than fifty years, Chinese society abroad had to make its own adjustments to the modern world unimpeded by traditionalist institutions. This has helped them to make the economic breakthrough in Southeast Asia and I think it is fair to say that they are confident in meeting the challenges of the twentieth

century.

Nevertheless,

in

Malaya

this

has

not

served to bring about similar changes in, for instance, Malay society. If anything, Malay society has tended in some respects to retreat into its traditional strongholds. Let me explain what I mean. Malay society, like most societies,

Subscribes

to a code

of conduct

which

sets

out

what is desirable or admirable and what is offensive or undesirable. Malay economy is geared to the slow rhythm of agriculture and the Malay has been taught to seek advance within the pattern of society established before the age of technology. In the ethos of Malay society, the unrelenting pursuit of an objective, like the accumulation of wealth, is not

held

in esteem.

In fact, it is condemned

as inconsistent

with gracious living on which they place much importance. The spectacle of the Chinaman working like a demon possessed and ruthlessly brushing aside any one or any obstacle that stands in his way is not one that arouses Malay admiration. And yet without this passion for wealth generating a fanatic determination to accumulate, is it possible for the Malays to achieve the economic success of the Chinese? Here one is reminded of what Weber and other Western sociologists have said about the contribution of the Protestant ethic to the early development of capitalism. The early stages of economic growth, be it through capitalism or communism, is necessarily a cruel and harsh process and it needs a robust philosophical outlook to go through with it. There is no easy way to grindout of the mass of poor people the economic surplus or savings needed to finance capital accumulation. Victorian England and Stalinist Russia did not present pretty pictures of bucolic happiness when they ‘vent through the process of capital accumulation and there 45

is no reason to expect that the backward countries of the world can hope to escape the same traumatic experience if

they want to achieve self-sustaining economic growth. The trouble is that, given the traditional order and the prevailing ethos, none of their leaders dares even to contemplate the stern measures that need to be taken to propel their societies forward. To me this, rather than the technical problems of economic planning, is the real dilemma facing Asian countries today. It is one towhich no solution has been found largely because, I suspect, not much thinking has been done on the subject. Economists limit their attention strictly to the economic variables, political scientists are absorbed with problems of political structure and processes, and anthropologists study exotic tribal customs. The integrated, comprehensive, all-embracing approach to these vital problems of the modernization process has yet to be made. Asia has produced a Mao Tse-tung; it has yet to produce its Max Weber. In the meantime everybody travels hopefully, aware of his shortcomings but aware also that no one can plan a path or chart a course of historical development. After all the Japanese have succeeded without the conscious guidance of dogma or doctrine. But it was more than a hundred years since Commodore Perry's black ships anchored at Edo Bay, now modern Tokyo. And throughout their lengthy process of modernization the Japanese had the advantage of a homogeneous society and a strong and continuing framework of leadership. There are not many countries in Asia that can lay claim to these advantages.

46

Making Compatible Choices

As this is a training course on leadership, it seems appropriate for me to talk on some aspects of leadership. I want to discuss a rather fundamental aspect of leadership, and that is the question of choice of objectives. Before a leader can lead, he must decide exactly where he intends to lead his flock to. That is an obvious, indeed, a trite observation. Yet leadership in the real world is seldom such a simple matter. The reason is that we are not leading people to one physical destination. For instance, if you are a leader in the political field, you need to have some notion, some idea, or some vision of the future society into which you want to lead

your

people.

This

is a complex

business

for there are so

many aspects to a modern society in regard to economic structure, political systems, cultural values and so on. And in each of these fields, you will have to select, consciously or otherwise, a set of goals. The question I want to discuss today is: How to make choices that are compatible? All too often, we see people pursuing contradictory objectives. In the end, they just weary themselves out without achieving anything worthwhile. Speech at the opening ceremony of the University of Singapore Students' Union student conference at the National Youth Leadership Training Institute on 9 May 1971.

47

Let me discuss this subject of compatibility of choices by reference to some examples. Some fifteen years ago, an Indian economist doing his Ph. D. thesis at the London School of Economics, set out this proposition: It is desirable for a modern society to achieve four objectives —i) political democracy, ii) full employment, iii) price stability, iv) eco-

His thesis was that a modern society can nomic growth. choose any three of the four but not all four simultaneously. If a democratic nation strives after full employment and economic growth, this can be only at the cost of price inflation. On the other hand, if it wants to achieve price stability, then it must give up either full employment or economic growth. And so on for other variations on the theme. it is an attractive thesis, not without relevance to the world today. Countries in Europe and America have achieved full employment with economic growth; at the same time they have saddled themselves with near endemic inflation. Yet, like most propositions in the social sciences, this thesis cannot be pushed too far. We have dictatorial regimes in Latin America, and unhappily in countries in Asia as well, which have achieved neither full employment nor price stability nor economic growth. And there are countries in Asia which have achieved only one of the four objectives, namely, political democracy, and find themselves ridden with massive unemployment, price inflation and economic stagnation. Needless to say, political democracy does not last very long under these conditions. In the physical sciences, the question of compatible choices is easily seen and understood. Take, for instance, the design of aircraft. As technology increases, we can

design and build faster, larger, more versatile aircraft, with longer range, payload and other desirable characteristics. However, at any one moment, at any given level of technology, or, to use the jargon, at any given state of the arts, you ‘have to make some compromise between the various characteristics you want — speed, range, payload, etc. You canhave more of one at the expense of less of the other, So you trade off speed for payload, payload for range, or whatever. 48

Whereas in the physical sciences the constraints in making these trade-offs are unavoidable, spelt out in theory and observable in experiments, that is not the case with the social sciences. Not only are the social sciences inherently inexact, but human beings themselves when they make judgements on human affairs, are captives of their past experiences, including what they have learnt in schools and universities, the biases that developed from these, their unconscious desires and frustrations. The result is that the level of thinking on human affairs by human beings themselves is often deplorably low. Let me illustrate the subject of compatible choices by reference to our experience in Singapore. I want to discuss

the trade-off between economic growth and nation-building. At first sight, it might appear that there is no conflict of choice between thetwo. You may argue that economic growth helps nation-building and nation-building in turn helps economic

growth.

As

people improve their standards

of living,

they become more conscious of their common identity and common interests, and as unity and solidarity improve, people are better enabled to increase the GNP. This, Iam afraid, is a simplistic version of social and economic processes. In the real world, in Singapore, things do not work out this way. There are several reasons for this but I will deal with

only two major ones. In Singapore, we have mounted the main effort toachieve fast economic growth through the free enterprise system. There is no other realistic alternative. The free enterprise system, as you know, depends on indi-

vidual initiative.

It is not the Government that makes the

crucial investment decisions on which our economic, particularly our industrial, growth depends. It is people in the private sector which do this. They may be our own citizens or they may be foreigners. These decision-makers make

close

calculations

tives,

future

culations,

of markets,

earnings

they

decide

and

costs,

so on.

whether

or

profitability,

incen-

On the basis of their calnot to invest

in this

or

that industry. The key element in their calculations is how much profits can they make, now and in the foreseeable future. Through-

49

\ out the free enterprise system, calculations of this kind are constantly being made. The type of people who run the system are necessarily those who are hardheaded, ambitious and pretty ruthless in overcoming obstacles. Such people are conditioned to placing their individual interests and that

of their firms above all other considerations. These are the successful and they set the trend, the style, the ethos — call it what you will. Unless our society is tempered with a broader

vision,

it is easy to see that the pre-

vailing values will be self-centred, self-seeking and concerned with short-term interests. Nation-building does not

flourish in a climate of this kind. There is asecondunfavourable element in this free enterprise system. And it is that the greater the inequality of wealth, the larger will be the proportion of national income saved. Big corporations and rich people save a larger part of their earnings than the poor do. Savings make capital investment and economic growth possible. It is a sad but nevertheless true observation that inequality of income is good for economic growth. So here you will find, readily, the elements of social tension.

People compare

their present income

not with what

it was five or tenyears ago, not with what it would have been if there had been no economic growth; they compare their present income with the income of those who are more successful. Discontent of this kind is good for economic growth as it spurs people to put in more effort to increase their income. But the result is that the big economic growth of the type we have had in the past few years, far from leading to unity and contentment, produces the reverse effect. Let us now consider the reverse case. Indonesia, under the rule of the former President Soekarno, provides a striking example of a different kind of trade-off between economic growth and nation-building. Soekarno thought that economics was for book-keepers. Though, as you know, the economy

performed

dismally

during his regime,

there is little doubt

that the Indonesian people achieved a higher level of consciousness of their national identity than has been the case with Singaporeans, Anyone who doubts this need only hold

discussions

with Singapore and Indonesian intellectuals. 50

He

will find that, in this respect —acceptance of the national identity —the two differ profoundly. Another indicator, and it is only an indicator, is that Indonesians take defeats of their national sports teams very seriously. In Singapore,

we bear these set-backs with complete equanimity. Indeed many of you would question whether 'set-back' is the right word to use. Indonesians would not question this. Thetrade-off between economic growth and nation-building is a subject which, to my knowledge, has not been dealt with in the literature of any of the social sciences. One therefore

has to move carefully in this terra incognita. The observations which I want to make relate to the situation in Singapore and may not have any validity beyond our shores. First, though in the short term the claims of economic growth and nation-building may be competitive or contradictory, in the longer term this may not be the case. If we did not have suf- . ficient economic growth at least to mop up the large number of unemployed youths, which was then thought to be an in-

soluble problem, then any talk of nation-building would be idle chatter. Our society is likely to plunge into a series of social

and

political

convulsions;

and as these cause further

deterioration to the economy, the country will go into a tail spin from which recovery is very difficult to contrive. My second observation is that the choice between economic growth and nation-building, like so many choices in human affairs, is not a choice of all for one and nothing for the other. It is how much of one at the expense of how much

of the other. Only history will tell whether we have selected the proportions correctly and, within the selected proportions, whether we have done enough to redress imbalances, to reduce the tension resulting from rapid economic growth, and to inspire the broader vision I referred to earlier. How do we advance our national cohesiveness in the face of short-term constraints created by economic growth? The solution lies in taking advantage of certain long-term factors produced by sustained economic growth. As we get large numbers of educated and successful careerists and entrepreneurs, a growing number of them will realize that a firm and durable political system is a prerequisite for their

51

continued

affluence.

We

will then get an increasing number

of them who, out of enlightened self-interest, will make the effort to contribute towards this objective. They will learn, I hope not by the hard way, why and how they can work for

greater

social

cohesion

and how they can provide effective

political leadership. At the same time, economic growth will make possible improvements in the standard of living of the working class.

This would be achieved boththrough higher wages and better social services. Despite the occasional grumblings from those who fail to keep up with the Joneses, an expanding economy generally benefits workers, both by expanding employment and career opportunities as well as by wage increases. The assumption for believing that we can reconcile economic growth with nation-building is that the Singapore citizen, despite his occasional waywardness, is basically a rational human being. In the final analysis, he knows where his own interests lie. If he is provided with adequate information, his choice will be predictable and, in the main,

rational. There

are other types of trade-offs which one can conceive of as being relevant to Singapore. For instance, there is a trade-off between individual liberty and nation-building. If you care for more complex stuff, you can think of a threeway trade-off between economic growth, individual liberty and nation-building. This is a subject worthy of a Ph.D. thesis. I cannot hope to do it justice in a brief address. I treat the subject from the point of view of a trade-off between competing objectives to emphasize the point that in human affairs there seldom are absolute values, that there is no such thing as going all out for economic growth or nation-building or individual liberty, or this, that or the other. We have to find a right mix of these desirable objectives, often sacrificing a measure of one to get more of another. In Singapore, people often forget this, especially in arguments or public debate. The result is that they want to have their cake and eat it as well. It is all right for the general public to do this. But those who want to lead them cannot afford such careless thinking, 52

Man and Economic Development

A student of economics who has gone through dozens or hundreds of books on economic development may lose sight of the basic human and sociological principles because of overemphasis on details. The textbooks will discuss technical matters, such as the rate of gross domestic capital formation, the capital-output ratio, balance of payments problems and so forth.

There ties, we

is a danger that in his absorption with technicali-

he overlooks the basic elements

talk about

economic

development,

of the problem. we

often

When

forget

that

what we really mean is how to make man better off materially —howhe

can have more

and better food to eat, better homes better means of leisure, in fact, how man can achieve

to live in, better education for his children, transportation,

more

a fuller life. Building of factories, opening of docks, railway lines, mines and power stations are merely the means whereby man can have a fuller and more meaningful existence. We know that in Asia the vast majority of mankind live on the verge of starvation. Economic development is a means whereby we could abolish the endemic poverty which has been man's fate for centuries and generations. In other words, economic development is for man. This Article in Commerce, journal of the Commerce University, Vol.1 No.4, November 1961.

53

Society,

Nanyang

is quite obvious. But what has also often been overlooked is that it is also man that carries out economic development. It is not an amorphous body like the state which carries out economic development, nor is it carried out only by experts, be they engineers, financiers, economists or whatever they are. It is the human aspect of economic development to which, in my opinion, inadequate attention has been paid. This failure on the part of economists is not surprising. Economic theory presupposes rational economic behaviour in man. Theory assumes that man would prefer to consume more goods thanless; itassumes that mancan make rational calculations as to the future and will be prepared to undergo present sacrifices in return for a greater deferred reward in the future. These assumptions as to human conduct are true only in a limited sense and they are made in regard to economic phenomena in a limited context. Students are familiar with what economists call 'marginal analysis', that is, analysis of small change, in the economic system. Where large changes have to take place, then it by no means follows that the assumptions under marginal analysis hold true. But there are other more important reasons why the questionof human motivation is of fundamental importance in the study of economic growth. First, the assumption that man wishes to improve his basic material living conditions does not always hold true. There are societies or sections of societies where, owing to lack of contact with modern civilization, or the drag of centuries-old traditions, or the resignation and torpor which grinding poverty induces, or a combination of all these factors, human beings seek no improvement or change in the material conditions of life. To arouse such societies from their lethargy is the business

not of the economist but of the sociologist and the politician. Until they get going, there is little that the economist can do. Secondly, economic theory dealing with economic changes almost invariably postulates complete mobility. This means that people are free to change their occupations according to what they think is to their best advantage. They are free to buy and sell their labour, their services and their products on the most advantageous terms. In the real world this very often does not happen. There may be social or political

04

factors which prevent the free mobility which economists postulate in their theories. For instance, religious customs may prevent certain types of people from entering certain occupations, thereby preventing any improvement of their status. Where the state controls the economy through licences, then obviously there is a check upon mobility. A person may want to produce certain goods or enter certain occupations but may be prevented from doing so by the li-

censing authorities. The problem therefore resolves itself into the policies which a government should adopt to achieve the changes in society and in individual human beings that will permit the objective factors of economic development to assert themselves. One of the primary objectives is the spread of education which can itself be sub-divided into general education and utilitarian education. General education is fundamental, and the percentage of literacy in a society is taken to be an index of its cultural leveland general well-being. The state's attitude to compulsory schooling, the school-leaving age, free education and facilities for higher education are important to sustaining long-term economic growth. Without a well-educated population, no state can possibly develop its

economic

resources

to the full.

Besides

giving rise to a

population that is aware of the benefits of economic development, education—if suitably directed —can inculcate in a people a sense of social discipline, which is of prime importance if the process of economic growth is to take place with a minimum of unrest. It will moreover ensure, at a later stage, that the fruits of economic growth are not dissipated in frivolous hedonistic pursuits but in the attainment of a fuller and more cultured life. But education alsohas its utilitarian functions to perform to ensure that citizens are well equipped for the functions they have to perform in society. Obviously no society can afford to, or will be well advised to, provide each and everyone of its young citizens with education to university level. Such a system will never work as human beings basically are not endowed with the same talents or skills. Secondly, no society can consist entirely of the intelligentsia. The duty of the state, however, is to provide all its citizens

55

with the same opportunities to make the best that they can of their available talents and energies. A developing society requires a wide range of skilled personnel and the state has to provide them at the right time in adequate quantities. This requires, besides the usual general secondary schools, the establishment of vocational and craft schools, of technical colleges and polytechnics and of the modern university departments of science, technology, agriculture, economics, business administration and accountancy. Besides education, the other main non-economic factor which affects economic growth is the opportunity which a society affords to those with talent, ability and skills to rise to the position for which they are best fitted. This requires firstly that the state is ably led and well administered, that the political leadership and the bureaucracy are free from corruption and nepotism. To achieve an honest and energetic administration appears easy in theory. In practice very few of the young and emergent nations in Asia and Africa have achieved this. Even in the most advanced and leading societies,

whether

communist

or

democratic,

the

problem

of

nepotism is a recurring one and can only be countered by constant vigilance. In advanced societies, it is not so much open nepotism which is to be feared but the insidious ‘old boy' type whereby no illegalities are committed but in which the pinnacles of power, influence and wealth are the reserve of those born into the right families. In underdeveloped countries the matter could be more serious. A system may arise in which the dominant minority, whether of families, clans

or even entire communities,

arrogates to itself not only the

openings to the seats of power but also the avenues by which individuals can fit themselves out for such positions of power. Thedominant minority is thus able to point out that those outside of the charmed circle just do not have the necessary qualifications to be admitted to the elite group. Thus many able and aspiring people are denied the opportunity for the full use of their abilities. This represents a loss whicha developing economy, almost by definition short of skills and talent, can ill afford. This loss takes place in two ways. First there is the direct loss of talent kept out. But the second way is even more serious and sinister. The dominant

56

minority will be in effect a closed privileged group and will be likely to exhibit the familiar traits of such groups. They are likely to be lazy, inefficient and, in varying degrees, corrupt. Finally, when they find their privilege threatened, they are likely to be oppressive. Experience in other countries show that economic development is not likely to succeed in such circumstances, The attitudes of society to change and social mobility determine whether individuals are able to find their proper level in society, with its corollary that the most able individuals get to the top. In both democratic as well as communist societies these are the proclaimed ideas. So far as economic development is concerned, what matters is how to ensure that your ablest men rise to the top in business and in industry. In other words, how to produce and expand your class of entrepreneurs. This is the most vital aspect of economic development on the human side. Entrepreneurs are something which the state cannot directly create. Entrepreneurial talent emerges if the conditions in society are appropriate. All the state can and should do is to remove the restrictions on the development of such talent. It is a paradox that developing societies require more such entrepreneurial skills than developed societies. In developed societies, whether capitalist or communist, the entrepreneurial function is very largely performed by corporate bodies consisting of members recruited from the managerial elite. These corporate bodies plan the moves which lead to the expansion and diversification of industries and organizations, to takeover bids, mergers and so on. These functions call for a great deal of knowledge, experience and shrewdness on the part of the new type of entrepreneurs, but theirs is distinct from the sort of entrepreneurship which creates an enterprise from the ground level. The era of the captains of industry emerging from the grass roots to create a vast new industrial empire is

all but over in the developed societies. But in the developing countries, the need is just for such men who are willing to build from the ground level. Whether they are allowed to go forward and pursue their goals unhindered determines to a large extent whether society moves

57

forward or stagnates. For it is the entrepreneur who supplies the push to expansion. It is a sad paradox that many of the developing countries which are so desperately in need of this push are carrying out policies which frustrate the acti-

vities of entrepreneurs and actively discourage the growth of an entrepreneurial class. Often this is done in the name of socialism. It is held that entrepreneurs belong to private enterprise, which is capitalistic and therefore bad. So both naiveté and dogma combine to induce the leaders of these developing countries to pursue self-defeating policies in economic development and hence their efforts are doomed to failure from the start. The matter is of some importance and deserves closer attention than it has so far been given. I come finally to an assessment of the position of Singa-

pore in relation to the human and sociological factors which influence economic growth. The first thing to be noted is that the existence of a large population of immigrant or recent immigrant origin presupposes that our society is willing to accept change and progress. If the immigrant peoples were not soinclined, they would not have left their homelands in the first place. Their presence here in large numbers further implies that the indigenous peoples are themselves sooner or later affected by the forward-looking dynamic characteristics of the immigrants. At best the indigenous people are stimulated, at the very least they are goaded on, by the thrustfulness of the immigrants. Furthermore, in Singapore, society or at least that section of the population living in the urban conurbations, has generally cast aside its rigidities, taboos and prejudices of the past and is willing to permit a degree of social freedom and mobility that is quite remarkable by Asian standards. Secondly, we have an administrative machinery that is relatively free from corruption and the grosser forms of nepotism. Moreover, the economy permits a high standard of living which makes for a fairly contented population that will not readily upset the apple-cart. Our social services, while

not

up to the

standards

of advanced

countries,

are

nevertheless improving and are even now commendable in the fields of health and social welfare. In education we have already reached the goal of free universal primary education

58

and the next decade will witness an expansion of the facilities

for vocational, secondary and higher education. Finally, the existence of a class of entrepreneurs have

we

been

allowed

will be well

a free

served

hand

who in the past has ensured that

in the future when a great deal of

entrepreneurial work will have to be undertaken for the economic development of our country. It is necessary that conditions should be set right so that their abilities can be channelled into the growth of new industries which is the most vital aspect of the economic development of our coun-

Py.

59

Social, Political and Institutional Aspects of Development Planning

I INTRODUCTION Preparing a development plan is one of the least troublesome efforts which an underdeveloped country has to make in its quest for self-sustaining economic growth. The techniques are standard and well known. Basically, a development plan aims to achieve both economic and social improvements. To “obtain economic growth, it is necessary to set aside resources for capital investment in projects which will en-

courage

economic

expansion.

In a system where the bulk of

economic activity is carried on by private enterprise, there is substantial agreement among economists as to the sphere of government activity in promoting growth. Public sector investments are concentrated principally in providing the physical infrastructure which will encourage private investment. These are roads, railways, telecommunications, power and water supplies, ports, industrial estates, research institutions studying important agricultural crops of the country, and so on. The optimum combination of projects A paper prepared for the conference on 'Economic Planning in Southeast Asia' organized by the East West Center in Honolulu, 1-5 February 1965.

60

that will induce the desired rate of private investment is very largely a matter of judgement. Conceptually the marginal return on any given investment should be equated to its marginal cost. In practice, however, it is generally not possible to quantify the elements involved. At the same time, the development plan must also provide resources for social development, the building of more schools and teachers' training colleges, enlargement of universities,

improvement

of health

services,

provision of

public housing, and so on. A balance must be struck in the allocation of resources designed to promote economic growth and to improve the social services. This is a matter of policy, and the point where the balance is struck depends on a number of political and social considerations.1 The first step in formulating a development plan is to compile an inventory of available resources in funds, in manpower and in natural wealth such as minerals and underdeveloped lands. This will involve the projection of government revenues and expenditures over the plan period, an assessment of external reserves and surplus funds, central bank financing and the ability to raise loans. When the estimate of resources available both from external and internal sources has been made, this may be compared with the total cost of the desirable projects. Where initial estimate of the latter exceeds the former —as is usually the case —then a scaling down of projects according to some policy criteria must be carried out to achieve the balance between resources and needs. As outlined above, it may appear that as an intellectual exercise, economic planning is a simple and straightforward matter. In practice, complications of course arise. There are tests of consistency to be applied to ensure that no sector has been unduly neglected to such an extent that it impedes progress in other sectors. For instance, ifatSepLoe posed to build a certain number of new power stations, it is necessary to ensure that there will be an adequate number of skilled staff to run the operation when these projects have is 1It is not proposed to discuss resource allocation here as this article. this of theme the to ce of secondary importan

61

been completed, without impinging on other sectors of the economy. Where deficit financing is resorted to, an assessment of inflationary pressure must be made and its effects on the balance of payments estimated. In particular, the impact of the plan on the key economic variable, whether it be the growth of the gross national product or the reduction in the level of unemployment, should be estimated as closely as data imperfections permit. These are the economic considerations and in respect of most of them techniques of estimation are available. Models may be set up, some of which of avery sophisticated nature, to show the inter-relations between economic variables. While economic variables form the main substance of a de-

velopment plan, they are probably the least troublesome factors to betaken into account by planners and implementation agencies, mainly because, in the aggregate, fairly reliable estimates can be prepared; further, the planning body should be able to make quantitative checks on plan performance against plantargets from timetotime. It is the non-economic variables that have, in the experience of so many underdeveloped countries, proved troublesome. Economists have, of course, been aware of the existence of these non-economic

factors and their general bearing on the rate of economic growth. The literature is replete with references to these elements. A United Nations committee of experts puts the matter succinctly as follows: 'Economic progress will not occur unless the atmosphere is favourable to it. The people of a country must desire progress and their social, economic,

legal and political institutions must be favourable to it'.2 Political, social economic variables

and institutional factors influence the of a development plan in three ways. First, they set certain limits to the magnitude of resources which canbe made available for use in the development plan. Second, by their effect on the criteria by which decisions on resource allocation are made, they determine the distribution of resources between competing claims in the plan. Third, there isa complex inter-relationship, as yet little un-

2 United Nations, developed Countries,

Measures for the Economic Development of Under1951,

p.11.

62

derstood, between the rate and manner in which development plans are implemented on the one hand and the changes in the structure of political and social institutions on the other.

MOBILIZING

DOMESTIC

SAVINGS

Economists are agreed that by far the most important single economic variable determining the scope and effectiveness of a development plan is the amount of domestic savings that can be made available from the economy during the plan period, or more precisely, the proportion of the national

income that can be saved. In this respect, underdeveloped countries are caught in the well-known vicious circle. The level of savings depends on, among other things, the level of income. Where incomes are low, savings would be low, not only in absolute terms but as a proportion of income. The poor man saves a smaller percentage of his income compared with the rich man. Similarly a poor country saves a smaller proportion of its gross domestic product than a rich country. In many poor countries, kinship ties impose certain economic obligations that are absent in Western countries where welfare and social security schemes assist those whose sources of incomes have been disrupted through old age, illness or unemployment. The extended or joint family system, by placing these functions on the income earners of the extended family, diminishes their capacity to save and may even reduce incentives to earn more income. Since the volume of foreignaid available to underdeveloped countries amounts inmost instances to avery small fraction of their gross national product, the capital accumulation that is needed to produce more wealth must come principally from

domestic savings.’ But poor countries find it more difficult to save a given proportion of their national income than rich countries. Thus poverty itself becomes a reason for stagnation and for the indefinite continuation of poverty. There are several ways by which the ratio of savings to 3 There have been notable exceptions, as for example the Canadian experience, and more recently, the Formosan one.

63

income can be increased. One method would be to promote a greater inequality of income distribution. Since the ability to save increases with the level of income, an economy with a high inequality of income distribution is likely to generate more domestic savings than one with a more even distribution of income. From this, the conclusion may be drawn that a highly unequal distribution of income in underdeveloped countries, by favouring a high level of savings, favours economic growth. But there are institutional factors which may falsify such a conclusion. First, such a distribution of income, if it serves to produce social unrest, may thwart economic growth because of the instability of the political system which social tensions may engender. Second, the recipients of large incomes in certain underdeveloped countries belong mainly to the rentier class who are generally much given to conspicuous expenditure. A high level of savings depends not only on large incomes but on the kind of large incomes that are generated. It is profits from business _enterprises that can be depended upon to supply savings.4 Even this needs a further qualification for an underdeveloped country. Where business enterprises are foreignowned, part of the profits are lost to the country in the form of dividends remitted abroad. Where prospects of expansion are not seen to be good in the lines in which the original capital was invested, it is unlikely that such profits will be available as a source of domestic savings in any significant amount, as for example the traditional, colonial-type investments in mines and plantations. The limit to expansion is set by the availability of mineral and land resources, but often, before this limit is reached, further expansion is restricted by a falling world market demand for primary produce. These considerations, together with a reluctance of

such capital to move into other fields, such as manufacturing industry, reduce the usefulness of traditional capital as a vehicle for the continuous generation of growth. Where investment capital is free of such institutional immobilities, an increase

4W. Arthur Lewis, Illinois,

Richard

The

Irwin,

in the share of profits in the national

Theory 1955,

of Economic pp. 226-7.

64

Growth,

Homewood,

income will increase the rate of savings. Economic considerations obviously lend support to a policy to achieve this end. But a government that derives its authority from popular franchise obviously will experience certain inhibitions in pursuing an income distribution policy that will maximize savings. Most of the leaders of governments of underdeveloped countries have been exposed to the influence of Western egalitarian concepts. They are loath to accept a policy whereby savings for development are consciously generated at the expense of the poor, although this was the historical experience of many successful economies, both free enterprise and communist. Further, there are the real pressures of the electorate which an elected political leadership cannot ignore except at its own peril. These pressures are likely to be acute, since in the campaign for independence the political leadership usually attributed mass poverty to colonial exploitation. With the removal of colonial authority, the populace naturally expect immediate and widespread increases in their

standards of living, an expectation which is not often fulfilled. In urban centres, where rapid growth is easiest to achieve, the poor are most likely to have organized themselves into interest pressure groups such as trade unions. Such techniques of mass organization are easier to learn and to apply than the more complex tasks of increasing productivity , the consequence must be disadvantageous to achieving a higher rate of domestic savings. Where a substantial part of the private enterprise sector is under foreign ownership, the government is even more inhibited in promoting a policy of wage-stabilization in the interest of greater profits. A second method whereby domestic savings can be increased by government action is to raise taxes and commit the yield, or part of it, to development expenditure. Most

underdeveloped countries on achieving independence have inherited from former colonial authorities a tax base which is inadequate to the needs of development planning. Colonial governments differed in their policies towards their colonies in regard to political and cultural matters, but in economic policy there was substantial similarity in their objectives, 65

and these did not envisage a rapid rate of economic growth through planned effort by the government. Accordingly, the resources

by

required

colonial

governments,

were

much

more limited than that which independent governments would consider essential. In their attempts to increase government revenues, underdeveloped countries have undergone widely differing experiences. This is only to be expected as the adequacy of government administration particularly the tax collectionagency, differs widely from country to country. In the main, revenue from taxes in the colonial era was derived principally from the collection of indirect taxes, since these are the easiest to administer. Where a good proportion of manufactured goods was imported from abroad customs duties, designed not for protective purposes but for revenue purposes, produced a good yield with minimum effort. Similarly, where the economy was dependent on the export of a few primary commodities, export duties were again easy to levy. Much the same tax structure remained

after independence. ® The reasons for such a tax structure are fairly obvious. Import duties are easy to collect where the bulk of imports passes through a few ports. Where domestic manufactures are unimportant, import duties collected at the point of entry will obviate the need to set up an extensive system of tax collection through retail distribution outlets widely dispersed throughout the country. As regards export duties, these may also be collected at the ports with relative ease and little possibility of evasion. It should be noted, however, that such taxes affect only the monetized sector of the economy.

SAVINGS

IN THE

SUBSISTENCE

SECTOR

Such taxes as those discussed above will not impinge upon the subsistence economy, and where this sector produces a large part of total output, then a problem arises as to how SA.R.Prest, Public Finance in Underdeveloped Countries , London, 1963, pp.63-4, Prest gives the following percentages for customs duties related to total government revenues: 25% for Ghana and

30% for Ceylon as against 1% for the USA

66

and 6% for Australia.

resources from the subsistence sector can be mobilized for development purposes. The typical underdeveloped country of Asia has one outstanding characteristic: an abundance of labour in relation to the other resources, land and capital. Nearly threequarters of the labour force are engaged in peasant agriculture, mainly in the cultivation of food grains. With public health and sanitation measures and the eradication of epidemics, population growth has reached a point where underemployment in the rural economy has become a serious economic and social problem in most underdeveloped countries. The stage is believed to have been reached when the marginal productivity of the rural population may be zero or close to zero, in the sense that if labour was transferred from farms to other uses, say to the urban centres, there would be no decline in food production. Where the opportunity cost of surplus labour is virtually zero, it is argued that the stra-

tegy for development planning should be to concentrate on the growth of manufacturing industries in the cities. It is also argued that savings can be generated in the subsistence economy by the transfer of surplus labour on the farm to productive work in new industries in the cities. The argument runs as follows. As these surplus labourers are taken away from the land, the output that was formerly used to sustain them accrues to the economy in the form of savings as those who supported these idle hands are relieved of the task of feeding them. Accordingly, subsistence economies contain a hidden resource which may be utilized for

development, We can examine this concept from the point of its theoretical foundations as well as its practical value as a guide to the strategy of development planning. The theoretical analysis rests on a number of assumptions; it is possible

6R. Nurkse, Countries

Problems

, Oxford

of Capital

University

Press,

Formation 1962.

in

Underdeveloped

See also commentaries

by R.J. Bhatia, 'Disguised Unemployment and Savings Potential’, /ndian Economic Review, August 1958, and A.S. Bhalla, 'On Nurkse's

Concealed

Savings

Jndian

Potential’,

1960.

67

Economic

Review,

April

to question the validity of three of them: 1) the marginal productivity of farm labour is zero, 2) the marginal propensity to consume of farm workers who support unproductive dependants is also zero, and 3) the state of technology in the villages remains constant while innovations are introduced in the cities. Whether the marginal productivity of farm labour is zero is a matter for empirical test. It is widely believed that a densely populated countryside resulting inminute subdivision of farm plots means that virtually the same output can be obtained with fewer workers.

A corollary to this, however,

is

that as population increases through time, the unit area yield will remain constant while average productivity per worker, and hencethe amount of foodavailable per head of population, must fall. If this had happened to the overpopulated underdeveloped countries, then a decline in the average food consumption must reach a point where the land can support no more people, and the rural population must therefore remain constant either through migration or an increase in the death rate, or both. In fact, this has not happened and there has been a sustained and continual increase in the rural population. What has happened is that population growth has caused marginal lands to be brought under cultivation, thereby increasing food output. For instance, in India—a country believed to be as densely overcrowded as any in the world — the area brought under rice cultivation rose from 22-3 million hectares to 33-6 million hectares in the fifteen-year period ending in 1961, an increase of 47-6 per cent.7 The 7 FAO (Food and Agriculture Organization), Yearbook, 1948; FAO, Rice Report , 1963; United Nations, Economic Commission for Asia and the Far East, Economic Survey of Asia and the Far East, 1963. Statistics of area under cultivation and crop yields in underdeveloped countries are notoriously subject to error. It could be that the larger areas reported to be under cultivation are partly due to better statistical coverage. Also the population increase in the countryside would be less than that for the whole country if there was

an urban

drift.

All these

notwithstanding,

the

available

evi-

dence does not support any assumption of zero marginal productivity of farm labour.

68

population increase was 35-3 per cent over the whole period. In Indonesia, there was a 73 per cent increase in the area under rice cultivation and a 33 per cent increase in population during the same period. Further, unit area yields have not declined, as marginal lands were brought into use. There was a 17 per cent increase in unit area yield in India and 16 per cent in Indonesia. It is unlikely that, if the population had remained constant, either a larger cultivated area or a higher yield per acre would have been achieved, assuming that the state of technology has not changed. There are technical possibilities in the case of wet rice cultivation of increases in yield per acre with additional inputs of labour. Because of the importance of irrigation in wet rice cultivation, greater care of irrigation bunds between fields and irrigation ditches will tend to increase output. So will more careful sowing of rice shoots in the paddy fields, more careful methods of harvesting, double cropping, alternative cropping in off-seasons and other labour utiliza-

tion measures.8 The assumption of zero marginal propensity to consume is not entirely realistic.9 With an average food intake at extremely low levels, any reduction in the number of dependants will almost certainly result in an increase in average consumption and not an increase in savings, unless the food that was formerly consumed is compulsorily acquired by some form of taxation. Only in this way would the savings potential in practice be utilized for economic development. This case then falls within the general case of increasing government taxation to yield a surplus for savings. The third assumption of constant technology in the villages is probably a realistic one. Agricultural technology can, however, be changed by planning policy in the provision of larger and better extension services, more agricultural research, the supply of subsidized fertilizers and so on. 8 See Press,

most same

C. Geertz, 1963,

Agricultural

p.151.

Geertz

Involution, claims

University

that wet

rice

of California farming is 'the

highly perfected device of running faster while staying in the place’.

9 Nurkse, of course,

recognized this. See op.cit., pp. 41-3.

69

Improvements in technique are unlikely totake place in peasant agriculture without state intervention. But if this possibility is allowed, then certain policy implications follow. It is a practical impossibility to operate a tax system which will extract the food surplus only from peasant producers whose dependants have migrated. However, if as a result of the migration of farm workers there is a general increase not only in output per worker but also in yields per acre through improved technology, it becomes possible to levy a general tax on the countryside that will cream off a portion of the increased output and make this available for development expenditure. 1 _The example of Japan during the Tokugawa To . Shogunate and the early yyears of the Meij3i Restoration has often been cited as an example whereby the countryside provided the savings for industrial development in the cities. There was a sustained and continued improvement in agricultural techniques and output increased both in terms of yield per acre and per worker. Through high land taxes it was possible to extract savings from peasant agriculture for investment in new industries. But it is unlikely that such a process is possible even with a strong central government such as Japan had if there had been technological stagnation in peasantagriculture. In Indonesia during the Dutch period of the culture system between 1816 and 1830, the same process of using surplus labour in introducing new lines of activity as a means of capital accumulation also took place. Here it was a case of introducing

a new crop,

commercial

sugar,

as an alternat-

ing crop on rice terraces 10 Since the peasants did not have to migrate, the problem of physically transferring the surplus

labour

necessary.

did not arise. Fiscal measures were, however, taxes were reduced, not increased, to

Land

provide the peasant with the incentive to grow sugar. The strategy of generating a surplus in agriculture for development purposes, particularly for capital accumulation in industry, is basically sound. Indeed, for underdeveloped countries

containing

only possible

a large

strategy,

10See Geertz, op.cit.,

subsistence

barring

p.63.

70

foreign

sector,

it is the

aid on a massive

scale or the fortuitous discovery of rich natural resources such as oil, Advocates of this strategy are, in part, moved by the dynamic potentiality of modern industry not only to introduce technological innovations but also to create new social forces powerful enough to raise traditional society out of the stagnation characteristic of the peasant subsistence sector. But this short cut to economic take-off is full of pitfalls and unlikely to succeed if it leads to a neglect in improving the technology among the peasants, however in-

tractable the difficulties may appear to be.11 Unless food production is adequately secured, the nation's development plan is likely to run into both short-term and long-term difficulties. In the short run, adverse climatic conditions, leading to crop failures, may create acute balance of payments difficulties when food has to be imported from abroad at the expense of capital equipment imports scheduled under the development plan. In the long run, of course, increased incomes in urban manufacturing centres must lead to an increase in the demand for food, not only more food but better food, that is, food containing a higher content of animal protein. If an increased flow is not forthcoming, this will bring about inflationary pressures or ba-

lance of payments difficulties or both. In certain countries which imported immigrant labour in its early stages of development, there is an additional political complication. The division between rural and urban population follows racial lines. For instance in Malaysia, labour required for the opening up of jungle areas to rubber plantations and tin mines in the nineteenth and early twentieth centuries was supplied from south China and south India. The indigenous population remained a self-sufficient food-producing peasantry and was by-passed in the early

11Democratic

economic planners may take comfort in the fact that

they are not the only ones to underestimate the importance of food supply. The chaos created by Stalin's liquidation of the kulaks is past history. More recently Communist China's Great Leap of 1958-9 flowed from the same facile assumption that with the massive diversion of resources into manufacturing industries, the food supply can take care of itself.

71

economic development which took place in the plantations and tin mines, along the main lines of communications and in the urban centres, particularly the ports which served as outlets for the produce of these new enterprises. The population of cities and ports tended tobe predominantly immigrant, and enjoyed the fruits of development to a greater extent than the indigenous rural population who remained largely outside the mainstream of economic growth. Such disparities between urban and rural areas which follow the communal divisions of the population create a source of tension that can be removed only by bringing about an accelerated pace of development in the countryside. Unfortunately, this development of the rural sector, although given urgent recognition, has not proved easy to achieve. Individual countries, especially if their populations are small, may pursue industrialization at the expense of food production if they can develop export earnings from which they can pay for food imports. For larger countries and for underdeveloped countries as a whole, this cannot be the solution. The experience of the industrial development of Europe in the nineteenth century is probably a unique experience in human history for, concurrently with the growth of industrial cities and rapid population increases, vast new granaries were opened.up in the New World to meet the food demands of the industrial population. In underdeveloped Asia where the river valleys have long been settled, there are no new frontiers of any size awaiting development for food production. It is likely that food supply will remain the critical factor in the economic growth of underdeveloped countries which contain a large subsistence economy. The trouble is that a sufficiently rapid growth in this sector is extremely difficult to bring about because of the peasant nature of production and the various social and institutional rigidities of the traditional peasant society. This is particularly true when the ratio of population to resources is unfavourable, as is

generally the case in these countries. It is hardly necessary to adumbrate the backwardness of peasant society which results principally from overpopulation and antiquated social customs and institutions. The 72

literature in the form of case studies provides ample evidence of this.12 New techniques are resisted because they transgress social norms. Improved rice seeds are rejected because the taste of the new rice is unfamiliar to the palate.

Caste systems not only retard the social mobility which is necessary for economic progress but act as a barrier against new ideas and innovations. In terms of numbers, the magnitude of the problem staggers the imagination; more than 1,000 million people subsist on minuscule plots of land. It is little wonder that many who have addressed their minds to the problem — such as Boeke in his studies of the Netherlands East Indies — see no hope of such economies ever escaping stagnation.

SOCIAL

AND

POLITICAL

CAUSES

OF

STAGNATION

The problem extends beyond economics. In a stagnant peasant economy concepts of entrepreneurs as the standard bearers of economic progress and as introducers of innovation are of little relevance. In such a society the accumulation of personal wealth takes the form of buying up other people's land or usury or both. In our present state of knowledge, we do not know how such peasant societies can be transformed so as to make

self-sustaining growth possible. Any increase in productivity through government action by way of agricultural extension services, improved seed selection, irrigation, and fertilizers threatens to be absorbed by the growth of population. No practical method has yet been devised whereby population growth can be controlled in these peasant societies. The widespread use of contraceptive techniques is prevented by poverty and ignorance, which therefore perpetuate themselves in an apparently inescapable vicious circle. Certainly the democratic governments of the overpopulated underdeveloped countries have yet to find an effective operational technique whereby rapid self-generating growth 12See for instance Admantoos Pepelasis, Leon Mears and Irma Analysis and Case Studies ,HarAdelman, Economic Development, per International Student Reprint, 1961.

73

in peasant production can be achieved. It is likely that this will involve uprooting the traditional social order, and no democratic government would have the courage even to con-

template this. 13,14

}

Can totalitarian methods succeed where democracy has not produced a solution? If the experience of the Soviet Union is any indication, there is room for doubt whether such draconic measures would produce the desired result, at any rate

in food production. Russian agriculture remains conspicuously backward in comparison with Russian achievements in industry, science and technology, and this in acountry with a favourable ratio of land to population. Nevertheless, the result of the Chinese experiment in communes is awaited with interest. In the system of communes, there is no barrier to the full exploitation of Nurkse's concealed savings potential. The problem is basically one in which economists have a limited contribution to make. When prospects of economic growth become so closely related to changes in the social order, other disciplines may be called upon in the search for asolution. The results so far have not been encouraging. Various theories of social change have been put forward which hardly bear close examination. One characteristic of these theories is their postulation of inevitable and autonomous progress resulting from the introduction of certain catalytic elements into a traditional society or from the operation of certain dynamics inherent in society. 13The views of an intelligent

layman can be more

illuminating than

those of an expert. 'There are pervasive limitations on planned achievement imposed by India's type of democracy....Where an overarching plan has to succeed, it can do so by either monolithic

coercion which India does not employ, or by an animated forwardsurging democracy which India does not have.' Albert Mayer, 'Social Analysis of National Economic Development in India', Pacific Affairs, Vol.XXXV, No.2, summer 1962, p.130. 14It is not denied that even in the most backward states elements of modernity exist. But these consist almost entirely of the urban intelligentsia, and the political, administrative and business elite. They live in a different world from village life and there is little inter-penetration of ideas and values between the two societies. There is thus a dualism not only in the economy of underdeveloped countries but also in their social structure and cultural patterns.

74

Karl Marx

was,

of course,

the first to work out a theo-

retical system postulating the laws of development of society from one stage to another. Marx's dialectical materialism leads him to the inevitable progress of society towards a classless Utopia. Rostow's propensities take him through another route to adifferent kind of millennium —a high, mass consumption society on the North American pattern. More recently Hagen, greatly distressed and puzzled after a tour of duty as economic adviser to the government of an underdeveloped country, decided that the answer is not to be found in economic analysis and produced a bold and original theory of social change based on the application of psycho-analytical techniques to social groups.15 While the intellectual vigour of the approach is not to be disparaged, Hagen's theory suffers from the same shortcoming as other theories of social change. It is simple enough to select a case where the theory does not fit. This is probably the inevitable fate of social theories which are specific enough in identifying social elements making for change and at the same time claim an encompassing universality. This is not, of course, to deny their usefulness; they provide an insight into the manner in which societies have changed in the past and may change in the future. If we eschew such theoretical generalities it is clear enough what kind of institutions should be created in a society that would encourage development. The government must be effective and incorruptible; it should strive continuously to achieve economic growth and should not be distracted by other goals such as national prestige, military strength, the personal fortunes of those in power, or religious sanctity.16 Enterprise is to be fostered, modern efficiency to be encouraged. Status should be dependent on successful performance and not on birth and inheritance.

15E, Hagen, the Dorsey

On the Theory of Social Change , Homewood, Press,

16 Manning Nash,

tin America

Mlinois,

1962. 'Social Prerequisites

and Southeast Asia',

tural Change , April 1964,

pp.225-42,

studies.

75

to Economic

Growth in La-

Economic Development and Culprovides

some

useful

case

Law and order should be maintained and the sanctity of contracts observed. The catalogue of economic virtues can be expanded but in themselves they are hardly of any operational value. For in practice governments have often proved themselves irresponsible, corrupt, obscurantist and oppressive. Law and order is difficult to maintain in the face of rebellion or banditry. Antiquated customs survive from the past, stultifying progress. Success in business depends less on good management than on favours and concessions corruptly procured. These factors are both the result and the cause of backwardness and very little can be done in such circumstances, short of sweeping away the old order. Development plans, if they are prepared at all, remain a pious expression of intention and are not serious targets capable of being achieved. This then is the explanation why performance in this Decade of Development has been generally so disappointing in underdeveloped countries. To effect the transfer of resources from the countryside for development purposes requires a ruthlessness of purpose of which only a well-established (perhaps only an irremovable) central authority is capable. The harshness of the process may be mitigated where productivity, both per acre and per worker, increases continuously. But in many stagnant agricultural communities, the new techniques that are needed to achieve this can only be introduced if fundamental changes take place in the social structure and cultural patterns in these communities. It is precisely in these areas that political obstacles arise which appear so formidable as to defy solution. In states governed

these above.

under

a

difficulties Do

the

democratic

are

constitution,

the

causes

of

clear enough and have been discussed

non-democratic,

non-communist

states

fare

any better? Experience has shown that the same inhibitions operating in a democratic society also obtain there. Indeed, the situation is probably worse as the political leadership is not constrained by the need to produce results by way of economic and social improvement. The underdeveloped countries have emerged only recently as independent nation states. Their boundaries were often fixed not by rational criteria of cultural or historical

76

homogeneity but by historical accident. Hence there is a need to engage in nation-building activities to bring about an acceptance of the recently established authority by a diversity of peoples and cultures. This may explain the reluctance of elected governments to upset the social order, apart from vote-catching propensities natural to an elected leadership. Nor are the options open to a non-elected government much greater. In nonit is not non-communist political systems, democratic, possible for the leadership to maintain a totalitarian authority indefinitely, particularly in a large territory with difficult communications and a culturally heterogenous population. To the power of the army must be added the charisma of political leadershipif the new nation state is to survive as an entity. The result is usually disastrous to the planning of economic growth. It is not difficult to see why this would be the case. A development plan calls for sacrifices from the people. Calling for sacrifice is not necessarily something which a charismatic leadership will reject if results, particularly spectacular results, can be immediately demonstrated. But starting from the low level of technology, quick results are impossible to obtain. Instead there is only the prospect of a long haul to develop human skills over a whole range of activities —a slow, laborious, exacting but unexciting process. Further, success in this process requires the widespread inculcation of rational habits of thinking which of necessity undermine the emotional appeals of the leadership. Hence the retreat into romanticism and obscurantism and the appeal to the traditional virtues of some mythical bygone age. In such a society, planning for economic development merely takes on the form of a symbolic activity devoid of substance and economic meaning.

THE

CASE

OF

SMALL

COUNTRIES

Until the problem of rapid increases in productivity in peasant agriculture has been solved, it is likely that the conquest of poverty in underdeveloped countries would be achieved only in those small countries whose economies are export

vat

oriented. In these countries the problem of feeding a growing population is less intractable so long as terms of trade do not move against their export goods. Curiously enough, in such countries there are often found advocates of selfsufficiency in food supply, even though success in this direction would mean a lowering of achieved standards of living.

But

in

other

greater prospects per capita national of a country with a Malaya in 1958 had US$200 and Ceylon or

less in the

such

respects,

economies

have

far

of taking off into continuing growth. The income is substantially greater than that large peasant agriculture. For instance, a per capita annual income of more than more than $118 compared with some $60

case of India,

Pakistan,

Indonesia

and

Bur-

ma.l7Jt is in these raw material export-oriented economies that development planning is not bedevilled by stagnation of peasant food production. There are other more tangible advantages in such economies which development planners can utilize. In the first place, the proportion of the gross national product accruing to the government as revenue is substantially larger than that in peasant-based economies. In Ceylon, Malaya and Taiwan,

government

of the gross

revenues amount to 20 per cent or more

national

product.

In India,

Pakistan and Indo-

nesia, the percentage is between 11 per cent and 12 per cent.18 One reason for this is that taxes on the:import and export trade are, as we have seen, easier to collect than

taxes on peasant agriculture. Further, there remains the choice open to the government in which, by judicious selection of commodities to be taxed, it is possible to ensure that government revenues increase at a faster rate than the national income. The implementation of a steeply rising rate in

the export

comes

tax

structure

will

cream

off substantial

in-

during periods of high prices of the raw materials.19

17United Nations, Economic Commission

for Asia and the Far East,

Economic Survey of Asia and the Far East, 1961. 18ibid. 19In Malaya, for instance, the rate of export duty on rubber is a

parabolic function linear function.

of the current

78

price.

Curiously,

for tin it is a

The inclusion in the customs tariff of import goods with a high income elasticity of demand will also help to achieve this end. The second advantage is that these export-oriented economies enjoy wide possibilities of import substitution as a means of promoting the growth of manufacturing industries. The value of imports to the gross national product in the case of Ceylon and Malaya ranges between one third and nearly one half. For India and Pakistan, the proportion is less than 5 per cent. A high import ratio provides the govthe ernment with substantial opportunities to determine types of manufacturing industries which can be established through the erection of protective tariffs. By relating market size to the economic scale of production as determined by technological factors, it is possible by judicious planning and selection tointroduce industries which are competitively viable. In this way planners may apply a rational economic calculus and need not depend on faith and guesswork to set up a chain reaction that will maintain the momentum of industrial growth. The third advantage lies in the better infrastructure of social overheads. These were, in the first instance, designed for the use of the raw material export industries, but they can be shared by the new manufacturing industries. Finally, modern business institutions in banking, finance and insurance as well as specialized trading skills and the supply of entrepreneurs are relatively ample in these economies. Thus nearly all the prerequisites for economic takeoff exist. Under such conditions, the role of a government planner is meaningful. He can programme capital investments

in a way

that will

maximize,

with

less uncertainty,

the rate of expansion given the resources that are available. Further, since the supply of entrepreneurship is not an insurmountable bottleneck, it is possible to follow a planning strategy that will create the inducements needed for the growth of private investment. Whether these economies will actually adopt such a policy depends on the political philosophy of the government leadership. In Ceylon, for instance, concepts of state ownership and the suspicion of the role of private investment are prevalent; encouragement of private

(i)

entrepreneurship will therefore not.take place.29 Malaysia, on the other hand, follows a more orthodox policy of giving private investment a leading role. THE

ROLE

OF

THE

ENTREPRENEURS

The role that is to be accorded to private entrepreneurs in the development plans of underdeveloped countries not only depends on political attitudes, but to some extent is influenced by the adequacy of the supply of entrepreneurs. In India, for instance, planners believe that the supply of entrepreneurship is inadequate. Further, for many of the large industrial projects included in India's development plans, resources to meet the demands of private entrepreneurs are also believed to be inadequate. Accordingly, the role accorded to private sector development is restricted while the state itself participates in both the ownership and the management of new industries. The role of entrepreneurs, broadly, is to perform the function of risk-taking by investing capital in new ventures. They introduce innovations in processes or in products. It is on the successful performance of entrepreneurs that continuous economic expansion in modern industrial society largely depends. In modern businesses and institutions entrepreneurial functions are generally performed, not by one man, but by the co-ordinated effort of the corporation management staff. Whatever the actual institutional arrangements in modern industrial societies, there are some important differences in the character of entrepreneurship found in developed and underdeveloped economies. In general, as underdeveloped countries are at an earlier stage of development, the more elementary type of entre-

20 Indonesia alsodiscourages non-native entrepreneurship, thereby creating problems. D.S, Paauw in Financing Economic Development, the Indonesian Case , Glencoe, Illinois, The Free Press, 1960, p.73, notes: Indonesian experience since the transfer of sovereignty in 1949 suggests that the country's prospects for development may hinge more on its capacity to provide effective entrepreneurship than on its capacity to mobilize financial resources. !

80

preneurship is likely to predominate. But more important than this, the entrepreneur in underdeveloped countries fulfils the function of innovation only ina restricted sense. It is not his function to invent fundamentally new processes or to introduce new products. Entrepreneurial functions are more characteristically those of an imitator rather than an innovator. Technical processes already developed and in common use in industrial countries are introduced in the new environment. Products which were formerly imported are now made in the country. The demands on entrepreneurs are, therefore, less exciting in underdeveloped countries than in industrial countries. Further, feasibility studies of products to be introduced, studies of technical processes and costs of production can be worked out either by some government agency or a consultant service. Technical know-how may be obtained by agreement; trade marks and patents may be used on the payment of royalties. Where specialized technical staff are required, they can be hired from overseas. It is in this easy and relatively inexpensive access to the accumulated knowledge of advanced nations that underdeveloped countries can find an assured way of achieving sustained economic expansion. There is, however, one problem. This access to modern scientific know-how can be achieved with little social change, especially in the countryside, since it is in the cities that modern institutions are located and where the new industries will be established. In the countryside, where the surplus for capital accumulation has to be generated, the traditional social milieu either will not have access to modern science or will resist it. Where techniques already in operation elsewhere can be supplied and accepted in the countryside, the gains that can be achieved are likely to be substantial and probably adequate for purposes of capital accumulation. Japanese rice production in terms of unit area yield is three times that of other Asian peasants in south and Southeast Asia. Her superiority in output per worker is probably of the order of six times or more. This rich potential resource — the access to science and — seems to have been neglected by development technology

81

planners —and government leaders—in favour of more glamorous short cuts in development through integrated steel industries, 'basic' chemicals and the like. As a result the spectre of Malthus, exorcized in the West by the discovery and establishment of the rich granaries of the New World, hovers over underdeveloped countries in Asia, cast-

ing a malignant

spell on their efforts

from poverty.

82

to free themselves

Management in the Developing Society

Following the end of World War II, countries in Asia and Africa which were formerly part of the empires of Western nations achieved independence one after another in rapid succession. The emergence of independent nations in the two continents constitutes a process which is unique in world history. Hundreds of millions of people who were formerly held in political subjection attained their freedom. National governments were formed with the establishment of independence and, without exception, these governments accepted as one of their basic duties the improvement of living standards through economic growth. For centuries, large sections of mankind which were on the border of subsistence had at last the opportunity, through their own efforts, to tackle the problem of endemic poverty andof economic backwardness which had been their lot for many centuries. It would not be an exaggeration to say that in the early years of independence, there was optimism and confidence of their ability to solve this problem. Nearly every country established a planning agency to map out the future course of economic development and to ensure that adequate resources were devoted to carrying out the plan for economic growth. The subject of economic development itself aroused Address at a symposium on 'The Role of Management in Industrialization' at the University of Singapore, 15 March 1963.

83

unprecedented interest in universities, in government ministries and in various

international organizations,

particularly

the specialized agencies of the United Nations. A vast literature proliferated on the subject. A new jargon grew up. There was talk of a revolutionof rising expectations. Phrases such as 'the take-off into self-sustaining economic growth’, etc. became stock expressions at international conferences when these problems are discussed. In 1960, it was confi-

dently predicted that the forthcoming decade would be known in history as the Decade of Development. Unfortunately, the performance in recent years in many developing countries has not completely justified the original optimism.

In many

countries,

not only

is there absence

of

economic growth but there has been an actual retrogression. It would be unkind perhaps to specify the countries concerned and painful to dwell upon the details. But the latest casualty gives cause for disappointment. This is the case of Ceylon, a country with an advanced standard of education, a standard of living above the Asian average and possessing a competent administration. In fact, if we look around Asia today, we find that nearly every country is in serious economic difficulty. There are notable exceptions. India, despite the immensity of population and size, struggles valiantly to maintain economic growth. The territories comprising Malaysia form another bright spot on an otherwise dark horizon. The present time seems to be an appropriate one to take stock of the situation. Are the difficulties into which the developing countries have run temporary troubles, inescapable in the early stage of historical development? After all, a major endeavour of such magnitude must have its early teething troubles. If so, these teething troubles can be of value as they enable the countries to gain valuable experience which will be of use in the long term. Are the difficulties of developing countries of this nature, or, on the other hand, do they point to some deep-rooted deficiencies somewhere which has created a permanent block to economic growth? If so, precisely where does the deficiency lie and what are the remedies? There are many complex reasons for the collapse that has occurred in these countries. In each and every country,

84

there which

may be in addition a special set of circumstances is the immediate cause of the stunting of economic

growth. An adequate treatment of the subject would entail much labour and occupy many volumes. It is quite possible that no consensus of opinion would be reached and there may be as many viewpoints as there are minds addressing themselves to the problem. It is not my purpose here to enter into what may well turn out to be a morass. But I wish to select one aspect of the process of economic decline that we see in some developing countries. This is the role of management in the process of economic development. Management is a crucial factor in economic growth for reasons which are too obvious to need elaboration. If you want to run a railway or an agricultural co-operative, or a steel mill, you obviously meet the people who have the capacity and experience to do the job properly. Otherwise, you cannot hope to run these enterprises as going concerns. Yet obvious though the proposition may seem to us, it appears that it is precisely here that fatal weaknesses have appeared in the development efforts of these new countries. I wish to examine the role of management in developing societies in a somewhat broad perspective. I am not concerned here with specific problems of how a particular project or industry could improve the quality of its management personnel. I wish to go even beyond the general problem of encouraging the growth of an effective managerial class in developing countries in the strategy of economic development. There are certain basic social issues in regard to economic growth in general and the establishment of a managerial class in particular which have not been resolved in developing countries. In many instances, these issues have not even been faced and the result has often been a contradiction between the declared policies in support of economic growth and the actual performance which hinders such growth. This matter is of some importance for unless the contradiction is resolved, we will not achieve economic progress. Underdeveloped countries, by definition, are in short supply of management skills because modern economic institutions

are more

found only in limited fields of their economy.

Further-

much of the modern sector of the economy was either

85

run directly by overseas personnel or hadonly recently been managed by local personnel. This being the case, we can expect that much of the thinking and social attitudes of the population run along traditional lines, hardly affected if at all by the impact of modern ideas and thought. Given the large illiteracy rates prevalent in underdeveloped countries, the strength of social traditions, it is only too easy for the governments of these new states to be unwilling to accept the new socia! attitudes that are necessary to sustain modern enterprises. It could even happen that the governments of these states may not even be aware of the inhibitions which traditional thinking must place upon economic progress. Perhaps I may explain the position more clearly if we could compare the social values of a modern state with those common in developing societies. By modern states, I refer both to the countries of Western Europe and North America as wellas to the Soviet Union. These are the countries which have the highest industrial and economic capacity as well as the most advanced scientific and technical know-how. It is one of the curious illusions of the present age that there are fundamental and enduring differences between an advanced communist state like the Soviet Union and the democratic states of the Western bloc. It is true that the political institutions are different, but there is more similarity between them in other respects than either side cares to admit. Under both the democratic and communist systems, there are three basic beliefs sustaining economic growth. The first is the belief that man through his intellectual

powers,

disci-

plined under training in the physical and biological sciences, can find solutions to the problems and limitations imposed on him by his natural environment. This belief in man's ability is of fairly recent origin. Its first seeds were sowed during the Renaissance of Europe which cleared intellectual cobwebs that have hindered man's development until then. Without this confidence in the ability of science to provide man with powerful instruments to achieve whatever purposes he seeks, the growth of modern industry would hardly be possible. Both the modern communist states and the Western democratic states accept this belief almost without

86

reservation,

and accordingly the keenest intellects that they can muster are concentrating their talents and energies towards extending the frontiers of human knowledge. The second belief common to both systems is that material welfare is an end worthy of pursuit. The communists are quite explicit in terms of their philosophy, the Western countries rather less so. But in both systems, people and government believe that material improvement in terms of a higher standard of living, more food, better housing, more leisure, are useful ends and a substantial part of government action is undertaken to secure these ends. The Western industrialized countries have already attained to what they sometimes term the affluent society and the Russians are hoping to catch up with them. It is true that in the Western democracies, there have been critics of this materialist approach to life. The poets, painters, novelists, even in Victorian times, have raised voices of protest against the industrial society. Nevertheless their impact has not extended beyond their narrow artistic and intellectual circles. So far as the ordinary man is concerned he appears avidly in support of the good things of life, better homes, motor-cars, scooters, household gadgets, foreign travelling and the like. And the ordinary man proceeds with his hedonistic pursuits untroubled by any sense of guilt. On the contrary, there is every display of relish

and

enjoyment

and,

of course,

in this process

he is

incited by an extensive advertising industry which exploits every psychological gimmick to make the consumer eager to consume more. This, of course, at present holds true only of the Western democracies which have reached a high stage of affluence and abundance in the production of goods. The Russians have not quite reached this happy position and no

doubt when they do so in the future,

similar

exhortations

will be directed to the Russian consumer. The third belief which has sustained economic growth under both systems

is respect for meritorious

performance

in

the creation of wealth. This again is of recent origin. In previous ages, the adulation of society was reserved for artists, sculptors, poets, scholars, soldiers, bishops and other nonproductive types. It was only when the Industrial Revolution

87

had reached an advanced stage that success

in industry,

and

the wealth and the position that it carries, came to be accepted as worthy of respect and emulation. There are people who regret that this should be so but neither in Russia nor

in the West do their views have much influence. The processes of production are technically similar under both systems and even the forms of economic organization bear substantial resemblance. The fact that in one part of the world there is private ownershipof property and in the other state ownership of property has not led to the differ-

ences in economic organization which philosophers of the nineteenth century had predicted must follow. Under both systems,

there is a labour force and there is a management

personnel. Both systems are faced with similar organizational problems created by increase in size of production units. In Western countries, although there is private ownership, because of the institution of joint stock corporations and the rise of financial institutions which provide much of the investment funds for modern industries, the control of industry has been largely divorced from ownership. Where the technical processes are similar and where the forms of economic organization do not differ considerably it is not unexpected that similar difficulties are faced and very much the same solutions are reached in overcoming these difficulties. One of the problems of management of large-scale enterprises is to ensure that the most able man rises to the top. This is true whether you run a capitalist corporation or an industry in a communist

state.

And in both the systems, it has been found necessary to provide incentives that are in keeping with the responsibilities and skills required. Studies made of differences in pay between worker and top management in Russian industries and their counterparts in the capitalist countries show that very much the same structure of differentials exist. Under both systems it has come to be recognized that the only criterion by which a man canbe appointed to executive positions in industry is his performance. Merit and not birth should be the criterion. Of course, there are variations in practice and departures’ from this standard. Influence in high places has sometimes become an important consideration both in

88

the free enterprise and the communist systems, but when this happens, it is more often regarded as a symptom of

some defect rather than the norm to be followed. The result of this is a highly competitive struggle for status and position. Because the prizes are rich, the ablest men are attracted into management positions of industry. Of course, the severity of competition differs from society to society even in the West. It is probably fiercest in the Soviet Union and the United States and an opinion has been expressed that there is very little difference between an American business tycoon and his Russian counterpart. Both are men of tremendous vigour and capacity for work combined with shrewdness of judgement. In other countries, the rat racé is not as fierce. Apparently, material prosperity does

not

suffer

much

harm

in consequence.

For

instance,

Denmark and New Zealand are wealthy by any standards, but the people seem to be free of the tensions that go with a ferociously competitive system. It is easy tosee that once these three sets of basic beliefs permeate through a society, the net result must be advantageous to industrial growth and must lead to a recognition of the value of the managerial class. Similarly, it also follows that when these beliefs are either rejected wholly or in part,

or

when

their

diffusion is limited in a society,

the

basic drive towards economic growth would be inhibited. Take a few examples. When a society believes that wealth and poverty, health and disease, happiness and misery are pre-ordained by supernatural powers, then it is impossible to expect their members to devote time and effort towards the acquisition of knowledge and modern techniques. In the case of the developing countries, it is a regrettable feature that alarge part of the population subscribe to various forms of fatalism. This induces an apathy which is not conducive to economic growth. Further, as it is likely that vested interests, either in the form of landlords or religious institutions, would have been built around the maintenance of superstition among the masses, any attempt to awaken them is likely to meet with serious political resistance. Then take the attitude towards higher consumption standards. Here again, it is well known that many Asian societies

89

reject the materialist approach. The supreme excellence in life is often assessed in terms of spiritual values and not material progress. Solong as powerful sections of the community believe in this, they will view with grave suspicion the reforms that would be necessary to bring about economic growth. In this respect, however, the situation is less serious. I suspect that much of the emphasis on spiritual values —important though they are in attaining a full and rounded life —is influenced by despair over the prospects of success in the conquest of age-old poverty. Should visible signs of material improvement be achieved, then we are likely to see a fading-off of the advocacy of spiritual welfare. So far as the ordinary pegple are concerned, there is little doubt that they will accept the material improvement in their livelihood as eagerly as the people of the West. For instance, the Japanese, who have always been brought up in the Spartan tradition, are now energetically participating in the production and consumption of all the gadgets ‘that go with Western standards of living. When we come to the third factor, the acceptance that advancement in life, and the status and prestige it carries, should be based on proved merit in free competition with all others, we see that, other than in one or two enlightened countries, this principle is hardly observed at all. In most Asian

traditional

mined

largely

societies,

take a considerable

do

not

system

change

status

and

by birth and heredity. time to overcome,

overnight.

is introduced,

such

Even as

are

deter-

this will

for social institutions

where the

position

Undoubtedly,

a modern

political

national state which re-

placed the colonial regime, we again see that, except again in a few enlightened countries, the opening of opportunities on an equal basis to all persons is not observed in practice. In view of the wide variations in education and social status between people in these countries, we can hardly expect the egalitarian principles to be established in a short time. In the developing countries of Asia, these are some of the important factors that have inhibited economic growth. They operate directly through the unwillingness of national governments to carry out the most effective policies to promote economic growth. Indirectly the effects are probably

90

more pernicious. The most important is its inhibitory effect on enterprise and the growth of anenergetic and self-assured managerial class. In addition to these social attitudes which are harmful to economic growth, there are often found in these developing countries irrational political attitudes and dogmas which are harmful to economic development. Where the political system is unstable, then of course we cannot expect economic growth to occur. The efforts of those in power will be directed towards non-economic objectives such as the maintenance of largearmed forces which absorb substantial sums

of money

and skills that otherwise could have gone towards

capital formation. Even where this does not occur, an unstable political situation is likely to have certain undesirable consequences. First and most obvious, neither the domestic nor any potential overseas investor is likely to establish new enterprises where the future cannot be foreseen with any degree of certainty. The second consequence is likely to be the posturing of contending political forces. Such political postures are likely to take the form of exaggerated nationalism with its concomitant anti-foreign and anticapitalist content. When the economic situation goes from bad to worse, the political gestures become increasingly extreme.

At some

stage in the debacle,

there is a resort to

the incantation of magic words as a remedy for all troubles. It is a curious phenomenon that in almostall instances some ill-digested brand of socialism is invoked as a magic cure for all social ills. What conclusions can we draw from this account of the early difficulties encountered by developing countries? The first is that the slow-down of economic growth is almost inescapable,

given conditions obtaining in most of these coun-

tries. Social attitudes of the majority of the population are not in keeping with the needs of modern economic organizations.

The political

institutions

established

in these new

states were beset by all manner of difficulties. In some there was inadequacy of administrative personnel. In others, internal dissensions occupied most of the energies of the government to such conditions

Under neglect of economic problems. it cannot be expected that serious attention

the

91

would be paid to fostering the growth of technical and managerial skills needed to sustain economic growth. Nevertheless it is too early to assume that progress will not eventually take place. We should not ever forget that it took some centuries of cultural revival in Europe followed by an almost equally long period of social change during the Industrial Revolution before Europe itself took its final shape as a progressive industrial society. If it takes just as many decades in Asia as it took centuries in Europe to accomplish the change, then there should be no cause for disappointment. Progress will be easier in Asia because it has to encounter none of the pioneering difficulties which the early Europeans had to contend with. Much of what we have to do lies in the acquisition of knowledge already available to mankind. A further reason for qualified optimism that long-term progress is likely is that the factors making for permanent change in Asia are likely to be stronger than those resisting such change. Each year literally tens of thousands of Asians go overseas to acquire knowledge in various fields of learning or to undergo experience in various fields of practical work. Moreover in most Asian countries new forms of economic organization had already been set up. They may not be of the highest standards of efficiency but, having been set up at high cost, it is unlikely that they would be abandoned. The passage of time will likely see an increase in efficiency and a spread of influence of these modern economic organizations throughout their own societies. Early in my address, I made passing references to our own position in Singapore and Malaya. We are far more fortunate than most of our neighbours inour economic progress. Our success in this respect has not been accidental. In part it is because we are fortunate in that we have abetter starting position to proceed from. Our per capita national income is well above the Asian average and this is important, because it is easier for us than it is for the poorer countries to maintain a given rate of gross formation. But apart from this, there are other favourable factors to economic growth. People of Malaya and Singapore have no reservations about obtaining the highest standards of living open to them and

92

everyone will make the effort to better himself if the opportunity offers itself. Opportunities are available, in large measure, equally to everyone who possesses the ability and capacity to work. We are fortunate in that because of the strength of our national currency, it has not been necessary to impose the various government control measures on trade and industry that arefound in other developing countries and which serve to strangle initiative. The need for improvement both in quality and quantity, in managerial and technical skills is not only accepted by the Government but every practical measure is undertaken to press forward with implementation. In fact, this symposium itself is a testimony to the importance which both Government and industry place on this subject. When we look to our future supply of talent and skill, the position is most reassuring. In recent years there has been an unprecedented expansion of educational services at all levels — from primary schools to universities. The clamour for education is a spontaneous expression of our people for progress and advancement. However fast we expand our schools and universities, we

seem

unable to satisfy the thirst for education,

and each year we see our young men and women in their thousands in search for knowledge. Our universities are filled to capacity and thousands have to go abroad to study the subjects which are not yet taught here.

93

Workers in Developing Countries

The subject on which I have the honour to address you is 'The Problems of Workers in Developing Countries'. Before coming to the substance of the subject matter, I intend to spend some time dealing with the setting of the problems rather than the problems themselves. This is a matter of some importance because in an era of rapid change such as we live in today, it is all too easy to be so absorbed in contemporary events that one loses the broader aspect. Therefore, I propose to examine the general setting of the prob-

lem, mark out the general terrain and indicate some possible guide-lines as to the course of future development. It is hardly necessary for me to say that the diversity of conditions in Afro-Asian countries is so great as to make valid generalizations a dangerous matter. Whilst this is true, it is also true that only the quibbling academicians will refuse to see that there are important similarities in broad experience and general trends in developing countries of Asia and Africa. I intend to make three generalizations in respect of developing countries which I believe to be valid for most of Afro-Asia. These generalizations are as follows. Address

at the opening of the International Labour Seminar sponsored by the National Trades Union Congress at’the Singapore Conference Hall on 18 October 1965.

94

First,

the economic

gap between poor and rich nations in

this world is large. Further, this gap is widening and not narrowing. That is to say, rich nations are getting richer, and by contrast the poor become poorer. Second, workers form a minority of the population of the developing countries. There are exceptions to this as, for example, my own city-state of Singapore. But in general, the predominant economic pursuit of countries in Asia and

Africa

is that of food-growing.

Anything up to 70 to 80 per

cent of the population in developing countries are engaged in the growing of food. This is done mainly by the peasant, who may or may not own his land. Here, I distinguish the peasant from the worker in the sense that the worker offers his service and is paid a wage by the employer. The peasant gets his return from the harvest he collects less the taxes he has to pay to Government, rent to the landlord if he has insecticides, animal one, and payments for fertilizers, feeds, if he buys these things in his process of production. In fact, the economy of most of Afro-Asia resembles more that of medieval Europe rather than that of the modern cities which have developed within their national boundaries. Often we tend to lose sight of this basic fact. It is in the cities that workers are found apart of course from plantations employing wage labour. For the worker is a person whose livelihood depends on the wage employment, and this is the product of modernization in Afro-Asia. Even in Europe and America, wage employment became a predominant source of livelihood only in the nineteenth century. From this we come to the sobering thought that all the matters that have been discussed in this conference and will be discussed in this seminar, that is to say, matters of interest to democratic trade unions, are totally irrelevant to 70 to 80 per cent of the population of Afro-Asia which pursue their livelihood in peasant, feudal or tribal economies. Nevertheless, the position of workers in developing countries assumes an importance out of proportion totheir membership. One does not have to seek far for the reason. As I

have

just said, workers are the result of the modernization

process which such they are

has taken place in developing countries. As the advance guard in the process of social

95

change which

is going on.

And this is my

third generali-

zation.

So much for the general background. Now I want to deal with the general trend of change in developing countries. It has become more and more accepted that social and economic change in developing countries will not or must not be allowed to take place autonomously, that is to say, without control or intervention by government. Indeed, it has come to be accepted, at least in principle, though regrettably not in practice, that it is the prime responsibility of the government to guide and control the process of social and economic change so that the greatest benefit may accrue to their citizens. I make this point because it seems to me that developing countries are presented with a range of choices in meeting the challenge that is facing them today. Basically it is the challenge of modernization. In international conferences at which representatives are present, everybody speaks as if no choice exists. That is to say, it is taken for granted that developing countries should attempt, by modernizing their societies and their economies, to close the widening gap between developed and undeveloped nations. But I am not so certain that in practice such a decision hdd been taken

by all the governments

concerned.

This

is only one of the

options open to governments of the developing countries. Other choices have never been explicitly stated in respectable circles but they nevertheless exist: first, to retreat from the challenge into some kind of revolutionary romanticism; second, to retreat into political and economic isolation. These are choices of some importance. They have, in fact, been taken by a number of so-called developing countries,

although

those

concerned

would

be the

last to

admit it. I do not think that, in addressing such an enlightened audience as meets here today, I need plead very strongly the case for squarely facing up to the challenge of modernization nor for the importance of economic development as a means of closing the gap between the rich developed nations and the poor underdeveloped nations. We all accept that ignorance and poverty are evils in themselves and should be abolished 96

within the shortest possible time. In addition to this, the existing inequality in wealth between nations brings with it inequality in power. So long as Afro-Asian nations remain poor and economically weak, they are in serious danger of being prey to the stronger and wealthier nations, whose predatory instincts have been so strongly demonstrated in recent history. Even today, the large Asian nations with modern defence forces are almost completely dependent on foreign sources of supply for their armaments. In this manner, true independence or non-alignment is very difficult to maintain. While we accept that ccuntries in Afro-Asia should do their utmost to secure speedy economic development, it is by no means certain how this is to be achieved. Five years ago, people were more sanguine about this subject and indeed a historical meeting of the United Nations Assembly passed in 1960 a resolution proclaiming the 1960s as the Decade of Development. It was believed that this decade will see events of far-reaching proportions in developing countries which will set them firmly on the road to self-sustaining economic growth. We are half-way through this decade and, at any rate in south and Southeast Asia, the results have been generally disappointing. The monster of stagnation and poverty which economic plans were supposed to conquer proved a more tenacious adversary than was thought. What went wrong? How was it that twenty years after the conclusion of World War II, the per capita national income of nearly all developing countries is not significantly higher? I think we can get some guidance in our search for a solution from the experience of two countries that were defeated in World War II, I refer, of course, to the celebrated cases of Germany and Japan. Twenty years ago these countries lay prostrate before the victorious Allied nations. Their cities were reduced to ashes, their industries pulverizedand their communications systems utterly destroyed. Their populations were reduced to a standard of living lower than that in any developing nation at that time. Yet within a generation, both Germany and Japan achieved what we call the 'economic miracle'. In the economic field they have surpassed, in many respects, many of the nations that defeated

97

\ them. How did this happen? What did they do that developing nations did not do? What did they have that developing nations did not have? The answers to these questions turn out to be surprisingly simple. Germany and Japan had two things which developing countries did not have twenty years ago and stilldo not have in sufficient degree today. The first of these is a high level of scientific knowledge diffused over the entire population. The second is a set of social relations which had begun developing, in the case of Japan since the overthrow of the Tokugawa Shogunate in the nineteenth century, and inGermany since the time the Industrial Revolution began there. It is this set of social relations which makes it possible for modern systems of production to be organized very rapidly. While the Allied nations were able to bomb their cities out of existence and destroy the factories and communications systems, these two sets of factors — scientific knowledge and modern social relationships — survived all the aerial bombardment and war destruction, as they must survive unless the entire population is destroyed. It is these two factors that enabled Germany and Japan to perform their economic miracles. And it is similarly the absence of these factors either totally or to an adequate degree in underdeveloped countries that has been the reason for their lack of progress. I referred a moment ago to modern social relationships which existed in these two countries and which enabled them to stage a spectacular economic recovery. I would like to attempt a more precise definition of these terms, without, however, being unduly pedantic. By social relationships, I include the social values which motivate the people of modern societies. For example, respect for law and order as the basis of social discipline is an item in this set of values. Awareness of rights and obligations, and institutions that are required to resolve any disputes over the exercise of such rights, form another important element of modern society. In addition we must include attitudes towards work, willingness to endure the disciplines of the wage system, eagerness for advancement in education, and, at a higher level, insatiable intellectual curiosity and abounding business

98

enterprise. These are the intangibles of the modern society. But they exert a decisive influence on the modernization process and on economic growth. Without them the injection of foreign capital, no matter how massive, will fail to achieve the purpose of generating economic growth. Perhaps an analogy drawn from the field of my new profession may make my point clearer. A modern army in its external appearance consists of men dressed in uniforms and equipped with modern weapons. From this the uninitiated may believe that if you get a large number of men, dress them in uniforms and hand them over with modern weapons, you have got a modern army. Anyone of us can see that this is an

absurdity,

from

constituting

and

that

such an assembly

a modern

army,

would

of persons,

far

in fact be a com-

pletely undisciplined rabble group whose only function in war would be to deliver their weapons to the enemy. The strength of the modern army lies in the intangibles, the training and discipline of the troops and the courage, skill and experience of their commanders as well as in material factors such as modern weapons. And

so

it is that in a modern

society,

one does not build

a modern economy merely by ordering the construction of steel mills, the erection of power generators, the laying of railway lines, and the like. The real elements of a modern society lie in the intangibles which, as we saw in the case of

Germany and Japan, enabled these two countries to achieve spectacular progress, while other countries without these

intangibles have failed to achieve self-sustaining economic growth despite the massive foreign aid which many had received, I believe the intangibles to be at the root of the matter. In other words, economic growth is something that involves far more basic elements than economic factors such as capital investment, the infrastructure of social overheads and the like. I believe that most developing countries have been misled by economists as to the importance of economic factors. I will be the last, being by training an economist myself, to deny the importance of economic factors, but the process of development and modernization does not begin It is necessary that we and end with economic factors. 99

should pay due regard to them but it is not sufficient merely to do so. There have been instances in the experience of developing countries where neglect of non-economic intangibles have resulted in the failure of-development projects. There are documented case histories of such failures. Large sums of money and immense effort have been devoted to the construction

of irrigation

dams.

These,

however,

led to very

limited benefits because the subsidiary network of irrigation channels which had to be constructed by the efforts of the peasants themselves had failed to materialize. Similarly, in attempts at community development, the introduction of new and better seeds and of scientific processes and farm techniques failed to find adequate response because of resistance by peasants. Such resistance has at its root conservative social habits and customs. In addition to such social inertia is the prevailing attitude that these projects must be carried out by the government itself and that their role is to be restricted to that of recipients of benefits and not of participants in the project. What has all this to do with the worker? Here may I take you back to the initial generalizations whichI made in regard to Afro-Asian

societies. These are, first, that the widening of the economic and political power gap between rich and poor nations must be arrested. Second, though the peasantry forms the majority of the population in most Afro-Asian countries, the workers in fact belong to the modern sector and, therefore, form the vanguard of the movement of social change. In other words the workers belong to the movement of modernizing the whole society as a means of acce-

lerating economic development whereby developing countries can catch up with the Western nations. I am in entire agreement with the National Trades Union

Congress of Singapore in their stand that it will be wrong in developing countries for leaders of workers to take a narrow and restrictive view of their role in society. Such a position may be acceptable in developed nations, where the question is no longer that of initiating or sustaining economic growth but a fairer division of the fruits of labour. But a restrictive role in developing countries would be harmful 100

to the modernization process of society which we sometimes term the social revolution. The worker, being in the vanguard of social change, must accept responsibilities in regard to the control over the direction and pace of change. If he relinquishes this responsibility, he must not be in any

surprised if he turns out in the end to be the loser. It was Karl Marx who first foresaw the role of the industrial proletariat as the vanguard of social revolution. It was the city and the workers' movement in the city that was to conquer the countryside. By a curious irony of history, in the developing nations of Asia the Marxist doctrine of proletarian revolution had come tobe completely reversed by another revolutionary leader and thinker. Mao Tse-tung, while accepting the method of dialectical materialism as a means of analysing historical and social processes, arrived at the strategy of the countryside enveloping and conquering the cities. The dispossessed peasant, and not the exploited industrial worker, was to be the instrument of revolutionary change. It is not my purpose here to be involved in the unending controversy in which Marxists of different schools engage. I make reference to these matters in order to show how fundamental these matters are in the time perspective of history. Accorded then, either by historical destiny or by philosophical doctrine, a vital mission to perform in developing

way

nations, how are the workers

to accomplish

their task?

It is

here that we arrive at a sharp distinction between those who

seek to achieve their objectives through the establishment of an authoritarian regime and those who wish to preserve individual liberty in the process of modernization. In the first group, we have, as the most distinctive representatives, the communists. For them the path is quite clear. Marx,

Lenin

and

subsequent

thinkers,

including

Mao

Tse-

tung, have laid down not only the broad strategic concepts but also a great deal of the tactical doctrines of revolutionary struggle. No one who has made a study of the subject can fail to be moved by the passion with which the revolutionaries have

expressed

themselves,

or

by the

they have carried out their tasks. 101

heroism

However,

with which

what

can be

doubted is the applicability of their doctrine to each and every distinct situation found in the countries of Asia and Africa. Here, the second group of socialists — those who believe in the establishment of a political system which respects individual freedom —are diffident about laying down strategic doctrines and tactical principles intended for general application. They prefer a more empirical approach, taking into account the special circumstances in which each developing nation finds itself at any given moment. It is, therefore, for this reason that I hesitate to express any prescription to the distinguished trade union leaders from the countries of AfroAsia. I am certain that they are more capable than any one of us in Singapore of thinking out solutions to their own problems. Regardless of the differences in special circumstances, I believe that we are agreed not only on objectives but also, in great measure, on the methods. First, when we advocate a democratic solution to a problem, this presupposes that

such a solution is feasible, that is to say, a political movement based on working-class support can either win anelection victory to form the government or be sufficiently strong to influence government policy insignificant measure. Where this is not possible as, for instance, when power is vested in, say, a military dictatorship or in a reactionary ruling class

that

does

not

allow

democratic

processes,

then

of

course a resort to violent revolution cannot be avoided. In Singapore, we are fortunate that democratic processes are available. It is our hope that our experience in this small island-state in carrying out a social revolution in a political movement in which the workers occupy a strategic position would be of interest and value to our comrades from Asia and Africa.

102

Labour and the Co-operative Movement in Singapore

It has been evident for some time that the labour movement has been in a state of depression if not demoralization. No doubt the passing of the new Employment Act, and by a socialist government which has enjoyed the support of the broad labour movement, has come as a disappointment to the rank and file membership and possibly even to some in the leadership. The Employment Act enjoins upon the labour movement more discipline, restraint in wage negotiation and, generally, a greater awareness of the social responsibility of organized labour in the larger framework of the national interest. It is to its credit that organized labour has accepted both the spirit and the letter of the Employment Act. Considering the somewhat hectic past of the trade union movement, this may come.somewhat as a surprise to observers. In the early history of the trade union movement in the post-war years — when influence of the Communist Party of Malaya was dominant —the standard of excellence by which a union was judged was militancy of its membership. The labour movement became an important arm of the political struggle for independence. Further when the boss is, as in many instances, a Speech given on 18 November 1969 at the National Trades Union Congress delegates' seminar on ‘Modernization of the Labour Movement' at the Singapore Conference Hall.

103

citizen of the imperial country, bashing him is not onlya rewarding activity, it is also a patriotic one. We all agree that all this is part of the past. And yet in the new situation facing the movement, it is curious how the old instinctive responses survive. No doubt many of the old vanguard

will

ask the question,

'If bashing the boss is to be

foregone, what is there left for the labour movement to do?' And the answer provided by the organizers of this seminar is, ‘Quite a lot.' I wish to congratulate the NTUC and all those who took part in preparing for this seminar, particularly those who produced the excellent series of study papers, on facing up to the challenges of the times squarely and not ducking the issues.

Without

cross-roads.

a doubt,

the labour movement

is now at the

It can take a new direction, develop new fields

of endeavour and thereby grow from strength to strength. Or it can take the other turning, sulk away in resentment and despondency, and then be cast into the limbo of history. I

would like to think that the labour movement will take the positive road —the road to greater, more meaningful and, possibly, more difficult means of participation in the national life of the Republic. I would like to take this opportunity not todiscuss history and philosophy appropriate to the labour movement, important though these subjects are in their context. I would like to discuss certain practical problems which the labour movement would encounter should it take the positive road which I hope it would. I want to confine my discussion to a relatively narrow field, namely, how organized labour can develop the cooperative movement in the Republic, to its own advantage as well as to the national advantage. An excellent background paper has been prepared for the seminar and I would like to supplement this paper by suggesting a practical approach, a correct strategy if you like, whereby the cooperative movement in the Republic, now in very rudimentary form, can develop as an important element of the broad socialist movement. There are, as a paper noted, several operati — consumer ves co-operatives, rural

104

forms of coco-operatives,

industrial co-operatives, insurance,

investment

co-operatives for housing,

and

so

on.

In my view,

credit,

the potential

for growth of the co-operative movement if supported and labour is excellent, provided the sustained by organized right strategy and the right methods are employed. But before I go on to suggest the growth strategy for the co-operative movement, let me first lay down certain principles under which such a movement will have to operate in the Republic. The first principle is that the co-operative must be fully competitive with private enterprise. It cannot expect privileged treatment by the Government. We want sturdy cooperative units and the extensionof preferences tothe movement will result in weak structures and not robust growth. I underline this point because anxiety has been expressed both privately and in public by businessmen in the Republic that the Government intends to extend privileged treatment to enterprises in which it has a financial interest. Such fears are completely without foundation. It has not been and will not be the policy of the Government to single out individual enterprises for favoured treatment. This also applies to cooperative ventures which the labour movement may sponsor in future. The second principle, which derives logically from the first, is that the labour movement should engage in cooperative enterprises inthose fields in which it has a natural built-in advantage. In so doing, it will be easier for the cooperatives to compete successfully with private enterprise. The third principle is that the highest standards of integrity must be established and maintained. This would imply, in our stage of development, that there must be one central authority which supervises co-operative enterprises by trade unions and will have the power to take remedial action where weaknesses in this respect are detected. Such authority, I believe, rightly belongs to the NTUC. The fourth principle is that the co-operative must have effective management. I will elaborate on this point at a

later stage. I will now propose a strategy of development which, if these four principles are observed with fidelity, will ensure

105

successful and rapid growth of the co-operative movement. Let us first take a lesson from the experience of co-operatives in other countries. These have not grown up purely as a result of ideology or dogma, nor because people

believe

in socialist principles, but in order to fill practical

needs. Second, growth has been slow and often painful and difficult. But eventually, co-operatives grew to very sub-

stantial size, not because of any feather-bedding by the Government, but by the strength developed by the movement itself, In Singapore, however, we would like to avoid if we can slow, difficult and painful growth. Just as we have to develop industries in a hurry, so must we achieve, in co-operative development, in years what others took decades. To do this, I believe that it is essential the co-operative movement should start with a firm and solid financial base. In our industrialization programme, if we had not started up the Economic Development Board with a fund of $100 million, it is unlikely that we would have achieved the industrial growth we did. Now let me immediately disabuse your mind of any prospect of a similar bonanza to start up the co-operative movement. The labour movement must find the money itself, without any financial assistance from the Government. The first step in our strategy, therefore, is to solve the problem of how to build this financial base. One possibility for building the financial base could be to start a co-operative bank or a workers' bank or something like that. I would, however, advise against this. People will not have confidence in the bank, unless they have confidence in those who are starting it. Unless the co-operative movement has already behind it a string of successful enterprises, it is unlikely that people will put money in a co-operative bank, except perhaps the small group of loyal and faithful members. Regrettably, these are seldom people of substantial means.

I suggest that the financial base could be built upon a life insurance co-operative. The insurance co-operative should not, at any rate in the initial stages, move into other fields

of insurance

such

as

fire,

marine, 106

motor

and

general

insurance. There is no advantage that a co-operative enterprise enjoys in these fields over private enterprise. It is otherwise in respect of life insurance. Private enterprise life insurance business depends on a large

corps of salesmen, in return for whose services substantial commissions and rebates are paid. In the special multi-racial and multi-lingual society of the Republic, an insurance sales canvasser, unless he is an exceptionally gifted and versatile person, is restricted in his field of activity by virtue of language, education and class. As compared with this, the labour movement straddles all barriers of community and language, and even, to some extent, of class. There is a widespread network of contacts which extends through many strata and sections of our community and which has no counterpart in private enterprise. This network is formalized in structures such as individual trade unions,

their branches,

shop stewards

and so on.

For

the purpose of publicity, mass education on the benefits of life insurance, sales of policies, this network provides the life insurance co-operative with a clear advantage over private enterprise. For instance, individual unions as well as the branches may benefit financially from the activities of the insurance co-operative as they may legitimately retain the commissions or rebates which normally would go to the insurance canvassers. Competitions can be arranged between unions and branches in the spirit of socialist emulation. I need not elaborate on these possibilities, but I would urge that if unions were allowed to retain commissions and rebates, these should be vested in a separate fund usable only for cooperative development. But there is another aspect to this. And this is the question of whether a life insurance co-op would be fulfilling a genuine social need. Unless this is so, there is no reason to expect that it will be successful. In my opinion, there is a genuine need for members of the working class to take out life insurance policies. If the need is not fulfilled, it is because private enterprise cannot reach these strata of society or the workers themselves do not understand the value and

benefits of taking out such policies. 107

Because social security in Singapore is in an extremely rudimentary form, the death of a wage-earner almost invariably results in a harsh and cruel fate for the widow and surviving children. They often are reduced to immediate and appalling destitution. Life insurance taken out by workers would alleviate such hardships. Further, even if the risk against which the worker is insured, that is, of premature death, does not eventuate as would be the case for most of the insured, premiums paid on life insurance policies and annual bonuses received will accumulate as a valuable form of savings for these people for their old age. To the labour movement as a whole, a co-operative life insurance enterprise would provide a good financial base. For instance, if no more than a quarter of trade union registered members took up policies with premiums averaging, say, $150* a year, this will mean a cash flow of some $5 million a year. With an annual cash flow of $5 million, it should be possible to accumulate a fund of a respectable size within a few years. Of course, there is no reason why actual performance could not be considerably better than $5 million a year. The potential market is not restricted to union members; it can extend to all employees as well as to small businessmen, hawkers and taxi-drivers and others

who work on their own account. The outcome depends largely on the intensity of intelligent effort put in. The next type of co-operative which I would recommend for early growth is the consumer co-operative. Experience of the labour movement in other countries shows that, given sustained effort and dedicated leadership, this kind of cooperative is not too difficult to establish and can take permanent roots in society. In Singapore, a co-operative consumer society was established in the early post-war years when there was a shortage of consumer goods. The cooperative, however, died when shortages disappeared. The lesson here is that it is necessary to propagate the principles of the co-operative movement so as to ensure mem-

bership loyalty. *Unless

otherwise

stated

monetary

dollars throughout.

108

figures are cited in Singapore

The best way to start a co-operative is probably to select a good locality in one of the major housing estates where a good number of trade union members live. Possibly some part of Queenstown may be suitable. Jurong may offer some possibilities; one of the larger firms there is running a thriving co-operative for its members. The first consumer co-op should be started as a pilot project. If the top union leadership were to lavish care and attention to its growth, the consumer co-op should succeed. After some time, the leadership would have valuable ex-

perience which can be used to good effect in starting up cooperatives in other housing estates. Once a network of cooperative shops has been established and the advantages of consumer co-ops made apparent to all members, the movement could develop its own momentum of growth with the growth of population, improvements in standards of education and increases in personal incomes and wages. But I should sound a word of warning. There is little gravy in the retail business in Singapore and much effort, dedication and an enormous amount of ingenuity and skill will be needed if the consumer co-operative is to succeed. Housing co-operatives also offer a promising field of development. It is, however, very specialized work and you will need a good band of workers with professional qualifications, experience,

zeal and dedication.

It is better to wait

until the life insurance co-operative has accumulated sufficient funds. At that stage, the insurance co-op will no doubt want to invest some money in real estate and that will be the time when it may be willing to finance a housing cooperative. I may mention

here that government employees through their housing co-operative are able to own houses of their own on reasonable terms. The Government assists this society by extending loans to meet the cost of such houses, The insurance co-operative will perform this function for the housing co-op. The co-operative bank I regard as an essential element in the later stage of co-operative development. If and when the insurance co-operative has established itself on a sound basis, with accumulated funds of $20 to $25 million, and

109

when the co-operative movement has established a string of consumer co-operatives, and when the housing co-operative has got off to a good start, the time may come to consider setting up a co-operative bank. By that time, I expect the broad base of the co-operative movement led by the trade union movement would have won the confidence and participation of a sizeable part of Singapore's population. It would have behind it several major successes. It would have experience in the management of financial and business affairs. That would be the time to think of starting a cooperative bank. As regards other types of co-operatives, the NTUC study paper mentions producers' co-operatives and notes the fact that the Ex-Detainees' Association has succeeded in establishing a producers' co-operative engaged in the production of shoes. In this enterprise the Government advances the money in the form of a loan to pay not only for the training expenses of the ex-detainees, but also for the purchase of machinery and equipment. Though still in its infancy, the co-operative shows every sign of promising growth. Another producers' co-operative consisting of members

who were formerly political detainees has been launched. This is in the field of ornamental ceramics. A group of eight are undergoing training. The second co-operative undoubtedly faces more formidable challenges than the shoe co-op. They are mainly concerned in making souvenirs for the tourist trade and clearly there are difficult matters of design of product which have to be solved, as well as of the marketing of their output. However,

with

the

assistance

of the

Tourist

Promotion

Board,

we hope that these problems can be solved. I make this point to show that producers' co-operatives are quite a tricky business. This explains why, under a system of free enterprise, there have not been many successful instances of producer co-operatives. Where these have emerged and survived, as in Israel for instance, they are the result of special historical circumstances. So far as producers' co-operatives are concerned, I suggest that the matter be treated realistically. It is easy enough to produce study papers to show that this or that

110

kind of producers' co-operative has a potential. But unless you have the people who are willing to put in the effort and sustain it over a long period, you are not likely to achieve much. The ex-detainees are good material for producers' co-operative because they have been unemployed a long time and some local employers, enlightened in other ways, are somewhat chary about giving them employment for reasons which we can understand but not sympathize with. So unless there are union members who are highly motivated, for one reason or other, with the desire to start up a producers' co-operative in a trade in which they have the necessary basic skills, I suggest that you do not give much further thought to this. As for the other forms of co-operatives, agricultural co-operatives,

investment

co-operatives

and

so

on,

I see

no special advantage which the co-operative movement can enjoy in these fields and suggest that such time and energy as people can spare be better directed elsewhere. But whatever type of co-operative you decide to establish, whether it fails or whether it succeeds depends as much on one factor alone as on all the others combined. And this is the factor of management. If you have good, keen, effective management, then any kind of co-operatives that you establish, even the producers' or the agricultural co-operatives, will succeed. On the other hand, if you havea lazy, fumbling, ignorant, indecisive kind of management, even the most promising project will fall apart in your hands. This is not the place to expound the principles of business management. However, I think both the NTUC leadership and the trade unions will have to adhere tocertain principles very strictly, if the co-operatives they establish are to have any chances of survival. The first principle is that the staff of the co-operative, be it the top executive or the general run of employees, should be recruited entirely on the basis of merit. The co-operative should not be made the dumping ground of loyal and aged union members who are tired of their present employment and believe that they deserve a more congenial occupation at better rates of pay. Nor should appointments and promotions to any position in the co-operatives be subject to political pressures or in-

111

fluence. Merit and performance must be the only criterion. Staff recruited on unsound principles cannot be properly disciplined and trained. Favouritism, intrigue and eventually complete demoralization will set in and reduce the organization to a moribund condition. The second principle to be observed is that while it is proper that the professional staff of the co-operative be held responsible to

a committee,

board of directors, or whatever

the governing body be called, it should be given considerable scope for the exercise of initiative, judgement and enterprise. The committee or board should not interfere in the day-to-day management of the co-operative. Its duty is one of laying down policies and guide-lines and general supervision of affairs of the co-operative. There are other principles of good management, such as staff training programmes, effective audit and accounting systems, but these are of a specialist nature and I will not deal with them here. These then are some of the opportunities as I see them whereby the trade union movement can move into new and productive fields of endeavour. The Government, while it cannot extend direct financial assistance in launching any of these co-operative enterprises, would be willing to assist in whatever other ways it can, such as in giving technical assistance in the formation of the co-operatives. But the principal task must be faced by the trade union movement itself. The movement is faced with an unprecedented challenge created in the new situation where the simple traditional virtues of militancy and struggle are of little relevance. It must seek a new role in society and in seeking, and eventually performing, the new role, it will need to adapt to the changing environment.

112

Differences in Economic Development Problems as between Singapore and Other Asian Countries

In recent years, there about underdeveloped tries of the world are developed countries of is that the gap between creasing,

continues

has been any number of books written countries. While the wealthier coungetting richer and richer, the underAsia are not keeping pace. The result rich and poor nations, instead of de-

to increase.

So, many

economists

turn

their attention to the problem of underdeveloped countries. They try to findreasons why their economies fail to expand. They then try to recommend policies which will bring about sustained economic growth in underdeveloped countries. In studying the analyses as well as the recommendations of these economists, we in Singapore must take into account several factors. First the economy of Singapore is basically different from that of the typical underdeveloped Asian country. Thus, the analyses and specific remedies found in these economic textbooks are often not applicable to our situation. However, this does not mean the basic principles of econoArticle published in Commerce , journal of the Commerce Nanyang

University,

Vol.1

No.4,

November

113

1961.

Society,

mic development underlying their analyses are wrong. These are simple enough. Economic development, in simple terms, is no more than the extensive application of modern techniques of production in an economy based mainly on traditional methods. But the application of modern techniques requires three things which are difficult to get, especially in underdeveloped countries where they are most wanted. __

than a poor man, so a wealthier country can save a larger part of its national income than a poor country, and this is one of the reasons why the disparity between wealthier and poorer countries continues to increase. The rich have more capital at hand because they are richer and can save more, The poor find it difficult to save even the same proportion of income as the rich. For instance Western industrial countries may save anything between 17 to 25 per cent of their national income and invest it for the expansion of their economy. Asian countries are rarely able to save more than 8 per cent out of a much lower per capita national income. The second vital requirement is know-how. This is not

merely a matter

of engaging a few experts; if it were

as

simple as this then the question of economic development can be solved very easily. It means raising the general education standards of the whole population. It means also the establishment of technical institutions, training centres and other facilities on a massive scale. This is a costly and long process. The third essential is to have large numbers of men capable of establishing and managing new economic organizations. These organizations may be industrial plants, railways, agricultural co-operatives, power stations or any of the varied activities needed for economic growth. Economic textbooks call such men 'entrepreneurs', They are men with initiative and organizational ability. It is they who put to use accumulated capital into new ventures for the expansion of the economy. So far as they go, these general principles apply equally to Singapore as to other Asian countries. But because the economic structure of Singapore differs from those of other

114

Asian countries, the way in which these principles can be implemented differs. Let us consider just a few of the major differences between the economy of Singapore and that of other Asian countries. When one talks of an Asian country, one is confronted with a wide variety. A territorially dispersed country such as Indonesia is different from, say, a compact land mass such as India. The rice-producing economy such as Thailand differs from, say, that of Malaya which derives much of her wealth from two or three export industries. But there are certain common features in the economies of most Asian countries. The first is that, with a few exceptions, of which Singapore and Malaya can be cited as examples, Asian countries are primarily grain-producing countries. More specifically, most of the people in Asia are engaged in growing rice. About 80 per cent of the population are engaged in agriculture. Asian countries have large populations. China, India and Pakistan between them contain about half of mankind. A distinctive feature of the grain-producing economies of Asia is the high density of population in areas opened up to agriculture. This results in a scarcity of land relative to labour, and because the average farmer has so little land he produces little and remains poor. There is another distinctive trait in Asian countries and that is their long heritage of civilization and culture. This has tended to produce traditional societies with somewhat rigid values. In many of these traditional societies, we find a small but powerful class of landlord who often stand in the way of economic progress. Very often it is found that the landlord does not have the spirit of innovation or the grasp of modern management to be able to launch and manage the new enterprises that are needed for economic development. The traditional landlord is not an entrepreneur and hence the wealth he accumulates, often by exploiting the peasantry, is not used for economic expansion. There is one further significant economic feature of Asian grain-producing countries which stands in the way of their

economic growth. And this is the lack of export goods from which they can earn foreign exchange to pay for the import of capital goods required for economic development. Only 115

a few countries such as Indonesia and Malaya have readily available substantial markets for export goods, for example rubber, tin and oil. Most of the other grain-producing countries have only a small range of export goods, whose foreign exchange earnings therefore are usually inadequate to finance imports of capital goods. The general strategy of economic development in these Asian countries is well-known. It consists of a general advance in all sectors, particular attention being paid, however, to increasing the output of agriculture through improved techniques, for example fertilizer, better seeds and improved irrigation. Increased agricultural output leads to several desirable results. First, there could be a shift of labour from agriculture to industry. Next, it would avoid a shortage of food which otherwise would have to be met by imports of food from abroad thereby using valuable foreign exchange resources.

Further, as farmers earn more

income,

they would provide a market for the products of industry. Markets are not merely a matter of number of people. The buying capacity of these people also has to be taken into account. A prosperous farming community would provide a tremendous boost to industrial expansion as recent experience in Japan shows. As part of the general advance, it is necessary to create a new class of persons with the necessary technical and managerial capacity for directing enterprises. Where the social

system

does not throw out, through free competition,

men of directing ability, an effort must be made to produce such men. This is often more difficult than it appears. The problems which have been so briefly sketched here are, in reality, immense in scale. Only in the last decade or so have Asian countries turned their attention to economic progress. It will require several generations to see the fruition of their endeavours only recently started. We may now discuss economic problems in Singapore and Malaya against this general Asian background. As regards Singapore two things stand up. Our population is not large. We do not produce food grains; our farmers. produce only vegetables, fruits, poultry, eggs, and pigs, mostly for consumption in Singapore and south Malaya.

116

Our economy is based on trade as Singapore serves as a supply and distribution centre for south and east Malaya and much of Indonesia and Borneo. Unlike most other Asian countries, we have a plentiful supply of capital. Our national income per head is several times higher than that of the grain-producing countries of Asia. Hence we can accumulate capital with less effort than they can. We are not faced with any difficulties over foreign exchange because the Government has not resorted to deficit budgeting. This being the case, the strategy is not to base the creation of new modern industries on the surplus earned in agriculture but rather on the surplus earned in trade. Trade provides Singapore not only with capital but with men capable of directing business organizations on a fairly substantial scale. So far such talent and energy has been directed principally towards trade. Our problem is to induce them to divert both their business skills and their capital to industrial expansion, In this respect we are more fortunate than most Asian countries. We donot have to create a new director or entrepreneur class because we already have one though it isa class less skilled in industry than in trade. Given, however, the incentives to create new industries, there is no reason

why they should not respond or be as successful in industry as trade. The problem therefore is how to create conditions

whereby they could be induced to move into industry. Here we are at a disadvantage as against other Asian countries with large populations. For our small population means a limited market. And new industries are more easily established when there is a large and protected home market. Industrial growth in Singapore could be more easily fostered if a protected market could be established which goes beyond the boundaries of Singapore, for example the Federation of Malaya in the first instance and possibly the whole of the Malaysia area eventually. This is the reason for the proposal by Singapore to set up a common market with the Federation

of Malaya

which

could be extended,

in due course,

to

cover a wider region. Until the common market can be established Singapore's industrialization must be based on the present markets open

ay

to her. As we serve as the supply base for much of Southeast Asia, there are opportunities for supplying to her neighbours that which at present is imported from overseas and re-exported to them.

This, however, means that such industries as we now establish must be fully competitive right from the beginning. This somewhat restricts the range of goods we can produce. Obviously products which canbe produced economically only on a very large scale cannot be set up in Singapore because the cost of production would be too high for small outputs. For example, we can manufacture electric bulbs for the whole of pan-Malayan markets. But the cost would be two to

three

times

that of imported

bulbs

which

are

made

in

large plants overseas turning out more than a hundred times the number required in Malaya. We can take better advantage of our status as the largest port in Asia by building up industries ancillary to the port. We can expand our ship-repairing industry to take advantage of the large demand for such services which cannot at present be fulfilled inSingapore. Other industries such as shipbreaking are obviously advantageous to Singapore because of the large volume of employment they generate. The large Asian countries can afford to establish relatively inefficient and high-cost industries, if the prospects

are good that such industries can improve themselves in due course. These industries can be made to survive through import duties or even through prohibition of imports. Such a course of action is not generally possible in Singapore without placing a punitive burden on consumers, that is, the

general public. To induce the flow of capital and skills from trade to industry, certain positive measures by the state are needed. These can be supplied in a number of ways. First, feasibility studies of new industries should be undertaken to find out what new industries can be established under the competitive conditions of Singapore. These studies canbe undertaken both by the Government as well as by private enterprise. A lot of this is already going on. Next, new industries should be able to acquire capital, especially working capital, more easily and on better terms thanare now available. Then 118

the basic essentials of industry, suitable factory sites, power supplies,

water,

roads,

communications,

port

facilities,

should be made available abundantly and at reasonable prices. All this will help to improve the competitive strength of our industries which have to fight in the export markets of the world. There is also need to improve labour-management relations

which

in the

past

have

not been,

from

the

point of

view of potential investors, as advantageous as they could be. It is not only in the interest of labour as well as management to see that proper relations are maintained but it is also in the interest of the whole country to ensure that

this is brought about.

Otherwise, thousands of young men

and women looking for work each year will remain unemployed because new industries are not set up. The situation which faces Singapore today is as challenging as that of any period in Singapore's past history. Our forefathers had built Singapore from a swampy island into a flourishing trading centre with one of the highest standards of living in Asia. It is the duty of the present generation to see that the thrift, industry and skill which created modern trading Singapore will be sustained in the years to come to create an industrial Singapore of the future.

119

Regional Co-operation in Southeast Asia

I would like to discuss regional economic co-operation. I confess to some trepidation in selecting it. Hardly a week passes by without some conference on the subject. All proclaim the virtues, the necessity, the benefits, and the inevitability of regional economic co-operation in Southeast Asia. It seems clear that regional co-operation is fast attaining the status of a sacred cow. And yet in spite of the proliferation of conferences and literature on the subject, it looks to me as if there has been precious little clear thinking on it.

To

start

with,

what

do we

mean

by the term

‘regional

economic co-operation'? Incredible as it may be, I have yet to come across a sensible definition. What are the means by which such co-operation is to be achieved? Again, apart from exhortations to goodwill and the appointment of more

committees of officials, nothing much has emerged. These are the indisputable facts. Yet, like people in the fable of the naked emperor, everybody, with the honourable

exception of my colleague the Foreign Minister, makes a pretence that all is well while they know the reverse is true. I confess to some hesitation in discussing this subject. As a practitioner in the field I cannot, like the university Speech at the annual on 24 January 1970.

dinner of the University of Singapore Society

120

academics, invoke the principle of freedom of expression and, indeed, I feel that my position is somewhat analogous

to that of an archbishop in mediaeval Europe who questioned in public the doctrine of the immaculate conception. The trouble is that when people talk about regional economic co-operation they talk as if this is something new. The truth

is that,

by any

reasonable

definition of the term,

re-

gional co-operation has been going on for more than a century, ever since the European imperialists set foot in this part of the world and opened it for economic development. What we are now doing is, in part,

the outcome

and the con-

tinuation of this long historical process. Let me give you some concrete examples of activities which I consider falling under regional economic co-operation. What.I say may startle some of the regular conference-goers. Nevertheless, let me proceed to give this example. We eat rice from Thailand and bananas from Malaysia. We do so not because of beneficent feelings towards the Thai or the Malaysian peasants, or out of our wish to co-operate with them. We do so simply because we get value for money. In the same way, the Malaysians, the Indonesians and others in Southeast Asia use our port to market some of their produce as well as for

some of their purchases. Again, they do this not because they love us. They too get value for money for the services and goods which we provide. So in this way, Thai and Malaysian peasants get more money than they otherwise would have, rubber estates in Johore and the east coast of the peninsula market their products at a lower cost than otherwise would be the case, Singapore consumers get the benefit of low food prices, and Singapore businessmen get income from performing both entrepot services. The trade that takes place between countries in the ASEAN group is much bigger than most people believe. It comes to more than $5,000 million a year. Without this trade everybody would be much poorer and Singapore would cease to exist. With these preliminary

observations

on

the nature

of

trade between countries in the region, we can try a tentative preliminary definition of regional economic co-operation. It

is that there should be adivisionof labour between countries

121

of the region whereby each produces the goods for which it is endowed with natural advantages to produce, and by trading with each other the total economic well-being of all members

is increased.

This

definition,

as

any

economist

present here will immediately recognize, is based on the classical doctrine of international trade. It is as old as Adam Smith. It assumes that trade between countries will move freely and without obstacle. Of course, every schoolboy knows that the classical concepts of free trade are hardly observed in their entirety in the real world, either in Southeast Asia or elsewhere. In practice, import duties are levied either to protect domestic industries or for revenue purposes. Quantitative restrictions by way of quotas are a common occurrence. Then there are exchange controls not only on transfers of capital but, in the case of currencies in trouble, also on payments for current transactions. Over and above all these, most countries in

the world maintain pretty strict controls on immigration. All these restrictions on the free movement of goods, people and money across national boundaries are tantamount to a reduction in the scope and volume of regional co-operation

between

countries as well as the diminution of

economic well-being defined in the classical sense of the word, It is therefore necessary when discussing policies of regional co-operation to inquire into the reasons for such restrictions. The principal reason for the substantial increase in recent years in obstacles to free trade and free movement of capital and people in this region is the attainment of independence by countries in the region. At first sight, this may appear an unlikely outcome of independence. It could be argued, for instance, that countries having thrown off their colonial shackles would rush to embrace each other in friendship and brotherhood and tear down the walls which imperial powers had erected to divide and rule the diverse peoples of Southeast Asia. This is what one might have expected to happen. But what actually did happen was quite

the reverse. There was greater freedom of movement of goods, and

capital

people during the colonial time than there is today. Let 122

us take the position of Singapore, Malaysia and Indonesia. In the pre-war years Singapore was the base of British imperial power in Southeast Asia. It was also the base of British economic power. The great British agency houses had their head offices in Singapore. From these head offices they extended their operations not only into the Malay peninsula but also into Borneo and into Indonesia. Thus the enormous expansion of the rubber and tin industries in Malaya and the opening of large estates in Sumatra and Borneo were to a substantial extent financed, directed, managed and supplied by British agency houses operating in Singapore. There were no restriotions of movements of population between Singapore and the Malay peninsula such as those that

exist today. There was, for much of the time, no restriction on movements of population and money between Singapore, Malaysia and Indonesia such as exists today. Malaya, as it was then known, achieved her independence in 1957, and the Malayan Government took immediate steps to reduce the dependence of the Malayan economy on

Singapore. Agency houses were induced to establish their head offices in Kuala Lumpur. Through technical devices, such as valuation of imports for custom duty purposes, imports from Singapore were placed at a disadvantage as compared with imports through Penang or Port Swettenham. An energetic drive to reduce dependence on imports of Singapore manufactures began and firms producing in Singapore were given substantial inducements to open up operations in Malaya. Similarly, the Government of Indonesia undertook a deliberate policy of encouraging direct shipments of her produce, much of which used to be marketed to the countries of the West through Singapore. However much our interests were adversely affected by these measures, we must recognize that they were legitimate objectives of independent sovereign states. The Malayan Government saw little point in buying goods produced in Singapore when these same goods could be produced in Malaya to the benefit of the Malayan economy by way of employment and income. It was a simple enough matter to bring about this result by placing tariffs on such goods and 123

allowing inducements by way of a tax holiday for their production in Malaya. Such problems did not arise in the colonial era for the simple reason that the colonial governments were not interested in establishing manufacturing industries. As regards control on movements of money and capital, we are fortunate that none has so far been introduced between Singapore and Malaysia. Both our currencies are strong and the Agreement on Interchangeability of Currencies is working well. But where the currency is weak, as is the case with some countries in the region, extensive exchange control measures have had to be enforced. As regards movement of populations across national boundaries, there was virtually complete freedom of movement not only within the region but also with the rest of the world during the colonial era. The colonial governments wanted to encourage exploitation of the wealth in their colonies through plantations and mines. Since the resident populations, whose traditional activities consisted mainly of self-employed peasant agriculture, were reluctant to work in these plantations and mines, the colonial government in Singapore and Malaya decided to import large numbers of labour from south China and south India. There was also a substantial migration of workers from Indonesia into Singapore and Malaya. The Great Depression of the 1930s saw a reversal of this policy of free migration. But with the advent of the independence of Malaya in 1957 further steps were taken to control the influx of workers from outside in order to reduce the population, pressures within national boundaries. Since then not only was there an increase in immigration control but a new

innovation

has

been

introduced

recently,

and

this

is

the requirement for employees to take out work permits, a technique whereby citizens of a country can be given employment preference over non-citizens. This innovation was introduced by Singapore and it did not take long for these practices to spread beyond our borders. It is against this dismal background of increasing and not

diminishing obstacles to division of labour between countries in the region that we have to assess prospects for regional economic co-operation, It is clear that co-operation, in the

124

classical sense of allowing specialization to develop through the free market mechanism, will remain inhibited so long as these barriers are retained. This is why, nowadays, when people talk about regional co-operation, they usually speak in terms of deliberate and planned inter-governmental measures designed to promote economic co-operation in some vague sense. I now turn to this subject of co-operation

between governments. The most comprehensive and advanced technique of achiev-

ing such co-operation is the establishment of a common market of one variety or another. In the post-war years, we have seen in Europe the Treaty of Rome giving birth to the European Economic Community. This is one of the major reasons for the unprecedented prosperity which the six countries concerned enjoyed in recent years. Some people believe that something along these lines, possibly on a less ambitious

scale,

should be attempted in this region.

I do not regard the Southeast Asian common market as a practical proposition in the foreseeable future. There are too many disparities in levels of development, technology, access to capital, infrastructure and other factors. What is more important are the attitudes and policies of individual governments in the region which have based their industrialization programme principally on the basis of import substitution. This term means simply to produce goods which one formerly imported and to make its production viable by imposing a high enough import duty to shut out imports. Import substitution is the easiest, indeed, the most obvious strategy for industrialization. However, there are limits to industrial growth that can be achieved in this way. These limits are set by both economic and technical factors, and depending on how fast the pace of such industrialisize of the domestic market and programme based industrialization an certain other factors, on import substitution reaches its limit of growth when the list of possible substitutes of imported goods runs out. In itself, import substitution does not provide the basis for self-sustaining industrial growth, except possibly in large zation

can

proceed,

the

countries,

125

Because

it is the most obvious and the easiest approach

to industrial growth, and because each government wants to get the benefits of such growth for its own citizens, governments are unlikely to be attracted by appeals based largely on abstract theoretical reasoning on the advantages of common market arrangements. It is more likely to be concerned with fears about the ability of its own industries to compete, especially if these were established on the basis of high import duties. Governments calculate on short-term possibilities and only take into account factors that can be clearly seen, on tangible results that are readily achievable and on dangers that are felt to be imminent. Governments are seldom moved by doctrines, principles, theoretical arguments and analyses which academicians consider important. If we candismiss grandiose schemes such as the regional common market as a chimera, then what are the projects which lend themselves to co-operation between governments ? I think the answer is provided by looking at what regional co-operative efforts have already been mounted in the postindependence era, and which are successfully being implemented. To my knowledge, there are only two of such projects which are of any significance. The first is the production and buffer stockarrangements inthe tin-mining industry that have been established, and in which three governments in

the

are of the and

involved. Second are the arrangements for the pooling passenger rights between the main airline companies of region. Anyone who has travelled, say, between Bangkok Singapore, will know that he cannot board, for instance,

a

BOAC

traffic

region,

or

namely

Qantas

is reserved

for

Malaysia,

Indonesia

and

Thailand,

plane to Singapore. Such passenger Thai Airways, MSA and other re-

gional airlines. These two examples have certain unique common characteristics. The first is that they are concerned with the modern sector of the economies of the region in which the dominant business units are large and heavily capitalized, which operate on modern systems of management, and which are engaged in some aspect of international trade. The second feature is that both these attempts at regional co-operation intended to protect the market and increase the profits of 126

enterprises engaged in them. The third feature is that the number of business units concerned is relatively small. The schemes do not involve the typical economic units of the region, which consists largely of peasant farmers, smallscale producers, independent petty traders and shopkeepers, and such types. If past effort is any indication, the most likely fields for future regional economic co-operation between governments are likely to be limited to those sectors of the economy which have the characteristics I mentioned. If you want concrete examples, those which spring to the mind include shipping — more particularly the carriage of goods between destinations within the region—and the travel and the tourist industry. In my view, this isall that we can expect by way of intergovernmental co-operation on regional economic affairs in the foreseeable future. It does not hold out exciting prospects for bold, imaginative plans for economic upliftment. I think this is the reason why the voice of Singapore when heard in ministerial conferences on the subject has always been one of moderation and realism. It is not that we are against regional schemes of co-operation, trade liberalization, common

market

or whatever;

on the contrary, we

stand

to benefit enormously if these things could be successfully brought about. Our reservations rest on our doubts about the will and the capacity of other parties concerned to make complex

plans and, more important, to implement these complex plans. What, then, are the consequences for Singapore in this kind of limited situation? I believe there are four consequences. First, we must plan our industrial growth principally on the basis of markets of developed countries of the West,

and

in due course,

of Japan when

she liberalizes

her

trade policies as she must do in course of time. We should not of course miss any opportunities in regional markets, but past experience has shown that, except for special products, our access to these markets is likely to be temporary. My second conclusion is that economic growth in every country in the region is to our own economic advantage, and to the extent that we are able to assist in such growth we should do so. Such effort is more effectively mounted

127

through private enterprise channels. That is why we encourage our own industrialists to invest in Indonesia and we offer them substantial inducements to do so. Regional joint efforts by governments are likely to have greater chances of success if each of their economies is growing at a brisk rate. Under such circumstances, there is more leeway and more scope for give and take and these are the essential governprerequisites to successful negotiations between ments on regional projects. Where growth is slow or, worse still, where stagnation takes place, every government will try to take as much as possible and give away as little as possible. No realistic agreements can be reached under these circumstances. The third consequence is that we should make greater efforts in co-operative endeavours between governments in non-economic fields. Indeed, the present situation is one where governments co-operate more successfully in these areas,

such

as,

for

instance,

in the

establishment

of edu-

cational, research and training institutions for common purposes. So far as Singapore is concerned, we should be generous in providing resources and staff for such ventures, whether they are sited in Singapore or elsewhere in the region. Further, we should make available increasing opportunities in our own national institutions of education to citizens of other countries. Much has already been done in this respect under the Colombo Plan and the ASEAN scholarships. I believe that we can do much more. Finally, as Singaporeans, we must know more about our neighbours. What strikes me as very curious is that even though Singapore is one of the great trading centres of the world the average Singaporean is insular in his outlook to an extraordinary degree. For instance, not only does he know very little about the customs, the history, and the general way of life of the enormously rich diversity of peoples in Southeast Asia, but he has very little interest in finding out. I do not know the reason for this state of affairs but I think it is something which intelligent people would want to have remedied as quickly as possible. Iam sure that an audience such as the one I am addressing tonight will readily understand the need for this.

128

Foreign Big Business in Singapore

Since 1959 many remarkable developments have taken place in Singapore. Much of it has been commented upon from time to time by the international press, in monographs produced by scholars in universities and even in books. But there is one feature which appears to have escaped the notice of scholars, historians and newspaper correspondents. And this is the quiet manner in which European business has merged into the political and economic landscape of Singapore. The whole thing happened as if it was the most natural occurrence. And yet when we consider the post-independence experience of countries in Asia and Africa, we-find-that the European businessman is._often.the-centre of..acute tension ~andcconflict, The absence of stress in Singapore, the manner in which European financial and commercial interests have

continued

their

independence,

It certainly

roles

from

is surely

the colonial

a remarkable

calls for explanation.

kinds of explanation.

The first,

era

to the stage of _

phenomenon,

One can think of three

the simplest explanation,

is

that offered by the Barisan Sosialis, that is, that we are living in a neo-colonial regime; whatever this means I won't waste time in refuting this view at a gathering such as this. Speech to the Singapore International luncheon on 29 March 1968,

129

Chamber of Commerce

at a

NE

The second explanation is more sophisticated. It is that as the result of superior excellence in the way in which we have conducted our affairs, yourselves as businessmen and ourselves as political leaders, we have discovered a modus vivendi which has escaped less talented people elsewhere.

My feeling is that this explanation, however flattering to our ego, must be rejected. There is a third explanation which I believe to be the genuine one. This explanation has regard to the special circumstances of Singapore, its historical development, and the special economic role which it fulfils in this part of the world. The explanation is rather complex and I would have to spend some time developing my thesis. Let us first look at the post-independent era of the new states of Asia and Africa. It is, of course, reckless to generalize about so varied a collection of countries. But in so far as the generalization is permissible, I believe the following is true. In most of these countries political leadership, both during the anti-colonial and post-independence era, lay with the Western-educated elite. By training and education, these elites have a natural desire to modernize their states, to create modern industry, strengthen the economy, introduce a progressive political system and so on. In their endeavours to do so, one would have thought that they would have found Western business an important adjunct to their economy. But, in fact, certain underlying factors stood in the way of a working relationship between modern business from the West and the new political elites. Part of the difficulty had origins in the type of education which new elites received in the West. Many of them were educated during the inter-war years when a reactionary brand of socialism received widespread acceptance as a result of the economic dislocations caused by the Great Depression of the 1930s. But apart from this, the modernizing elites came across other difficulties which, in the event, turned out to be insuperable. Here we can distinguish between those countries which are heirs to ancient civilizations and those countries

which donot enjoy such a cultural heritage. In countries with ancient civilizations, the modernizing elites found themselves

confronted

with the

pervasive influence of tradition.

130

There was the hold of age-long religion on the teeming masses living in the countryside. Not only was this a matter of customary beliefs, superstitions and practices, but often leadership at ground level was institutionalized to give great weight of power to those occupying traditional posts, either

in the social hierarchy or in religious institutions or both. It is because they were unwilling to risk the break-up of a society integrated by means of traditional values and traditional institutions that the modernizing processes in these countries were halted. Invariably, this affected the pace of economic development and, given the expectations of a better life in these countries, the consequence

was

often acute po-

litical tension, which aggravated economic difficulties. All this is familiar to those of us who study the affairs of these new states. In the countries without a background of civilized history, the modernization process broke down simply because of the absence of a governing apparatus. You cannot have a modern system

of government without an effective civil service, and

where one does not exist and cannot be created you geta Congo-type situation. When the newly-independent_states run into trouble of one _kind oro other, very often the first victim is the foreign businessman. He is a convenient target to which to deflect popu-

“jar discontent. The apparent wealth which he owns presents a tempting target for expropriation.

The fact that he is usu-

ally of the same nationality as the former imperial power makes him even more vulnerable. In Singapore, these things have not taken place. Why? First, we have no traditionalist power group to block progress. Singapore is really an artificial creation and our

population comprises

either

migrants

recent migrants.

choice

in Singapore today is between

The

or

descendants

of

us who are the modernizers and the rationalists and the rest of the field composed mainly of eccentrics of one variety or another. It is regrettable that an alternative government in the form of a party in opposition does not exist. I do not, however, expect this situation to continue indefinitely. But even when there was astrong and coherent opposition, as during the years 1961-3, the confrontation was not one of 131

{

a modernizing group and a traditionalist group. All contenders claim to be progressive and modernist. And so a different kind of polarization of political forces occurred, with Barisan Sosialis representing the dogmatic revolutionary left, and ourselves as socialists of the pragmatic type. We joined issues on a large number of subjects but the abolition of European business was not one of them. This is surely an astonishing omission, but I have yet to read a historical narrative of events of those stirring days that drew attention tonite Was this omission an accidental, perhaps unintended, oversight by the contenders preoccupied with other matters ? Or was there a rationale behind it all? How was it thata party like the Barisan Sosialis with such radical aims and possessed, at that time, of a fervent following among the young, did not campaign against the iniquities of foreign monopoly capitalism in line with Marxist textbook prescriptions? Elsewhere even the most respectable socialists would feel constrained from time to time to make appropriate noises and strike heroic postures over foreign big business. Here the whole subject was just ignored, even by the revo-

lutionary left! Now, I know why my party did not make an issue of foreign big business, but I can only guess at why the others did not. Perhaps it was an oversight but more probably it was because it was not an issue that would excite many people. Of coursethere were strikes by employees of Europeanfirms and sometimes feelings ran high. But they subsided when the

strikes were settled. Iam not saying that in the years preceding Singapore's self-government there wasn't strong feeling against Europeans. There was. But it was directed against the continuation of British political power and not against their business interests. You could get people to act against the first but not the second, except of course in individual cases of industrial disputes. You may say that it takes an electorate of some sophistication to make a distinction between the two and I'll accept this as a valid point. At the same time I will add that the special role which Singapore plays in the region, of which most people are undoubtedly aware, helps to make it easier 132

to see this distinction. role. Singapore

has

been,

Let me dwell at some length on this and

still is, the entrepot

centre of

Southeast Asia. In the post-war years, many observers believed that when countries in the region achieved their independence, much of the entrepot trade would be lost as these new nations establish direct trade relations with the outside world. Prophecies of this kind are nothing new in the history

of Singapore. May I quote

from Makepeace's

Years ofSingapore published in 1919.

Ad

One Hundred

Yad tinge

At this time there were misgivings as to the future of our trade; the acquisition of Hongkong and the opening up of commerce with China were expected to affect our interests injuriously; it was thought that the zenith of Singapore's prosperity had been reached. Later, when Labuan was ceded to us, many were the evil prognostications in circulation. And so on down the century we have always had from time to time these gloomy forebodings. In our own time most of us can call to mind doleful prophecies that Singapore's supremacy must decline in these advanced days of communication and direct shipment.

—,

:

>

:

:

.

In much of the nineteenth century, commercial rivalry between the British and the Dutch was centred around the entrepot trade of Singapore which the Dutch resented and wanted to by-pass. The odd thing was that very often Singapore was successfully by-passed and yet trade grew by leaps and bounds. How did this happen? Successful by-passing of Singapore was not so much the result of trade controls by foreign governments as the result of improvements in transport and of economic growth in the region leading to the building of new ports elsewhere. The loss of the entrepot trade in China tea as a result of the tea-clippers sailing direct from Britain to China is an example of the first. But superior transport systems, while bringing diversion of trade insome

commodities,

opened new trade opportunities in other lines. The building of new ports in the region, while diverting some trade, increased general prosperity in the region which, in turn, was reflected in more trade for Singapore. We seem to have enjoyed the best of all worlds. In a sense

133

this is true, but what should not be forgotten is that we earned this good fortune. We earned it by taking advantage of our central geographical position, our natural_harbour, | ahd; above all, by providing the most efficient service at the lowest possible cost. Only in this way can we maintain our —

pre-eminent trading position. And

it goes without saying

that to secure this level of efficiency, we must have an open competitive system. At least, I knowno other way of achieving efficiency. We cannot allow business success to depend on, for instance, access to political influence —a situation not unfamiliar in other countries. Once we resort to dubious practices of this kind, our economic decline will soon set in. The open competitive system not only makes for efficiency. It also explains why foreign big business in Singapore has not become a politically sensitive issue. This would not have been the case if their operations were based on privileged positions protected and licensed by the colonial government. It also explains why a rational elected government of Singapore refrains from taking measures designed to make structural changes in our trading practices. And in all this we see the vindication of the great vision Stamford Raffles had 149 years ago of the miraculous manner in which liberal economic principles would transform a small fishing village into a great city.

134

Singapore’s Monetary System, 1969

Since I shall be leaving Singapore next week to attend the Annual Conference of the World Bank and the International Monetary Fund a sense of occasion would dictate that I talk about money. At first I was sorely tempted to give my views on the present state of the international monetary system. However, on reflection, I resisted this temptation for two reasons. The first is that it would be prudent for a country like Singapore not to give unnecessary offence to the great. The state of the international monetary system being what it is, this is best achieved by withholding comment. The second and more immediate reason is that one should not gotoa meeting of cardinals reeking of heresy. I have therefore decided to talk to you about more parochial matters, namely our own monetary system, a subject which gives less scope for impious or irreverent thoughts. When we left the Federation of Malaysia on the 9th of August,

1965,

we

were

faced

with

urgent

decisions

about the

kind of monetary system we should establish for the new Republic. The urgency was caused not merely by the fact of independence but by the previous notice given by the Government of Malaysia to the Board of Currency Commissioners of Malaya to terminate the old Currency Agreement Speech at the thirteenth anniversary dinner of the Economic of Singapore, 20 September 1969.

135

Society

which had provided for a common currency between the states of Malaya, Singapore and the Borneo territories. This meant that by the 11th day of December 1966 Malaysia would have its own currency and the old currency notes would be replaced and eventually de-monetized after that date. What the Government had to decide was, first, whether to establish its own currency or to have a common currency with the Federation of Malaysia. Secondly, to decide on the nature of the new monetary authority, whether it should take the form of a central bank, or the old-fashioned currency board or some other form. These were novel and challenging problems. We had no experience in managing our own currency and accordingly decided to engage experts to advise us. Further, there was little time left for making the physical arrangements on note and coin issue. Even after more than two years of independence, we were virtually without any new coins when sterling devaluation occurred. It was necessary to rush emergency measures at great cost, airlifting 180 tons of coins in ten plane-loads of chartered aircraft at a cost of nearly a million dollars between 5 and 25 December 1967. The currency problem was kept under close and continuous study by Cabinet. No less than seven cabinet memoranda were prepared and discussed at length between 21 November 1965, when the subject was first brought up, and 23 July 1966, when the final decision was made. Having acommon currency with Malaysia at that time had great attraction for many members of Cabinet. To have a joint currency would mean greater combined total reserves and hence astronger currency than two separate currencies. Secondly, by established custom, Singapore has had a common currency with the states of Malaysia for several years. The introduction of a new currency may well produce difficulties over confidence and acceptability. Finally, there was a fair amount of external pressure to retain as far as possible existing economic ties with Malaysia and it was thought that splitting the currency would be a retrograde step.

In spite of its attractions, Cabinet recognized that certain complex problems arise in sharing a currency with another state.

There

are,

of course,

136

precedents

in other

parts of

the world. the French

For instance, the principality of Monaco uses franc and in another principality, that of Liechtenstein, the Swiss franc circulates as currency. But Singapore stands in a somewhat different relationship with Malaysia and matters of ownership and control of reserve assets which do not arise in these two principalities are matters of importance for us. To have our own currency might mean smaller reserves and hence a weaker currency. It would sever an important tie with Malaysia. Having a common currency avoids these but creates problems over ownership and control of reserves. It was a complex and intricate problem. Cabinet finally arrived at a decision in the way human beings are prone to when faced with complex and difficult choices. It decided to have its cake and eat it too. Without going into technical details, the proposal was to have currency notes of the same design but run on different serial numbers, each country to have its own series. The external assets will accrue to the respective monetary authority according to redemption of the old note issue and will be kept in two separate accounts. Nominally Bank Negara Malaysia would present a combined account; the Singapore Authority would maintain its own accounts but would keep Bank Negara informed of all changes in reserve assets. It was an extraordinary compromise and, with the assistance of experts to help out in negotiations between the two Governments, nearly all technical problems were solved to the satisfaction of both parties. However, finally, in respect of one detail, some legal technicality on ownership, agreement was not reached and negotiations broke down on this point. Singapore then decided to have its own currency. As regards the type of monetary authority, whether it should take the form of a central bank or a currency board, a decision was reached without much difficulty. The test Cabinet decided to apply here was which type of institution would inspire more confidence in the new currency? There is little doubt that the currency board would fulfil this requirement better than a monetary authority of the central bank type. I think Cabinet reached the right decisions on both these issues. My personal position was to support a separate 137

currency right from the beginning as Idid not believe that joint currency arrangements could work in practice. These are bound to lead to long and tiresome arguments between the parties concerned and in the interest of good relations between the two Governments; I thought it wiser they should go their separate ways. But I supported the compromise that was reached in Cabinet though without any confidence that agreement was possible. Somewhat to my surprise, negotiations made more progress and lasted much longer than I had expected. Once the two Governments decided to go their separate ways, they both recognized that their two currencies and, indeed, their banking systems stood in special relationship with each other as against the rest of the world. Accordingly, it was decided that this relationship should be enshrined in some kind of agreement to give special status of the currency of one in the territory of the other. The Interchangeability Agreement which spelt out this relationship was formalized in an exchange of letters. It is working well and is serving its intended function. It has survived the sterling devaluation crisis and all the other numerous crises which have plagued the international monetary system in the past three years. When Cabinet decided to establish a currency board instead of a monetary authority such as a central bank, the reasons were, as I described before, short term. As such, the subject of establishing a central bank will no doubt have to be seriously considered at some time in the future. There are, of course, many advocates of a central bank both in academic-and other circles. But I think that the reasons they advance have limited relevance in an economy such as Singapore's, Take, for instance, monetary policy. A central bank, as against a currency board with its automatic mechanism anda legally prescribed minimum reserve cover for the currency issue, is believed to have the virtue of flexibility in respect of control over monetary supply. It was thought that by means of credit creation during a down-turn of the economy and credit restriction in an up-turn, fluctuations of economic activity could be levelled out and more stability introduced in the system. There is one snag to this argument, and that

138

is the question of import leakages, Anyone in the slightest doubt as to the seriousness of this problem would have his doubt quickly dispelled by a reference to Table 13.3 of the Yearbook of Statistics. In 1968, of an estimated private consumption expenditure on goods of $2,047 million, no less than $1,230 million or 60 per cent consists of expenditure on imports. The percentage varies between class of goods, being

75

around

per

cent

in recreational

goods,

durable

goods and clothing and personal effects. Even as regards food, $493 million out of $880 million, or 56 per cent, was imported. When some 60 per cent of expenditure on goods leaks abroad, the effect of the Keynesian multiplier, which

provides

the raison

d‘étre for an expansionary credit policy

during periods of low economic activity, is subject to severe constraints in its operations. If during a slump Singapore decides to expand credit as a means of counteracting the recession, the result could be to compound our difficulties. An economic down-turn is likely to be accompanied by a run-down of our external reserves. When credit is expanded with

the

object

of increasing

expenditure,

the result would

be to accelerate the loss of reserves. Sooner or later we will be landed with the need to mount strict foreign exchnage and import controls. A seaport like Singapore, with a wide open economy, is a Controller's nightmare and the final result of financial miscalculations could be more traumatic than would be the case with other countries. As a consequence of this, there is for Singapore no easy way out. The way to stabilize the economy would lie less in monetary than in fiscal measures. During a down-turn, it would be possible to mitigate the harsher effects of a recession if the Government were to run budget deficits financed not by central bank credit creation but by spending accumulated overseas assets or proceeds of foreign loans raised on the collateral of these assets. But this would imply the accumulation of such funds during good times. This is what we are doing and for this we don't need a central bank,

as

the

instrument

for

such measures

of stabilization

would be the normal government budget. But even here the efficacy of a stabilization programme through fiscal policy is subject to the same constraints as monetary policy. The

139

advantage is that these limitations are more immediately apparent and the risk of over-playing one's hand is accordingly less. So I am afraid the solution is prosaic and unglamorous. For us in Singapore the road to greater wealth is through thrift, enterprise and hard work. The road to stability lies in prudence and foresight in prosperity, and patience and fortitude in adversity. In the swinging age of the new economics, all this sounds old-fashioned and Victorian. No doubt it is, but I think it is unrealistic to expect that doctrines worked out for developed economies where foreign trade forms a relatively small part of the GNP would apply in their entirety to the exceptional situation that is ours. I would like to give you a brief outline of how our present monetary system works. There are some misconceptions about this. Some are inclined to think that our monetary system on the Government side consists of the Currency Board and no more. Others find distasteful the idea of the Accountant-General performing certainfunctions of the central bank, such as lender of last resort. The present position is quite complex and no less than ten government departments or authorities are involved. Thereis first, of course, the Currency Board of Singapore whose functioning is determined by the Currency Board Ordinance and the automatic mechanism of its operations is known to all. Then there is the Exchange Control Department, This is a shadow of its former self in the immediate post-war years when exchange control within the sterling area was a powerful instrument of policy. Because it operates under sterling area rules which are becoming increasingly irrelevant to Singapore, the Control wears an increasingly Byzantine aspect. However, we are still in the sterling area and we must observe the sterling area rules. Then there is the Accountant-General's Department. I should mention in passing that the Accountant-General is the Deputy Chairman of the Currency Board as well as the Deputy Controller of Foreign Exchange. The AccountantGeneral comes into the monetary picture as he keeps the deposits which banks have to maintain with the Government under the Banking Ordinance. He also issues Treasury Bills

140

on tap to banks. In a limited sense he is lender of last resort in the banking system. The fourth component of our monetary system is the Commissioner of Banking. He enforces the Banking Ordinance which is intended to see that banks keep sufficient liquid funds, engage in sound banking practices, whatever this means. I have always thought that for a government official to tell banks what they should do is like teaching one's grandmother how to suck eggs, but the experts assure me that this is not the case and that it is necessary to keep banks under constant surveillance. Then there is the Registrar of Loans who is really the Accountant-General wearing yet another cap. He has just floated, as you know, a loan of $187 million, a record in the Republic's history. I suppose we should include the Registrar of Companies as he is concerned with the processing of applications for Stock Exchange listings. I should certainly include the Clearing House by which inter-bank settlements of cheques are effected twice daily. The Clearing House is managed by none other than the Accountant-General. Then there is the Commissioner for Finance Companies who is really the Commissioner of Banking administering a different ordinance. An important element in the system is the Department of Over-

seas

Investments.

This used to be the alter ego of that ver-

satile public official, the Accountant-General. The need to set up a separate department to look after our overseas assets became increasingly urgent as aresult of the exceptionally fast rate at which these were increasing. Last reported

at $2,200 million, they are now heading for the $2,400 million mark, Finally, there is the Ministry of Finance itself which directs and co-ordinates the activities of these ten separate authorities

and

departments.

sisting of units that grew

It is an untidy

up

adhoc

system,

in course

con-

of time in

response to urgent requirements. In the aggregate, they can be said to perform central banking functions in the Re-

public.

The task of co-ordinating and directing the policies

of these ten departments is not a simple one. It cannot be done entirely by conventional methods of government procedures, that is, by writing minutes to one another. A system

141

developed in the Ministry of weekly conferences whereby staff invarious departments meet me early on Monday morning. Reports and study papers are circulated the previous Saturday for weekend reading. During periods when the financial centres go through a crisis of one kind or another, I hold an additional staff meeting on Friday, and during periods of acute tension,

on Thursday as well.

How has this system been performing? A recent assessment made inthe London 7imes, which published a Singapore supplement on 9 September this year, goes as follows: In the financial area too there is an atmosphere of optimism and confidence in thefuture. The currency is strong....Money is easy, with interest rates among the lowest in the world. The budget is balanced, there is no inflation, and no balance of payments problems or restrictions on credit.

In sum, the system is doing well. I would add a word of caution, for the Singaporean is apt to attribute his good fortune to some superior merit or high virtue which only he possesses. In this instance, there are some favourable technical factors of a temporary nature. With luck, these may persist till the middle of next year. Be that as it may, I now pose the question which is the subject of my talk, 'Should Singapore have a central bank?' The answer, in my opinion, is» 'Yes:'

Some of you who have been following my arguments closely may say that this is a complete non sequitur but this view really misses the point which I am trying to establish. This is that we do not need a central bank for the purposes of credit creation or flexible control over money supply. Even without a central bank, we have the means whereby credit can be created through the Accountant-General's operations, though some ingenuity has to be exercised for this purpose. Similarly, control over the supply of bank money can be exercised through the Commissioner of Banking. It is doubtful, though, whether open market operations would be the efficacious instrument that they are in countries with a well-developed money market. Having or not having a central bank makes no practical difference in this respect. The case for establishing a central bank in Singapore rests on other grounds. First, the untidy scatter of elements 142

making up the government structure of the monetary system can be collected together in one house. Apart from administrative tidiness, itself byno means aderisory consideration, the assemblage of these units into a coherent structure would give the organization a sense of purpose and direction which is now lacking and which is only partially supplied by the Monday morning meetings. Only in this way can we develop a high level of professional expertise which is needed in the conduct of monetary affairs. I would add two provisos as regards the timing. Firstly, the move to a fully fledged central bank should be taken in two steps. The first step could be to collect the disparate units into a central monetary authority which will work closely under the direction of the Ministry of Finance. In course of time, with the growth of professionalism and the development of appropriate financial doctrine, a proper central bank will emerge from this authority. In this way we can have a central bank worthy of its status as an independent monetary institution. My second proviso is that it will certainly be necessary to wait until the present reforms contemplated for the international monetary system have proved their worth and the financial world has moved into a period of tranquillity. In the meantime, I fear, there is no substitute for the inordinate amount of time and effort which my staff and I devote to the study of current monetary developments. There is another more sophisticated reason for establishing a central bank. Perhaps I can best describe this by ana-

logy. It is related to the way in which man makes his decisions in the face of difficult situations. The most difficult decisions to make, I expect, are those connected with the conduct of wars whendecisions have tobe made under stress, in the face of imponderables and on the basis of imperfectly

known data. It is instructive to see how man has tried to escape from the horns of dilemma. Let us take the Roman generals. When they find themselves in a state of extreme perplexity they kill a sheep and examine its entrails. On the basis of portents which they read from the condition and configuration of the sheep's entrails they often reach their most fateful decisions. We moderns of the twentieth century

143

find such procedures laughable. So we have generals of modern states arriving at their decisions with the assistance of systems engineers and electronic computers. I suppose that it can be said that this method of decision-making is more rational than the Roman: system. And yet I wonder if it results in more correct decisions or whether generals equipped with computers can always beat the daylights out of generals who don't have computers. I doubt if this is the case, for if it were so the Veitnam conflict would have been resolved long ago. The point of this incursion into the esoteric field of military decision-making is that if you have to make mistakes, it is best to dosoby the most modern scientific method. To me this is an unanswerable argument for setting up acentral bank in Singapore. And it has the advantage of many distinguished

thought

for

precedents.

reasons

But

I must

I gave

at the

144

not pursue

beginning

this

line

of my

of

talk.

Education Reform

In recent months, there has been increasing attention paid in the Singapore Cabinet to educational matters. The first phase of the Government's education policy has come to an end. In this phase the aim was to provide a place in school for every childof school age. There was an enormous backlog to be caught up with and the emphasis was just on quantity — producing enough schools and turning out enough teachers to give education to every child. This aim has been achieved and today there are more than enough places in schools and we are moving to a second phase._ In this phase, the aim is to improve the quality of education. How can we achieve this? We have to do some thinking “on many basic problems and go beyond the purely professional aspects of education. That is to say, the content and syllabus of teaching, teaching methods and that kind of thing. For, when reshaping the whole education system, you have to be very clear in your mind what is the type of product you wait toturn out. To answer this question, vwe eM

HEN Oesome

ore RS

future that we think the a cide what

changes

we

have

should have which will de-

to make

in our school system.

Speech at the Anglo-Chinese School eighty-first Founder's Day reunion dinner on 1 March 1967.

145

Every minister probably has his own views on this subject and I will give mine. I do not say that my colleagues agree with

me

on

every

detail.

But for what

it is worth,

this is

what I think on the subject. In reforming an education system, we must build on what already exists rather than demolish the present structure and try to restart from the ruins. If we were Mao Tse-tung and we had a million Red Guards in Singapore, we might be tempted to do this in a moment of insanity. But the proper thing would be totake advantage of what we have and improve upon it. I therefore want to speak only about the improvements that can be made. First, I think that there has been far too much emphasis on academic performance. The Higher School Certificate contains too many subjects and the number of subjects can be reduced to advantage. At present the general complaint is that the young have to spend so much time in studying that they have very little time to do anything else, such as playing games. An education that lays too much stress on the academic as against the physical and moral side of life is unbalanced and lop-sided. I think this obsession with getting outstanding results in the Cambridge examinations is a very bad thing. After all, much of what a boy or girl learns in school — history, geography, mathematics or chemistry —will be forgotten in ten years' time. What is the point, therefore, of all this effort? The real purpose is to distinguish the bright and clever boys and girls from the less bright and clever. A classification of this kind is necessary for purposes of university entrance and maybe eventually for selection of candidates in the Civil Service and other occupations. If this is the purpose of examinations, then obviously you can discriminate

between

excellent,

good,

fair

and

mediocre

on

the

basis of, say, three or four subjects as you can ona larger number. Further, you can take into account other activities of the students, such as sports, participation in extracurricular activities, leadership potentialand so on. In fact, this is what we should do and what people in advanced countries are doing. The preoccupation

in Singapore with exami-

nation results is unnatural and unhealthy and we should bring it toan end asearly as possible.

146

After all, good performance

in examinations only proves one thing —ability to answer examination questions. This ability is, presumably, related in some way to intelligence. It-is-also related-to-the-posses——

sion of good examination techniques. And it does not tell us ~a lot of other things about a person, for instance,

his inte-

grity, his character and so on, which are just as important as intelligence and more important than the mastering of examination technique.

Going back to the reforms in the education system,

apart

from greater stress on the physical side of education, I think there are three matters or aspects of education which have been neglected in Singapore, possibly as a result of over-emphasis on examinations. These three aspects are 1) creative imagination, 2) character, 3) moral values. I do not say that the present system does not try to instil moral values or develop character or cultivate creative

imagination. What I am saying is that the effort is not sufficient and must be greatly improved upon. At any rate, this is my impression, judging by the products of schools. Let me deal with each of these three points. By creative imagination I mean the ability to think independently and find solutions to problems without reference

to the textbooks and without instructions from others. Imaginative thinking is, for instance, cultivated in playing an intellectual game like chess. It is encouraged in certain types of physical activities like outward bound training courses. It is inhibited by parrot-like teaching of textbooks and I hope that abominations of this kind will cease in all our schools. It is only when a person can think creatively that he is capable of initiative, that he can form his own judgements on matters and that he can be entrusted with great responsibility. These are the qualities which we want to inculcate in the young. The second point is character. The psychologists say that character and intelligence are independent attributes. An intelligent person can have no character; that is, he may be weak

and

irresolute.

Conversely,

persons

of lesser in-

telligence can show a high degree of courage and tenacity when placed in trying or adverse conditions. I think Iam 147

right in saying that the development of character in this sense has not received the importance it deserves. In the British public school system there has been a very great stress on character-building and I think this is an admirable example which we would do well to follow. Now I come to moral values. Imagination and character are necessary but not sufficient in themselves to produce a desirable type of citizen. For instance, the most successful leaders of pirates, brigands and gangsters have imagination and character in ample proportions but they, of course, are sadly lacking in moral stature. This part of education is receiving due attention in a school like the Anglo-Chinese School which, as an institution founded by religious missionaries, naturally puts high priority on training in moral values. This, of course, is a good thing and I hope that it ‘will be extended to all schools, particularly government schools. The importance of moral values to good citizenship is obvious. We want people who have a sense of social responsibility, who are able to overcome their innate instincts of greed, personal vanity and other human weaknesses in the interest of the common good. Without a widely accepted code of moral values, Singapore will remain what it is now — a community which is basically self-centred and selfish. Such a community may be all right if it is governed by others, but it will not survive for long as an independent democratic national state if the more successful citizens continue

to place

their

self-interest

before

the

interest of

the community. This point is obvious, I do not think I need labour it. Now, why do we want to turn out citizens of this kind, that

is,

with

creative

imagination,

stout

character

and

a

sound sense of moral values? I believe that without this kind of citizen, there is no guarantee that we can maintain. a continuing basis for our survival and prosperity. As an island-republic in the centre of a turbulent region, our society needs to be resourceful and adaptive. We should be able to seize every advantage which the current situation offers

us.

We

must

be

prepared

to innovate,

to strike out

into new lines of activity whenever these are necessary for our well-being. Without creative imagination there can be 148

no innovation and without innovation we will not succeed in adapting ourselves to circumstances as they change. As for character and resolution, these are always necessary in adversity. At present we have a community which tends to be complacent and arrogant when successful. At the first signs of coming troubles, our people are liable to panic. There is no guarantee that in future decades ali will be smooth sailing all the time. So, without some iron in the soul, without a strong backbone, a debacle can be brought about should we be confronted with a sustained series of misfortunes. Once people lose their confidence and décide to pack up, Singapore can quickly revert to the jungle swamp

that Stamford Raffles first saw in1819 for we have no natural wealth to fall back on. These, then, are the qualities which I see as necessary in the future citizen,

and indeed,

in ourselves.

The present

thinking of the Government on the reforms in our school system will, I hope, stimulate public debate and public thinking on the subject. Both the professionals — school principals and teachers — and the laymen — community leaders and others — have an important contribution to make in the reshaping of our education system. First we have to decide what kind of product we want to turn out. This is something which concerns all of us. Once this is decided, then we can leave it to the professionals to say how we go about achieving what we want. I hope that the Anglo-Chinese School will play a leading role in this process and that the Old Boys' Association will also have valuable ideas to con-

tribute.

149

Population Control

Last year, Mr McNamara made out a powerful case for population control as a paramount item of policy of developing nations in their quest of increasing economic welfare of their inhabitants. In his address last Monday he has reinforced these arguments with force and clarity. The experience of my own country Singapore in this field may be of interest to the conference. For a short period of eleven years, we have reduced the annual rate of population increase from a horrendous 4-4 per cent in 1957 to a manageable 1-5 per cent in 1968. Distinguished delegates may be interested to know how this rapid decline in the rate of increase was achieved. It would be pleasant if I could ascribe this result to farsighted attempts by my Government to introduce a rational population policy as a consequence of undertaking a costbenefit analysis indepth of the economic value of new babies. It would be pleasant but it would not be true. The actual sequence of events which led to declining birth rates followed a different course and I may perhaps be allowed to relate some of the more important events. In 1959 my Government was elected to office on a platform which included, inter alia, free universal primary education. If regard had been taken to the demographic Speech on 1 October 1969 at the International Monetary Fund/International Bank for Reconstruction and Development Annual Meetings in Washington.

150

trends of the previous two decades, the Party might perhaps have hesitated to make this electoral promise. But demographers are seldom consulted in the drafting of election manifestoes. A crash programme soon started to build new schools — soon one school was completed every six weeks — and torecruit and train teachers by the thousands each year. Expenditure on education grew at an annual rate of nearly 30 per cent thereby putting severe strains on the budget. In February 1963 I was idly going throughroutine papers, among them the preliminary 1962 report of the Registrar of Births and Deaths. It contained a remarkable statistic — the total number of births in 1962 was reported to be just under 59,000. I recognized at once that an extraordinary event had occurred as births in the previous fifteen years had increased from 20,000 a year to more than 60,000. Clearly the matter called for close examination as to the reasons why the previously burgeoning number of births had apparently levelled off. The government statisticians got to work on this and reported that since 1957 there had been a steady and continuous decline in the age specific fertility rates for all age groups. That is to say, birth rates were going down for women of all child-bearing ages. The levelling of births was therefore not due to changes in age and sex composition of the population, as for instance could result from the small numbers of girl babies born during World War II and coming of age, or to defective birth registration or for other reasons. Unknown to me at that time, the University of Singapore demographers had independently come to the same conclusion on the basis of their own research. This was a discovery of profound importance for it meant that it was possible to expand education expenditure without dreading that the inevitable outcome would be to flood the labour market with unemployable educated school-leavers as had happened in so many other developing nations. Further, there was hope of a levellingoff of expenditure on education in six or seven years' time. The problem had assumed a finite dimension and it was possible

to proceed

with development planning with the hope that the resulting increment in GNP will not be eaten up by uncontrolled population increase.

151

The reason for declining fertility was obviously related to family planning. This was started in Singapore by a voluntary group of private enthusiasts way back in 1952. The only support given by the Singapore Government was a derisory annual grant of US$33,000 or two cents per head of population. The decline in fertility rates continued as the activities of the Singapore Planning Association met with increasing response. By 1965 it became clear that the scope of work was beyond the capacity of this voluntary organization to handle and Government established an official agency under an Act of Parliament, the Singapore Family Planning and Population Board, to augment family planning efforts. The annual subsidy was increased to three and a half cents per head of population. By virtue of improved planning, execution, more personnel and greater promotion work a substantial increase in converts to family planning was achieved. In 1965 the number of new cases was just under 10,000. In 1966 it trebled to 30,000. The effect was a sharp drop in the birth rate for 1967 and 1968. Between 1957 and 1965 there was an average annual decline of 3-7 per cent in the age specific fertility rates. Between 1966 and 1968 the decline averaged 8-6 per cent a year.

During the whole period under review, that is 1957 to 1968, the crude birth rate fell from 42-7 per thousand to 23-8 per thousand. The rate of natural increase, that is excess of births over deaths, fell from 35-3 per thousand to 18-2 per thousand. The difference between these figures and the ones I quoted earlier is due to migration, which was positive in 1957 and negative in 1968. What lessons can we draw from the Singapore experience? I will make the following points somewhat tentatively for our experience is recent and muchresearch is still going on with only some of the results available. The first point which emerges is that the initial fall in the birth rate was not the result of Government policy or action and in fact had been taking place for several years before Government became aware of it. Second, once acceptance of family limitation had taken root in a significant part of the population, an accelerated

152

decline was achieved by Government effort throughimproved methods of dissemination of information and advice, contraceptive supply and so on, Third, on a technical point, the intra-uterine device on which many people had placed high hopes proved a failure in Singapore. So did sterilization. By far the most popular technique was oral contraceptives. Two-thirds of new converts use the pill. Fourth, family planning penetrated all ethnic, cultural and religious groups though at different rates. Even the Muslim and Hindu communities, hitherto believed to be traditionally hide-bound, have taken to family planning and have shown continuous decline in fertility rates over the years. Fifth,

family been

the

initial

limitation born.

experience

only after

In recent

years,

was

that

mothers

took to

a large number of children had the

evidence

is many

take to

family planning soon after marriage. What caused the population to take to family planning in increasing

measure?

First,

it should

be remembered

that

Singapore's population is essentially urban. Mass media are varied, efficient and effective if the message put across fills a need felt by the population. But this still begs the question why people desire to limit their families. Is there one factor more important than others? Here I can only hazard a guess for field research has yet to shed light on many unknowns. My own guess is that the population of Singapore took to family limitation for much the same reasons as other societies did. But the rapid results achieved may have some causes rather specific to Singapore. One of these is probably the rapid improvement in the status of women in recent years —their access ona rapidly increasing scale to free education and to paid employment, their rights to property, the abolition of polygamy, punishment of husbands for deserting wives, and other rights

under the Women's Charter passed by Parliament in 1962, This was soon followed by introduction of equal pay in the Civil Service. Once women begin to achieve a status of dignity in society, the rest is a matter of technique. In conclusion, it is a matter of satisfaction for Singapore that the Chairman of the Singapore Family Planning and

153

Population Board and concurrently Singapore's Deputy Director of Medical Services, Dr K. Kanagaretnam, will soon join the staff of the World Bank as Chief of the Bank's Population Projects Department. This is a brain drain which Singapore does not grudge. It is our hope that other developing countries will be able to have the benefit of our experience

cultural methods

though,

of course,

their

social,

economic

background being different, no doubt and approaches will need to be used.

154

and

different

Voluntary Social Work

There are two ways in which a modern society provides services for its citizens. The first is by government action, the second is by voluntary effort of private citizens. There are certain services which only the government can provide. For instance, in no well-ordered society do private citizens carry out the functions of the army, police, the prisons and the law courts. These functions are properly carried out by the government.

On the other hand,

there are

certain activities which governments usually do not wish to be engaged in. Other than in communist countries and in underdeveloped countries in the last stages of economic ruin, governments do not engage in wholesale and retail trade. Generally, most economic activities are also carried out by private enterprise. There is a considerable field where services may be provided both by governments and by private citizens. In Singapore, water, electricity and telephones are run by government bodies. The Port of Singapore is also run by a government agency. In other countries, these services are sometimes managed by private business. It is in the field of social services that there is a considerable overlap. In education, we have some schools run by private citizens Speech at the First Plenary Session Conference on 8 January 1966.

155

of the People's

Association

and others by government. Similarly, we have government hospitals and medical clinics as well as private ones. We have private social welfare institutions as well as government social welfare institutions looking after children, old people and other socially handicapped persons. What is the proper criterion by which to judge whether a service should be provided by the government or should be carried out by free private initiative? The answer to this question is that there are no universally accepted prin- | ciples to go by. What happens in any country is very much the result of its own historical experience. Sometimes you have among the citizens, men of philanthropic disposition who create and provide these welfare services for their less fortunate fellow-citizens. Then the private effort will be larger than the state effort. Sometimes you have a government that is energetic in these matters and you get the reverse situation. Where both government and citizens are lazy and indifferent to the public good, then a sad state of affairs exists. Sometimes you have religious or other missionary bodies from abroad who set up these establishments in the country. The present mixture is the result of past experience as is the case both in Singapore and elsewhere. There is, however, cieties,

particularly

one development democratic

in most modern

societies,

so-

which has given

rise to concern among thinking citizens. This is the trend towards what some people consider ‘excessive government’. The government, instead of encouraging private initiative to work

out

solutions

for the

community,

moves

in under

one

pretext or another to provide for these services whether or not they are really wanted and whether or not they do any

good.

For instance

I have often wondered whether there is

any point in spending money in improving medical services in a poor and over-populated country. Similarly in a country where jobs are scarce and unemployment rife, why do we want to achieve universal free secondary education? I said a moment ago that this danger is prevalent in democratic societies. The reason is not far to seek. The Americans have coined a phrase which explains it very well — 'the pork barrel', This refers to the practice in American states andcities whereby the elected state or city government

156

makes use of public money for vote-catching purposes. No elected government is free from this danger, What I find remarkable is that the citizens actually encourage governments in this kind of activity. Somehow, when a government builds a road in a kampong or provides it with electricity or water supply, the notion is accepted that the government is providing something valuable free of charge to that community. In a sense, of course, it is, in that the persons enjoying the benefit of the road or the street light or the water mains are not called upon to pay directly for the cost of establishing these services. But in a real sense, this notion is quite illusory. Nothing is free, because it has to be paid for out of taxes which are collected from the citizens of the whole country. So, if the citizens want more and better services, they should be prepared to pay more taxes and at higher rates. But if any project were to be put bluntly in these terms, quite a great deal of the appeal of the pork barrel will have gone. There is another cause for this trend towards excessive government. The rich countries of the West have been able to provide such social services because they are rich. Welfare state concepts have been transmitted to underdeveloped countries including our own through higher education, books, films, travel abroad, etc. All these require governments to provide additional state services in the interests of the citizens. I do not wish to exaggerate the dangers of excessive government in Singapore. Matters are worse in certain other countries than they are here, for we have basically a population with a strong tradition of private initiative. The pioneering spirit of our ancestors has not, as yet, been vanquished by the new ideas of the welfare state. Before I pursue this line of argument, I want to make it clear that Iam not against the welfare state. All modern societies, whether based on private enterprise or on the communist system, move towards the welfare state in their advanced stages of development. What I am opposed to is the belief that the good things of life can be got without sustained effort, and that it is the duty of a good government to act as the ‘uniIn our present stage of development in versal provider'.

157

Singapore, we are not rich enough to be able to set up the welfare state. Our first preoccupation should therefore be the accumulation of wealth through economic growth rather than a more equal distribution of existing wealth and a pro-

liferation of state welfare services. Under these circumstances, the scope open to private effort in providing community services is very large and accordingly every encouragement should be given to voluntary effort. It is necessary not only to maintain voluntary effort at its present level, but also to expand it into new fields. What are the new community activities which can be developed in Singapore? I want to discuss this subject not only in relation to what is possible in community centres but also against a larger background. I intend to take up a number of concrete proposals for the consideration of the Conference. There may be other proposals which may be just as worthy of the attention of the Conference, but obviously in a subject like this, it is not possible to discuss all of them. My first proposal relates to the care of old people. We all have often heard it said that we are a young population with more than half our people under twenty-one years of age. All this is quite true. Yet, for quite a long time, there has been an acute social problem of old people, a problem

which has not received the attention that it deserves. I believe this problem to be peculiar to the immigrant communities in Southeast Asia. Who are these old people and what is their problem? Why is it that they cannot be looked after by their children just as old people in most Asian communities are looked after? The answer is simple. These are the people who first came to Singapore, mostly from China but some also from India and Indonesia, some thirty or forty years ago. They have never married here and have not brought their families with them.

Consequently, in their old age, they have no relatives to look after them and they live in utter destitution. Further, since the Central Provident Fund was introduced some ten years ago, when they were near or past the age limit for contribution, this source does not provide them with much money.

158

In due course, of course, all these people will die and the problem then solves itself. But I do not think it can be a credit to our society to solve the problem in this way. There

are

several

between

of them,

thousands

10,000

to

15,000, both men and women, mostly sixty-five years or older. They are incapable of work and are dependent on public assistance from the Social Welfare Department. Most of them would like to live ina home for old people. There are five such homes now — three run by the Government and two by private institutions, but their combined capacity amounts to only a fraction of the need. Those who are not looked after in homes for the aged live under pretty miserable conditions. Should the entire responsibility of decent care for these old people rest on the shoulders

also

of the Government,

share in this responsibility?

numbers

of homes

for

the

aged

or should private citizens

It is no use building large because,

as

I said,

when

these immigrants die, then it would be necessary to close down most of these homes. It seems to me that organized private effort, working in co-operation with the Government, can reduce the extensive suffering and destitution now being experienced

by the

old.

For

instance,

Government

can en-

courage donations from local citizens towards the establishment and maintenance of a ward ina home for the aged for substantial donors, or even a bed for those with limited means. A sum of $3000 to $5000 may be adequate to see an old person in decent comfort the rest of his or her life. Those of you who have personal experience of the living conditions of these old people would know how urgent the problem is. What is needed here is a joint effort by voluntary leaders and Government to produce a practical solution. My next field for voluntary social effort lies in traffic accidents.

If, each

week,

three

or

four

persons

are eaten

by tigers in Singapore or struck dead by lightning, there is bound to be a public outcry and a demand for action to put an end to it. Yet, when the same number of people are killed by motor-cars, buses, taxis and lorries, nobody feels that

anything unusual has occurred nor is there any feeling that the community must do something about it. The result is that

159

the slaughter on the roads continues, inflicting much avoidable pain and suffering on hundreds of families each year. Why do we get this state of affairs? Is it because the Singapore citizen is a selfish and unfeeling brute, caring only for himself? I do not think this is the answer, for we have many examples of selfless voluntary effort in so many fields. I think the real reason is ignorance of the size of the problem. One does not see an accident every day and on the occasions when one does come across street accidents, the mangled body has usually been removed. So the number of people killed or maimed on the roads remains only a statistical entity. We will not be able to reduce traffic deaths and injuries until the whole population is made aware of how serious the matter is. This requires a sustained programme of public education through all the media of publicity at our disposal. Voluntary leaders obviously have an important role to play in a public education programme of this kind. My next example relates to an activity closely connected with the community centres, namely, the Vigilante Corps. The Vigilante Corps was formed last year following the two riots. Response to the call was excellent and the number enrolled into the Vigilante Corps comes to 10,000. Attendance at functions, patrols mounted each night have all helped the police in the maintenance of law and order. It is necessary that the keenness of the Vigilante Corps should be maintained and their organization and training strengthened. Members of Management Committees can play an important role in these matters in encouraging and supporting the Vigilante Corps. The police is working out a programme of training and reorganization of the Vigilante Corps, whose services have been a matter of great pride to the country. On examining the working methods of the Vigilante Corps, I find that items such as coffee, sugar and torch-light batteries have still to be supplied by Government. It seems to me that these are properly functions which the Management Committees of community centres can very well take upon themselves. :

My last example is how to make Singapore a clean city. The

main

work

of

removing

160

refuse

is,

of

course,

the

responsibility of Government. The Ministry of Health will soon increase the number of street cleaners employed, so that we shall have a city that is tidier than it is today. But whatever the number of street cleaners the Ministry of Health employs, the private citizen has a responsibility. This responsibility is of two kinds. The first is to desist from dirtying the city by dropping litter on the streets or in the parks, Spitting in public places, and indulging in acts of vandalism, like writing on walls, bus shelters, lifts and so on. This is a negative responsibility which most citizens will surely not find too difficult a task to perform. The second one requires some positive action, and that is to prevent careless, untidy or unruly people from dirtying the city. Those who do so should be cautioned and, if the offence is serious, such as acts involving damage to private or public property, then the culprits should be apprehended and brought to book. The general conduct of Singapore citizens in this matter is probably no better or no worse than citizens of most other countries, but there is an irresponsible minority which has to be disciplined. Obviously, this is not a matter for the police force, which is concerned only with more serious

crimes, but for the citizens themselves. By expressing public disapproval and censure on the guilty parties we would have a quick and effective method of checking the menace. Here again, a campaign of public education is called

for, and this can be carried out only if we have large

numbers of voluntary leaders who are prepared to put in the effort. I now come to my last and most important point: Why should any person want to provide the voluntary leadership in community activities? These are unpaidactivities and the person is no worse off materially if he does not come forward. What then is the motivation? I think the answer is that voluntary leaders take some pride in our city and our nation. We are citizens of no mean city and our historical

past, though brief,

has shown that we

are capable of great achievement if we put in the effort. It is therefore pride inour city and pride inour fellow-citizens that motivate the more responsible of our citizens to provide the leadership in voluntary community effort. So long

161

as we in Singapore have many people of this calibre, we can have confidence in meeting the challenge before us. Government has asked the voluntary leaders to come forward to assume the responsibility for the management of community centres, The response has been enthusiastic and encouraging. What is now needed is not somuch more effort and more enthusiasm, for there is plenty of these. What we need is more

reflection,

more

analysis

on how best such leadership

andeffort can be mounted so that Singapore shall be a better, a more decent and amore cultured and civilized place tolive in,

162

150 Years of Singapore

One of the more notable character traits of the Singaporean is his unconcern for the history of his country. One would have thought that in the year when we are celebrating the 150th anniversary of the foundation of Singapore, there would be a kindling of interest in Singapore's past. I myself have been moved the last fortnight to borrow from the National

Library copies of the works of Munshi Abdullah — The Hika-

yat and

The Voyage of Abdullah . But I'm afraid I'm a soli-

tary exception to the general disregard for our past history. Let me make a plea on behalf of history. When I was a civil servant, I used to spend many fascinating hours in the official archives, a practice which, regrettably, I can no longer afford. But perhaps I may be able to induce some of you to do so by recounting some interesting episodes. How many people, for instance, know that when the post office decided to monopolize the postal business in Singapore in the year 1876, this step was greeted in Singapore by several days of bloody rioting? Apparently our forbears firmly believed that this was an unwarranted intrusion into a preserve of private enterprise. And they responded with the vigour characteristic of Singaporeans. Let me read out to you excerpts from their manifesto. Speech at the opening of the '150 Years of Development' at Elizabeth Walk on 1 August 1969.

163

Exhibition

We know that since the English Barbarians established themselves in Singapore their rules have for a long time been very beneficial to the people, not like some of our Chinese, one or two of whom are 'red rats', degenerate fellows of a completely oppressive nature, reckless without any regard to the right. Their only rule is making money; they boldly intrigued and worked on the prince of Singapore and secretly with cunning formed a conspiracy to farm the Post Office monopoly. This truly is a course that will prevent us from having any good fortune. This will injure and destroy the living of the people and produce misery beyond description. Alas for our coolies, with their toils,

labour and miserable condition! Now we must clearly awake tothis vicious and delusive system, so as to clear ourselves from a guilt which cannot be prayed for. As for you who wish to establish this Post Office, may your wife and daughter, dressed in their finery, be placed at the door for men to buy and deride and for the use of every lustful person. If not this, then let them die at once.

The manifesto ends with this exhortation: If any honest virtuous man will cut off the heads of the Post Farmers, he will be rewarded with one hundred taels.

Office

Compare this ringing denunciation of iniquity and its rousing call to action with the turgid prose of present-day Barisan Sosialis political tracts and one cannot but regret the decline over the decades in the standard of polemics. But lest some of you think that the views of our ancestors on economic policy were quaintly Victorian, let me remind you that today no less an authority than Professor Milton Friedman of the University of Chicago is a staunch protagonist of the view that the American post office should be handed over to private enterprise.

In 1964, when rioting broke out with tragic loss of life in Singapore, many people could hardly believe that such things could happen in Singapore. However, if they read their history, they would have found that riots are a regular feature, and what happened in 1964 was kid stuff compared to what

That He

our

forbears

mounted,

for

instance,

in May 1854.

year the Governor was a colonel called Butterworth. must have been a pompous disciplinarian—his subor-

dinates may,

gave savage

him the nickname

'Butterpot'.

rioting

in that

broke

out

164

year,

Be that as it between

the

Hokkiens and the Teochews. Against the advice of his Commissioner of Police, Colonel Butterworth decided to restore law and order by the sheer force of his magnetic. presence. He mounted a white charger, and set forth from Government House towards the riot area. His arrival was greeted by incredibility at first on the part of the rioters. When they had recovered from their surprise, they agreed on a temporary truce, and turned upon the good Colonel who then had to leave with more haste and less dignity than when he arrived. Rioting quickly spread from the city to all parts of the island. The police force numbering some 300, reinforced by the military and a detachment of marines, were unable to contain the situation. European civilians formed themselves into a special constabulary; their contribution too was minimal for rioting and looting went on unabated for ten or twelve days. Apparently violence in rural Singapore exceeded that in the city. The Chief Justice who tried some culprits remarked on the rural population as consisting of men ‘who live in a state of secluded semi-barbarism in the jungle with little or no idea of what law or order is...the rural districts were the scene of the most lamentable outrages. There was no exact count of casualties; estimates of the dead vary from four hundred to over six hundred. There are many other interesting tit-bits you can collect from

the

documents.

For

instance,

let me

read to you this

excerpt from The Hikayat. Every day without ceasing murders took place along the road to Kampong Glam. There were policemen on duty here and there but they themselves were often murdered.

Little does our Foreign Minister know what a disreputable past his constituency has to live down. As late as the 1890s, a man was eaten u,. by a tiger along Balestier Road: This was the last occasion this happened, but if my memory does not fail me, a tiger was found in one of the public rooms in Raffles Hotel after the turn of the century. In the early years of settlement the growing of gambier was apparently a popular though illegal business

undertaking.

The

official

records 165

talks

as

darkly

about

gambier growers as they do now about pirate taxi-drivers. I suspect that both belong to the sturdy breed of men whose contribution to the national economy hardly merited the official strictures passed upon them. There must be some reason underlying the lack of interest in his past history on the part of the Singaporean. I have a theory about this. It is a long and complicated one and I will therefore not take this occasion to inflict it upon you. Instead I would like to turn towards the future, and in this respect Singaporeans show an avid and healthy interest.

This occasion is probably as appropriate as any other todiscuss Singapore's future for we have in the departments and agencies within the portfolio of the Ministry of National Development all the key elements which provide for the planning and the construction effort which have produced such spectacular changes to the Singapore landscape in the last decade. Quite the most momentous event going on in Singapore is the building of a new city on the site of the old. We are knocking down slum dwellings and building in their place better-designed high-rise dwellings and shopping complexes. We have already seen the beginnings of the effort in Crawford,

Havelock

and

Sepoy

Lines,

on the

site of the former

Outram Prison, the People's Park area, and on Mount Emily. A high-powered team staffed by both United Nations and Singapore experts are working on planning, design and technical studies of urban renewal. It is a vast and complex undertaking. Building a new city on the shambles of the old is not merely a matter of knocking down old buildings and erecting new ones. There are problems of transportation, traffic flows, mass transit systems, location of shopping, entertainment and cultural centres, forecasting future population size and composition, defining a meaningful and productive relationship between private capital and government development expenditure.

I cannot hope even to summarize the main issues, let alone deal with them with any adequacy. But I would like to comment on three aspects of this great enterprise. The first is the existence of eye-sores, often in places where they should not be. For instance, if you leave the Port

166

Authority area by the main gate, that is Gate No. 2, you will be greeted by the sight of buildings of incredible squalor and dilapidation. At the corner of Philip Street and Chulia Street, is a building obviously on its last legs. It must have received its last coat of paint before the Pacific War. Similar sights can be seen everywhere in the main business and financial area of Singapore. I suppose we have been so conditioned through familiarity that they have ceased to shock and appal. While we are trying to make Singapore a clean garden city, it is extraordinary that we allow these scandalous and squalid relics to continue. It will be a long time before urban renewal overtakes all of them. In the meantime I suggest that some urgent action is needed to remedy the

present unsatisfactory situation. My second comment is that we have to draw a balance between what is ideally desirable and what is economically realistic. In a certain Latin American state which shall remain unnamed, the government once decided to engage the foremost architects in the world and build a capital city worthy of a great nation. They built it 500 miles away from the nearest human habitation on the theory that this would stimulate the development of a new frontier. Every bag of cement and every bar of construction steel was flown, I repeat, flown by air plane to the new site. A noble city embodying the most advanced ideas of town planning and modern architectural design grew up. During parliamentary sessions, the buildings were inhabited by notables connected with the government establishment but most of the nonofficial population lived in a shanty town nearby. The cost of the effort proved so ruinous to the economy that eventually the civilian government was overthrown by the army and a military dictatorship took over. I am not suggesting that we are in any danger of emulating this particular Latin American republic. I think our architects have both feet planted firmly on the ground. The Housing Board flats have been designed to severely utilitarian standards and their popularity with the lower-income groups has shown that Singapore has avoided the main defect which has overtaken housing projects in many developing countries, that is, building houses for better-off people and neglecting

167

those whoare in the most dire need of better accommodation. And yet if we look ahead fifty years or more, standards of living then will be substantially higher than what they are today. Housing standards which people consider adequate in 1969 will be considered sub-standard by the turn of the century. I can well imagine some wretched Ph.D. student in the Social Studies Department of the University commenting acidly on the parsimony and inhumanity of the PAP Government which voters unwisely elected to office in the 1960s. But for us there is no complete escape from this dilemma and I expect that this is a problem which is constantly exercising the minds of the Ministry. All this brings me to my last comment. And that is the need for greater public awareness of both the general and the specific problems or urban renewal. I would put it this way. We are now engaged in an exciting historic enterprise of rebuilding our city. Every Singaporean should want to know what kind of new city it is we are creating, how it will look in 1975, in 1980 and 1990 and so on. We want to know not only the physical appearance of the city but the many problems which the experts are now trying to solve in the field of traffic and communications, in the provision of social amenities, the lay-out of business, shopping and other facilities that are neededin any great city. Much has already been done to make the public aware of these in the way of TV and radio forums. I hope more will be done in future in these and other ways as well. I should like to end as I began, by exhorting Singaporeans to take more interest in the history of their country —its

founding, development and progress. They will then realize the magnitude of the problems that have had to be faced and the great achievements that have been accomplished. I hope that this exhibition will help tokindle

such interest.

The or-

ganizers of the exhibition have put in months of thought and hard work; if they succeed in arousing historical interest and a sense of national pride, amply rewarded.

168

their efforts would have been

Jurong Bird Park

Your

Excellencies,

ladies

and

gentlemen,

since

Mr

Woon

Wah Siang has revealed, doubtless with the best intentions in the world, my involvement in this project, some words of explanation from me seem to be called for, perhaps even some words in exculpation. For in the history of mankind, there have from time to time risen to eminence men of high principle and staunch moral character who are prone to regard aviaries and bird parks as unworthy frivolities. The Confucian scholar Mr Ni Jo-shui was one such person. He lived during the time of the great T'ang Emperor, Hsuan Tsung, whose reign from A.D. 712 to 756 witnessed the apogee of the dynasty's cultural brilliance. In the year 716, Emperor Hsuan Tsung decided to build a bird park in the imperial garden and dispatched collection parties to the four corners of his realm. Mr Ni objected to this enterprise and addressed the Emperor as follows: Though

farms

and mulberries are in a critical state just now,

collection parties capture birds and wild fowl in their nets to supply frivolities for garden and pond. From far beyond the river

and mountain passes, these are transferred under escort by water and land and fed with millet and meat, so that passers-by cannot but conclude that Your Majesty esteems birds while despising men. Speech at the opening of Jurong Bird Park on 4 January 1971.

169

It is difficult to follow the logic of this complaint. Apart from the elementary point that one can esteem both birds and men, leopards,

birds, unlike predatory animals like tigers and do not eat much and impose no strain on the

nation's food supply. However, this was preparatory to the main argument to come and Mr Ni continued: 'To Your Imperial Majesty, a phoenix must surely be an ordinary bird and a unicorn an ordinary beast.' This was hitting below the belt for Mr Ni knew that Hsuan Tsung could not contest this proposition without serious damage to the dignity of his office. Then came the telling blow: If so, how much more ordinary is a pond heron or tufted duck. In what way are they so worthy of esteem?' Thus cornered, Hsuan Tsung was obliged to disband the collection parties and release the birds. He then presented Mr Ni with forty pieces of rich cloth. I suspect that this is in subtle revenge. Though the history books did not record it, this present to the austere Mr Ni must have led to a rupture of domestic peace between him and his wife as to what to do with it. It is more than possible that there may be people in Singapore who question the propriety of building the Jurong Bird Park at a time when the Republic is assailed by so many problems. I will justify the project on four grounds. First, its origin is impeccable, its conception immaculate. The idea first occurred tome while attending the World Bank meeting in September 1967 in Rio de Janeiro when during a free moment I visited the Rio Aviary. I was confirmed in the soundness of the idea when attending an ECAFE meeting in Bangkok the following year. The authorities managing the Bangkok Aviary, which I made a point to visit, assured me their main problem was what to do with the millions of bahts they had accumulated over the years. My second line of defence is that this enterprise should be self-supporting, though it may not be in the same moneyspinning class as the Bangkok Aviary because of its much higher capitalization. The third justification is that, unlike the aviaries of the Emperor Hsuan Tsung, this one will be open to all people and at all times, albeit for a modest fee.

170

And finally, the purpose of the bird park. Here one should be careful not to overstate one's case. It is as well to concede at the outset that the bird park will not make our society more rugged, certainly not with the train service Mr Woon is providing. It will have negligible effect on the productivity of workers in the Republic. Its efficacy as a means of tightening national cohesion is also open to doubt, as is its contribution to raising cultural or education standards of the population. I am afraid that the bird park will achieve none of these admirable ends. But it will add to the enjoyment of our citizens, especially our children. At the risk of appearing less than God-fearing, I give this as my final justification. The bird park is incomplete in one respect. I had originally planned to introduce falconry displays as part of the bird park's activities. The valley next to this seems well suited for this purpose. We approached the British Services for an adviser in the belief that among these versatile and intrepid people can be found experts in any of the more esoteric pursuits of man. However, it turned out that this royal sport had died a long time ago, most likely a sad victim of the great egalitarian movement of recent history. I do not know whether any of the Ambassadors and High Commissioners gathered here represent a country where this noble sport is still practised. Iam not optimistic about the modern industrial nations. But perhaps in some quiet corner of the world, in some last refuge of reaction and obscurantism, people still happily engage in falconry without let or hindrance from tiresome moralizers. If one of Your Excellencies represents such a twentieth-century Ruritania, may I suggest that our respective Governments immediately enter into a Bilateral Technical Assistance Agreement for

the Promotion

of Falconry in Singapore.

yal

The Hippie Threat

From time to time, community leaders in Singapore voice their anxiety about the spread of hippie culture among young Singaporeans and about the dangers of drug addiction, and the spread of permissiveness. Last September, there was an uproar in the press when it was discovered that some schoolgirls, belonging to a convent school of all institutions, had been buying pills from drug pedlars. This was taken as another piece of evidence confirming that the deep malaise now afflicting so many modern nations has now descended upon us. Just how serious is this threat? Are our youths on the road to perdition? Is there a generation gap developing in Singapore as there allegedly has been in nearly all the nations of the West? To give sensible answers to these questions, one should try to understand some of the essential features of youthful dissidence in Western countries. Here I cannot but give a very brief sketch for it is impossible to do justice to the subject in the time at my disposal. The main difficulty is that this phenomenon of youthful dissent and alienation has not been completely understood even by the most perceptive observers in Western countries. No one can yet say whether Speech at the sixth anniversary dinner and dance of the Democratic Socialist Club on 25 October 1970.

172

this is a temporary phase or whether its roots go deep into the nature of Western civilization. At one time it was thought, for instance, that the Vietnam war was the principal reason for trouble in the campuses of American universities. Now we know better that this was just an issue, a tactical rallying point, for dissenting students in their assault on university authority, on the government establishment and on society generally. Nor could it be said that the troubles were due to the machinations of a small conspiratorial group. No group of conspirators can succeed in mounting campaigns of such widespread dimensions unless the ground situation is ripe for mass action. It is dangerous to make generalizations about this phenomenon. Not only does the situation vary from country to country, but even within one country the movement covers a wide spectrum of people and organizations each with different attitudes and motivations. At one end of respectability we have the liberal intellectuals, critical of modern society in general and of the government establishment in particular. At the disreputable end of the spectrum, there is the anarchist lunatic fringe whose members regard the communist parties of their countries as softies and reactionaries. Despite the wide variation in political positions of the dissident movement, certain common values are held though with varying intensity. First, they are against the established values of society, regarding them as hypocritical and, in instances, evil. Needless to say, they are against the policy of the government establishment, which they feel is dominated by the military-industrial complex. They are against war of any kind. Because they reject the traditional social values of their parents, they cease to strive for status and position in society for which their education qualifies them but which they despise. They have opted out of the rat

race. The dissident movement contains at least two well-defined types. There are, of course, many other types but these two are especially interesting. First, there are the children of well-to-do families. They are disenchanted by the society in which they find themselves with its evident inequalities,

173

injustices

and

cruelties.

It is this

diametrically

opposite

attitude of parents and children that creates the generation gap. The second type consists of people who have lost hope of achieving a satisfactory status in society because they ’ believe that they have been discriminated against as a group or because they do not have the intellect or character to make the grade. From attitudes of these kinds emerge external manifestations of the dissident movement. These are as varied as the attitudes themselves. The activists, often penetrated by the lunatic fringe, resort to violence either by isolated acts or by instigating, organizing and leading others in protest movements and public demonstrations. The reaction of authority to these and its attempts to maintain law and order often misfire as a result of inept handling of an inflamed situation, thereby strengthening the influence of the dissidents. Violence is but one part, perhaps the least important, of the general movement. The taking of drugs, the craze for psychedelic music, the practice of sexual promiscuity, bizarre styles in dress are other manifestations. These are the inevitable consequences of people who have decided not to strive and achieve in a society whose values they reject as pernicious. Once they reject established values, once they consider conventional ethical codes as a hypocritical cover for unjust practices, then the door is wide open for uninhibited hedonistic practices of all kinds. This is the basis of the hippie culture. I donot know whether what we are seeing today is a passing phase or whether it is here tostay. If it takes permanent root and on a wide scale, I doubt whether the complex in-

dustrial

economy

which

is sustaining the high living stand-

ards of the West can survive. But this and I shall say no more about it.

is not our problem

I turn to the position in Singapore. I think I can most vividly depict the situation we are in by relating an episode in which I was personally involved. Earlier this year, when I was making preparations for my transfer to the Ministry of Defence, I interviewed a number of engineering graduates. I wanted some top-class engineers in the Defence Ministry

174

to strengthen the scientific and technical personnel there. The graduates I saw were Colombo Plan scholars who had recently

returned

from

universities

abroad—in

Britain,

Australia, New Zealand and Canada. They had distinguished academic records —all had first class honours — most of them topping their classes each year and winning all available academic awards. The most outstanding common feature about these engineers was their humble family origins. Among their fathers were a cook, a taxi-driver, a laundryman, a clerk and such similar occupations. The most affluent father was a small contractor in Sabah. None came from what we might call the professional middle class family. Their fathers were migrants from China. I have little doubt that they were men of great ability; otherwise they would not have passed on such terrific genes to their children. But the colonial society in which they grew up did not give them opportunity to develop their potential. Their children, however, were able to make the grade through our educational system, despite the handicap of a difficult childhood environment. The road to affluence in our society, the rise from the grind of poverty to comfort, security and decent living, is open to anyone who has the brains to get into a university and the perseverence to apply himself to his studies. The generation gap in Singapore is not to be defined in terms of acceptance and rejection of ethical codes. It is the difference between the standard of living of a cook, taxidriver or laundryman and that of an engineer or an administrative officer in the Civil Service. It is the difference between going by bus to office and being able to do so ina Mercedes. If you succeed, it is the difference between taking your girlfriend out on the pillion of a Suzuki or in the comfort and style of a Jaguar. Of course not all university students are gifted and ambitious children from working class families. Children with professional family backgrounds, whether they are in school or in the university, are under constant pressure from their parents to perform well. They are given every care and attention including private tuition and surreptitious coaching. Many parents want to send their children to schools abroad

175

in the belief — probably not without justification —that our school system could be improved. This is the position in Singapore. Ours is a harshly competitive society with good rewards for the successful. But competition is fair and open. Everybody knows that influence counts for nothing in appointments to the Civil Service and very little in business careers. Advancement depends on merit and performance, not on birth, social class or political connections. There is no sympathy for the under-dog and those who do not make the grade are just passed over and forgotten. This is hardly an environment which favours hippie activity, drug-taking and opting out of society. To be sure, some young Singaporeans have taken to some of the external trappings such as manner of dress, musical tastes, if that is the word for it, even hair styles. But all these, to my mind, are timid self-conscious imitations of the West. As is usual when the Singaporean apes the West, he goes for the froth and the frills and not for the substance. In this instance it is as well that this is so and that the result has been that the hippie threat to Singapore is largely an illusion. While we may congratulate ourselves that we have avoided the traumatic experience of Europe and America, this has not been an unmixed blessing. Because a student's future is so heavily dependent on his examination results, in school and university, his striving after good grades in Higher School Certificates and university degrees has resulted ina stultification of intellectual development. The university is regarded as a means to securing a good degree and thence to a good job. The idea of education as a search for truth, the excitement of intellectual inquiry and speculation —all these are given lip service and little else. And so we have in Singapore intellectual conformity in place of intellectual inquisitiveness. And the sum total of it all adds up to a depressing climate of intellectual sterility. If we are honest with ourselves, I think we can detect in contemporary Singapore a strange but striking similarity of intellectual climate and social values with Victorian England, together with much of the hypocrisies and cruelties of that age.

176

What can be done about this? First, I want to dispose of a facile solution which may come to those who believe that the Government is to blame for everything, including intellectual timidity in the university. There are some students who believe — and I am told they quite honestly believe this — that the Government maintains a large corps of Special Branch agents to identify and root out heresy among the student body. These people flatter themselves. The number of students with pro-communist inclinations at the University of Singapore is pathetically small and their quality poor. Other forms of intellectual heresy we are not interested in. You may say that the Prime Minister, Mr Lee Kuan Yew, on his visits to the campus acts as an intellectual depressant. Mr Lee is a much misunderstood man in spite of Mr Alex Josey's efforts, possibly because of them. I know of his intense desire that our university should be the centre of bold and creative thinking about the manifold problems facing the Republic. But each time he goes to the campus, he finds himself confronted by evidence that neither the student body nor some members of the staff have the slightest inkling of the problems that we face, much less about their possible solutions. His reaction to disappointments of this kind has been characteristically vigorous as some of you would have personally witnessed. I am not the first or only person to have commented upon the intellectual sterility of our society. Other people have but none have offered any workable solution. My friend Mr Gerald de Cruz the other day was reported to have pleaded for the emergence of what he termed 'a heroic intellectual’ to discover the social values of Singapore and presumably to campaign for their general acceptance. I doubt whether a heroic intellectual will do much good. Certainly he will not be listened to. Nor is our situation one which breeds heroic intellectuals. For thinkers of this kind we need a leisured class, people of independent means who do not have to work for a living. Many of the great thinkers of England, such as the Russells and the Haldanes, came from aristocratic families. But let us get our perspective right. If we donot produce the Russells

17

and the Haldanes, there are many countries in the world larger and richer than we are who also do not. The scope of intellectual inquiry in Singapore must necessarily be on a modest scale and of limited range. What we should try to do is to build up a respectable research effort in various disciplines of learning. This means strengthening the position of post-graduate studies in the university. It also means establishing full-time professional research institutes. In this respect, some progress has already been achieved in Singapore and, in course of time, I have little doubt that

we shall reach higher levels of achievement. Post-graduate studies should be encouraged in our universities and not merely for those who intend to follow academic careers. For instance, it may not be a bad idea for the Government to allow senior civil servants to do a year's sabbatical at the university. This interchange between the practitioners and the academicians cannot be but good for both. It is along these lines that I envisage gradual but progressive improvement in Singapore's intellectual climate. I am fairly optimistic that this will happen. As standards of education go up and as increasing numbers of the population receive tertiary education, they will be increasingly dissatisfied with the slick slogan or facile verbalization that passes for analysis. To correct the impression that I am being over-critical of the shortcomings of our society, I want to conclude my talk with a defence of our own social values. It will be an exaggeration to say that Singapore is motivated solely by a

gross

form

of materialism

and I hope I have not led you to

this conclusion. It is true that in the colonial era, all that mattered was a fat bank balance and cordial relations with the powers that be which were necessary to sustain such bank balances. I think we have moved some way from that position, We are no longer a collection of individuals each solely concerned with his personal well-being. There is an awareness of collective problems. There is a growing pride

in being citizens of a Republic which has registered achievements in housing, industry and education. But more than this, even in regard to the rat race, I found from personal 178

experience that while the size of the monthly pay-cheque is important, it is by no means the sole consideration. In my ten years' experience as a minister, I have had occasion to work with civil servants and others both in the Government and in the statutory authorities. There were the executives who carried out great projects which have made Singapore renowned as a centre of dynamic progress. These people could have walked out of their jobs to the private sector and earn salaries three to five times what we paid them. They have not done so and I believe the reason is that they find satisfaction and fulfilment in their work. Beyond a certain income level, a man finds that being able to satisfy his creative impulses, having the opportunity to take part in great undertakings which will leave a noble mark in the history of Singapore —all these give him a sense of achievement which no bank balance can produce. If we continue to have in the public services talented people with motivations of this kind, as I believe we will, Singapore can look forward

to continuing growth and prosperity.

I began my talk with girls of the convent school and I will end with a final reference to that episode. What these schoolgirls bought from the shady characters were not marijuana, LSD or such types of hallucinogens. The pills seized by the police were sent to the government chemist for analysis. They were found to be anti-malaria tablets,

calcium tablets, and vitamin B2 tablets. The most dangerous pills in the collection were some tranquilizers. Why these schoolgirls want to buy calcium, vitamin or anti-malaria tablets, I do not know. Maybe it was just for kicks and they thought they were getting something more potent. Maybe it was to find out at first-hand what all this fuss about hippies and hallucinogens was about. If this was so, this incident, which must have caused much distress to the Mother Superior, at least held one crumb of comfort for us. It is that intellectual curiosity among our young still survives.

179

Government and Society

Some time ago an Israeli general on a visit to Singapore asked me this question: 'Why is it that you use the term "society'' and not "nation"? In Israel we talk of the Jewish nation not Jewish society.' This was on the first morning of his visit and he had only read the morning papers. Yet this perceptive question puts in a nutshell our basic political problem.

We are not a nation,

we are a community,

a society, a

group of people living in the island of Singapore. And this fact is recognized by the title given to me to address you on, 'Government and Society', not 'Government and Nation'. There are two ways for me to handle the subject. The first is to take the analytical approach. This means defining the concepts of government, society and nation, explaining their structure and functions as they exist in a modern state, examining the inter-relations between the various aspects of these functions, and then finally studying these conditions as they exist in Singapore and how they differ from accepted concepts and practices elsewhere. This is the analytical approach, I will not adopt it for two reasons. First, to do justice to this method would require more time for reading and research than is available to me. Second, even if I had the time, I doubt whether you will be able to understand Opening speechat aseminar on'Democracy and Communism' sponsored by the Ministry of Education for pre-university students, at the Singapore Conference Hall, 24-9 April 1971.

180

much of subject learning are still

what I would have to say. It is not only that the is abstruse, more to the point, the branches of involved, namely political science and sociology, in their early stages of development. There seems to be an advantage in the other approach, in which I will describe in general terms rather than in analytical concepts what this business is about — government and society more especially as it concerns young people. It would shed more light if I were to discuss these ideas in relation to the real world as it is today. In other words, I will try to compare the position of the young, people like yourselves, in the modern states of the West, that is, America and Western Europe, on the one hand, and the young in the developing nations of Asia on the other. Secondly, I will touch on the differences between the younger and older generations in Singapore itself. In this way, we may be able to see some of the special features which confront the young in Singapore. As I shall show, we have special problems that are rather unique to us, a fact which one would have thought to be obvious. And yet this has escaped the attention of many people in Singapore who should have known better. Let me begin with the young in the West. The matter is of some importance to us because we are exposed to influences from the West through films, television, newspapers, magazines, books, university education, and in so many other ways. As a result, we sometimes follow their fashions for good or for ill. We sometimes even think, especially the English-educated, that their problems and misfortunes are also ours! Nothing could be further from the truth. Many of you probably know that in the past three or four years there has been a great ferment of new ideas among European and American youths, an upsurge of radical, even revolutionary, attitudes among them. The young appear to have rejected the values, the morality, the standards of behaviour which had been established and accepted in their countries. There have been protests and demonstrations in university campuses. The younger and the older generations hold such widely different views that people begin to talk of the 'generation gap’. 181

Now, what is all this about? We are probably too close to events to be able to speak with confidence on the real significance of the youthful revolt in the West. It is still going on and has yet to work out its course. Let me give you my own interpretation. At the heart of the matter, I believe that the young in the West aredisenchanted with the world as they see it. On the one hand, they see dazzling achievements of science and technology in the ability of men to conquer space and

reach

the

moon.

Yet,

this

great effort and the vast in-

dustries that result from modern technology produce societies which are unsatisfactory in many respects. The great industries have produced dilapidated slums, traffic

congestion,

lakes;

in their

own

pollution

of the

societies,

they

air, the see

rivers

and the

manifest injustices

and inequalities. In America, the idealistic young are aggrieved by racial problems — the indignities which Negroes have

to suffer.

Above

all, many

young

Americans

see the

Vietnam war as cruel, senseless, unjust and unnecessary slaughter and destruction. And they blame their Government and what they term the 'military-industrial complex' for the horrors of Vietnam. They think that there is a better way to order human society and to take advantage of technology to produce general happiness. Because they are disaffected or 'alienated', to use their jargon, they are opposed generally to all authority, not only that of the Government, but in many instances, the authority of whoever is in direct control of them, such as the authority of the university if they are university students. Many of them think it pointless to strive and to achieve ina society whose values they reject. So they do not study hard in school or university. They do not believe what older people tell them. They aim for an easier, more relaxed personal way of life. Many try to find the good life in free sexual relationships, in drugs and in the pursuit of personal happiness through enjoyment. In extreme form, they become hippies, or if they are more active types of people, they take to violence and try to overthrow the established order through revolution. In very broad outline, this is what is happening in the West. But I do not want to give you the impression that all

182

or

even

most

young

Europeans

or Americans

are

hippies

or anarchists. _These are the extreme types. Those I am talking about are the trend-setters, people who set a new style, articulate their opinions and provide the leadership which many of the others follow in greater or lesser degree. Now, what about the young in the newly emergent states of Asia? In many of these countries, youthful discontent and dissent also exist. But they are of a different kind and have taken even more dangerous forms. As you know, there is now in Ceylon an armed uprising which is believed to be led by the large numbers of university graduates who cannot find employment. In the Philippines, you have read of student violence and riots from time to time. Nearer home, the young too have their problems, but I will not dwell on them; what I have to say may strain relationships with governments with whom we are trying to keep on good terms. But you will note that the troubles of the young in Asian states are the result of frustration and poverty, the lack of decent career opportunities after they leave school or university. Theirs are deeply personal problems of earning a living. Only to a lesser extent are the young troubled, as they are in the West, with larger political and social problems. In the West, they are not concerned with finding a job or finding a worthwhile career in life. In fact, many reject the idea of working within the system, which they find unacceptable and inadequate in so many respects. The discontent of the young in the West is related to the affluence of their countries. Indeed many of the youthful dissenters come from well-to-do and even rich families. In Asian countries, the young are discontented principally because the economies of their countries have failed to develop. You can see at once how different our situation is from both the advanced and the emergent nations. We have not reached the state of affluence of the West when we can take for granted our future progress. I think it is fair to say that the young in Singapore believe that if they have the talent and make the effort, they can succeed in securing for themselves a good livelihood in the professions, in Government or in private business. Far from being disenchanted at such prospects, the young believe that the effort is worth making.

183

In this respect, we differ also from the unfortunate masses of unemployed university graduates in Asian countries. Here, regardless of the effort that they make, very few will succeed in getting good jobs. And even these few will need to have the support of the rich or the powerful. In Singapore, you do not need this. All you need is a good brain and the willingness to work. This is what we mean when we say that we are a meritocracy. Even for those who do not reach the very top—for not all of us are geniuses — there are for Higher School Certificate and university graduates, a wide variety of interesting and well-paid careers to choose from. Let me now turn to the second comparison Iam making, that is, between the generations in Singapore. Let us consider,

to start with,

the differences

between yourselves

and

your parents. As a general observation, I think it is true to say that you are better educated than your parents were. There may be some of you from families of professionals of whom this may not hold true. But most of you now in the pre-university classes have fathers or mothers whose education has not reached that level. That is one important difference. This difference leads to another: you will probably work in better-paid occupations than your parents. In a rapidly growing economy such as ours, this development is to be expected. There is yet another difference: many of your parents were not born in Singapore. Some came from China, others from India, others from Malaysia or Indonesia or elsewhere. As they are not born in Singapore, their attachment or loyalty or commitment to Singapore is not a natural one. It is acquired. They have adopted Singapore as their permanent home. They have taken on Singapore citizenship and they are likely to remain here for the rest of their lives. But in their childhood, and even in their adult years, they knew of another country, their own birthplace. For you, this is the only place you know as your homeland. Your attachment to Singapore is therefore undivided and natural. . There is yet another difference between your parents and yourselves. Many of your parents have lived their adult

184

years

under several political regimes, the British colonial government, the pre-PAP government of the Labour Front, and the present PAP Government. Mostof your parents were in Singapore during the brief period of Japanese military occupation and they know what terrible years those were. Several consequences follow from this. The first and

most obvious is that having lived under different political regimes they could make comparisons from personal experience. This you are unable to do. But more important than this, very few of your parents would have had much involvement in the political development of Singapore except for voting during general or byelections. For the most part, they were content to leave the work of government to other people while they attended to their own personal and business affairs. If they belong to my generation, it is unlikely that many of them would have political ambitions to be, for instance, a prime minister or a cabinet minister. Such an ambition will probably be regarded as quite unrealistic. With you, and your generation, it is quite different. By the time you come to my age, my colleagues and I would have long departed from the political scene, probably from this world also. The cabinet ministers of that age will befrom your generation, probably even from some of you present at this seminar today. It is for this reason that politics, which basically is the way in which a society chooses its government, is a matter of direct and practical relevance to you, which it is not to your parents. While most of my generation for the rest of their working lives may be content to leave this business of governing Singapore to my colleagues and myself, this option is not open to you. What

does

this

mean?

First,

it means

that you have to

take politics more seriously than your parents do. Why is this so? You may say that, after all, there are only fiftyeight seats in Parliament and adozen or so cabinet ministers. Why then should the thousands and thousands of preuniversity students whe leave school each year bother about political affairs since only a very small fraction of them can hope tobemembers of parliament and an even smaller number cabinet ministers?

185

I can answer this question in two stages.

First, in a coun-

try like Singapore which has no natural resources, the type of government that is elected to power is probably the most important single determinant of whether the country prospers or declines. This subject will no doubt be discussed in further detail in the closing address which will be delivered by the Prime Minister. I will, therefore, not expand on it. If you accept the first part of my argument, that the type and the quality of government is crucial to all Singaporeans, then it is in your interest to ensure that the country is not foisted with mediocrities or, worse still, adventurers and crooks as members of parliament and ministers. If you read the newspapers and magazines dealing with world affairs, you will be aware of the fate suffered by many Asian countries whose electorates have allowed themselves to be deceived by political adventurers and opportunists. Why did this happen there? Is it possible for this to happen in Singapore? There are many reasons why the electorates return poor quality governments. To simplify a complex subject, perhaps one could say that the basic reason is either that the electorate is poorly educated, as is the case in some countries,

or

that,

where

education

standards

are

high,

the

better educated have not made their opinions felt. In other words, they have remained indifferent to political affairs; as a result they have lost by default. And they themselves are the people who suffer as a result of government mismanagement or corruption, or both. In a democratic system such as ours, political stability in the short term can be produced by strong, effective and efficient government. At the risk of appearing immodest, I suggest that this is the situation in Singapore. However, in the long run, since all men are mortal, political stability cannot be allowed to depend on a few men. What is needed

is an influential and cohesive social class that will ensure a high standard of performance among political parties contending for support among the electorate. That kind of political climate can be produced only if the great majority of those who have received higher education take a personal interest in the affairs of the country, make an effort to understand these issues, and are willing to provide leadership

186

in the formation of public opinion. Only under such circumstances can a democratic society ensure high standards of government, irrespective of which contending parties win the general elections and form the government of the day. When

we

achieve this in Singapore,

we would have achieved

long-term political stability. Therefore, your future role in Singapore is in providing leadership in the formation of enlightened public opinion. Too many people regard political ideas not as serious matters affecting their lives but as topics for idle discussion. These people never try to put to the test of practicality the ideas they toss around. Nor do they ask of themselves what is the relevance of these notions to the situation in Singapore, to-

day, tomorrow and in the next decade. It is for these reasons that a great deal of political commentary in Singapore, when this is inspired by contemporary ideas fashionable in the universities of the West, has little meaning or relevance. I hope that in your time, when you go to the university and address your minds to these matters, you will remember to apply this stringent test of relevance and practicality to the many ideas, ideals and principles which you will learn there. It will be good for you and it will be good also for the university. Why do I emphasize the need to talk and think about relevant and practical matters? I believe that if intelligent and informed people apply their minds to the real problems and actual difficulties facing Singapore, they will reach a large measure of agreement on what should be done. They may differ about how to do it and honest differences of opinion will emerge and will give rise to public debate. However, when people talk about ideas, values and ideals which are trivial or irrelevant to our situation, what you get is not consensus but a babel of noises, a lot of posturing, a habit of opposition for the sake of opposing — in other words a lot of hot air generated by chatterboxes. Some people in Singapore labour under the illusion that this is democracy. The experience in Asian states where such practice flourishes shows that democracy dies quickly when the educated dissipate their energies this way. It is your responsibility and it is in your interest when you grow up to see that this does not happen in Singapore. 187

Industrial Growth and Political Stability

I have always regarded the pursuit of knowledge as the noblest and the most rewarding activity of mankind. This is particularly so in the so-called underdeveloped countries of the world today. Much has been said, by experts and laymen alike, on the subject of bringing about economic growth in backward societies and literally thousands of books have been written on the subject. Indeed it is a subject of widespread and profound interest among all governments of the world today, both of the advanced and underdeveloped countries. If I were asked what is the most important single criterion by which to judge the prospects of any underdeveloped |country in achieving self-sustaining economic growth, I

|would have no hesitation in saying that it is its attitude to\wards education. AE

education,

Where

where

the

there

is an abounding enthusiasm

demand

for education appears in‘satiable, then I say that particular country is well on the road to economic progress. On the other hand, where there lis apathy in this field, you can pour in all the foreign capital, \foreign aid and foreign experts into that country and you can ‘be certain that all this will go down the drain. This is a point which, unfortunately, has not been fully appreciated Speech at the third graduation day ceremony of the Singapore Polytechnic in August 1963.

188

by many governments and international agencies engaged in promoting aid programmes in underdeveloped regions. Happily for us, Singapore belongs to the first category. Here the desire of our people for all forms of education knows no bounds and all our institutions of higher education are bulging to capacity, with an overflow of several thousands into universities abroad. It seems to me that on an occasion such as this, the third graduation day of the Singapore Polytechnic, it would be appropriate to say something about the products of the higher education we are providing our citizens. More specifically, what is the future of Polytechnic graduates ? How would they fit into the future scheme of things? What rewards can they expect from society in the way of interesting and rewarding careers? What are their responsibilities to the society that has nurtured them in their youth? Let me first set down a few basic facts of our present situation and our possible future developments. We in Singapore, that is both the people and the Government, are-deeply aware that to maintain and improve our standard of living we must build new industries. This follows the fact that there is no other major outlet for absorbing our growing population in useful employment other than new industries. We have made a start and we have laid down extensive basic industrial facilities to encourage the rapid growth of our new industries by extending our power supplies, enlarging our port facilities, building roads, railways, industrial estates, communications and transport facilities. _~ Industrial growth depends only partially on how much the ‘ Government does to provide these basic facilities. It depends to an even greater degree on how people respond and take advantage of the facilities that the Government provides. )| Where people as a whole sit back and expect new industries |) to grow up like mushrooms or drop from heaven like the biblical manna, then of course all the money we have put into Jurong would be completely wasted. We would have done no more than created the largest white elephant in the history of our state. Happily, the response has been good and it is growing. And the response has been good from all strata of society —

189

the businessmen, the professional class and the workers. First, the businessmen: these are the people with capital, experience and know-how who have to plan, build and run the new industries. Starting a new industry is a very practical affair. It is not an academic business of thinking about economic concepts. It means working out concrete details on what goods to produce, how to do it, and how to sell them. It means working out estimates of future markets, estimates of competition from within and from abroad, the expected cost of production, the different types of technical processes to use, the sort of men to employ at expert managerial and supervisory levels and a multitude of such practical problems. These then are the ones who make the important decisions on these matters, andon the correctness of their judgement depends the success or failure of the new enterprise. Then there is the response from the managerial and technical staff. The best of managing directors would be helpless unless he is able to recruit an efficient staff who, if they do not have the experience in the new venture, have at least the capacity to learn. In this respect, Singapore is fortunately well endowed with potential talent and indeed it is one of the major functions of your Polytechnic to produce the future managerial and technical personnel of our growing industries. The third response comes from workers. It is a matter of whether they can learn the skills and provide efficient work so as to enable the new enterprise to succeed in competition with others. We are not here concerned either with the industrialists or with the workers. In both these fields there are special problems but these need not concern us today. Our interest today is in the body of technical and managerial personnel who will man the key posts in our future industries. Obviously, if the rate of industrial growth is fast, then the opportunities for useful careers for graduates of this institution will be all the greater. The growth of industry and supply of technical personnel are in fact inter-related. Without the supply of technical personnel, we cannot expect industry to grow. And without the growth of industry, there will be no supply of technical personnel because nobody wants to undergo a long and expensive education without prospects

190

of a career. In Singapore we decided to do both together, to increase the supply of technical personnel and accelerate

the growth of industries. Obviously in the early stages, when one is not certain exactly what type of industries will be developed in, say, the next ten years, maiadjustments in particular lines may well happen. There could be for example a shortage of, say, electrical engineers while at the same time a glut of mechanical engineers or architects has developed. It isnot possible to planevery detail of the long-term growth of industry and then arrange to fit the supply of your technicians into this detailed plan. It is in the nature of things that such an exercise is not possible. But so long as growth is taking place it does not matter if there is maladjustment in particular lines for sooner or later increasing demand will catch up on any temporary over-supply in particular lines. So the conclusion that we come to is that the faster the rate of growth of industries, the more opportunities there will be for graduates of the Polytechnic to find useful employment. I think that this is a self-evident proposition. But from this, we can proceed to a more interesting question and that is: What do we have to do to foster the most rapid rate of industrial growth? Now there are two approaches to this

question. The first is the narrow technical one of government policy. This willembrace questions of economic policy such as setting up of the common market, the provision of adequate industrial infrastructure, mobilization of domestic capital and so forth. But these technical policy considerations are really secondary to a larger and broader issue. The larger aspect of the problem is to create a permanent and enduring social environment under which rapid industrial progress can take place. Let me say a few words on what I mean by a permanent social environment favourable to industrial growth. When a man puts in, say, $10 million in a new venture, he must be sure not only that the immediate economic factors, such as production cost, market price of his product, would be favourable but he must also be reasonably certain of the years ahead. He must be confident that there will be no radical change of government policy. In other words there must be expectation of political stability in the foreseeable

191

future. The reasons are obvious. The capital invested in an industrial venture will take many years to recover. Unless he can make a confident forecast of stability for the foreseeable future, he will not establish a new plant.

There is also another important element in this social environment, or social climate as some people call it, and that is the expectation of fair treatment. Every industrialist hopes that he will get favourable treatment as against his competitors, but he does not mind if he does not get such a privilege. But he wants to be certain that he is not unfairly treated or discriminated against. Then, again, not only he, but his staff also, want fairness and justice sothat the ablest can rise tothetop. Favouritism in oneform or other is most

damaging to industrial growth. There are other elements in the social climate but these two are the most basic ones. So long as there is confidence in stability

and fair treatment

in the foreseeable

future,

we

can expect to get as fast a rate of industrial growth as the objective economic factors warrant. There is also another reason why the social values of stability and fair treatment are important. Building new industries and running them require the highest powers of intellect and character that man possesses. It is a creative and absorbing endeavour in which only the best will ultimately succeed. The experience of successful industrial nations shows this. Therefore we must have a system whereby the ablest and most energetic of our citizens have the opportunity to rise, in free and fair competition against all others, to the topmost positions in industries. This will ensure that not only do we have many industries but that we have good and strong ones. To many of you, what I have said about the social environment favourable to industrial growth may appear commonplace. If this is so, the reason may be, I suggest, that in Singapore this largely describes the situation as we have it today. But can we be sure that it will continue in the future? Within a matter of weeks we shall be part of an independent nation of Malaysia.* Will the purpose and drive behind our *Singapore became part of Malaysia when it was created in September 1963, but separated from it in August 1965.

192

plan of industrialization endure after Malaysia? Is this purely a matter for the Government? Or has the ordinary citizen a responsibility and a role to perform? In particular, has the professional and technical class a special duty to carry out? Before I answer this question, it may be profitable to look outside Malaysia and see the experience of our neighbours who have achieved independence long before we did. I do not think I am uncharitable in my judgement if I were to say that the picture is one of woeful confusion. In one country after another

we

have seen a decline of standards

of government,

a deterioration of standards of living and a running-down of the economy. The countries which fifteen years ago embarked on their own national independence with all the enthusiasm and idealism have today lost the drive and the purpose which then inspired them. Will the same thing happen to us? We can get an answer if we examine the reasons for the decline of these newly independent countries of Southeast Asia. I do not have the time here to go into a detailed historical review of the underlying factors contributing to this decline. But one element stands out as being of paramount importance. And that is the failure of the educated elite in these countries to make an effective contribution to the leadership of opinion in their countries. This has allowed a decay in standards of conduct and morality in public affairs. They have left the field

open

to adventurous

demagogues,

crooks and fanatics

until ultimately the army takes over the country. The net result of the decline in these countries is that the educated elite themselves were the first to suffer. They suffer directly from the repressive measures, from monetary inflation reducing the value of their earnings, and from the lack of opportunities for useful careers following upon economic decline. It may be harsh of us to pass judgement on the educated elite of other countries. In some countries there were too few of them. In other countries they were too absorbed in their personal careers to care much for national affairs. But, whatever the reason, they have not escaped the sufferings that followed upon the running-down of these countries.

193

What lesson can we draw from that experience? The first is that it is important that the highest standards of integrity of conduct be maintained in public affairs. What I have said about the creation of a favourable social climate to promote industrial growth really means no more than that we must have an honest and effective government, uncorrupted and incorruptible. The moment any government relaxes in these matters, it takes the first step down a long and slippery path to disaster. The second lesson is that the response of our own educated elite must be more positive and effective than that of the elite in neighbouring countries which have suffered misfortune. The system of parliamentary democracy has no built-in guarantees that it will automatically survive and endure in Malaysia or in any other part of the world. It is a delicate and complicated system of checks and balances which will work only if there is a broad stratum of intelligent leadership to give purpose and direction in public affairs. It is singularly vulnerable to abuse on the one hand and subversion on the other where there is widespread ignorance of and apathy to the workings of the democratic system. In such a situation, the demagogue or a welldisciplined minority organization can easily take over power through political manoeuvres and tactics. In Singapore, and indeed in Malaysia, the democratic state is still a tender plant. It has to be nurtured and nourished and protected from those who wish to destroy it. Its workings are stillnotfully understood by many who, because they have not lent much thought to it, believe that its capacity for endurance is greater than it actually is. So my message to you is this. The great things we are trying to achieve in Singapore will come to fruition only if the democratic system survives and endures. To ensure this, our educated elite must avoid the fatal mistake which their counterparts in other countries have made — the fatal error of withdrawal from leadership of opinion. Our own educated elite today show every sign that they will commit this same error of omission by their inability or unwillingness to lead public opinion on national affairs. Hence their aversion to what they call indulging in politics. A French

194

politician once said that war is too serious a business to be left to the generals. If I may parody him, politics is too serious a business to be left to the politicians. Well, I am not unhopeful that we will learn our lesson in good time to avoid the disasters that have overtaken other countries. If we succeed in building a stable and enduring structure within which the talent and energies of our people can find useful and creative exercise, we can face the future with every confidence. Those who are graduating today will, I trust, meet the challenge that is facing them and fulfil their obligations to the society that has equipped them with their specialized education.

195

Parasite States

The times in which we live has a number of unique characteristics compared with other periods of history. One of these characteristics is the very large and growing scope of

government intervention in the affairs of the nation. Traditionally, that is to say, before the Industrial Revolution, the functions of government were restricted to that of keeping the king's peace, that is, maintaining internal law and order and the protection of the nation's boundaries against foreign invasion. But today government activities are complex and farranging, and the state budget of a modern nation consumes up to 25 per cent or more of the gross national product. This extension of state activity is true not only of modern industrial states but also of developing countries. This is a phenomenon which we shall have to go into in some detail. In the meantime I refer to another characteristic of our age. This is the well-known gap between rich and poor nations, a gap which is increasing in the course of time as a result of accelerating growth of the economies of modern industrial states and relative stagnation in poor countries. This constitutes a vexatious problem which is a source of concern to both rich and poor nations. Speech to the Public Services International Second Asian Regional Conference, jointly sponsored with the Amalgamated Union of Public Employees, at Victoria Hall on 11 November 1968.

196

The third feature of our time is the state of uncertainty into which both governments and societies have been plunged, We are no longer sure of ourselves. Established codes of conduct sanctioned by religion, custom or usage are being challenged on an increasing scale. The ethical principles which appeared secure

in past generations are being rejected

while no new values are being established in their place. Even the mightiest or the wealthiest of nation states are today undergoing this experience. It does not take a man of deep perception to come to the conclusion that this is an age

of momentous change. I shall approach my subject in a somewhat indirect way. Instead of plunging into the problems and troubles of contemporary society, I will choose to go back to the remote past and consider the political system of another age and another society. I intend to discuss at some length the essential features of the Chinese imperial civil service. I doubt whether many of the civil servants gathered here from European or even Asian countries are well versed in this somewhat esoteric subject. But a comparison of the problems and functions of twentieth-century public services with those of ancient China will not only afford some relief from the perplexities which confront us but may shed some light, for it may give some perspective to our problems. The doctrines and principles on which the Chinese imperial civil service was eventually established were propounded some 500 years before the birth of Christ by Confucius. Confucius was disturbed by the troubles of his times, particularly by the mis-government of the feudal states into

which China had been divided—each the absolute authority of a king.

state governed

under

Confucius never saw his principles adopted in his lifetime, and it was not until several centuries later when the country was unified under the first of the Han emperors, that the doctrines of Confucius prevailed over doctrines propounded by other schools of thought as a solution to China's problems. The evolution of the Chinese civil service from the rudimentary system established in the early Han dynasty to the complex organization of later times need not concern us. I only need to draw attention to certain important and enduring

197

features of the service. The first was that entrance into the civil service was determined by written examinations. These examinations were held at three levels: the district level forthe first degree, the provincial capital examinations for the second degree, and the imperial examinations in the capital for the highest degree. The examination system was basic to the structure of the Chinese civil service and contained many unique features which we shall examine later. The second feature of the civil service was its attachment to the ethical principles propounded by Confucius and developea by his disciples and subsequent scholars. These set out the rules of personal conduct, the relationship and obligations between members of society and the proper conduct of enlightened government. The third feature is this: imperial China was an absolute monarchy and the civil service was an instrument of government of the emperor, an extension, so to speak, of the imperial will. The civil service examinations had, as I said before, a number of unique features. The first is that the subjects on which candidates were examined belong to what we today call the humanities, and they include historiography, literary criticism, calligraphy, and poetry. The text on which candidates were examined were mainly the Confucian classics and commentaries on them. One extraordinary feature of the examination system, that is, the three-tier level corresponding roughly to our bachelor,

master, and doctorate degrees, was the very small number of candidates who passed at each level. So far as records are available, in recent historical times, that is, over the last 500 years before the establishment of the republic in China, the percentage of candidates who passed at each level each year remained steady at about one per cent, that is, ninety-nine per cent failed. If you compound this at three levels, it means that on the average one in ten thousand candidates sitting for examinations at one

level or the other got the final degree which qualified them for admission into the civil service. But because of the enormous prestige which degree holders enjoyed, every man of talent with financial support spent many years, even a whole lifetime, in full-time study for these examinations. 198

It was estimated that ina normal year more than a million adults would be studying for these examinations. It was not unusual for grandfather, father, and son to be sitting for these examinations at the same time. People have wondered how this extraordinary state of affairs could have lasted for so long, The Han dynasty was established about 250 years before Christ, and the last dynasty (Ch'ing) was overthrown in A.D.1911. So for more than 2,000 years this bizarre system was practised continuously except for brief interruptions during civil wars between the overthrow of one dynasty and the establishment of another. Modern scholars have come to the conclusion that the imperial examination system served at least two purposes, both of great importance for preserving the unity of the state and for preserving continuity of internal order. First, the system has been described as an ingenious cost-free method of self-indoctrination. The government spent very little by way of state propaganda as the cost and the effort of absorbing the orthodox doctrine were borne by the candidates. Where

the best brains and the natural leadership were indoctrinated into a uniform mould, you get a degree of social cohesion and unity which makes the government of a large population less difficult. Secondly, some modern scholars have come to the conclusion that by keeping the ablest and most ambitious men continuously occupied in studying the Confucian classics, internal order was preserved as these men might otherwise turn their thoughts and energies towards rebellion. But wherever the truth may lie, there is no doubt that the system introduced a form of meritocracy in a regime which was otherwise one of absolute authoritarianism. The system enabled people of humbler birth to rise to the top ranks in the administration; it also enabled the monarch to be independent of feudal princes as a means of maintaining domestic peace. There is a third function which the civil service undoubtedly performed. This is to keep within tolerable limits the excesses of absolute monarchy. Indeed if one looks at Chinese history from a very broad view, one can detect a cycle repeating itself from the rise of adynasty, its maturity

192

and decline, and its replacement by another dynasty after a rebellion. New dynasties observed both in form and spirit the ethical precepts of Confucius. Emperors and officials lived frugally. Corruption and other malpractices were sternly punished. But in course of time, puritanical zeal waned; court and official life became more comfortable, more refined and more sophisticated. Literature and the arts flourished. Confucian precepts began to be observed more in form than in spirit. The seeds of corruption and decay were sown. Cynicism increased with sophistication and refinement declined into luxury and licentiousness. The size of the emperor's harem was a useful indicator of the state of the realm. In periods of decline, eunuchs who managed these harems became increasingly influential as they had the ear of a profligate monarch. Protest against malpractices from honest officials only brought upon themselves retribution. Court extravagance on an increasing scale resulted in increased taxation and this in turn resulted in increasing discontent and eventual rebellion and the replacement of the old dynasty by a new one. Austere living again becomes the order of the day, and the cycle begins anew. The length of a cycle of the greater dynasties such as Tang, Ming and Ch'ing comes to about three and a half centuries. It is noteworthy that in spite of its great cultural and literary achievements, ancient China never developed modern science and technology as we know it today. No doubt this was partly due to the rigid social conformity produced by the Confucian ethic and the intellectual straight-jacket into which the best minds of the country was put by the examination system. For the development of scientific thinking has as its basis a respect for free intellectual speculation and also opportunities for creative innovation. These ran contrary to the spirit of the Confucian system. With China concerned largely with the past and with intense indoctrination in the orthodoxy, mankind's escape from stagnation was to be realized in the societies in a different part of the world, namely Europe. Europe

power

never

attained

achieved

in China,

the

Even

200

degree

of centralization

so, the tendency

of

within the

shifting boundaries of national states was for power to be concentrated in the king at the expense of the feudal chieftains. But as a result of the continued existence of many kings, dukedoms, baronies, principalities and with dynastic families constantly warring against each other, European history took a more complex course than Chinese history. Nor did European monarchs succeed in creating the professional civil service based on entry by competitive examinations, although one American scholar claimed that some elements of the Chinese system of bureaucratic government was introduced into Europe from China through the Arabs to the court of King Roger II of Sicily around the year A.D. 1140. This looks rather far-fetched. The problem of limiting the tyrannies and excesses inherent in an absolute monarchy was handled by Europe by means other than civil service government. In part it resulted from the balance between the king as the central authority and the barons occupying positions of some independence in the king's domain. In some countries, ecclesiastical power limited the authority of kings. Many institutions, such as the establishment of parliaments and free cities served the same purpose. The practice differed from country to country and from period to period. Whether kings were restrained by a bureaucracy as in China or through more ad hoc arrangements as was the case in Europe, the functions of government were very limited. The Chinese bureaucracy and the European kingdoms were basically concerned with domestic peace within the realm and defence against external military threats. Under both systems, levies of money or by way of labour or military service were exacted from the populace for this purpose as well as to maintain the rulers in varying degrees of comfort, splendour and luxury. Where the power of the government was not restrained, one notices an almost inevitable trend towards excessive luxury. Such governments can be considered 'parasite' governments in that they consumed far more of the wealth of the country than what they earned. Since technology was virtually stagnant throughout the history of mankind until the Industrial Revolution, increased enjoyment by members

201

of the government elite, the king and his court, or the emperor and his civil service, could only be obtained by increasing exactions from the rest of the population. We have seen how in China the dynastic cycle moves inexorably in this direction despite Confucius and the civil service. In Europe —to judge by the number, size and elegance of palaces and castles which kings, dukes and their retinues had left behind — extravagance of this parasitic nature was not completely absent. The Industrial Revolution brought about a profound change to all this. The use of machines in producing goods came about in gradual stages over many decades. The significance of machines was not at first grasped by thinkers of the day

)and it was

Karl

Marx,

a thinker

of great

originality

and

power, who first saw the real long-term effects of the Industrial Revolution. He realized that mankind for the first time in history had within its grasp the ability to achieve standards of living far beyond that possible under the system of subsistence agriculture which had hitherto been the main occupation of the majority of the human race. Marx understood this, while the others were complaining of the ‘dark satanic mills'. Marx saw the basis of progress in the surplus value created by the application of labour to machines, the-surplus production that is available after the worker is given sufficient means to keep himself alive. Marx thought that if the surplus value were to be shared by everyone, then eventually human society would attain such a stage of abundance that the conquest of poverty would be achieved. He saw these possibilities while virtually all his contemporaries, under the influence of Malthus, believed that the vast majority of human society was doomed to perpetual and abject poverty because the increase in population always exceeded that of food supply. But, as you know, Marx thought that mankind's advance to universal happiness was hindered by the bourgeoisie, that is, the owners of capital

who. instead-of took the whole

sharing the surplus value with everybody lot for themselves.

It is, of course,

easy for

us to denigrate Marx today as, in the event, history has proved him wrong on this point. But at the time in which he lived, he had strong justification for his belief. 202

The Industrial Revolution

gathered full strength in West-

ern Europe in the nineteenth century,

and so the bases were

laid there for the growth of modern industrial systems. It saw not only the accumulation of wealth on a vast scale but also the growth of large cities, factories and the introduction of new processes and products. It also brought about social upheaval on an unprecedented scale. It was in response to the problems created by the Industrial Revolution that government's functions grew in scope and complexity and the nature of government itself changed. Industrial growth under a completely free enterprise system treated with great harshness people who could not adjust to it. Unemployment during slumps required positive action by the government, as the unemployed had no rural refuge to return

to.

Further

it was

quickly

perceived that industrial

growth required new skills and this could best be attained by taking over the education system from its traditional handlers. The governments were involved in the education and training of its population ona scale never experienced before; similarly in many other fields like health, communications. All this is familiar in recent history. The rise of industrial societies in Europe put.an end to parasitic governments in that continent. Even before the Industrial Revolution went into full swing, the liberal ideas which preceded it brought about the downfall of a number of monarchies in Europe and produced a chastening effect on the survivors. More important than the effect of ideas was the rise

of two new social classes —the industrialists,

that

is, the owner of the new wealth created through the Industrial Revolution, and the large industrial working class employed in the cities and the factories. They demanded and obtained a form of representative government in which rights of the individual, the rule of law and sanctity of contracts were enforced, thus bringing about the abolition of arbitrary government, Power in the government lay no longer in the hands of hereditary kings but in the hands of elected governments. Because of the complex scope of government operations, an entirely new professional civil service had to be engaged to implement the policies of the elected government. 203

However, the end of parasite government did not necessarily mean the end of all trouble for the people of Europe. For the disunity of the European peoples resulted in, as I have said, rival kingdoms with many of them inheriting strong militarist traditions. And the major European powers had a long historical involvement in national rivalries. With the new technology produced by the Industrial Revolution, wars became far more disastrous in terms of human casualties and involved entire populations in tragic losses when they occurred. Let us consider the conditions of developing states against the background of the celestial empire and the modern states created in Europe following upon the Industrial Revolution. It is clear that the economy and political systems of newly emergent countries of Asia and Africa possess a number of features found in both the modern age and in antiquity. It is the coexistence of these incongruous elements which lie at the root of much of the troubles now facing them. Let us examine some of these. In most of the developing countries, the traditional society such as existed in medieval or even pre-medieval times continues to function untouched by modern science and modern technology. In so far as these countries depend on peasant agriculture as is the case with most of them, the strength of these traditional societies is very great. Regrettably they remain largely obscurantist and opposed to change and progress. At the same time, developing countries have taken over wholesale the political institutions and systems of governments from the industrial states. They have elected legislatures (or appointed ones when the constitutional government is abolished), professional civil services, standing armies, judicial codes, development plans, and all the formal paraphernalia of a modern state. In most countries strong elements of modernity have existed in the cities. These include modern means of communications (railways, seaports and air terminals), manufacturing industries, radio, television, newspapers, universities, and so on. Unfortunately behind the paraphernalia of a modern state there has not been built up in many of these countries the

204

underpinning to the political system which was successfully realized in Europe. One can proclaim a modern constitution quite easily, since lawyers can be engaged to draft one. But without a solid base of support from a mature citizenry and without the checks and balances against government abuse which developed in Europe out of the powerful new classes, the industrialist and organized labour, there could be no secure guarantee against the return to parasitical tendencies which has plagued the governments of so many societies in the past. Universal franchise, though of some value, has proved to be ineffective where the majority of the electorate are peasants. It may well be that the institutional support which developed in Europe will also be created in the states of Asia and Africa in course of time. It could be argued that political development in Europe to its mature form of today required more than two centuries, whereas it was barely two decades since the independence of most of the new states. Such an argument is of little value as it gives no indication of how to meet the practical difficulties of the day in the face of the urgent need to achieve fast progress. In the immediate post-independence years, men in these new states were inspired by the vision of rapid and continuous progress, the conquest of age-old poverty which had afflicted most of their population and the transformation of backward populations into modern societies. It is becoming clear today that the original hopes are not being fulfilled. It is not merely a matter of progress being slower than expected though the ability to reach the goal eventually is not doubted. Doubts are being felt on this basic point. This loss of confidence is the result not merely of dismal annual statistics on balance of payments or of economic growth rates. To many people, these are incomprehensible in any case. What is distressing is that the loss of confidence has been the result mainly of the lowering of standards of public service, both among the professionals and among the political leadership.

The general picture is one that can give no reason for complacency. In many poor countries, civil service standards are seriously jeopardized by political patronage, that 205

is to say, the appointment into the civil service not on merit but by virtue of political connection. Concurrently with the growth of the spoils system, we have seen the rise of graft and corruption on an increasing scale. All these are symptoms of the parasitic tendencies of government to which I have referred. Unlike the traditional monarch of antiquity, the mayor of a city or an elected minister or a civil servant cannot lay claim to an exceptional standard of opulence and luxury by invoking the doctrine of divine right. If he wants to achieve such exalted standards of living, he must do so by surreptitious means, that is, by graft. It is this decline in the standards of administration and in the standards of public service that is at the root of economic stagnation. Opportunities for parasitic activities are much more numerous and profitable in emergent countries of today than they were in traditional societies. The modern sector which has been established in most new countries produces a surplus value through the application of technology, and it is this surplus value which the parasites in government

prey upon. There are many economists, I regret to say, who believe that economic development in poor countries is possible in spite of corruption. In theory, they may be right. But they assume that human avarice can be kept within tolerable limits and this is contrary tothe experience of history. Corruption may be tolerated in a country so rich in resources that the pocketing of a few millions here and there will not have much effect on the economy. But not all the poor countries have oil fields in abundance, and those who have a super-power to serve as universal aunt are not many. In

fact, most countries are in a tight situation and the filching of surplus value by corrupt politicians and civil servants would mean the transfer of resources from capital formation either into a Swiss bank or into conspicuous consumption. In either case, the effect on development is bad. But such technical economic effects are minor compared with the demoralization which corruption spreads throughout the whole of society. The formation of new skills, the development of new attitudes of thrift,

206

enterprise,

integrity,

which

are so necessary in running the institutions of a modern state —all these are totally subverted, and their effect is far more damaging than the short-term economic effects of resource diversion. It seems to me that in discussions on economic development there has been too much emphasis on the purely technical aspects of the development process to the neglect of social and political questions. Where a society is governed by what is basically a parasite government, no amount of foreign capital in-flow or technical assistance can make for enduring change and bring about the upsurge of production necessary for self-sustaining growth. As a result of overemphasis on the technical aspects of economic development, people have forgotten that the basic ideas are really simple. First, we must accept that what took Europe two centuries to achieve cannot be done in Asia or Africa in a few years. But it can be done in less than two centuries. Second, progress cannot be achieved when society is confused, bewildered and demoralized. The effort needed to create a modern industrial system is immense and would require a strong national sense of single-minded purpose if it is to be achieved in a short space of time, say, over three generations. If for this period the underdeveloped country can enjoy enlightened government of integrity, the transformation of backward society can be accomplished in stages through education and by application of science and technology to all forms of production. The knowledge and techniques to do all this are known and only need to be absorbed and applied. Where the whole of the increased output produced by modern technology is returned to the system to create new wealth, then we look with confidence to self-sustaining growth. The case of Japan underlines the point which I am trying to make, that is, it is necessary to have a firm and durable political structure under a leadership continuously committed to the drive to modernity. The Meiji Restoration in the last century provided the Japanese with this opportunity, and under the institutions which they developed, sometimes borrowed from the West but essentially adapted to the needs of Japanese society, they have become the first and today

the only nation in Asia to equal the West. 207

In contrast with this the poor countries inAsiaand Africa, with very few exceptions, have failed to establish durable and firm political institutions which can propel their societies into the twentieth century and beyond. In too many countries we have seen imported constitutions complete with elections, legislatures and so on winding up as total failures. With their collapse, men with the gun have taken over. What amazes me about the whole situation is that there

has beenvery little thinking of substance done on these basic problems. It will bewrong to say that no thinking of any kind is done. Indeed there is a profusion of books, conferences, and papers on problems of poor countries. But these are mostly on technical minutiae and not on the essentials. Our countries are in many ways in a situation similar to that of China in the times of Confucius and of the Hellenic world of the same age. In China there was vigorous intellectual debate about the nature of society and government, and many schools of thought contended. In addition to Confucius, we

had the Taoists, the Legalists, the Moists, the Logicians and many others. The intellectual ferment in the Hellenic world is better known to all of us. But in developing states we have nothing equivalent tothis, even though our problems are

equally pressing and our opportunities much greater. This being a meeting of members of unions affiliated to Public Services International, I would suggest that the arguments which I have put forward before you in this address may be worthy of consideration, if not at this meeting at least on some other occasion.

208

Socialism in Singapore

This occasion, the combined annual dinner of the Singapore Manufacturers' Association and the ninth Pioneer Certificate presentation ceremony, is both an important and an auspicious one. It would not be inappropriate for me to go beyond mere courtesies and formalities and make some statements of policy significance. Today is a happy occasion when leaders of the People's Action Party Government and the leading industrialists of the Republic celebrate an important event. But let me take you back exactly ten years and ten days when my Government first assumed office on 3 June 1959. Businessmen and industrialists, far from hailing this event as a happy augury for the future, felt for the most part that the end of the world was around thecorner. The stock market collapsed and there was a flight of capital out of Singapore. Several people fled the country. In a short time of ten years, we brought about a transformation of the business climate. This transformation is by no means an unqualified bless-

ing to us, the Government leaders belonging to a radical socialist party suchas the PAP is. There is a story — probably apocryphal — that the eminent Swedish economist Professor Speech at the combined annual dinner of the Singapore Manufacturers' Association and the ninth Pioneer Certificate presentation ceremony on 13 June 1969.

209

Gunnar Myrdal, after a visit to socialist Singapore, told his academic colleagues that the way to make capitalism work in Asia is for the people to elect a socialist government. My colleagues who have attended international conferences of socialist parties, can hardly escape some feelings of embarrassment when fellow socialists from other parts of the world gently deprecate us for the indulgence that Singapore socialists extend to the class enemy. What I want to do first tonight is to give an account of facts and figures to suggest that the PAP Government are good socialists notwithstanding our genial relations with the capitalists. It is one of the fundamental tenets of socialism that the state should own a good part of the national wealth, particularly what is called the means of production. In this regard, that is state ownership of the means of production, it is my submission that the socialist state of Singapore is not lagging behind the achievements of socialist governments in other parts of the world, probably ahead of most of them. In parenthesis may I say when I use the term ‘socialist' I exclude communist states. Let

me

now present the facts and figures.

To start with,

the Singapore Government is by far the biggest and most successful landlord in the Republic. The achievements of the Housing and Development Board hardly need any commendation from me; I merely want to present the figures. Excluding the properties they inherited from the former Singapore Improvement Trust, the Housing and Development Board have built 93,300 flats up to 31 December 1968. The value of these flats and the land on which they are built, valued at cost and not at market price, plus granite quarries and various machinery and other assets, amounts to $380

million, Some $49 million have been spent on reclaiming land in Kallang basin and off East Coast Road. A conservative estimate of the market value of the land would be twice the expenditure. This gives a total of $478 million. The value of the assets belonging to the Jurong Town Corporation, which has properties in thirteen industrial estates, amounts to $341 million. In addition, the Government has inherited equities taken over from the Economic Development Board on the formation

210

of the Development

Bank of Singapore.

These

equities have

an original cost of $37-3 million and a current market value of $88-3 million. In addition, the Government owns, as you know, half the shares of the Development Bank. It also has established the Neptune Orient Lines, an international trading company, INTRACO, and owns a substantial part of the MalaysiaSingapore Airlines. The value of these assets comes to $178 million. If we add these totals, which is the Government's ownership of properties and business, we get an aggregate of $1,085 million. It should be noted that this figure excludes the value of our holdings of Keppel Shipyard and Sembawang Shipyard. It does not take into account the assets belonging to the Port of Singapore Authority, the Public Utilities Board, the Singapore Telephone Board and other minor statutory authorities. To the state ownership of $1,085 million in real estate and business in the Republic of Singapore itself, we have to add another $2,200 million worth of overseas assets. This gives a total of $3,285-million or $3-3 billion for short. In 1959 my Government inherited from our predecessor overseas assets worth $362 million. So you can see that in ten years' time the socialist Government of Singapore has created nearly $3,000 million worth of new wealth. I therefore hope that my colleagues when they attend the next international conference of socialists will be less apologetic about our performance as socialists. They may even make the point that unlike other socialist governments, when we invest in industry, we make a .substantial profit on our investments. Further, my colleagues can claim in complete honesty that this creation of new wealth was achieved entirely by the exertions of the people and Government of Singapore. We did not receive one cent of foreign aid in the enterprises I described. The creation of new wealth in the public sector has been matched by equally successful performance in the private The particularly in the manufacturing industry. sector, AsManufacturers' growth of membership of the Singapore sociation, the number of pioneer certificates awarded, and the large number and high morale of present company testify to this more vividly than any array of statistics can.

211

The present state of affairs suggests that the view that you can make quick profits on trade, that is buying and selling, while returns in the manufacturing industry are slow is not true. I will rebut this point of view by taking one or two concrete examples. If, five years ago, in 1964, any Singaporean had sufficient foresight to put in $150,000 in National Iron and Steel, he would today be a millionaire. I wonder if it is possible to increase your capital by seven times in five years in any other line of trade? There are other

instances —to name

a few,

Pan-Electric

Industries,

Sheng Huo, Prima Flour Mills, Jurong Shipyard. Jurong Shipyard had difficulty at the beginning in getting capital from people, many of whom thought the whole idea was quite crazy. I exerted persuasion ona close friend of mine and, just to do me a favour, he agreed to put in a quarter million dollars into this venture. If Jurong Shipyard goes public today, his shares will be worth much

more

than a million dol-

lars. So you see, it is not true that you can't get rich quick in manufacturing. This brings me to the question of the stock exchange, because it is the appreciation of the capital values of your investments in the stock exchange that enables you to multiply the value of your initial investment. We have a good stock exchange in the Republic. A good stock exchange is a great asset to an industrializing country. It is an effective way of mobilizing domestic capital and, more important, the opportunities for capital appreciation on good performance is one of the great incentives to industrialization. A stock exchange, in this country or elsewhere, is a valuable instrument of capital formation only if it enjoys and retains public confidence. This requires on the part of members of the stock exchange both wise judgement and ethical conduct. Otherwise failures of some issues would undermine public confidence and would damage and possibly destroy the viability of the stock exchange. This has happened in several underdeveloped countries as a result of unwise or unethical practices. There is a rush by various companies to seek listings on the Stock Exchange. A good number have already obtained

212

listing this year and many more are in the pipeline. There is an arrangement between the Stock Exchange and the Finance Ministry whereby initial vetting is done by the Ministry. I would have preferred the Stock Exchange to exercise final judgment on whether an application for listing should or should not be approved. Members of the Exchange, however, are reluctant to take on this responsibility, presumably because the Management Committee does not like to turn down the applications sponsored by another member of the Exchange, I suppose on the principle that dog does not eat dog. So they accept the assessment of the Ministry of Finance. In practice this means that my Permanent Secretary Mr Joe Pillay and myself become a two-man capital issues committee. We have recenily refused three applications. This does not reflect upon the adequacy, integrity or effectiveness of the businessmen concerned. We refused to recommend listing because we were not satisfied that they could achieve a satisfactory rate of profits on the capital structure proposed. Neither Mr Pillay nor myself relish performing the role of final arbiter on stock exchange listing. We are human beings and, as such, not infallible in our judgment. I don't know what the final solution should be and because of this I have asked for an expert from the United States through the International Executive Service Corps to look into the workings of the Stock Exchange and to make recommendations to me. But I want to stress that whatever I have said about the Stock Exchange today is in no way intended to denigrate the efforts and achievements of its members. They have performed yeoman services in the past and no doubt will continue to do so in the future. While we are talking about how to make fortunes on the stock exchange, it is as well to remind ourselves of the labour theory of value, to which, as socialists, my colleagues and I subscribe. I make this point because some businessmen, delighted at the discipline imposed on wage labour by the new Employment Act, believe that now is the time to put the worker in his proper place and to extract the maximum blood and sweat out of him. This attitude is wholly to be condemned. The new Employment Act not only

213

imposes discipline and responsibility upon the worker, it does so even to a greater extent on the employer. I have received complaints from the National Trades Union Congress of alleged malpractices by certain employers. These are being investigated and if verified, the employers concerned will find themselves in very deep trouble. Let them be under no misapprehension about the sanctions available to the Government to bring them to heel. This type of unthinking and unenlightened employer pushes his labour force around and acts in a high-handed manner. When the labourers have reached their limit of tolerance, they take collective action and, in the subsequent confrontation, it is invariably

the employer who succumbs, giving way to one demand after another however outrageous andunreasonable these demands may be. I have seen too many of such instances and I intend to put a stop to this. Irresponsibility in one quarter breeds irresponsibility as a response and the result is toendanger the entire stability of the wage structure of the Republic. Happily it is only a very small minority of employers who stand in default and thus it is easier to deal with them. Let me set out once again the background thinking of the Government which moved us to pass this new Employment Act. The basic object is to mop up the large pool of unemployed young men and women looking for their first jobs in the labour market. And this must be done under two adverse conditions. First, a small domestic market is of little value to much of modern industrial processes. Second is the fact that Singapore must compete with low-wage countries like Taiwan and South Korea for investment capital and know-how. We cannot afford an undisciplined labour force, nor can we afford a wage spiral. That is why we have the new Employment Act. But let us not forget that the ultimate object of this whole exercise of industrialization is not to provide fortunes for a fortunate few but to raise the standard of living of the entire working class. This must be the credo of a socialist government. At present it is possible for some industries which have got over their teething troubles to afford a steady and reasonable increase of wages to their labour force. Such increases should be linked with increases in productivity.

214

My colleague Mr Rajaratnam and I are holding discussions with the NTUC on how this can be achieved without reducing our competitive edge as a good centre of industrial investment. I am also holding discussions with leaders of the Singapore Manufacturers' Association on how temporary shortages of labour in particular categories can be overcome by relaxation of immigration requirements, work permits and such-like administrative measures. What I have said so far this evening underlines one important principle which has been said in the past but which is worth repeating. This is that there must be willing and intelligent co-operation between the three parties who are vitally interested in achieving economic growth — namely, the Government, the businessman and the labour movement. If we continue to work together towards this common purpose, I am confident that the successes that we will achieve in the years ahead will be even greater that those we have left behind us. The Singapore Manufacturers‘ Association has always extended maximum co-operation to the Government, which is greatly appreciated, and Iam sure we all look forward to the furtherance of good relations between Government and industry. Finally, let me offer my heartiest congratulations to the forty-three companies who have been awarded Pioneer Certificates this evening. I wish them every success in their endeavours.

The Nature and Appeals of Communism in NonCommunist Asian Countries

Those who in private life behave well towards their parents and elder brothers, in public life seldom show a disposition to resist the authority of their superiors. And as for such men start-

ing a revolution, no instance of it has ever occurred. lects of Confucius, Waley edition, Book I, Verse 2.)

THE

ELITE

COMBAT

(The Ana-

PARTY

There is a widely held misconception about the nature and appeals of communism in backward countries. Communist appeal and communist strength are sometimes believed to be the result of poverty, oppressive domestic government or frustrated nationalism. I think this pays the communist movement an undeserved compliment, placing it in the role of a Galahad in shining armour, defending the exploited peasant against the landlord or fighting imperialists on behalf of oppressed subject peoples. It is easy to cite examples from contemporary history in refutation of this view. For instance, when it went communist,

Cuba was

one of the most

Address given in Canberra to the Australian Institute of Political Science on 28 January 1967. First published in 1967 in Communism in Asia: A Threat to Australia? , Angus and Robertson Ltd.

216

literate Latin-American countries with a standard of living much higher than the average. The State of Kerala in India, where the communist appeal is strongest, enjoys the highest rate of literacy in India. Singapore is considerably richer than the State of Trengganu in the east coast of Malaya. There is awell-developed communist underground in Singapore but nothing of significance in Trengganu. The Indian nationalists have been frustrated for decades prior to the achievement of independence, but communist influence during the struggle for independence was not of consequence. On the other hand, Ceylon got her independence the easy way and communism there exerts more influence than in India. In the new African states, no communist party worthy of the name emerged, despite a long tradition of frustration. But in the Republic of Haiti, where there is degrading poverty, extensive ignorance and an atrociously oppressive regime, these conditions have not produced a communist movement, All these examples do not prove or disprove that there is some relationship between poverty, nationalism and mis-government and the rise of communism. Ibelieve that a relationship exists but it is not a direct one and operates in a subtle and complex manner. A valuable starting point in the process of understanding this relationship is to study the nature of the communist party, the way it operates, the type of people who work for it, and the different kinds of appeals it holds out to different people. It is important to realize that the communist party is a special type of organization and that the communist is not anordinary person. The communist party in any country has only one purpose —the revolutionary capture of state power. To achieve this objective, the communist party has at its disposal standard doctrines and ideologies which have grown out of the thinking and experience of communists in many countries for more than a century. To understand the appeals of communism in Asian countries — or elsewhere —we must take into account the communist ideology. The ideology itself has no appeal to the general public and is probably incomprehensible to the ordinary citizen. The communists never attemptto direct their ideology for public consumption in countries in which they

217

have not assumed power. But the ideology sets out very clearly the nature and objectives of the movement, its operational techniques, the types of persons it recruits, how it trains them, and how they should be deployed over a broad front to create a situation favourable to a communist revo-

lution. The ideology itself can be classified under two categories. The first consists of that part of their belief which relates to the interpretation of historical development of human society. This part of the ideology I shall call the communist theology. The second part consists of principles underlying their organizational and operational methods. I shall call this the doctrine and, in fact, its meaning is very similar to the term as used by the military. First, the theology. This was expounded by Marx and Engels in the great classics of the nineteenth century, and can be labelled as dialectical materialism. The theology envisages the development of human society ina series of quantum changes, as society is transformed from one system to another rather like a chick emerging from the eggshell. The propelling force behind these changes is antagonism between social classes. At any stage of the development

of

human

society,

a new

social

class

emerges

and

grows in strength and reaches a point where it overwhelms the existing social order and transforms it into a new one. In the new society the emergent class forms the dominant power. Thus capitalism has within it its own seeds of destruction through the growth of large numbers of factory and industrial workers. In the course of the development of capitalism, two processes take place — the concentration of capital in fewer and fewer hands, and the increasing impoverishment of the general population. The workers finally overthrow the system and establish a classless society in which, presumably, the dialectics of history cease to operate. All this is old-fashioned stuff familiar to most people. This theology — Marxism as it is commonly known — might well have died a natural death and be relegated to the limbo of history, just like other nineteenth century philosophical protests against the Industrial Revolution, such as Utopian

218

socialism, guild socialism, syndicalism, anarchism and others. But Lenin and the fortuitous circumstances of World War I produced conditions favourable to the capture of power by communists in Russia by the methods advocated and developed by Lenin. Lenin's contribution tocommunist doctrine was the result of the activities of the tsarist secret police, the Okhrana, in arresting and detaining communists, activists and sympathizers, and banishing them to the frozen wastes of Siberia. While the rapidly expanding working class in imperial Russia provided great opportunities for the communist movement to exploit, their activities were continually disrupted by the tzar's secret police. Lenin saw the solution to this problem in the creation of a party of professional revolutionaries working as a secret organization. 'Give us a party of professional revolutionaries,'

said Lenin,

'and we

will

overturn

the whole of Rus-

sia. 'l Without this no movement could endure as there would be no stable leadership to maintain continuity. 'When we have detachments of specially trained working class revolutionaries who have gone through long years of preparation, no political police in the world will be able to contend against them, for these detachments of men, absolutely devoted and loyal to the revolution, will themselves enjoy the absolute confidence and devotion of the broad masses of the workers." 2 The control over these revolutionaries was to be vested in a centralized leadership which would secretly deploy them to the great mass organizations whose key leaders should be either communists or those amenable to communist influence. These mass organizations should be ruthlessly utilized for the revolution. Lenin said this of trade union penetration: 'It is necessary to be able to withstand all this, to agree to any and every sacrifice and even, if needs be, to resort to all sorts of stratagems, or manoeuvres, and illegal methods, to evasions and subterfuges, in order to 1V.1. Lenin,

What is to be Done? , first published in 1902 in Stutt-

gart, reprinted in Moscow by Foreign Language 2Lenin, op.cit., p.149.

219

Press,

1947,

p.142.

trade

penetrate

unions, to remain

in them

and to carry on

Communist work in them at all costs.'? Lenin developed both the general idea of the revolutionary vanguard party as well as the tactical and strategic principles underlying the quest of power. The ultimate object is to undermine, through civil disturbances and political crises, the will of the ruling class to govern and, at the critical point, to take over state power through a wellplanned and ably directed insurrection. The cutting edge of the insurrection was to be the industrial working class led and directed by the Communist Party. From the victory of Lenin's Bolsheviks in Russia in 1917 till the rise of Mao Tse-tung in China in 1935, the Leninist type of party became the model for all communist parties to emulate. But the Chinese communists battling the Kuomintang in China found that the Leninist type of party and tactics did not work. The urban insurrections which they mounted in 1928 to 1930 failed and only resulted in weakening the communist movement. Mao's contribution to communist doctrine lay in the recognition that in backward countries, where some eighty per cent of the population live in the countryside, the industrial working class was too small a base on which to mount a revolution. Seeing that China's industrial proletariat proper amounted to no more than five per cent of the population, one would have thought the point to be self-evident. Nevertheless, it constituted a basic departure from the Leninist doctrine of proletarian revolution and it was Mao who formalized the new doctrine. The security of the leadership and the movement could not be achieved merely through resort to underground professional revolutionaries working in an urban industrial environment in the thick of the enemy. Instead, Mao advocated the establishment of a rural sanctuary which was physically separate from the enemy and which was defended by an armed force. From this rural base, the party sought to extend its power and influence 3V.I. Lenin,

Unions?' Harty

'Should

Revolutionaries

in Selected Works

l938

, Vol.10,

pave

220

Work

in Reactionary Trade

London,

Lawrence

& Wis-

outwards. Instead of working class support, the revolution had to depend on the peasants. Instead of the swift insurrection, there was to be the protracted war. But though it was recognized that political power grew out of the barrel of a gun, the supremacy of the party over the armed forces was upheld as an absolute principle. Let us see how theology and the doctrine operate in practice. The communists have constantly laid stress on the importance of what they term ‘ideological consciousness’ and ‘doctrinal purity'. And they are quite right. But theology and doctrine are not studied as academic pursuits but for their value in practical work, which is considerable in the hands of a skilled operator. For instance, in the recruitment of new members, the theology has a great appeal value in that it provides the puzzled initiate an understanding of the modern world. In the new Asian states it is strange but true that nobody bothers to advance an intellectually satisfying account of the modern world — how it came into being, the type of rational thinking demanded of a society based on a complex technology, and such like matters. So in the absence of a competing we/tanschauung , the communists very often win by default of others. For the young man trying to make sense of the profoundly disturbing state of affairs in his society, the theology can well provide what appears to him a tremendous insight into the perplexities confronting him. The second function of the theology is to act as a filter to discriminate between suitable and unsuitable material for the revolution. For instance, those who are unconcerned with public affairs will not be attracted by it, whereas those who are concerned will constitute more promising recruit material. The theology also selects the types who are disaffected by society and who have a desire to improve it. These types are naturally prevalent in societies which are in the

process

of rapid

transition,

as

those of most Asian

states today. As regards the value of the doctrine and theology in revolutionary work, the contribution is enormous. The theology guarantees the inevitability of victory thus helping to maintain high morale, especially in adversity. Both theology and 221

doctrine act as intellectual tools whereby the communist can assess the situation confronting him, on the basis of which he can formulate his plan of action. They enable him clearly to distinguish between friend, foe and neutral. The united front doctrine teaches the party operator how to manipulate neutrals and sympathizers against the main enemy, in fact how to identify the main enemy. Where the party exists as an underground organization, its members must be able to operate independently and correctly implement the occasional general directive from superior party authority. Without proper training in the doctrine he can hardly do this. Organizational principles and practices serve to isolate the party worker in ahot-house environment where a high tempo of activity goes on all the time, absorbing all his interest, giving meaning tohis existence, and maintaining a high state of morale. In this manner, the communists establish and maintain a band of disciplined and dedicated persons who have surrendered their loyalties to a larger and impersonal cause. Communists generally observe a higher standard of conduct than their rivals, andwhen this happens it can plainly be seen by those for whose loyalty they are competing. In the process of his conversion from a raw recruit to a hardened revolutionary, the good communist learns a number of valuable lessons. For instance, as a trade union leader he knows that what he should strive after is not the best possible terms for the workers but just enough to increase the prestige of their pro-communist leaders and not enough to make them complacent or to weaken their militancy. Too good a settlement will not only do this, but may give the lie to the communist dogma that the worker's livelihood can find no fundamental solution in the capitalist system.

The good communist has a keen nose to scent out various kinds of social dissatisfaction. His training in doctrine and his experience enable him to judge which of these present the most promising issues on which to mount agitation, given the resources and personnel at his disposal. When an issue has been selected— or even created, as can be done given adequate organizational support —the real purpose is not the declared one, that is to get a solution to these problems and

222

difficulties, be they high food prices, oppressive land-rents, etc. The first aim is to bring discredit upon the powers that be, weaken people's confidence in them, and add to the general climate of discontent. Next, the operation serves as an organizational exercise and helps to identify capable leadership which may emerge in the campaign and to provide experience to everyone engaged init. Finally, if successful, it demonstrates the strength of the communists or, where the party is illegal, that of the open front organizations. In this manner they hope to convince the people that ultimate victory is on their side, a consideration which no politician will dismiss as unimportant. The good communist at a higher level of leadership will know how to direct combined operations with other political and social groups without losing the identity of his movement. At the same time he must be adept at deception for it is often necessary that certain campaigns must appear to be untainted by communist involvement so as toattract a larger following. The mature communist will also learn how to evade police surveillance, how to avoid arrest, how to establish

secure

communications

on delicate

subjects,

how to

arrange ‘safe houses' and do other practices of relevance to clandestine activity. In the Maoist type of revolution, when guerrilla war has taken place the party cadre has to be even more versatile. He must be able to command military formations in accordance with his party rank. More important, he must be able to secure the political allegiance of the villagers on whom the armed forces depend for supplies and recruits. In the process of the revolution, he will have to do a number of unpleasant things, such as the identification and execution of government officials and agents. What emerges from this account of how communists operate is that the appeals of communism fall into two distinct categories. First, the appeal to potential party recruits, future members of the elite combat party. This mainly takes the form of the theology and doctrine we disIn the new Asian states this appeal is addressed cussed. mainly to the intelligentsia, not only in domestic institutions of learning but also in foreign universities attended

223

by them. The foreign communist net can be relied upon to make attempts to cultivate these students. The response to this appeal varies with the circumstances of the intelli-

gentsia of the Asian country as well as with the character of the individual. In general, response is likely to be good when prospects of a meaningful career are poor, when the person is able and ambitious, when traditional cultural restraints have broken down and when the intelligentsia is confronted with manifest injustice of which no other methods of

redress seem feasible. The other type of appeal is addressed to what-is called the 'masses', that is the general public or a specific segment of it. This consists of the exploitation of specific grievances or of general discontent. It is the party apparatus that selects and defines the issues, plans the campaign of agitation and directs the open front organizations which carry it out. It is important to realize that the expression of social discontent in this form is not a spontaneous social process but a planned and organized political effort. That is why a good communist party establishes a wide variety of front organizations to cater for every conceivable interest and exploit any promising situation. Trade unions are a natural

target of penetration and control.

So are

organizations

of

youth, women, farmers, students. Cultural organizations can lend weight and respectability. In a thriving communist movement there is constant and growing interaction betweenthe leaders and the mass organizations, strengthening each other in a cumulative way, both in terms of political influence and organizational strength. It is in the mass organization that non-intelligentsia leaders are detected, cultivated and recruited into the party, pro-

viding proletarian stiffening to the intellectual elite. This stiffening remains a minority group; for instance, among Ho Chi Minh's communists in 1953 less than twenty-eight per cent were of peasant or working class origin.4 4 John

C. Donnell,

'North

Vietnam;

a qualified

pro-Chinese.

posi-

tion', in Robert A. Scalapino, ed., The Communist Revolution in Asia; tactics, goals and achievements , Englewood Cliffs, N.J., Prentice Hall, 1965, p.142.

224

In a well-ordered society, the ordinary citizen does not contemplate engaging in the horrendous activities which the communist party member will have to do in the line of duty at one time or another in his revolutionary career. And yet in the

countries we are studying,

over the last two or three

decades, large numbers of young men and women with fine intellect, admirable character and often of impeccable family background have been drawn into doing this. How and why has this happened? We may find some tentative answers to these questions if we examine the experience of communist parties in these countries, particularly during World War II and after.

THE

»&

i?

/

SOUTHEAST

ASIAN

EXPERIENCE

The communists in Indonesia did not emerge in the immediate post-war period as a clearly identifiable group. There was a little uncertainty as to who were the nationalists and who were the communists, and many of the emerging leaders subscribed to both Marxism and Indonesian nationalism, In the military and political campaigns against the Dutch, until the return in 1948 of Musso, a legendary Comintern leader, the communists formed part of the left-wing (Sajap Kiri) of the Indonesian nationalist movement. When the chips came down in 1948, many members of Sajap Kiri who were thought to be socialists or nationalists announced themselves as communists. These were members of a returned student group from Holland. Musso sought to give the communists in Indonesia a distinct identity and to capture the leadership of the revolution through the Communist Party of Indonesia (PKI). His efforts were brief and still-born. A revolt by some communists irregular detachments broke out in Madiun in September 1948 and Musso immediately threw in the support of PKI leaders around him to the rebellion. This was easily crushed by nationalist troops. Not only did the revolt fail, but it incurred for the PKI the odium of national betrayal as it oc-

‘curred at the time when the Dutch were expected to launch one of their pacification drives against the Indonesians. 225

The Madiun rebellion had profound effects on the subsequent policies of the Indonesian Communist Party. Because large sections of the communist movement opposed the Madiun rebellion, it was possible for the communists to return

to legitimate activity fairly soon, and by 1951 they appeared to be in full swing and had engineered an extensive series of strikes.

were

As

a result of this, large numbers

arrested

the party was

of communists

and detained by the Sukiman Government and crippled.

It was after these experiences that the leadership changed hands and Aidit and his colleagues obtained ascendancy in the party. Aidit reversed the previous policies of the PKI which got them into such disrepute. Instead of unqualified hostility towards the Government and the general nationalist movement, Aidit adopted a flexible policy of conditional support for the government in power, attempting to win over the more traditionalist Muslim Party, the Masjumi. At the same time, Aidit advocated enthusiastic support for Soekarno and, in particular, encouraged the President towards extremist nationalist postures involving a strident anti-imperialist and anti-Western advocacy. As regards party organization, Aidit decided to enlarge the membership of the PKI. It was apparently thought that the elite nature of

the PKI (which numbered only 7910 in March 1952) was responsible for its vulnerability tomass arrests. By converting the PKI into a mass party Aidit had abandoned the basic Leninist principle of a conspiratorial vanguard party of professional revolutionaries. Possibly, the PKI leaders had decided that the Leninist type of revolutionary work merely served to isolate them from the mainstream of Indonesian nationalism. As such, they probably decided that it would be better to work towards a re-entry into the mainstream of the nationalist movement than to oppose it. The quest of legitimacy rather than the pursuit of revolution became the principal object of the PKI, The flexible strategy of Aidit's leadership appeared to pay off as the party membership rapidly expanded to some two and a half million. The scope of its united front organizations increased in width and in depth, covering virtually all strata of Indonesian society from workers in SOBSI trade

226

unions, peasants Peasant sionals,

in the Barisan

Tani Indonesia (Indonesian

Front) women in the GERWANI, students, profesetc. The membership of united front organizations

believed to run to between fifteen to twenty million. This kind of communist strategy is unique and if the PKI had succeeded in winning power, they would have made an original contribution to communist theory. This strategy made sense only if the PKI sought to gain power by presenting itself as the only salvation available to Indonesia in the midst of growing chaos, mounting frustration and widespread

was

decay.° And from external appearances, events in the decade preceding the September coup appeared to support the soundness of the PKI political line. Competing parties were either banned and dissolved following the outer island rebellions of 1958, as happened to the Masjumi and the Socialist Party, or if they assumed power or participated in the Government, their mass popularity declined as a result of mismanage-

ment corruption and mounting economic troubles. Yet all the apparent success of the PKI concealed a deep and disturbing vulnerability. Security against their arch enemy, the Indonesian army, depended not on a Leninist secret organization of cadres nor on a Maoist rural sanctuary, but on the goodwill of President Soekarno. One way in which the PKI could assume power was through the liberal institutions of parliamentary democracy./Yet these were the institutions which had been condemned as un-Indonesian under President Soekarno's concept of guided democracy} So, despite the PKI's burgeoning membership and political influence, its position resembled

that of a squirrel on a tread-

mill, that is, runningvery hard but staying in the same spot.6 5See

Guy

J. Pauker,

Corporation

'Communist

Memorandum

Prospects

RM-4135-PR,

in Indonesia',

November

1964,

RAND

and also

published in Robert A.Scalapino, ed., The Communist Revolution in Asia; tactics, goals and achievements, Englewood Cliffs, N.J., Prentice Hall, 1965, pp. 256-89. 6 For a remarkably perceptive assessment of PKI's inherent weakness beneath its apparent strength, see Ruth T. McVey, 'Indonesian Communism and Guided Democracy' in A. Doak Barnett,

ed., Communist ernments

and

Strategies in Asia;

parties,

New York,

227

a comparative analysis of gov-

Praeger,

1963,

pp.148-9.

It might have been the realization of PKI's intrinsically weak position that induced Aidit and his colleagues to mount the September 30th coup when rumours of Soekarno's impending death were rife in Djakarta. The coup as a means of capturing state power has always been condemned in communist doctrine as a manifestation of petit bourgeois weakness and lumpen proletariat destructiveness and contrary to Leninism. The failure of this desperate resort to violence, the third in PKI history, has shattered, for the time being, PKI's chances of winning power. If the PKI had converted itself into a mass party along good social democratic lines, the Communist Party of Malaya (CPM) maintained its Leninist purity. At the end of World War II the prestige and power of the CPM reached unprecedented heights. It had a significant armed force which grew during the Pacific War as a resistance movement against the Japanese. It enjoyed high prestige among the Chinese population in Malaya and Singapore. It operated as a legal party from the end of the war in 1945 till its rebellion in 1948, The communists worked hard at building a Malay mass base and succeeded in obtaining the support of some Malay leaders whoeventually attained national stature. Whether the CPM could have obtained Malay support without the active intervention on its behalf by the PKI is doubtful. After the fateful Calcutta Conference in early 1948, the CPM decided on armed revolution before they had made much progress among the Malays. The revolt itself, though it lasted a long time and demanded the deployment of troops, static guards and armed police in a ratio of nearly a hundred to one, never had any real chances of success. There were three main reasons. First, Malay opposition to what was identifiable as a Chinese party. The Malays provided the large bulk of police and security guards, numbering at its height more than a quarter million. It was beyond the power of the CPM to subvert these forces. Second, the Chinese peasants, on whom the communist guerrillas had to depend for supplies, were not rice farmers but cultivated vegetables, fruit or rubber. Food supply became an acute problem tothe communists in the jungle. They 228

could not obtain their supply from Malay rice-growers. They virtually had to depend on the village grocer for their food supplies and, in the face of strict control measures, the amount forthcoming, even with the most strenuous exertions of their village political net, could not maintain more than a small detachment in the adjacent jungle. The result was the fragmentation of their guerrilla army into small scattered units and their failure to establish a compact guerrilla base which a rice-growing area might have supported. The third reason was intelligent British anti-guerrilla

strategy which concentrated on the interdiction of their food supply lines — the Achilles' heel of the communist guerrilla revolt. The CPM's method of recruitment, as practised today in Singapore (and doubtless also in Malaysia), maybe worthy of notice. They believe in getting their recruits young and, in fact, commence their talent-spotting among secondary school students in Chinese-language schools. In some of these schools, they have established a self-perpetuating net of student cells. Promising students are approached to join these

study

cells.

At

first,

their

activities

are

innocent

enough and consist mainly of coaching to improve academic standards. At some stage, the student is introduced to literature the nature of which is phased in stages. The first stage consists of stirring tales of Chinese heroes of past imperial dynasties. Next, the student is introduced to tales of heroism in China's war of resistance against Japan, Then accounts of the feats of reconstruction in Communist China are introduced to the novitiate and his or her attention is drawn to the achievements of communist society as against the defects of the actual society of Singapore. Needless to say, Singapore suffers badly by comparison with an idealized Chinese communist society even though the facts are that her per capita income is about five times larger than China's. Indoctrination material, of course, comes from adults outside the school, but all activities are carried out by students themselves under the guidance of a student leader in a deliberately fostered conspiratorial atmosphere. At some stage in this process of indoctrination, the student is committed more and more to activities of the united front. This

229

begins with fairly innocuous actions, such as attending political rallies, but eventually progresses to more dangerous activities such as participation in street demonstrations, pasting big character posters, supporting strikes of workers, beating up teachers, etc. This accent on China in their indoctrination effort is at once a source of strength and weakness to the CPM. While it draws on the strong motivational force of Chinese pride in their history and culture, it also serves to isolate the movement from the non-Chinese. After nearly forty years of revolutionary

effort, non-Chinese involvement in the CPM and front activities remains peripheral, notwithstanding the occasional Malay or Indian show-piece leader sometimes put up.

I do not intend to deal at length with the position in Vietnam. There are, however, a number of unique features in Vietnamese experience which have accounted for the success of the communist revolution there. First, unlike the plural

societies of Indonesia and Malaya, the Vietnamese people, apart from hill tribes, form a culturally homogeneous society with a strong awareness of their past history as an independent nation. Second, contiguity with China introduces some elements which are missing in Malayan and Indonesian experience.

For

instance,

during

World

War

II, the

Kuo-

mintang armies were training and equipping Ho Chi Minh's communists in exchange for military intelligence about the Japanese. Ho Chi Minh's cadres moved into Vietnam during the war to create a political network in the countryside. In contrast, Vietnamese proteges of the Kuomintang stayed in China to await VJ Day. When that day came, it was obvious who were in the stronger position. The common border with China was important not only during the Pacific War but also inthe war against the French. When Chinese communist troops reached this border in 1949, Ho Chi Minh's troops could depend on friendly support for war supplies as well as for military and political training on a massive scale. The use of field artillery supplied by the Chinese proved decisive in the battle of Dien Bien Phu. This pattern, that is, the availability of outside supplies and support, Vietnam,

has

repeated itself in the present war

230

in South

While Mao and his guerrilla armies had to fight both the Kuomintang and the Japanese unaided for the most part by outside supplies, the Vietminh were able to enjoy this important advantage. But, on the other hand, whereas Mao Tse-tung's armies had the whole vast area of China in which to

manoeuvre, the area in Vietnam is more constricted. Further, whereas China's remote rural areas were innocent of administration, the French had established an administrative presence in every village. The Vietminh contribution to the theory of guerrilla war consisted of the destruction of the government administrative network by the simple expediency of assassinating village officials. In this way they achieved the security which distance and remoteness provided to Mao's guerrillas. Only then could they carry out Mao Tse-tung's precept to 'make the enemy blind and deaf and drive his commanders to distraction by creating confusion in their minds'.’ I think it is this consideration rather than, as some scholars allege, an innate or war-induced

brutality of the Vietminh and the Vietcong that accounts for these killings,8

COUNT ER-MEASURES I now

come to the counter-measures

to prevent the growth of communist

which need to be taken

power.

I propose

to leave

out of consideration counter-measures against a communist guerrilla war. I have never fought an anti-guerrilla war and I am well advised not to offer gratuitous advice to those who are engaged in one. I will deal with matters in which J have some experience, that is, the methods of combating communist political subversion before it has developed into

7 Mao Tse-tung,

'On protracted war', a series of lectures delivered

in Yenan, May-June 1938, and included in Selected Military Writings of Mao Tse-tung, Peking, Foreign Languages Press, 1966, p.240. 8 See, for instance, George Modelski, 'The Viet Minh Complex’, in Cyril E. Black and Thomas P. Thornton, eds., Communism and

Revolution, Princeton

the strategic uses of political University

Press,

1964,

231

violence, Princeton,

pp.209-10.

N.J.,

armed revolt. This is the position inSingapore and Malaysia today, and it will doubtless be the position, before very long, in Indonesia when the PKI revives as a clandestine movement along sound Leninist lines. The first and most important of the prerequisites to success is, I regret to say, an efficient secret police, or 'Special Branch' to use the delicate British colonial term for it. The object is not so much to capture the secret communist underground, for without very severe totalitarian controls this cannot be easily achieved. The main function of the secret police is the penetration of all communist open front mass organizations. Since the membership and overt leadership of these organizations are by their nature open and not secret, penetration should not present difficulty to technically competent police personnel. The object is to identify the principal leaders, assess their character and capability, and find out the current intentions and plans of these organizations. Without such knowledge available to government, counter-measures against the communists may well prove counter-productive. With such knowledge, we can, to quote Mao, ‘await the enemy's assaults with ease and poise’. The second function of the secret police is to arrest and detain key united front leaders at suitable times. When this occurs, it is important to make explanation in terms understood and acceptable to the public. It is, of course, regrettable that the due process of law cannot be applied here. There are three reasons for this. First, the evidence to satisfy the requirements of legal procedure will blow the cover of police agents who have penetrated communist open front organizations. Second, the possibility of prosecution assumes that participation incommunist conspiratorial activities

is a legal

offence,

which

it is not in most countries.

Third, to wait for the communist activists to engage in overtly illegal action for example riots and other acts of violence before prosecution, will give them a political advantage which few governments of the new states of Asia can afford. For by then the political situation would have deteriorated to a state of acute instability, which in turn would probably have caused economic decline due to loss of confidence. Should political instability become endemic, 232

serious doubts will creep into men's minds as to who would emerge the winner. This can make the problem of control of subversion, for which public confidence and co-operation are important, a very acute one. The power of arrest and detention without trial is, therefore, anecessary weapon in the fight against the communists in the newly established Asian states. It is, however, of the utmost importance that the highest standards of conduct on the part of the secret police are maintained. There should be checks, in the form of review committees consisting of lawyers and professional men, on the actions of the police. These checks should be real and not perfunctory measures. Nothing would be more favourable to the growth of communist influence than extensive and indiscriminate use of the powers of detention. For this will generate widespread resentment against the authorities, which the communists underground can use to stoke the fires of revolution. Further, it is important that police action be limited to really worthwhile targets —the thinkers and the planners, the able propagandists and the organization men. Ninety-nine per cent of those who engage incommunist open front activities are not worth detaining, not even the second echelon activists and the muscle-men on whom the communists depend to discipline their followers. They are the expendables and can be replaced without much difficulty unlike the thinker and the plotter, and their detention serves no purpose beyond creating unnecessary disaffection among their families. The second prerequisite to effective counter-measures against communism is the proper treatment of social discontent. Asian societies are, as I said earlier, in a stage of rapid transition from traditional forms to those more consistent with the twentieth century. It is unavoidable in the process of change that uncertainty and discontent arise as a result of social and economic friction and dislocation. The comforting security afforded by the traditional order, where everyone knows his proper place, is eroded in the modernization process. Discontent may be trivial — for ex— or ample, grumbling over TV programmes, traffic jams It is unemployment, or serious, such as over bad housing instance, for as, no use sweeping discontent under the rug

233

a military dictatorship can well do. This does not dispose of resentment and may indeed aggravate it. Social discontent can hardly be avoided and its expression is good and healthy, for it identifies the faults in the social system and the points of maladjustment in the transitional process. The communists, of course, can be expected to capitalize on social discontent, and with the apparatus at their disposal they can be expected to make a good showing. Where the grievances are legitimate, such as a strike which has in-

dustrial and not political origins, or unjust terms of resettlement of farmers, it will be a grave error to use special police powers against the communists. To do so would only confirm in men's minds the role of the communists as champions

of the dispossessed.

Just as the communists

are

discriminating in the selection of issues on which to mount agitation, so must the government be discerning in choosing issues on which to arrest and detain them. It is also important that non-communist expressions of discontent and all forms of legitimate political dissent should be clearly distinguished from communist-manipulated political campaigns and allowed the fullest freedom within the law. The irony of the

situation

is that only with an efficient secret police can

this distinction be made with confidence thereby enabling the scope of civil liberties to be extended. It is necessary that social discontent should be dealt with through adequately institutionalized channels. In this respect, the democratic system is superior to an authoritarian one. Elected members of parliament can always be counted upon to be at the receiving end of social discontent! It goes without saying that the government should take effective remedial measures, particularly in sensitive areas open to communist exploitation. These measures may not be completely suc-

cessful,

but at least if it can be demonstrated to those con-

cerned that the government does care for the people's welfare, the battle against communist exploitation of social discontent can be won.

The third prerequisite is the absorption of the country's intelligentsia in meaningful occupations. In at least three

of the countries and

Singapore,

we have studied, namely Vietnam, failure

to absorb 234

the intelligentsia

Malaya or an

important section of it, was one reason for successful communist appeals in these countries. Under French colonial rule, large numbers of Vietnamese had access to modern education to the highest level. Yet, the absorption of these educated products in the Indochinese civil service was inadequate; top posts and even middle-ranking posts were occupied largely by Frenchmen. The pay of a Vietnamese professor was less than that of a French janitor in the same university.9 This is really looking for trouble. In Malaya and Singapore, the students who went through the Chineselanguage schools were faced with an occupational blind alley ‘ on completion of their studies and their gravitation towards In Singapore, one of the communism was not unnatural. first steps taken by my Government on election to office in 1959 was to de-fuse this dangerous position by throwing open to them career opportunities in the Civil Service. On this question, one cannot but view with concern the enormously rapid expansion of secondary and university education in so many new countries of Asia, usually aided and abetted by well-meaning friends in Western countries. Unless this expansion is related to available economic opportunities, the large sums of money spent will only create immense problems for the future from which the communists can probably profit. It is important that, if there are more highly educated people than opportunities available for their useful employment, the best of them be absorbed in available posts in government and in industry. In other words, some form of meritocracy should be established; political and other forms

of patronage cannot but be harmful. If the best brains and character are absorbed in the system while the mediocrities become dissident, the position can probably be held, but if the mediocrities are absorbed in the system while the ablest join the communists, calamity cannot be long postponed. There are other matters of relevance. To mention only two: there is need for government contact and public confidence at grass root level, and for exemplary conduct on the

9 Bernard B. Fall, The Two Vietnams; a politicaland military lysis, rev. ed., New York, Praeger, 1964, pp. 32-3.

235

ana-

part of government leaders. But these really belong to the general attributes of good government which are desirable in themselves and not for the sake of their utility as countermeasures against communism. If I leave these out of discussion, it is for this reason and not because they are unimportant in combating communist subversion. Indeed, in the final analysis, the only secure and enduring safeguard against communist revolution is good government.

236

Aftercare of Ex-detainees

On this occasion when the Detainees Aftercare Committee makes its public bow, it may be appropriate for me to give an account of the background thinking which has led to the formation of the Committee. In the turbulent years between June 1961 and September 1963, the Communist United Front was in full cry. Their hold on the trade union movement, ona section of students, farmers, old boys' association, cultural groups and the like was widespread and tenacious. The combined activities of these groups posed a grave threat to the security of the state. : During that period, however, the PAP Government decided to give them complete freedom of organization and agitation. We came to the conclusion that the correct strategy was to meet them on their own ground and fight them on the political battle-field. So between June 1961 and September 1963, the Communist United Front and the Government were locked in continuous and unrelenting combat — in the trade union field, in schools, the People's Association and other mass organizations. We considered — and from the hindsight of history our decision proved correct — that it was a

tactical’

error

to resort

to suppressive

measures

even

Speech at the inauguration of the Detainees Aftercare Committee at the Singapore Conference Hall on 28 August 1966.

237

though we had the power and, possibly, the justification to do so. But politically it would have had serious and damaging consequences, and it was likely that had repression been resorted to in the heat of the fight, the Communist United Front might have won in the end. It was not until the pro-communists were beaten in the 1963 referendum on terms of merger with Malaysia and Singapore's entry into Malaysia was assured that repressive action was taken. One extraordinary fact about the action that was taken in 1963 was the small number of persons that needed to be detained to ensure the collapse of the huge organizational structure which had been built up in the Communist United Front. About a hundred persons were detained in the operations. The impact was great because the targets were carefully selected. Careful and accurate target selection is of the greatest importance for two reasons. The first, the positive one, is the removal of key men in their organizations which immediately reduces their working efficiency. The second reason, the negative one, is that indiscriminate arrests of useless targets would be counter-productive in that they would result in extensive public resentment and more support for antigovernment agitation. The prophylactic action we took was effective and resulted in no adverse public reaction against the Government. This might not have been the case if it had been taken before the referendum had been won. It was possible to achieve an accurate selection of targets because of the extensive and thorough penetration by our intelligence service of all organizations connected with the Communist United Front. There is no information about their activities or their thinking, even at the highest level, which we cannot find out if we so desire. And there is no United Front organization that is invulnerable to penetration by our intelligence service. It is a tribute to the efficacy of our intelligence service that we were able to break up the Communist United Front organization in 1963 with the detention of so few people, The removal of key men from control positions in the Communist United Front organizations has resulted in a 238

marked deterioration in the present quality of their strategic and tactical direction. Things have now reached such a pass for them that ninety-five per cent of the activities that they now undertake are totally irrelevant to the political reality of Singapore. It is the duty of my Ministry to ensure that this will always be so. After a person has been detained, it is the Government's desire that he should be released as early as possible. It gives nobody any pleasure to see active and energetic young men and women incarcerated for one moment longer than is

necessary. At the same time, we would be guilty of grave dereliction of duty if we were to release detainees before we are assured of their sincere repentance and of their willingness to make a clean break with their past. It is for this reason that we require of them a public statement of their stand. We also require as acondition of release that they make a full statement of their past activities and associations. These statements are made in every case and eachof them amounts to a considerable document, sometimes up to ninety typewritten foolscap pages, single spacing. Once a detainee is released, the Government bears no malice towards him. On the contrary, it is our earnest desire that he devotes his talents — and in many cases these are men of considerable talent — towards constructive purposes in helping us build a new and better society. In the past, in an informal sort of way, we have helped them to find useful employment either in government service or in private business. But now we have reached the stage where informal efforts of this sort will no longer suffice. The number of persons released has been very large. For instance, in the last two and a half years no less than 156 detainees have been released and the rate of release is increasing as those detained come to realize the futility of the pro-communist

cause. The problem in ensuring that every released detainee gets useful and rewarding employment cannot now be left to chance. A system must be built and new institutions created to ensure that they and their families are well provided

239

for on their release. Hence there has been established the Ex-Detainees Association and now the Detainees Aftercare Committee. It will be their responsibility, together with a staff of professional aftercare workers who have been recruited,

to ensure

that those who

have

turned

over

a new

leaf will be re-absorbed as honourable members of our democratic society. In this way we can instil in them a new pride and a positive, forward-looking outlook. We do not want them to be haunted by the misery of their past activities or to have any feelings of guilt over their act of disassociation with their former

handlers

of the

Communist

United

Front,

or

with

the undercover agents of the Communist Party of Malaya. I believe that in Singapore the tide is moving against the communists and their supporters. Over the last three years their active espousal of anti-people and anti-nationalist causes has been so blatant that it will not be forgotten by the people of Singapore for a very long time. To those who still remain in detention I have this to say. There is no hope of any rescue operations being mounted by their colleagues outside the prison walls, for Barisan Sosialis does not have the capability of winning power whether through democratic elections or through armed revolt. With the destruction of the once powerful Communist Party of Indonesia, their release from jail through external intervention is also no longer a possibility they can depend upon. They should consider these matters carefully and decide whether or not they should join the ever-increasing stream of those who are forsaking the pro-communist cause for the more positive and dynamic cause of democratic socialism. If they decide to join us, they can obtain their release at very short notice. But if they persist in their obduracy and decide to engage in a game of patience with the Government, then I say that we are quite prepared to play this game as long as they wish. They will find our patience unlimited and inexhaustible. Finally it remains for me to thank the public-spirited citizens who have agreed to serve on the Detainees Aftercare Committee. They come from all communities of our multi-racial society and they represent all walks of life. It

240

will be their responsibility to assist ex-detainees to solve their problems of livelihood, their personal or family worries, and to render all possible material and moral assistance. I am personally most gratified that a very distinguished citizen of Singapore, a leading authority in his own profession, Professor Yeoh Ghim Seng, has so kindly agreed to serve as Chairman of the Detainees Aftercare Committee. I am sure that the people of Singapore will support them in their endeavours.

241

Creating an Officer Corps

Some three months ago I first had the honour of initiating the course of instruction which has now been completed. So

fast has time passed since then that that occasion seemed to be only a few days ago. But in these three months the school has carried out its training programme. I have been informed that the training has been rigorous and is designed to make the maximum demands on your physical endurance. I am glad to note that all of you have risen to the occasion and have completed the course to the satisfaction of your instructors. This reflects credit all round, both on the staff of the school and on the participants. It is hardly necessary for me to repeat what I said on the previous occasion—that is, the historical pioneering role which you will perform in creating the new defence forces of the Republic of Singapore. In a month's time, you will receive the first class of trainees and it will be your mission to turn them into capable army commanders. During this course you have been equipped with the technical knowhow needed to carry out this mission. In creating a new army, it is necessary that we employ the best and most up-to-date combat techniques and develop suitable military doctrines which will enable our defence forces successfully Speech at the first Instructors' Course graduation ceremony at the Singapore Armed Forces Training Institute on 7 May 1966.

242

to carry out the roles which the country assigns to them. Army commanders have to be equipped not only with technical knowledge but they have also to develop the necessary character traits which will enable them tobe courageous and aggressive leaders of men under their command. To put the matter more simply, it is necessary that the entire officer corps of our army should be imbued with fighting spirit. How does one go about it? No doubt this is a subject which has been occupying the attention of your instructors and yourselves as it has’ occupied mine. I do not pretend to be able to offer to you a definite solution or a ready-made system. But I think it is worthwhile reflecting upon the problem which is as old as mankind. Different societies in different ages and at different stages of development have produced their own solutions. Let us consider some of these. We can start with the primitive societies which are organized in savage tribes, very often warring upon each other. Primitive tribal warriors generate fighting spirit by engaging in war dances through which they work themselves up to a high pitch of frenzy, at which stage they fling thenrselves upon the enemy. As civilization develops, armies and combat techniques grow in complexity and this method of generating war-like attitudes falls into disrepute. The first Chinese theoretician of war, Sun Tzu, who wrote his treatise some 2,400 years ago, was probably the first person systematically to address his mind to the subject. In passing, I may say that no less an authority than Liddle Hart, in comparing Sun Tzu with Clausewitz, pronounced that Sun Tzu had 'clearer vision, more profound insight and eternal freshness'. So what he says on this subject is worth listening to. Sun Tzu believes that courageous commanders will be found in an army in which punishment and rewards are properly regulated. Those who flee from battle and those who are remiss in their duties will be punished while those who have accomplished acts of valour are rewarded. This method will obviously have limited application in modern armies. To start with, Treasury approval will be required in the granting of material awards. Nor is it

243

possible to inflict upon offenders the fearsome punishments which were in practice in the ancient Chinese armies. So, both in terms of deterrent and inducement, what is possible

in modern

societies is

much restricted as compared

with

Sun Tzu's times. Sun Tzu himself considered the subject of courageous commanders not to be of great importance, as proper regulation of rewards and punishment would produce the desired result. Further, he observed that courage and cowardice are relative terms, for in favourable circumstances cowards become brave, whereas in a disastrous rout, even the bravest men will tremble. Accordingly, Sun Tzu devoted his main thought to how, by good generalship, an army can always remain in a favourable position. There are, of course, other ways of producing brave army officers than by the regulation of rewards and punishIn modern

times

we have seen how men,

when moti-

vated by certain

ment.

ideas

or ideologies,

themselves

conduct

with the utmost courage and take on avastly better-equipped enemy. The Vietcong army gives us one example of courage produced by ideological motivation. The army of the Chinese People's Government provides another example. Let me quote what General Hsiao Hua of the People's Liberation Army said on the subject: 'In the end, victory or defeat in combat depends on the courage of man, his awareness and

his willingness to sacrifice.' And he goes on to say: 'To develop a force with strong combat powers, it is necessary for the cadres to profoundly learn the thinking of Comrade Mao on people's war and to be guided by the thinking of Comrade Mao in all activities. ' You are doubtless all aware of the system of political commissars which is adopted in the Chinese communist army. It is also in force in the Russian army although here, in recent years, technical and professional competence has risen in importance as compared with political indoctrination, The institution of the political commissar is probably no

innovation and it is likely that the armies of Mohammed and Cromwell had within their ranks a similar institution. The point that I want to establish is that is is possible to produce 244

a high level of morale and resolute leadership in any army by the method of political indoctrination. On my appointment as Minister of Defence, many wellwishers, some of whom have seen service in the Chinese armies, advised me to introduce political indoctrination in our own army to secure this objective. But I am afraid this easy method is not available to us. For ours is an open democratic society in which the government of the day can make no claim to divine revelation or infallibility of judgement on the basis of which it would be possible to enforce one kind of ideology or another. Enforcement of an ideology means the repression of competing ideologies, the establishment of thought control, the suppression of dissent, liquidation of unbelievers and the introduction of all the paraphernalia of the police state. I am sure that none of us who are gathered here today want topay this price merely in order to obtain brave army commanders. So we must set our faces resolutely against the Chinese solution. There are still others to consider. Now, we all know that the German and the Japanese armies produce commanders of very high calibre. The Japanese army is probably the only one that literally never surrendered, on the battle-field anyway. Nearly twenty-five years ago we were at the receiving end of this army and knew from personal experience the great fighting qualities of the Japanese soldier. How was this achieved? The Japanese people had, for more than a thousand years of their history, been governed through violence. Local feudal barons established hegemony over tracts of territory. These

barons,

the

daimios,

derived

their

power

from

a

warrior class known as the samurais, each daimio with his own following of samurais. The Meiji Restoration in 1868 put an end to the depradations of the daimios and samurais upon the civilian population and brought Japan into the orbit of modern nations. Unfortunately, in the process of modernization, Japan did what other modern nations were then doing, carving out empires and extending their spheres of influence on the basis of military power. The samurai, dispossessed after the Meiji Restoration, quickly came back to his own but

respectably disguised as a professional army officer. By the 245

1930s they had obtained such supremacy that the country was virtually ruled by the military. A creed of exaggerated aggressive nationalism was propagated in all sectors of society and the doctrine of Japan's manifest destiny was advanced.

What followed is recent history. The Japanese experience again is not for us to follow. I do not think any of us would want to have in Singapore a militarist society nor indeed can such a society survive for long if, by chance, it is somehow brought about. So we have to turn to other examples. And I think we should look around for examples in countries which have a political system similar to ours. The most obvious example is that of Britain. It is not easy to find out just exactly how the British produce capable and courageous officers. Like their constitution, which is unwritten, their methods in this respect evolved through their history and are not to be seen in their army regulations nor in any written document. We all know how British officers develop comradeship and esprit de corps around the institution of the regimental mess, In addition to this, I suspect there are other contributory factors, of which probably two are important. The first is the supply of British army officers from a certain class of British society, at any rate up to the First World War. The families who traditionally provided the army with their officers in the course of time developed a tradition of martial valour which helps to sustain high standards of conduct in war. Another important element is no doubt the unique sense of mission that pervaded the entire British nation during the Victorian era when it acquired an empire that surpassed in size and population any previous empires built by men. So we have the three elements

— the regimental

mess, the aris-

tocratic tradition and the sense of historic mission — which helped to shape the fighting qualities of the British army officer. These three elements in combination have created an elite so convinced of their own intrinsic qualities that they regarded exhibitions of chest-thumping or ostentations military posturing not only as tedious and unnecessary but also in bad taste. 246

In the other great democratic society, that of the United States, we find at once that the means available to the British do not exist in America, which has neither the aristocratic tradition nor the sense of historic mission nor even experience in state-craft. I am not certain what the American army does by way of morale-raising techniques. I am told, however, that they have produced a written code of honour which the American army officer repeats to himself from time to time. It would be interesting to find out what the Australians are doing in this respect and with what success. Now I make this cursory examination of the practice and rituals inother armies and societies, not under any pretence of being conclusive, but to underline the point that there are many ways which human societies have devised in achieving the objective of producing brave army commanders. We have to do our own thinking and find our own methods which will suit the style of our people and the social environment in which the army lives. I do not think that we can adopt in its entirety the system which has been found successful in one country or another. We may find a synthesis derived from different elements which I have briefly described, or we may strike out on a novel path of our own. I do not know. But I would recommend this important subject for the serious study of the school and indeed of the entire officer corps.

247

Hard and Soft Armies

On an occasion like this —the ceremonial opening of the Singapore Armed Forces Training Institute —it would be proper to address our minds to some fundamental questions concerning the armed forces. The question which I would like to discuss today is 'What kind of army do we want?' By this I do not mean the technical characteristics of the army, such as its weapons, establishment, combat doctrines, cqmmand structure and so on. These are not matters on which I am qualified to express an opinion and I am happy to leave them tothe professionals. What I want todiscuss is a broader subject — the general fighting qualities of the army. In man's long history, the armies which he has raised can be placed under two headings — a) hard armies, b) soft armies. I am using these terms for the sake of convenience, There is, in practice, no sharp dividing line between the two categories, as there are varying shades and gradations of hardness and softness. Nevertheless, certain types of armies have emerged in the history of man which can be classified clearly into one or the other of these categories. A discussion of this subject must, of course, begin with _ Sparta. Spartan society is probably unique in the history of mankind in that the entire adult male population of military Speech at the ceremonial opening of the Singapore Armed Training Institute on 18 June 1966.

248

Forces

age were members of the army. Nobody worked for a living and the necessities of life for the Spartans were provided by the helots or slaves, who tilled the fields, grew food, built houses and did all the jobs and provided all the services needed by the Spartans. Spartans were the military aristocracy and each Spartan held powers of life and death over his slaves, At an early age, the Spartan boy was removed from his family and placed in what was virtually a training camp. His education consisted mainly of exercise designed to strengthen his physical endurance to the limit, to develop his capacity to endure hardship and pain and to stimulate courageous conduct. He was fed on a diet of plain, coarse food and was taught to hold in contempt luxurious and soft living. When he came of age, the occasion was marked by a ceremony in which the lad was publicly flogged. If he showed any signs of pain either by crying or even by facial expression, he was instantly put to death. Training along these lines produced, as we can well expect, a Spartan army which was virtually unconquerable. They could take on enemy forces several times their size and put them to flight. I will be the last to hold the Spartan army as the model for us to emulate. Spartan social life was coarse and brutal. Spartans made noworthwhile contribution to human civilization unlike for instance their military rivals the Athenians. Further, Spartan generals, as one might expect, were not towering intellectual giants. Accordingly they were not adept either in strategy or even tactical manoeuvres. Brute force and brute courage are a source of strength when warfare consists of close combat with swords. Being poorly educated by our standards or by the standards of the Greek civilization of the time, the generals showed all the weakness of men of low education: they were unable to control their avarice. They were easily bribed and this became a serious source of weakness of the Spartan army. Poor Spartan generalship was highlighted in the protracted Pelopponesian wars. Sparta failed to defeat Athens despite the supremacy of the Spartan infantry until an Athenian general Alcibiades defected to Sparta and told the Spartans the right strategy. 249

If the Spartan army gives us one example of the hard army, in medieval Europe we find the other extreme. Armies

from medieval Europe were usually a motley collection of serfs, completely untrained and poorly equipped and gathered around the banner of the lord of the manor. They were little more than camp followers of the knights, who were the predatory aristocracy of the time. Fighting between these feudal barons, though frequent, can hardly be called wars, the general principle being observed that dog does not eat dog. When they embarked on serious war, as for instance the Crusades,. the results were usually disastrous. Among themselves, combat in medieval Europe was governed by an elaborate code of chivalry. The situation was not dissimilar from that of ancient China of the Spring and Autumn era. Here, we have very much the same structure of feudal princes and barons. An account given of one battle in which the Duke of Sung took part shows what absurdities could arise. The Duke's enemy was crossing a river and when about half of the enemy's

force had crossed the river, the commander of the Duke's army requested permission to attack. Permission was not given. When the entire enemy force had crossed the river but had not formed their battle array, the army commander again asked the Duke for permission to attack. The Duke not only refused permission but rebuked the general. 'A gentleman,' said the Duke, ‘will not take advantage of the unprepared state of the enemy. Let them complete their battle array and we can then engage the enemy.' It would be pleasant if history were to record that these noble sentiments on the part of the Duke resulted in his victory. Unfortunately, the reverse happened and the army of the Duke was routed. He himself was severely though fortunately not fatally injured. In course of time, as political rivalries between the kingdoms of ancient China grew in intensity, so also fighting methods improved in efficacy. The Spring and Autumn era of Chinese history passed and the period of the Warring States was ushered in. Soft armies became hard, and it was said of the period of the Warring States that very few generals died of old age. It was during the century and a 250

half of almost incessant war that the great military thinkers emerged,

had

such

profound

as

Sun

influence

Tzu

and Wu

Ch'i,

both in China

whose

doctrines

and Japan for more

than 2,000 years.

As in China, so in Europe. What began as gentle and courteous rivlaries between territorial barons or kingdoms developed into more serious business. Soft armies again developed into hard armies in course of time. The motley collection of serfs gave way to the institution of professional standing armies. In the history of the modern European army, Frederick the Great of Prussia occupies a place of honour as the person who developed methods of instruction and systems of discipline which were followed in all European armies until very recently. Frederick the Great was an extraordinary person by all accounts. As a youth, he showed such an aversion for the army and such a liking for literature and the arts that his father, King Frederick William of Prussia, a man When

of no cultural distinction, nearly had him executed. Frederick succeeded to the throne, he proved a most

able leader of men and an outstanding statesman. He created a large standing army by method of the press gang, which was commonly employed in those days. It was said that his army was composed of the dregs and scum of the cities of Germany and that given half a chance three-quarters of them would

desert.

They

were,

however,

given

no

chance at all

under the system of iron discipline which Frederick imposed upon the army. His training methods created not only technical proficiency and accuracy of manoeuvre on the battlefield, it also imparted self-confidence and high morale in the army. His military successes were due to the manner in which he raised and trained the army. Yetin spite of his military prowess, Frederick remained throughout his life a patron of the arts, a friend of philosophers and scholars like Voltaire and D'Alembert. Subsequently, other nations tried to imitate the methods of Frederick the Great, sometimes with success, as in the case of Napoleon, but often with conspicuous failure. The harshness of his discipline was imitated without the understanding that this was a means and not an end in itself. So

251

too with the precision drill which the Prussian army practised. It was said of the army of a European country which shall remain unnamed that it became a thing of reviews, parades and inspections in minute detail and great solemnity. Training was such as tomake thearmy forget its duty of preparation for war and to organize it for the panoply of peace. There was an occasional sham battle before the ladies and for the entertainment of the villagers. A comic opera incursion into a neighbourhood state threw the entire army into utter confusion. No one knew what to do. All notion of how to take the march or collect provisions was lost. What kind of army do we want? I am sure that there is no one present here today who wants to see established in our Republic the type of army that I have just described. Iam certain the officers, NCOs and men who pass through this Institute will bear more resemblance to the armies of Frederick the Great and no resemblance whatsoever to those of his unsuccessful imitators.

252

Singapore’s First Decade of Development

This

being the first budget statement of the new decade,

it

seems appropriate on this occasion to do a review of our economic performance during the past decade. This was the decade which the United Nations christened the Decade of Development. For us in Singapore, it was a turbulent decade

during which momentous changes took place. Singapore entered the 1960s as a British colony with self-governing powers in domestic affairs. We later achieved independence as part of independent Malaysia, only to be expelled from the Federation after two years. On August 9th, 1965, the independent Republic of Singapore was created. I propose to confine my review of the decade to Singapore's economic performance. I was engaged for most of the decade in a ministry which was charged with the responsibility for economic development and planning in Singapore. It is not altogether possible for me to escape bias, either in treatment or emphasis, in this account of the Republic's economic growth. No doubt some future economic Taken

from March 1970.

the

budget

statement

253

presented

to Parliament

on 9

historian will cover the same ground and will probably see events in a somewhat different light. He will also treat the subject more exhaustively than is possible in a budget address. : I propose to conduct this review of Singapore's economic development in the 1960s in two ways. The first is to compare the positions as in 1959 and 1969, taking two snapshot pictures,

so to speak,

of the main

economic

terrain.

Sec-

ondly, I will try to trace developments through the different phases of the decade in a kind of motion picture presentation, if I may be permitted to extend the analogy. First, the snapshot pictures. Singapore's gross domestic product in 1959 was $1,968 million. The gross domestic product is the value of goods and services produced within the geographical area of the Republic. They include the value of foodstuffs produced by our farmers, the earnings of our traders and shipowners on the entrepot trade, the value added in Singapore in the course of manufacturing operations, the

earnings

of retail

trade,

the

hotel

business

and

other services, the value of services provided by the Singapore Government, British military expenditure, and the value of construction of new power-stations and so on. The a close relative of the GNP, or differs from it only in that the

roads, houses, factories, gross domestic product is gross national product, and gross national product in-

cludes earnings of Singapore citizens from overseas sources and excludes earnings in Singapore accruing to persons and corporations abroad. In this account, I shall use the gross domestic product rather than the gross national product since calculation of the latter is subject to greater uncertainty. By 1969, the GDP had increased from $1,968 million by nearly two and a half times to $4,833 million. This represents a compound rate of increase through the decade of 9-4 per cent a year. We have therefore surpassed the United Nations target for the Decade of Development of 5 per cent annual growth. At the same time, our performance was well below that of some other economies such as Japan, South Korea in recent years, and Hong Kong. The doubling of the GDP during the 1960s was not due to 254

discoveries of natural resources as these are virtually absent. It was the result of the growth of trade on the one hand and the growth of industry on the other, with tourist development providing a small but welcome increment. In other words, it was largely the result of greater human effort. Associated with growth of the GDP has been a much faster

rate of capital investment in the Republic. The accounting aggregate representing capital investment — gross domestic capital formation in the terminology recommended by statisticians of the United Nations — increased from $150 million in 1959 to $919 million in 1969. Total investment increased at more than twice the rate of the domestic product, a compound annual rate of 19-8 per cent during the decade. In 1959, total investment amounted to 7-6 per cent of the GDP and this increased to 19-0 per cent ten years later. Ploughing back an increasing part of our domestic output is essential to sustaining our growth momentum and we should continue to increase this percentage. We are still a long way behind Japan, which invests more than 30 per cent of its income. Since much of investment was in industrial machinery and equipment, industrial output naturally expanded. Industrial output is sometimes defined as the output of the manufacturing, construction andutilities sectors. Their combined output increased, as one would expect, at a faster rate than the GDP. The compound rate of growth of 1959-69 was 16-2 per cent as against 9-4 percent, the overall economic growth rate. Manufacturing industries grew at 17-1 per cent a year, construction at 17-9 per cent and public utilities at 10-2 per cent. In value terms, the industrial sector's contribution to the GDP rose from $256 million in 1959 to $1,154 million in 1969. Employment in the manufacturing industry as determined in the annual census of manufactures covering establishments employing ten workers or more, increased from 25,199 to 87,128. Of these latter, no less than 35,000 were employed in pioneer industries in 1969. There were, of course, no pioneer industries in 1959, Entrepot trade also seems to have flourished during the decade though, as we shall see later, there were many ups and downs. There was an increase in total cargo handled at

255

the Port of Singapore from 14-2 million freight tons in 1959 to 37-7 million freight tons in 1969. The number of ships increased from 9,584 to 16,531. Passenger arrivals at the beginning of the decade totalled a mere 163,000 and increased to 546,000. Economic growth of these proportions must naturally be reflected in the financial structure of the Republic. There was a substantial expansion during the decade in the commercial bank deposits, from $816 million to no less than $2,745 million. The Central Provident Fund balances standing to the credit of members increased from $120 million to $632 million. Government revenue benefited

from

expansion,

increasing

in a decade from a paltry $275

million to $934 million. Despite expansion of output, volume of trade and total investment, as wellas money supply, there was a marked absence of inflationary pressure. The consumer price index as at mid-1969 stood at 110-9 with mid1960 providing the base-mark of 100. In a world where inflation plagues many countries, both rich and poor, an average annual increase of 1 per cent inconsumer prices over a decade is not a common experience. Economic growth has had beneficial effects on social conditions. One of the results of improved standards of living has been a substantial decline in the rate of popula-

tion growth. Infantile mortality rates declined. School enrolment and expenditure on education increased substantially. Newspaper circulation nearly trebled. Housing Board flats and shops increased from 23,019 to 106,418. Happily, increase in crime and violence, a contemporary phenomenon in many cities in both the developed and underdeveloped

world, did not afflict us. Armed robbery and housebreaking cases

numbered

3,125

in 1959 compared with a reduced fi-

gure of 2,010 in 1969, For the convenience of Members, as well as for the record, I am circulating statistical tables which set out in compact form the facts, a narrative of which would be long, tedious and possibly incomprehensible. Five of these tables relate to matters I raise in this statement. The others cover the field in much greater detail and provide the background of data on which I base my main observations. The first table summarizes the points of comparison I have been making.

256

Table

Basic Economic

NATIONAL

ECONOMIC

Gross Domestic Gross Domestic TRADE

AND

1

and Social Statistics,

1969

$1,968m. $150m.

$4, 833m. $919m.,

$7,349m. 14,2m. 9,584 163,000

$10,984m. rol. (i. 167530) 546, 000

$170m. $40m. $46m.

827m. 208m. 120m.

TRANSPORTATION

INDUSTRIAL SECTOR Manufacturing, value added Construction Utilities

No. Employed in Manufacturing

Indus-

try

25,199

No. Employed in Pioneer Industries Labour Ministry returns of Workmen, Clerks and Shop Assistants FINANCIAL

Nil 166, 747

87,128 35, 000 239,452

STATISTICS

Commercial Bank Deposits Central Provident Fund Official Overseas Assets Consumer Price Index (mid-1960=100)

$816m. $120m. $336m. -

$2,745m. $632m. $2,445m. 110.9

1.58m. 62,500

2.02m, 44,700

36.0

2u.0

STATISTICS

Population (at mid-year) Annual Births Infantile Mortality Rate (per thousand)

Rate of Annual Population Increase School Enrolment

Expenditure on Education (including capital expenditure) Daily Newspaper

Circulation

No. of Housing Board Flats and Shops in existence year-end No. Armed Robbery and Housebreaking cases

1959 AGGREGATES

Product Capital Formation

Total imports and exports Cargo handled (freight tons) No. of ships cleared Passenger arrivals, sea and air

SOCIAL

1959 & 1969

4.1%

1.5%

305,000

511,000

$63m., 119,970

$175m. 311,500

23,019

106, 418

3,125

2,010

In the nature of things, statistical information, which deals with social and economic phenomena susceptible to enumeration, does not and cannot describe the qualitative and non-numerical improvements that have taken place in our society. There is greater social cohesion, more social discipline and self-reliance, pride in performance and achievement in the face of adversity. These are the intangible yet supremely important factors for the progress of any society. By our common endeavours and achievements, we are slowly acquiring an identity of purpose and in this

way building up a sense rootless, himself,

migrant attitudes

and so

of belonging and nationhood. parvenu

prevalent

values

with

each

The

out for

at the beginning of the last

decade, are giving way to more positive group values of a self-reliant people determined to build an enduring future for themselves in this part of the world. In the final analysis, it is on the firm framework

of these values rather than

on steel and concrete structures that economic progress is* to be achieved and sustained. Max Weber was the first, but he will not be the last, to detect in particular societies the close interaction between ethical systems and the moderniprocess which enables economic transformation. zing I will now trace in outline the development of the economy during the decade. Singapore's economic development can ds be conveniently grouped in three perio — pre-Malaysia, during Malaysia, and post-Malaysia. Since the most relevant economic statistics are given in terms of calendar years, the three phases of Singapore's economic development may be considered in calendar year periods as follows: i) 1959-63, ii) 1964-5, iii) 1966-9. It should be remembered, however, that economic trends sometimes transcend two or more periods. This results from anticipation of future development, as for instance, in the years 1962 to 1963, when several industrial projects were started in Singapore in anticipation of a common market in Malaysia. Further, the lead time needed to see a

project

off the

ground—the

interval between the moment

a decision is taken and the completion of the project — often occupies a period of several years for large-scale projects.

258

ECONOMIC

DEVELOPMENT,

1959-63

ll

The pre-Malaysia period was dominated by political events. Several of the more discerning observers knew in 1959, when general election was won by a People's Action Party, that

behind

the

division

anti-colonial

between

solidarity was

a democratic

socialist

a deep ideological faction

and

a pro-

communist faction, It was a matterof time before the two groups were forced to bring their differences into the open as they contended for political supremacy. The policy of the Government, which consisted of the democratic socialists, was determined more by the immediate political necessities than by long-term needs of economic development. The procommunists broke off from the PAP and their United Front forces fought the PAP in the Anson by-election in July of 1961. They joined issue on the Government's policy to negotiate a merger with Malaya to form Malaysia. All this is ', familiar history. But events of such traumatic impact inevitably leave their mark on the economy as I shall shortly demonstrate. Meanwhile, despite the political preoccupation of the Government, the Economic Development Board was established ‘in August 1961. It was charged with the duty of promoting the growth of industries in Singapore. At the same time, the ormer Singapore Improvement Trust was absorbedin a more effective agency named the Housing and Development Board.

While the creation of new industries, by its nature requiring - a substantial lead time, could not show quick results, Government action in improving the social services produced swift and tangible benefits in the pre-Malaysia period. “Immediate action was taken to extend and improve the

education system. School enrolment both at. primary and secondary stages increased rapidly. Primary school enrolment

increased

1963;

secondary

‘

The

from

school

266,625

to 336,163

enrolment

Housing and Development

from

between

48,723

1959

to

to 84,425,

Board suffered some ini-

tial troubles under the former mayor of Singapore. After his replacement, the Board soon got into stride and showed dramatic progress. The number of flats and shops built each year was as follows:

259

Because cause there during this

1959°> 1,612 1960 - 1,682 1961 = 7,320 -1962 - 12,230 1963 - 10,085 industries took long in getting started

and be-

was little expansion in entrepot trade earnings period—the growth rate was a mere 4-5 per

cent per year —the substantial housing programme launched by the Housing Board undoubtedly helped to sustain economic expansion during this period. The finance to pay for this had to be obtained by civil service pay cuts and tax increases, measures which did not increase the Government's popularity rating. During this period, the gross domestic product increased from $1,968 million to $2,684 million. This represented a compound rate of 8-1 per cent a year. As a result of the Housing Board building programme, the construction industry prospered in the second half of

the period, generating the following output: 1959 - $40-0 million 1960 - $41-9 million 1961 - $56-0 million 1962 - $70-0 million 1963 - $94-7 million The construction industry during this period

increased at 24-0 per cent a year. The impetus came mainly from Government action in the housing field. Increase of public

sector

investment

during

this

period was

at a compound

annual rate of 27-5 per cent. The present rate, between 1965-9, has been 10-5 per cent growth a year, a more moderate pace.

The political in-fighting between the Communist United Front (CUF) and the PAP resulted in a large number of strikes called by the CUF as part of its attempt to coerce the Government. The number of man-days lost in strikes was as follows: 1960 - 152,005 1961 - 410,891 1962 - 164,936 1963 - 388,219

260

The defeat of the Communist United Front in the Referendum of August 1962, followed by subsequent security action against them, restored a measure of industrial peace. In 1964, strikes accounted for loss of only 35,908 man-days. In 1969, the figure was 8,512. During a period when unemployment was heavy, trade union irresponsibility on such a massive scale was hardly conducive to industrial investment. The following figures of employment in the manufacturing industries as recorded in the annual census of manufactures shows that the industrial sector was virtually stagnant between 1959 and 1962 and registered only a small increase in 1963.

1960 1961 1962 1963

-

26,697 26,837 27,924 35,256

Employment in pioneer industries, the first of which began production in 1961, rose from 241 workers to 2,654 in 1963. It was not easy to get started. The domestic market was small, as it still is today. Wages were then high compared to other Asian countries such as Hong Kong, Taiwan and South Korea. On top of all this, a near-endemic situation of management-labour conflict arose out of the show-down between the democratic and pro-communist forces. Despite these handicaps, the Government proceeded with its development plans with a confidence few believed justified. In September 1961 earth-moving operations commenced when the first bull-dozer moved into Jurong. By the end of 1962, 1,100

acres of prepared land had been levelled by cutting down hills and filling swamps. By the endof 1963, 1,800 acres had been prepared. Twenty-four million cubic yards had been moved in the process. Jurong, as of December 1963, had only two factories in production to show for this mountain of labour. They were the National Iron and Steel Mills and Pelican Textiles. Between them they employed ninety workers.

ECONOMIC

1964-5

DEVELOPMENT,

Singapore's entry into the Federation of Malaysia in September 1963 was preceded by many months of negotiations. 261

While the political arrangements in the new Federation were agreed to without difficulty, negotiations on financial arrangement and over the structure of the common market proved unexpectedly long and difficult. In the end, a compromise solution was found literally at the eleventh hour in London. Our membership of the Malaysian Federation proved to be short-lived. The reasons for the sudden separation of Singapore from Malaysia are now past history, as are the events which led to it. So far as Singapore's economic development is concerned, hopes for a Malaysian common market had led to some anticipatory investment in.1963. However, the proclamation of the new Federation was greeted by unexpectedly strong reactionfrom the Soekarno regime of Indonesia. Confrontation was declared, and with it the curtailment of our entrepot trade with Indonesia. yz The national economic aggregates show the results of the

\

;

\ factors I mentioned — Indonesian confrontation,

ot* w common

market

with Malaysia,

the financial

the abortive

arrangement

between the States and Federal Government. Of the three Mesericde in the 1960s, the years we spent in Malaysia showed . ly the lowest growth rates of gross domestic product, a mere 6-5 per cent annual rate. This was due to the substantial decline of our entrepot trade by some 16-8 per cent as trade relations with Indonesia were severed. As a result, earnings on the entrepot trade declined from $441 million in 1963 to $306 million in1965. Further, agriculture and fishing, never noted for rapid growth, showed a decline of 2-5 per cent. This was the result of night curfews imposed in Singapore waters for security reasons, which adversely affected the livelihood of fishermen. On the other hand, there was a very large increase in the value of military services, as one would expect. British military expenditure increased by 27-7 per cent in 1964 and again by 25.9 per cent in 1965. In absolute terms, this meant an annual increase from $323 million in 1963 to $519 million in 1965. This was sufficient to make good entrepot losses, taking two years together. But the year. 1964 was a particularly bad year, the decline in entrepot earnings was much greater than the increase in British- military expenditure. Accordingly, the gross do-

mestic

product for that year

showed the least increase of

262

the decade, a mere 0-5 per cent. But for increased British military expenditure, there would have been a substantial decline. The gross domestic product for the two years we were in Malaysia were:

1964 - $2,700 million 1965 - $3,043 million Despite Indonesian confrontation, total investments continued to expand and at a brisk rate too. Gross capital formation increased at an annual rate of 20-6 per cent running at $421 million and $476 million in 1964 and 1965 respectively. The manufacturing industry forged ahead in spite of poor trading conditions and deteriorating relations between the Singapore and Malaysian Governments. Manufacturing, construction and utilities showed a combinedaverage of 16-2 per cent annual growth during Malaysia as compared with 14-7 per cent in pre-Malaysia. Employment in the manufacturing industry increased moderately, some 14-2 per

cent a year. The increase of employment was about 10,000 over the two years, the 1965 census of manufactures giving a total

of 46,020

employees

for

1965 as against 35,256 two

years earlier. The Labour Department work force figures also showed an increase of about the same amount, that in 1965

ent

being 188,701 as against 178,787 for 1963.

that

the

manufacturing

industries

were

It is appar-

providing the

main new job opportunities. But these never reached the proportions which would reduce unemployment signifi-

cantly. The onerous term of the financial agreement under which “we entered Malaysia resulted in a decline of our overseas assets for the only time in the decade. Our overseas assets, which stood at $748-4 million at the end of 1963, were reduced to $631-0 million at the end of 1965.

ECONOMIC

DEVELOPMENT,

1966-9

I now turn to the last period under review, the years as an independent sovereign state. On the morning of August 9th, 1965, I was in my office in Fullerton Building brooding over

263

the enormous

problems

facing the country and the Govern-

ment. The problems of the future loomed in awesome and intimidating proportions. Therewe were an island trading post with its economic hinterland in other countries, a vul-

nerable defence country. We had

arrangement as confrontation had shown. Our token forces were manned mostly by citizens of another Even the water we drank had mostly to be imported. no natural resources other than a diligent and en-

terprising announced

people. At 10 a.m. news of the separation was over the radio. It was greeted by the firing of crackers in Chinatown. I thought this a light-hearted response to a grave situation. Two years later, in my budget statement of December 1967, I was able to say: 'After two years of independent existence, the Republic of Singapore continues not only to survive but also to flourish, to the surprise of many observers.' This account of the final period of the decade will describe how our economy grew in the last four years and will attempt to give the reasons for such growth. In the post-Malaysia period, Singapore's gross domestic product increased at a compound annual rate of 12:3 per cent as compared with 6-5 per cent during Malaysia and 8-1 per cent pre-Malaysia. Trade, industry and tourism provided the main thrust to our economic growth in this period. The result of robust economic expansion on the Government's finances was gratifying. Annual revenue increased from $508 million to $934 million last year with but minor adjustments in taxation rates. The reasons for expansion during this period stemmed from external as well as domestic sources. As regards the first, what undoubtedly helped most was the strong position of the economies of the United States, Europe and Japan. Notwithstanding recurring monetary crises during the last three years of the decade, the 1960s saw what was virtually a long sustained boom among the rich nations. One after another, they reached conditions of full employment and had to depend for further expansion either on imported labour as happened in the case of Germany and to a lesser extent Britain, or they had to move some of their manufacturing

264

operations abroad, as happened particularly with the United States and, to a lesser extent, Japan. We were alsoassisted by conditions in Hong Kong, where, as a result of growth at an extremely fast rate, tight employment conditions became apparent in the last two or three years. Hong Kong, whose wage levels used to be substantially below that of Singapore, ceased to be a provider of labour to foreign investors at cheaper rates than Singapore. Then, of course, the end of confrontation brought about a resumption of Indonesian trade. This gave our first year on our own the main impetus to economic growth. Outside conditions were favourable. But this by itself did not ensure our prosperity if we were unprepared to make the effort required to take advantage of our opportunities. Fortunately, the institutions which were established as early as 1961 had developed in experience and expertise. Iam, of course, referring to the Economic Development Board, which was the Government's main agency for promoting industrial growth. Industrial estates at Jurong and elsewhere had provided a wide range of industrial sites to meet every conceivable demand of industry. The Development Bank was amply supplied with funds and the Economic Development Board's overseas promotion officers improved in skill and efficacy in their efforts to attract large corporations to the Republic. Last but by no means least, the Employment Act passed in August 1968 with the support of the National Trades Union Congress gave an impressive demonstration of the will of the people to overcome all obstacles to make temporary sacrifices the better to secure the future for themselves. Perhaps more than anything else, the Employment Act projected an image of Singapore among substantial potential foreign investors of a disciplined and rational people upon whom they can depend for the success of their investment enterprises. With these favourable external and internal influences, except for the year 1967, the economy moved ahead briskly. The gross domestic product increased substantially, details of which are set out in Table 2.

265

Table 2 Gross

1966 1967 1968 1969

Domestic

Product at Factor

«35365 3,617 4,257 4,833

Cost,

1966-9

10-6 7-5 17-7 13-5

The 1969 figure is based on preliminary estimates and it is likely that the final estimates would show a larger figure. Expansion in 1966 derived its impetus principally from a resumption of trade with Indonesia as well as a general increase in world trade. In absolute terms, the earnings of entrepot trade increased from $305-6 million to $377-0 million in 1966. The manufacturing industry provided a useful gain of some $72 million in value added, from $414-3 million to $486-8 million. The good start the Republic made in 1966 was not sustained the following year, which registered an increase of only 7-5 per cent. The principal reason for this was a temporary decline in world prosperity. World trade, which before that year had been growing annually at between 8-4 to 11-9 per cent in the previous four years, showed a growth of only 5-4 per cent in 1967. Our entrepot earnings in 1967 showed a very small increase, just over 1 per cent on the previous year. At the same time there was a marked decline in British military expenditure from $549- 5 million to $489: 9 million. The experience of 1967 is pertinent because the two

elements making for the slowing-down of our growth — reduced military expenditure at the British bases and levellingoff of world trade —are prospects which face us in the next few years. The last two years of the decade were exceptionally good for Singapore. The principal thrust was an unparalleled expansion of our entrepot trade, earnings of which more than doubled. Buoyant world trade conditions during 1968-9 helped sustain our own growth of trade. ‘World trade in these two years increased by 11 per cent and 14 per cent.

266

At the same time, showed substantial

earnings in the manufacturing industry increases —19-2 per cent in 1968 and

22-9 per cent in 1969. The contribution of the manufacturing industries to the gross domestic product reached $827 million in 1969 compared to a mere $170 million a decade ago. The effect of this expansion on employment will be discussed later. Expansion of trade and industry was more than enough to offset the modest reduction in British military expenditure. In 1967 this amounted to $489-9 million and it was reduced to $415-4 million by 1969. We should remember that as from now British military spending will be reduced at a much faster rate. Between 1967 and 1969, quite apart from expansion of manufacturing and trade, even the tourist trade increased sufficiently fast to offset the reduced Bri-

tish military spending, so that increased earnings on trade and industry actually formed net additions to the domestic product. Earlier I had referred tototalinvestment which increased throughout the decade not only in absolute terms but also as a proportion of the gross domestic product. The increase in total investment was especially marked in the post-Malaysia era. The figures are given in Table 3. Table 3 Gross

1966 1967 1968 1969

Domestic

Capital Formation,

1966-9

Total Investment ($ million)

Percentage of GDP

473-3 518-3 735-9 918-5

14.1 14-3 17-3 19-0

There are certain interesting features about the growth of investment during this period quite apart from its size. The first is that the faster increase occurred in the private sector. The figures between public sector and private sector investment are given in Table 4. 267

Table 4 Public and Private Sector Investment,

1966-9

($ million) Public Sector

Private Sector

Total

239-6 224-9 300-9 322° 4

233-7 293-4 435-0 596-1

473-3 518-3 735°9 918-5

1966 1967 1968 1969

The increase during the period in private sector investment from $234 million to $596 million, an increase of 156 per cent, compares with $239 million to $323 million in the public sector, or a mere 35 per cent growth in the public sector over three years. This is as it should be. It reflects the response of private enterprise to the growing social maturity, to the NTUC's success in promoting labour responsibility and to Government's policy on wage stability and industrial incentives. All these created a favourable general investment climate. There was an interesting development in 1968 and 1969 which calls for attention. The statistics on capital formation give separate figures in respect of expenditure on machinery and equipment, transport equipment, that is, ships, aircraft and vehicles mainly, and buildings and works. The figures for the period under review are given in Table Re

Table 5 Components

of Gross

Capital

Formation,

1966-9

($ million)

Machinery & Equip-

Transport Equipment

Buildings & Works

Total

ment

1966

204-2

20-7

248.4

473-3

1967

208-7

23°4

286-2

518-3

1968

283°6

106° 4

34549

735-9

1969

400°7

116°6

401-2

918-5

268

A striking feature about the table is the sharp increase in 1968 in expenditure on transport equipment. The explanation lies in the substantial purchases of ships and aircraft in these two years. Purchases of ships in 1968 amounted to $30-2 million and in 1969 to $56-5 million. This develop-

ment fits into the general picture of sharp increases in entrepot trade during these two years against the background of burgeoning world trade. In 1969, purchases of ships included the four ships purchased by the Republic's newly established national shipping line, the Neptune Orient Lines. The ships accounted for in these figures did not include, as far as could be ascertained, ships registered under the flag-of-convenience terms provided for in the Merchant Shipping Ordinance which was revised towards the end of last year. Future calculations of gross capital formation would have to draw a distinction between Singapore-registered ships whose beneficial owners are residents in the Republic and those registered for flag-of-convenience purposes. This distinction is by no means easy to make in all instances. As regards aircraft purchases, the Malaysia-Singapore Airline's aircraft renewal and expansion programmes commenced in 1968, when deliveries of the new Boeings took place. New aircraft delivered in 1968 and placed in the Singapore Registry were valued at $59-4 million. In 1969,

$37°7 million worth of new aircraft were delivered.

Half of

the new MSA fleet carry Malaysian registration and these were not included in the above figures. The other noteworthy feature of the investment process in these four years was the large but regular increase in expenditure on buildings and works. As against this, expenditure

on

machinery

and

equipment

1966 and 1967 and took two large This reflects the recent increase ization with which most of us are is also reflected in employment

remained

level

during

steps in 1968 and 1969. in the rate of industrialfamiliar. This increase figures, to which I now

turn. In the budget address of 5 December 1967, after quoting figures of employment as reported in the annual census

269

of manufactures, I made the following observations: 'It is a sobering thought that with all the prodigious efforts put in, and the vast amounts of money and resourees which the Government had been channelling towards increasing the growth of the manufacturing industries, all that has been achieved is 5,000 net increase in employment in these industries each year. The rate of increase is clearly inadequate to meet our needs. ' Happily, performance since then has improved and I give the following employment figures in the manufacturing industries from 1966 to 1969:

1966 - 51,272 1967 - 56,762 1968 - 72,603 1969 - 87,128 In the last two years employment in the manufacturing industries has been increasing at an annual rate of around

15,000. This is more in keeping with what we need. In fact, taking into account that the stepped-up employment in industry coincided with the intake of national servicemen into the armed forces, the result has been tight labour market, more especially in the professional and skilled grades, where shortages in certain lines were acute. Finally, I want to deal with the very rapid increase in

our official overseas assets which grew from $631 million in 1965 to $2,445 million at the end of 1969. An increase of this proportion, four times in four years, is not a common occurrence in the monetary history of nations. This growth in our overseas assets was not due to financial wizardry. It was firstly the result of institutional changes in note issue arrangements after independence; secondly, the consequence of the financial policies we followed as an independent republic; and thirdly, the reflection of the rapid economic growth just described. There are three components to the increase of our overseas assets. The first is the establishment of our own currency and the transfer of assets from the old Malayan Currency Board to our own Currency Board when the old notes were exchanged for new. The assets of the Currency Board 270

at the end of 1969 amounted to $645.37 million. The second element is the large increase in commercial bank deposits. As a result of economic expansion, favourable balance of payments and, possibly, some inflow of 'hot money', bank deposits more than doubled since 1965, increasing from $1,222-0 million to $2,745-3 million in 1969. The Government sold Treasury Bills to commercial banks and the holding of such bills at the end of 1969 was $500-13 million compared with $23-07 million at the end of 1965. As the proceeds of Treasury Bills were invested abroad, this had the effect of neutralizing a good part of the increase in bank deposits, and in this way helped to avert possible inflationary pressure. The remainder, some $696 million, represented the accumulation of annual government surpluses since 1965 as well as those of the statutory authorities to the extent that they invested these in government securities. In ordinary circumstances, it is not necessary to hold such large assets overseas, which is really tantamount to investing our money abroad instead of investing it in the Republic itself. However, these assets may come in useful when possible economic trends in the next three years may require us to run down these assets from their present rather high levels. This seems the right note on which to end this narrative of the decade. We started it with a grave and persisting problem of unemployment fuelled each year by successive floods of post-war babies coming of age. Our difficulties were compounded by irresponsible actions of trade unions manipulated for political ends. We sought a solution in a common market in Malaysia that proved adeadend. Throughout the decade there was a persistent search for practical solutions, a patient building of institutions and infrastructure,

a generous

lection

of talented

allocation

staff.

of funds,

In the

end,

an

accumulated

it paid

col-

off. It is im-

perative that we should never, either through extravagance or carelessness, fritter away all that we had so laboriously built up. We must build on the foundation of the accumulated experience of the decade and ensure that progress and prosperity will continue to higher levels of consolidaHons...

271

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