Inward-lookingness of an Open Economy


Singapore’s economy is going into a period of much less optimism and this of course is something that we are not alone in when we look at the global economy. As much as we’d like to think we are insulated from some of the headwinds or that we can mute some challenging effects with expansionary budget, the fact that we are an open economy remains.

The idea of a small export-oriented economy succeeding in the world and that being the right strategy finds itself more in the global context that the economy is in, rather than the inherent structure or nature of the economy. Of course, Singapore put in place policies that allows us to execute on the ‘small, open economy’ idea well, and we reaped its success but let us not kid ourselves with that inward looking view that our policies by themselves stands up well (as though they are inherently good and not made optimal due to circumstances).

I’ve been a champion of using closer study of history (some older pieces includes this and this) to appreciate and understand the global context by which an economy succeeds or fails. And as the world enters a phase of increasing trade tensions, nationalism, indulge in the folly of closing their economies, we too, need to rethink our ideologies associated with being able to compete, and consider how far we are going with our so-called advantages and whether we need to invest more deeply into them. Our traditional metrics of competitiveness, of targeting growth might need to change and this is a window of opportunity to shift people’s attention to some new ways of looking into diagnosing the growth of our economy and fruits of our labour.

For a start, considering the structure of the economy in terms of demographics and how income, wealth and government’s revenue structure from various socio-economic groups in the country will matter. Next, looking at our connections with the rest of the world in the form of Foreign Direct Investments, Direct Investments Abroad, net Direct Investment Abroad, Imports, Exports and scrutinising the network of our Double Taxation Agreements and Free Trade Agreements will help. Finally, we can consider vibrance of community life of our citizens – be it civil society, or religious activities’ involvements.

When we were younger, our parents gauged our growth based on physical parameters like weight, height; then when we grew a little older, they looked at our behaviours, and the intelligence we exhibit. As we enter teenage and adulthood, our growth became more based on social parameters and maturity. While in some sense, those attributes manifest themselves imperfectly through grades, salary, job positions, etc, we need to acknowledge that as one grows, we ought to look at different and new parameters that indicates genuine growth.

Likewise, in an economy, if we are still stuck with looking at GDP and having policy or resources responding to that, then it would be rather immature. Yet at the same time, we ought to realise that those figures/quantities that represents the concepts behind them, are often flawed and we ought not take them too seriously to the extent of assigning them 100% weightage in reflecting the reality of matters. Finally, the global context we reside in must inform our actions and allocation of resources, investment into different areas. A man do not grow inherently or inwardly, he grows because external circumstances forces it to – if we often just think about insulating ourselves, then we may even insulate ourselves from the need to grow.