Introduction

Figure 0.1 plots Singapore’s real Gross Domestic Product (GDP) per capita since 1900 along with the series for the United States (U.S.). Before independence in 1965, Singapore’s real GDP percapita was growing at a pace to just maintain its relative distance to the U.S. economy. It then began to speed up to race towards the U.S. standard of living. Over the past 50 years, there has been a ten-fold increase in the standard of living for Singapore. Such an increase has been possible because the real GDP per capita has been growing, on average, at about five percent per annum over the past 50 years. Another way of putting it is to say that the standard of living has been doubling every 14 years. To see how remarkable a transformation can be made by maintaining a growth rate in real GDP per capita of five percent per annum, consider the experience of the U.S., the world economic leader in the 20th century. Since 1880, the U.S. economy has seen its real GDP per capita grow at an average annual rate of two percent per annum. At this rate, its standard of living has been doubling every 35 years; it, therefore, took the U.S. economy more than a century (115 years, to be precise) to see its living standard increase by a factor of 10. Singapore, however, took less than half the time that it has taken the U.S. economy to achieve a ten-fold increase in its standard of living. One reason Singapore could achieve this is that in its economic take-off it could copy the stock of technologies available in the world (rather than reinventing the wheel). The diffusion of technology from the world’s technology leader enabled Singapore to launch into a process of catch-up growth…