Economic Development and the Distribution of Land Rents in Singapore: A Georgist Implementation

Article excerpt

I

The Ideas of Henry George and the Policies of Singapore

Henry George is not a name which is generally known to policy makers in Singapore. However, a comparison of his ideas and Singapore's economic policies reveals fundamental similarities, as well as some areas of differences.

Henry George made a strong case for the taxation of rents from land, claiming that this would abolish poverty and economic crises, the latter being simply the result of speculation in land values. While the target of land taxation - the present landowner - may have paid a market price reflective of the capitalized value, George was of the view that it was not unfair for the state to take these capitalized values from the landowner.(1) He was an ardent advocate of free trade and a critic of too centralized government management of the means of production - socialism - as it would destroy spontaneous coordination. He did not believe in government handouts as a solution to poverty but in incentives and rewards. Singapore's success formula has included large doses of the above Georgist elements.

Singapore is a small island city state with a total land area of 640 square kilometers and a population of three million. It was founded as a British trading post in 1819 and remained a British colony until 1959 when it achieved internal self-government. The People's Action Party which was elected in 1959 has been returned at every election since. Singapore joined the then newly formed Federation of Malaysia in 1963 but withdrew in 1965 when it became an independent republic. At the time of its independence, the Singapore government was confronted with a host of political and economic problems soon compounded by the closure of British military bases in Singapore. Rapid population growth, a severe housing shortage evidenced by chronic overcrowding in dilapidated buildings and squatter slums, and the need for employment creation topped the list of problems.

Three decades later, Singapore has become a model for economic development. It has enjoyed growth rates in GNP per capita which averaged 7 percent annually and per capita income is presently in excess of US$20,000 (The World Bank, 1995). There is virtually no unemployment and approximately one fifth of the labor force is comprised of foreigners. The national savings rate is 51 percent while the home ownership rate is 92 percent. Many authors have attempted analysis of the factors behind rapid growth in Singapore and in the other East Asian countries. In a recently published book, The East Asian Miracle, the World Bank concludes that there is no single East Asian model and that ". . . high performing Asian economies have used different and changing sets of policies to achieve rapid growth with equity" (1993, 347). This paper represents an attempt to demonstrate that the Singapore model of economic growth encompasses key policy prescriptions of Henry George.

Section 2 of this paper describes the process by which land rents in an extremely land scarce country were captured. Section 3 highlights the importance of this exercise for international competitiveness and hence for the export-led growth which Singapore has enjoyed. In Section 4, the massive public housing program, through which the benefits of land value capture were redistributed, is described. Section 5 looks at the effects of land rent capture on the government budget. The philosophy of the Singapore government with regard to incentives and rewards, as reflected in its fiscal and social security policies, is also described. Section 6, entitled "Wipeouts and Windfalls," examines the distributional impact of certain land related policies. Section 7 concludes by highlighting areas of policy concern.

II

Land Value Capture

There is no hint of George's policies if one is to examine the property tax system in Singapore. This is especially true in that no attempt is made to separate site value from the improvements on land. …