Why people didn’t care to be the richest country in the world

It must have annoyed a lot of people to see on the front page of the Straits Times, Wednesday 15 August 2012, the boast that Singapore was the ‘richest country in the world’, validated by another hitherto unheard-of ranking study.

There might have been a time when people here would have taken pride in such an accolade. What better proof that all the sacrifices made in the decades post-independence had paid off, and that our city-state had arrived? But several people I spoke too pointed out that not only do we know it isn’t easy to be the richest country in the world, we look around us and we can clearly see so much that is wrong. “Richest country in the world” can’t possibly mean what it means in plain language.

It can only mean another empty boast.

Yet, the fact that our “nation-building” newspaper chose to highlight it on its front page shows how far removed it may now be from the typical Singaporean – that is, if my friends are representative of that. The newspaper is still engaging in old-style propaganda when its readers have changed. What to the Straits Times is welcome good news worthy of trumpetting is disgraceful gloating to its readers. Surely, a more assured recipe for losing customers, a newspaper can hardly design.

Why this gap between a number and people’s perception, I wondered? What’s behind the number in the first place? How valid is it? And why are people’s life experiences inconsistent with what the number indicates?

* * * * *

It turned out that the study cited by the newspaper was the 2012 Wealth Report, by Knight Frank, a property seller. It appears to be a sort of advisory to the “ultra high net-worth community” where to park their assets (preferably in real estate), and perhaps where to locate themselves so they remain connected to important trends, decision-makers and wealth-generating economies.

The website says in its introduction that “we uncover how the wealth being generated by the world’s fastest growing economies is an integral part of the equation, but also discover that economic growth alone is not enough to create cities considered genuinely important by the world’s wealthiest people.”

Please don’t ask me to parse such corporate-speak.

Despite that flimsy excuse, it really was not a rigorous study in macro-economics, though I couldn’t figure from the report’s website what its study method was. But there was enough to suggest that listing countries by relative wealth was only a peripheral issue, not the main aim of the study.

Yet, it merited a front-page shout from the Straits Times. The newspaper’s mendicancy for any news that might burnish Singapore’s image was a sight to behold.

But how was the figure showing  “richest country in the world” confected?

I reproduce at left a small table from the report, similar to the table reproduced in the Straits Times. It shows Singapore at the top of the heap in 2010 GDP per capita. As always with fishy-looking numbers, I began to squint.

What the Straits Times did not reproduce, nor mention in its write-up, is the footnote that local currency values had been converted to US$ at Purchasing Power Parity (PPP). It was not indicated how PPP had been calculated nor by whom nor what the conversion rates were. Needless to say, this is crucial; rankings can swing up and down depending on these assumptions.

(You might also have noticed that for a report produced by what was claimed to be a global real estate consultancy with oodles of money catering to clients with even more oodles of money, they couldn’t even find a minimum-wage spell-checker to spell Norway correctly!)

Despite the lack of background information about method of calculation, I took a stab at checking Singapore’s 2010 number. I’m like that. It’s an itch I have to scratch.

The springboard was our Gross Domestic Product in Singapore dollars for 2010, which was S$310,037 million at current market prices. To arrive at per capita values, we have a choice of dividing it by Total population, Resident population (citizens + Permanent Residents), or only Citizens. You can see the different results at right.

Which of the three per capita GDPs did the Wealth Report use? The report itself didn’t say, and furthermore, it was given in US$.

Using a process of induction, and applying three different exchange rates – US$1 = 1.30, 1.35 and 1.40 – we can draw up various US$ per capita GDPs. Those exchange rates are based on the historical. At the start of 2010, one US dollar was worth S$1.40; by the end of the year, it was worth S$1.30. We are assuming that PPP is not significantly different from market exchange rates since Singapore is not substantially costlier or cheaper a place to live compared to the US – the Wealth Report said it used PPP to convert dollar values, but didn’t say what rates it used.

The closest match with the Wealth Report figure of US$56,532 seems to be our figure of US$58,715. This suggests that the Wealth Report used the per capita GDP for Residents only, converted at about US$1 = S$1.45.

The problem with such a method of calculation is that Singapore’s population is much larger than our Resident Population. In mid 2010, we had 5.077 million on this island, of which only 3.772 million were Residents. And a great majority of the non-Residents hold work passes. In other words, they contribute to the GDP through work. How can we take into account their economic product, yet erase them when it comes to calculating GDP per capita?

It’s more reflective of reality to speak in terms of  Total GDP divided by Total Population, and if we do that, our per capita GDP in 2010 was S$61,070, or about US$42,117 at the same 1.45 exchange rate that I believe the Wealth Report used. That puts us closer to Hong Kong and Australia in the first table, and feels rather more realistic.

Why we don’t feel rich

Two other reasons why the Wealth Report’s figure struck people as removed from reality are:

1. Much of Singapore’s GDP is locked away in corporate profits and government surpluses;

2. A high income divide means the median Singaporean earner is substantially poorer than the statistical average income.

Re (1), a simple back-of-the-envelope calculation will demonstrate what I mean. In 2010, there were 1.15 million Resident households with at least one employed person (source: Department of Statistics), and each household had an average income from work of $8,726. The figures can be seen here. The figure includes employer CPF.

If we multiply the average of $8,726 by 1.15 million Resident households, we obtain a total income from work (including employer CPF) for citizens and permanent residents of S$120.4 billion in 2010. That’s slightly less than 39% of total GDP that same year.

That’s another way of saying that only two-fifths of the economic output of Singapore reaches its citizens and permanent residents via income from work. I glean from web articles on economics that such a proportion is low by world standards. It’s hardly any wonder that Singaporeans don’t feel anywhere close to being the “richest country in the world”. The money isn’t in our pockets.

Re (2), it’s a bit more complicated to try to illustrate what I mean. But, we can glimpse it by comparing the average income per Resident person with the median income.

First, at left is the data about median income for a Resident Singaporean.

As for average income, getting a figure is bit more tricky; it couldn’t find it directly, but I can estimate what it is.

I could find from the Department of Statistics that the average household size in 2010 was 3.5 persons. I could also find that 2.05 million Residents out of 3.77 million are in the labour force. This tells us there are an average of 1.9 working individuals in an average employed household, which in turn means that this average individual earns S$4,593 per month, including employer CPF.

(Avg income per household $8,726)/( (2.05/3.77) x 3.5 persons per household) = $4,593.

The gap between average income per month per person ($4,593) and the median ($3,000) gives you a clue as to the long tail reaching up the income scale. It helps explain how the aggregate can make Singapore seem very rich – pulled up by the super-rich – when plenty of ordinary people don’t find themselves so.

Singing off-key

Our pro-government media are behind the curve. Singaporeans no longer feel proud about sparkling “statistics” that prove how great Singapore is. The days of feeling happy when Singapore is “proven” to be respected by others even when we don’t have enough to eat are over. Today, there is an increasing attention to the self, and any attempt at singing the old tune will just sound off-key, when the self has not yet been satisfied.

Some may say it’s a bad trend. Rising selfishness can’t be a positive for the collective good.

But at the same time, I can see nascent shoots of something even better. Here and there, I spot signs, especially among younger Singaporeans, that the “self” is not just themselves, but also contains a sensitivity to those less privileged than them. When even upper middle-class Singaporeans roll their eyes at headlines such as “richest country in the world”, it cannot be because they feel their lives aren’t comfortable; it is because they are all too aware there are others whose lives aren’t. That there is no honour when victories are cast in soulless national terms, and if we have to measure anything, it must be at the level of real people’s real well-being.

See the box at right.  Think too about the disdain expressed when new citizens won medals for Singapore at the recently-concluded London Olympics.

The “collective” is not the state as defined by the ruling party; it is the community we may be beginning to feel we belong to. And that such flag-waving as headlined in Wednesday’s newspaper will only distract from the immense amount of work that still needs to be done for a truly happier, wealthier society.