Why Singapore’s stellar GDP per capita figures are unimpressive in context
Update: Amended the title just to be more specific with the content of the article.
Some time ago I wrote this post explaining why I felt that Singapore’s high GDP per capita ranking is unexceptional when put into context. It’s still worth a read. The main gist of the argument (more specifically the 2nd point) is that Singapore’s GDP per capita when compared to numerous other cities does not rank amongst the top in the world. The obsession with GDP per capita, is understood to have reached fever pitch when Singapore was judged to have reached a Swiss standard of living simply by attaining a comparable GNP per capita with Switzerland’s in 1999. For example, Matt Miller of the Washington Post gushed over Singapore’s GDP per capita in a recent op-ed here.
A recent publication by an American think tank seems to support this argument. The report argues that the US is more economically developed than much of Europe simply because more of their population is packed into mega-cities:
The United States, it turns out, actually derives more economic benefit from its cities than any other country on the planet. Roughly 83 percent of America’s GDP came from its “large cities,” defined as cities with a population of 150,000 or more. By contrast, China got 78 percent of its GDP from large cities and Western Europe got a surprisingly small 65 percent of its GDP from its large urban areas. Here’s the chart:
The report’s authors argue that the city gap between the United States and Europe account for about three-quarters of the difference in per capita GDP between the two. In other words, the United States appears to be wealthier than Europe because it has a greater share of its population living in large, productive cities.
All told, some 80 percent of Americans live in large cities, versus just 58 percent of Western Europeans.
In any case, the report also notes that America’s largest cities will continue to play an outsized role in the global economy. In 2025, the report predicts, about 600 cities around the globe will account for 60 percent of the world’s GDP.
So what does this tell us? It means that if a country has more cities and a larger proportion of its people residing or packed in mega-cities, it is expected that the country would enjoy stronger economic growth. Taken to extremes, what happens if your country consists of just one mega-city (ie. a city-state)? The answer is that you would enjoy stellar high GDP per capita figures.
To illustrate, Monaco, a sovereign city-state located in Europe, ranks above Singapore for GDP per capita (PPP). See here for the list provided by Wikipedia. So do Luxembourg, Bermuda and Liechtenstein, all very small states (though Bermuda is officially British territory). In fact, from the list of the top 20 countries with the highest GDP per capita in the world (referring to the CIA World Factbook’s list here), half of them are recognised as small dependencies and states. This fact itself takes away a large chunk of the credit for high GDP per capita often associated with foresight and planning on the part of Singapore’s policy makers. In other words it makes little sense to compare a country like Singapore to Malaysia when the latter is so much larger than Singapore with plenty of rural areas.
Of course on the other hand, if a large country such as the United States enjoys high GDP per capita despite being much larger, that should count as much more of an achievement right?
Just to note, writer Ng Kok Lim makes the same point here.