After reviewing the book, I have tried to link the different pointers that have been raised by the book with the country that I am familiar with: Singapore.
Singapore is a rich nation based on GDP but many who live inside feel that it is the government that is rich but not its people. Nevertheless, it should still be considered a rich nation and I will use it as a case study.
The Price of Prosperity. Why Rich Nations Fail and How to Renew Them
Todd G. Buchholz
Summary of points of Rich Nations
- Low fertility rate
- Grow rich via trade/globalisation
- High debt
- Youths are
- Less mobile
- Less likely to study "hard" subjects
- More entitled to welfare
- Need to have a strong cultural identity to maintain its uniqueness
Solutions
- Get immigrants to sign papers at historical sites.
- Same goes for students who want to borrow for study loans.
For social security and benefits.
- Only increase benefits to retirees if economy grows as they tend to benefit more than their grandchildren.
- Increase retirement age when life expectancy and health improves.
- Provide large tax rebates for 2nd kids onwards.
Better laws
- Give mobility credits for people who move out of states to find employment.
- Give bonus for finding jobs before unemployment benefits expire.
- Non hazardous jobs should not be licensed.
- Change disability benefit such that partially disable people can still work instead of retiring.
- Give extra social security benefit for young people who work before 21 years old to encourage them to learn the trade early.
Singapore
Total Fertility Rate
- Dropped to 1.1 (Replacement rate should be 2.1)
- Unsuccessful in encouraging more births
Total Trade
- About 300% of GDP
- Top 3 in ease of doing business
- Is a business friendly nation
Immigration
- 3.5 out of 5.4mil people are citizens (1/4 of the population is not a citizen)
- Xenophobia is building up due to perceived lack of protection of jobs for citizens
- Resentment of ease of hiring of foreign workers
National Debt
- Almost non existent
- Debt is backed by assets and is used to develop the financial market
Youths
- "Hard" subjects such as STEM are only avoided if the salary to effort required is low
- Hard Sciences and Engineering are mostly avoided
- Medicine, Dentistry, Law, Architecture, Computer Science and Computer Engineering are still well sought after. The common denominator for these majors are high paying jobs
- Youths still seek to travel overseas for work if the work provide higher pay and better opportunities
Strong Cultural Identity
- Singapore is young with an age of 57 this year
- Many perceive Singapore as lack of culture as Singapore focus strongly on the Math and Science but not on the Arts and Social Science but is slowly changing
- Singapore still promotes its cultural identity mostly based on after WW2 and post independence days
- Food is also a well regarded culture that Singapore hold closely to
- However, many cultural sites are still given way to economic development
Solutions
Integration of new citizens
I am unsure if the recommended ways to integrate the new citizens will work but a better way might be to find ways to educate them about the history and culture of Singapore. That is how the education teaches children and to instill a sense of citizenship.
Welfare Benefits
The solutions recommended by the book is not applicable to Singapore. Singapore does not have extensive and high welfare benefits. The policies are still to encourage work and to depend on oneself instead of the government.
Retirement Funds
Singapore implements the Central Provident Fund (CPF) where roughly 20% of the salary is contributed by the employee and 17% of the base salary is contributed by the employer into the fund. This forced savings is meant to help reduce the burden of the state and to ensure most people who are healthy and able to work to have a basic amount of retirement fund. Singapore has also raised the retirement age and is moving towards the age of 67 as the life expectancy continues to rise.
Encouragement of Births
Tax rebates have been given to working mothers for a long time. Cash benefits for newborns and equivalent top up of education funds have also been implemented but to no avail. It seems that judging between a career and caretaker role is difficult and is one reason why people are hesitant. Furthermore, the high cost of living in a city with ever shrinking living space makes it hard for families to decide having more children. There are new ideas that are implemented. These include encouraging a more flexible working culture, better work life balance. However, these are cultural aspects and might take a while to feed into society. Another solution might be to further reduce childcare cost and to increase the availability. Lastly, if money cannot solve the problem, it might just mean not enough money is thrown at the problem. Further increases of cash bonus for each child will help to reduce the cost of living for families. All the above mentioned require more money. Due to an aging population, healthcare cost is expected to rise further and further tax increase is expected to prevent increasing debt burden.
Simplified Economic Model of Singapore
Singapore promotes itself as a financial hub and a wealth hub. This model uses low taxes to encourage the rich to park their money within Singapore. With money flowing into Singapore, the government hopes these funds will create jobs. Funds will have to hire fund managers, lawyers and etc. These jobs created will then pay income taxes and consumption taxes.
With this economic model, let's explore some of the taxes that are levied.
Wealth tax
- Not easy to implement as it might push the rich away
Income taxes
- To be kept low to attract the rich to work in Singapore.
Corporate tax
- To be kept low to attract companies to set up in Singapore
- These companies will then create jobs
Goods and Services Tax
- Applied on every goods and services due to the difficulty in defining goods to give preferential treatment
- Tax/cash rebate given to lower income household to offset their taxes
- The only major tax component that can be raised without destroying the economic model of Singapore as it targets everyone and the rich will not feel ostracised.
Tax on gambling
- Might be possible to raise as gambling/greed is an inevitable habit of humans
- Not possible to stamp out completely. Might as well get revenue from it as long as gambling addiction is kept low and not destructive
Other forms of taxes/fees
- Taxes on tobacco and alcohol
- These are treated as possibly harmful but is hard to stamp out like gambling
- Does not affect the whole population and can be used to raise money
- Can be raised as it does not affect everyone
- Certificate of Entitlement (COE)
- Required to pay for it to own motor vehicles such as cars, motorcycles, and etc
- A way to control the vehicle population and raise money at the same time
- Controlled by market forces and cannot be raised directly. Can only limit the supply to increase the price
I have first posted on my personal blog.
I will try to review more books after I finish reading them but it will take some time.
