The Tigers Must Decentralize to Innovate

With the corrupting influences of chewing gum and the Internet temporarily in check, the social engineers who run Singapore have embarked upon an ambitious new crusade: to make Singapore’s famously disciplined workers more creative.

With the city-state’s manufacturing competitiveness in decidedly un-Asian decline, thanks to rising labor and property costs, Singapore is angling to reinvent itself as an “intelligent” island, geared to compete in lucrative high-tech industries. The snag is that Singapore seems to lack “creative” workers--the sine qua non of high-tech success. To change this, Singapore plans to spend $1 billion to promote innovative thinking in schools, and another $2.8 billion on university research and development. Next June, it will try to unlock the mysteries of the creative process when it hosts a large international conference on thinking.

“Creativity” is the new buzzword across Southeast Asia. Listen to Malaysia’s finance minister: “Our economy must be driven by intellectual and creative energy. The manufacturing sector will continue to be important, but the new stimulus will come from services and information-based industries.” Such challenges are of more than academic concern in Malaysia, where manufacturing growth has slowed and the shortage of skilled labor is severe, causing foreign electronics manufacturers to take flight. To stem the tide, the Malaysians are pushing a vast “multimedia super-corridor,” offering lavish tax holidays to foreign companies that will bring high-tech know-how into the country.

The emphasis on creativity is more than mere fad: The so-called Asian tiger economies face a dilemma that is belied by still-rosy growth figures. Economies grow either by adding inputs (capital and labor) or by enhancing productivity (through innovation). Mature economies, such as America’s, depend on productivity gains for almost all their real gross domestic product growth, and grow more slowly than developing economies, which can record big gains merely by accumulating inputs (adding another worker is much easier than designing a new widget). But input accumulation only works for so long.

Studies suggest that almost all the tigers’ growth to date has been due to input accumulation, and that productivity gains have yet to factor into the Asian “miracle.” In fact, the Asian tigers have yet to prove that they are capable of engineering such gains. And staying power is the real test. The Soviet Union and Brazil once looked like economic juggernauts, as input accumulation allowed them to record high growth rates; their “miracles” came undone when diminishing returns set in and efficiency gains proved elusive.

It is therefore curious that Asia’s leaders and pundits have begun to wax triumphant about “Asian values,” arguing, with no shortage of disdain for the “American” way, that the Asian admixture of authoritarian government, economic liberalism and Confucian culture does a better job of delivering prosperity and order.

This smacks of hubris. In the business of creativity and innovation, America is the undisputed world champion. The Asian notion that you can have the virtues of the American system (creativity, innovation) without the vices (seeming chaos, flux) is reminiscent of the old socialist conceit, that you can have wealth and equality without the price system, that the building can have a penthouse without a foundation.

The free-wheeling American way may create problems and uncertainties that are inconsistent with “Asian values.” But it also generates wealth and innovation on an unrivaled scale--a scale that Asia’s fledgling economies, laboring under the yoke of restricted freedoms and cultural elitism, are unlikely to match, no matter how impressive their performances to date.

Admonishing workers to be more creative and to improve efficiency will not make it so. Only institutions that promote diversity and tolerance create the conditions for sustained productivity-led growth. Until Asia’s leaders understand this, their efforts to spur “creative” thought are likely to be in vain, their rhetoric about Asian values will ring increasingly hollow.