Dateline: Kuala Lumpur, Malaysia
In the late fourteenth century, Iskandar Shah was king of the land. Despite a Persian name, his conversion to Islam remains debatable.
What is not debated is the story of his downfall.
After ascending to the throne, Iskandar Shah accused one of his concubines of committing adultery. As her punishment, he sent her into the streets and had her stripped naked.
The only problem was the concubine’s father was a prominent general in the kingdom.
In 1398, the general’s foreign accomplices set sail for the kingdom with with the pledge that they would receive assistance in pillaging the kingdom’s capital from the concubine’s father as his revenge.
Upon their arrival, it took a full month for the Kingdom of Singapura to fall and a river of blood to flow through the streets.
Iskandar Shah was the last king of Singapura, the island just a stone’s throw away from Kuala Lumpar.
Today, the kingdom of Singapura is, of course, Singapore, and it hasn’t seen so much scandal since.
But that lack of scandal along with some savvy planning on the part of Singapore has created a nation of almost total economic freedom.
In fact, Singapore celebrated its 49th birthday over the weekend. And they have a lot to celebrate.
After World War II, Britain regained control of the 231 square mile island at the southern tip of peninsular Malaya. As was increasingly becoming the case with British territories, Singapore was given an increasing amount of room for self government.
In 1963, the tiny island decided to join with Malaya to become modern day Malaysia. It only took two years for the more progressive government to the south to get fed up and get itself booted out of the union. (But not before being the victim of a small bombing by Indonesian commandos trying to stoke racial tensions.)
Left in shambles, Singapore was a far cry from the bastion of economic freedom it is today.
Unemployment was high and the place was still smarting from the war. A housing crisis made for a real public disaster.
Of course, it didn’t help that this tiny island in the Straits had no natural resources to speak of, either.
The new government sprung to work out of fear of being reabsorbed into Malaysia on unfavorable terms. They modernized the economy, made education a priority, and focused on becoming a highly developed nation with what they had.
Oh, and they decided to do something radical: make their city-state open for business.
Rather than chase after the lowest common denominator, Singapore focused on high-end industrial production. They lured businesses there with low taxes and promises of red carpet treatment. They gave ships a reason to use their ports.
They even lured big oil companies into building refineries in Singapore, making the city-state the third largest oil refiner only a decade after the split.
Today, surveys proclaim Singapore the second most economically free nation in the world, behind Hong Kong. Even now, Singapore is making improvements in its investment freedom as well as business freedoms.
For example, Singapore is one of the few countries with no minimum wage. Yet it has the highest concentration of millionaires in the world and, while the wealth gap is high due to the extreme wealth that has flocked there, very little poverty.
Trade freedom is high and the place is about as transparent as you can get.
In fewer than five decades, Singapore has become the world’s wealthiest nation by some standards. A country that is little more than a rock in the ocean figured out a way to not only out-earn the United States and other western nations, but outpace it in total economic freedom.
The pace at which Singapore has become incredibly wealthy is quite something, even before you consider that they don’t have oil to pull out of the ground of timber fields to harvest.
Meanwhile, countries like The Land of the Free are slipping in terms of economic freedom. This year marks the seventh year that the United States has fallen on the Index of Economic Freedom.
For as much as US persons might want to think they live in the most free country in the world, the reality is the United States is suffering increased corruption, decreased transparency, 80,000 new regulations a year, and an increasingly hostile attitude toward business.
What is happening in the United States has happened in Europe, as well. Just as the British Empire shriveled back into the British Isles and the country took a sledge hammer to economic freedom, the United States is doing the same.
These western countries are singing off the same hymn sheet of higher taxes, more regulations, and an increasingly hostile attitude to business.
So here are my two takeaways from Singapore’s economic success:
1. Friendliness to capital is an attitude
We talk frequently about the concept of culture here. Policies are important, but culture shapes an entire outlook.
Arrogant western governments might as well still think they are colonial masters with the attitude they have toward most business and investment. They treat capital with the attitude of, “if you don’t like it, leave”.
Only they add a “but not before we tax the hell out of you” at the end.
Singapore respected capital and knows it will continue to be a bastion of wealth with that policy. Things are moving in the right direction, like a decision to remove the GST tax on precious metals sales a few years back.
2. Question conventional wisdom and be open minded
Earlier this year, I wrote about how hard it is to move to Singapore nowadays. As the country has become wealthy, they can be more and more selective about who gets immigrates there.
Of course, a few decades ago, you could have written your own ticket. Back then, the entire world scoffed at Singapore. No one believed they would ever amount to anything considering the massive challenges they had in front of them.
As is often the case, the rest of the world was wrong.
Today’s emerging markets could become the next Singapore.
If you had the foresight to get in years ago you would have been on the cutting edge and become filthy rich. Things were easier even five or ten years ago when Jim Rogers was moving to Singapore, speaking highly of the opportunities here in Asia.
Not every emerging market will become the next Singapore. There are a growing number of countries seeking to be international financial centers; heck, even The Gambia is a hub for offshore companies now.
While those countries are taking steps in the right direction when it comes to economic freedom, most of them won’t be the next Singapore.
For instance, politicians in Lithuania have been telling their people that they would turn the country into “the next Sweden” since the fall of the USSR. Obviously, that hasn’t worked.
However, as western countries like Spain, France, and Italy continue to fall off their rocker with outdated, self-defeating economic policies, new nations seeking to topple them and take their lunch money will emerge.
If you don’t have millions to invest in a highly developed Singapore, how will you find the next Singapore and benefit from the same kind of total economic freedom?
You know I’m a big fan of Cambodia, although it has quite a leap to be as livable as Singapore. There are other emerging markets around the world that have the right stuff… you just have to know where to look.
That is what we talk about in The Nomad Society. Our premium readers get access to content not available on our free site. Quite simply, it’s designed to help you find “the next big place” while growing and protecting your wealth using flag theory.
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Nomad Capitalist is all about helping people like you “go where you’re treated best”. If you want to learn more about what exactly that means, and why I believe so strongly in it, I made this video that is worth watching: