While researching background information for my upcoming book, “Book a Trip,” which is based on my travels to Malaysia and Singapore, I asked ChatGPT to explain the differences between Johor Bahru and Singapore in light of the analysis presented in “Why Nations Fail.” I found ChatGPT’s analysis insightful and decided to share it here.
Author’s Note: ChatGPT’s facts hold up to superficial scrutiny on Wikipedia. I present this discussion not as definitive research but as a starting point if you ponder where and why the two countries diverged.
Me: Is there a political and economic explanation for the disparity between the culturally similar and geographically colocated cities of Singapore and Johor Bahru along the lines of extractive versus inclusive political and economic institutions described in the book Why Nations Fail?
ChatCPT: Yes, the disparity between Singapore and Johor Bahru (and, by extension, Malaysia as a whole) can be analyzed using the framework of Why Nations Fail by Daron Acemoglu and James A. Robinson. The book argues that the key to long-term economic prosperity lies in inclusive political and economic institutions, which encourage broad participation, protect property rights, and create incentives for innovation and investment. In contrast, extractive institutions concentrate power and wealth in the hands of a few, stifling broad-based economic development.
Singapore: Inclusive Institutions
Despite its early struggles following independence in 1965, Singapore developed inclusive economic institutions through a robust rule of law, strong protection of property rights, and a meritocratic civil service. The city-state attracted foreign investment by fostering a corruption-free business environment, enforcing contracts, and ensuring political stability. While Singapore often faces criticism for its authoritarian-leaning government, its political institutions, although not fully democratic, have been relatively inclusive in ensuring policy continuity, heavily investing in education and infrastructure, and avoiding the patronage-based politics that burden many post-colonial states.
Johor Bahru: Extractive Institutions in a Malaysian Context
In contrast, Malaysia has experienced a history of more extractive institutions, particularly regarding the concentration of political and economic power within specific groups. The New Economic Policy (NEP), introduced in the 1970s to tackle ethnic disparities, established an affirmative action system that, while aimed at uplifting the Malay majority, also entrenched cronyism and rent-seeking behaviors. Political elites controlled key industries, and economic policies often favored businesses with political connections rather than promoting broad-based competition. This approach discouraged investment and entrepreneurship compared to Singapore’s open and competitive economy.
Border Effect and Divergence
Johor Bahru, although it is located next to Singapore and shares cultural similarities, functions under Malaysian institutions. Consequently:
- Bureaucratic inefficiencies and corruption create hurdles for businesses.
- Land and infrastructure development are often tied to political patronage.
- The regulatory environment is less favorable than Singapore, deterring high-value investments.
Johor Bahru has benefited from spillover effects—such as Singaporean companies setting up factories or Malaysians working in Singapore for higher wages—but these gains are limited by Malaysia’s broader institutional constraints. In contrast, Singapore’s institutions have actively shaped an economic ecosystem that fosters long-term growth.
Conclusion
Following the logic of Why Nations Fail, the contrast between Singapore and Johor Bahru illustrates how different institutional choices lead to significantly different outcomes. Singapore’s relatively inclusive institutions (despite political constraints) have promoted innovation, stability, and high-value economic activity. Malaysia, while more developed than many of its regional peers, still experiences extractive tendencies that hinder Johor Bahru’s ability to fully leverage its proximity to Singapore. This dynamic continues to influence the economic divide between the two cities.
Me: Can you expand on the lack of fully democratic and authoritarian-leaning politics, as this contradicts the Why Nations Fail hypothesis?
ChatGPT: Singapore’s case presents an apparent contradiction to the hypothesis in Why Nations Fail, which argues that inclusive political institutions are necessary for inclusive economic institutions to emerge and sustain long-term prosperity. Singapore has achieved high levels of economic success despite having a political system that is not entirely democratic and exhibits authoritarian-leaning traits. Here’s how this paradox can be understood:
1. Singapore’s Political System: Not Fully Democratic but Stable
Singapore functions as a parliamentary republic with regular elections; however, its political landscape is dominated by the People’s Action Party (PAP), which has held power since independence in 1965. Several factors contribute to its authoritarian-leaning characteristics:
- Strong State Control: The government exerts tight control over the media, public protests, and political opposition. Defamation lawsuits and regulatory restrictions are employed to suppress dissent.
- Legal and Institutional Mechanisms: Laws like the Internal Security Act permit detention without trial, and the government wields considerable influence over electoral boundaries and political competition.
- Limited Political Pluralism: Although opposition parties are present and have made some progress in recent years, the PAP continues to hold a dominant position due to a blend of governance success, institutional control, and legal obstacles to opposition growth.
Despite these authoritarian tendencies, Singapore has not established extractive political institutions in the way Acemoglu and Robinson describe. Rather than concentrating wealth and power in the hands of a narrow elite that hinders economic dynamism (as seen in genuinely extractive regimes), Singapore has built a technocratic, meritocratic, and accountable governance system that emphasizes national economic growth over the personal enrichment of ruling elites.
2. How Has Singapore Avoided Extractive Tendencies?
Singapore’s governance model operates differently than traditional authoritarian regimes by upholding several key characteristics that align with inclusive economic institutions.
- Rule of Law and Strong Institutions: Unlike extractive regimes, where the political elite rewrites laws for personal gain, Singapore has built a highly efficient, rules-based bureaucracy with low corruption.
- Meritocracy and Competence: Government positions and economic opportunities are primarily based on merit rather than political loyalty, minimizing the inefficiencies associated with cronyism.
- Public Goods Investment: The state consistently invests in infrastructure, education, and housing, ensuring widespread benefits instead of concentrating wealth in a small elite.
- Economic Openness: Singapore has embraced free markets, attracted foreign investment, and promoted competition, steering clear of the monopolistic tendencies often found in extractive economies.
3. Why Does Singapore Work Despite Its Political Constraints?
Acemoglu and Robinson argue that inclusive political institutions create feedback loops that sustain inclusive economic institutions. However, Singapore has maintained long-term economic success despite its dominant-party rule because:
- Elite Constraints Exist Internally: Although the PAP holds significant power, it is limited by internal norms, elevated public expectations, and global economic pressures. The government is highly responsive to economic challenges and community concerns.
- Political Stability Has Encouraged Investment: Unlike many authoritarian regimes, where political power shifts violently or unpredictably, Singapore’s stability is a vital asset in attracting businesses and investors.
- Performance Legitimacy: Rather than depending solely on force, the government secures legitimacy by consistently providing economic growth, effective governance, and a high quality of life.
4. Is This Model Sustainable?
Singapore’s model works as long as the ruling elite remains committed to national prosperity rather than personal enrichment. However, if the PAP’s dominance leads to complacency, growing inequality, or declining political responsiveness, the absence of democratic safeguards could become a liability. Political transitions in non-democratic settings can be risky, and if the current system weakens without institutionalized political competition, Singapore could ultimately face governance challenges.
Conclusion
Singapore’s case challenges the Why Nations Fail framework by demonstrating that economic inclusivity can thrive in a system with limited political inclusivity—but only under specific conditions. The key distinction is that while Singapore’s political institutions are not fully democratic, they are also not entirely extractive. The country has managed to avoid the elite capture, rent-seeking, and cronyism typically associated with extractive regimes, allowing its economy to prosper. However, this success relies on sustained institutional integrity, which is not guaranteed over the long term.