Singapore Has Instituted An Alternative To Welfare…And It’s Working Well!
It seems that the “American Dream” of persevering and working hard, is alive and well, in Singapore. Yes you read it correctly “Singapore!”
By embracing the economic philosophy of capitalism Singapore has become an economic powerhouse raising its per capita income from $500 a year to $52,000 a year, and averaging a 7% annual growth rate since the 1970’s. And astoundingly a 50% higher rate than Britain, its once colonial ruler.
How then did Singapore achieve this remarkable transformation? The answer of course begins with leadership and the vision of Lee Kuan Yew the first prime minister who navigated this once fledgling impoverished country and transformed it into the second “freest” economy in the world, right behind Hong Kong.
What Singapore has done was to take the American model of capitalism and infuse it with some common sense government regulations that directly benefit the people, while also building an infrastructure and an alternative to the European style welfare state. In that rather than relying on the benevolence of government “hand-outs” Singapore has instituted a government system by which everyone over the age of 50 must set aside 20% of their wages and employers must contribute another 16%, in short “forced savings”.
These funds go into accounts where they grow through time until specific needs arise, such as housing or perhaps education. Remarkably about 90% of Singapore households own their homes, which is the highest rate of home ownership in the world.
In 1984 Singapore began a healthcare system called “Medisave Accounts” in which 7% of the 36% of combined savings goes towards healthcare and is deposited into a separate account. Individuals are also automatically enrolled in catastrophic health insurance which is optional, and once the Medisave account reaches a balance of $34,100 (an amount equal to a little less than half of the median family income), those excess funds are rolled over and can be used for non healthcare purposes.
It has taken almost 3-decades for economists, politicians and scholars on all sides of the political aisle to finally acknowledge what Singapore has known all along
Washington University economist Michael Sherraden summed it up; “Step by step, the Singapore state created a new social policy system that had asset building as its central structure…. In the world of social policy, it would be hard to overstate the exceptionality and the extent of this innovation…. During the past 25 years, Singapore policy has taken important steps toward lifelong asset building, beginning very early in life. These innovations include EduSave, the Baby Bonus, Child Development Accounts, and related asset-building incentives.”