Ability to maintain law and order and to ensure the prevalence of the state’s laws and rules ● Importance of competent and stable institutions ○ Rule of law, reasonable public infrastructure, functioning banking system, provision of basic services (education, health, water and transport) ● Importance of domestic political legitimacy of governing authorities ○ Relatively free media, modicum of civil and political liberties, no exclusion of significant minorities from power and political process, tolerance of dissent Singapore’s success ● Began tiny and underdeveloped, no natural resources; population of immigrants with little shared history. ● Strategic location - middle of the world/ natural harbour ○ Dynamic region - mouth of Malacca Strait where 40% of maritime trade occurs ● Welcomed FDI - multinationals encouraged to expand and prosper ● Government - kept small, efficient, authoritarianism style of government emphasizing the island’s vulnerability in a potentially hostile neighbourhood MARKETS VS. GOVERNMENTS “The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the “rules of the game” and as an umpire to interpret and enforce the rules decided on. What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game.” -- Milton Friedman Nordic examples ● Developed economies with well-functioning state institutions ● Formal rules influence individual and collective behaviour ● Modest-sized governments but continued commitment to welfare state ● Open economies with continued investment in human capital: lower taxes and world’s highest rates of social mobility ● Healthy competition between private and public sectors in the provision of public goods, e.g. education and healthcare ● Topping indices for competitiveness and welfare – AAA ratings CORRUPTION ● “misuse of entrusted power for private gain” - includes acts of bribery, embezzlement, money laundering, nepotism ● Most common: bribery -- illegal payments to bureaucrats and politicians.
LISA YANG IBUS20002 Business in the Global Economy ● Estimates of bribes paid for government procurement contracts alone: US$1 trillion per year. (World Bank) Naturally also present in developed world ● Leaking of Panama papers in April 2016 suggests wide-scale, high-level fraud ● Siemens: global-scale bribery and corruption in 2008 and has paid fines and costs of US$1.6 since then ● Rolls Royce caught up in the Brazilian Petrobras US$2b corruption scandal RATIONALE FOR FIGHTING CORRUPTION Increases costs of doing business ● bribes and drawn-out negotiations to bargain them add additional costs to a transaction.
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- Developed country, LISA YANG