Just as you would not be able to judge the financial soundness of a company by looking at its income statement but would need to see its balance sheet (and cashflow) as well, so using GDP to measure how well a country is doing also has major flaws. In fact GDP is worse because whereas the income statement for a company is meant to represent what can be distributed to shareholders without diminishing the company’s stock of productive assets there is no such assurance with GDP. Countries with large stocks of exhaustible resources such as oil or coal could enjoy high incomes fuelled by resource depletion. However unless these resources are transformed into capital assets or invested in education, the income will not be sustainable in the long run. Similarly developing countries may enjoy fast rates of growth as they industrialise but fail to take account of the environmental costs of that industrialisation which in some cases, like India and China, can be substantial and ultimately undermine the very improvement in living standards that is the objective of that growth.

The Government publishes every year with the Budget a Statement of Assets and Liabilities. I was the first to draw this to Singaporeans’ attention as during the Budget debates it has been completely ignored. Obviously the PAP MPs are not going to ask any questions that might shed light on the Government’s murky accounting. But it is inexcusable that Workers Party never raise any questions. Perhaps WP MPs are unable to understand a balance sheet as there are no economists or even accountants among their ranks in Parliament? The statement contains no information or footnotes nor does it explain whether this is just a Government balance sheet or whether it includes all Government-linked companies and statutory boards. I have written extensively on how the numbers do not add up and on how the total of assets net of liabilities is far too low for the recorded surpluses.

However this blog is not about the state’s assets and liabilities

The World Bank have for some time tried to produce a balance sheet for most of the world’s countries in an effort to measure wealth per capita. I have been reading their latest update The Changing Wealth of Nations 2018.

They divide their measure of wealth into the following categories:

• Produced Capital and Urban Land-machinery, buildings, equipment and residential and non-residential urban land.
• Natural Capital-energy and minerals, agricultural land, forests and protected areas. Natural capital is measured as the discounted sum of the value of rents generated over the lifetime of the asset.
• Human Capital-measured as the discounted value of earnings over a person’s lifetime.
• Net Foreign Assets-the sum of a country’s external assets and liabilities

The World Bank produces a measure of investment called adjusted net saving (ANS) which is measured as gross national savings minus depreciation of produced capital, depletion of subsoil assets and timber resources, the cost of air pollution damage to human health plus a credit for education expenditures. Education  expenditures increase the value of human capital but the relationship is not one-to-one as they may not be used efficiently or wasted. The same is true of investment in produced capital. Levels of atmospheric pollution, measured by concentrations of particles less than 2.5 microns. In many East and South Asian countries, including Singapore, pollution costs detract significantly from ANS.

Estimates for human capital are derived from household income and labour force surveys. The authors state that most developed countries conduct household surveys annually but Singapore only conducts one every five years.

Putting together all four measures of wealth the World Bank publishes estimates of wealth per capita for 140 countries. While Singapore has one of the highest GDPs per capita (which like Ireland’s does not accurately reflect living standards) the figure for wealth per capita ($775,196) is fairly average for developed countries.

This is a list of countries with higher levels of wealth per capita:
Norway ($1,671,756)
Qatar ($1,597,125)
Switzerland ($1,466,757)
Luxembourg ($1,288,607)
Kuwait ($1,123,144)
Australia ($1,046,786)
Canada ($1,016,593)
USA ($983,280)
Sweden ($886,129)
Denmark ($854,331)
Iceland ($825,857)
Netherlands ($792,396)

While some are oil producers with small populations (Norway, Qatar, Kuwait) the rest are not. The USA is a big oil producer but has a large population. Also Singapore has locational advantages due to its strategic position at the centre of much of the world’s oil trade.

Breaking down the components of wealth Singapore of course has almost zero natural capital but the value of its urban land is captured in produced capital.  We fare surprisingly poorly on human capital ($466, 119) where we are surpassed by Germany ($467,668) and Ireland  ($473,656) and almost equalled by Finland ($460,082) and the UK ($457,223). I find this surprising because Singapore is a city and 100% urbanised. If you compared us with other large cities like London, New York, Los Angeles or even Tokyo the relative figures for human capital per urban resident would likely be much worse.

Additionally, given the high value of Singapore’s urban land relative to other countries, you would expect the value of produced capital per capita to be higher yet it is surpassed by many other developed countries including the USA, given that we save about 40% of our GDP

There are also problems with Singapore’s data for human capital. If they are drawn from the household income survey then this only covers resident and resident employed households. It would exclude foreign workers who represent nearly 40% of the labour force and whose incomes would be considerably lower. The fact that Singapore’s dependency ratio is abnormally low (again due to the big foreign workforce) would also push up our figure for human capital because there is a high number of workers to each retired person.

While Singapore has a mediocre score for human capital, it has one of the highest scores for net foreign assets per capita ($123,004), only exceeded by oil producers Qatar, Kuwait and Norway. But Singaporeans are unlikely to benefit from these assets. In contrast to the Norwegian pension fund which is owned by the people (with the fund’s value displayed in real time on the internet) and where 4%  automatically goes into the Budget regardless of performance, only UP TO 50% of the long term returns (whatever they are!) of Temasek, GIC and MAS is added to revenues available for spending.  And most of this is put into capital funds such as the one for the Pioneer Generation and is not available for current spending. If the Government had invested much more in education and health (in both of which we rank among the lowest countries as a percentage of GDP) and less in low and negative return foreign assets,our total wealth per capita would probably be significantly higher. The same is true of investment in reducing air pollution which is a significant detractor from our high savings rate.

This report suggests that Singapore’s performance is pedestrian rather than the exceptionalism that the PAP Government is fond of claiming  as a justification for authoritarianism, lack of transparency and self-enrichment that would be criminal in most democracies. Not surprisingly it has not been reported on by state media.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam