I’ve on and off been arguing that there is an alternative to the unbridled free market, socialism, distributism, and postliberalism, namely, Singapore’s example of “functional capitalism” or what I’ve frequently called “cameralism”.

The basic idea of functional capitalism is that the government will own a majority shareholder stake in certain corporations, but the corporations itself will be run like any other business enterprise on a competitive basis. The prime example here is Singapore International Airlines, Singapore’s national carrier, which before the pandemic has been consistently rated the world’s best airline. And since it is an international airline serving numerous foreign destination, it has to compete with all other international brands on an equal footing. Further, SIA generates considerable profits which, when translated into dividends, generates income for the Singapore government as the majority shareholder of the company. Thus, not only does the government not need to prop up the company by sinking money into it (except during the pandemic for obvious reasons), it generates profits for the government and fund its expenditure.

The tenets of functional capitalism is that the government plays by the same market rules like everyone else, they enter the market as shareholders, and like any vanilla commercial corporation, the shareholders will appoint directors who will make the executive decisions for the company. The company is not staffed by civil servants or run by government bureaucrats. The history of this can arguably be traced to the 18th century “cameralism” or the “science of administration” where royal governments will invest and manage in economic activities like mass scale mining, forestry, and agriculture, etc. Unlike the modern welfare state, this is an executive action on the part of the government who is an agent among other economic agents, a very big agent to be sure, but still navigating market forces like any other economic player. While the modern welfare state is characterised by legislation providing for impartial rules and rights for everyone within the general categories, or passing uniform regulatory laws for all businesses, cameralism is by its nature an exercise of executive discretion to invest and manage particular businesses on an ad hoc basis.

From here we can explain what does “Confucian” here mean in “Confucian Capitalism”. If the government were to be a player among other economic players, instead of regulating other players by passing coercive laws against them, then the government can influence other players and economic agents by setting up an example. To give a brief and distorted summary of the difference between Confucianism and Legalism, Confucianism emphasises the role of the emperor as needing to be personally virtuous and righteous, and by seeing his example, the people will imitate the emperor and the whole empire will become virtuous. Legalism on the other hand emphasises the use of laws as instruments, punishments and rewards, create incentives for the people to conform to the laws and generate the desired behavioural outcome.

Whatever the merits of Confucianism and Legalism with respect social norms (and for the record I fall squarely on the Legalist side), I think there is a considerable argument to be made that on the economic side “best practices” in economics and trade is best be set by example rather than by regulation. Here’s how it could practically work. Let’s take the most basic job qualifications. Suppose the government, for every company where they are the majority shareholder, will pass internal company by-laws that the company will hire people who have certificates from certain certification boards the government recognise. Thus, if the certification boards were truly competent and set examinations with high standards with relevance to the industries, then the other private companies will start also recognising certifications from such certification boards, the masses themselves, so as not to miss out on job opportunities at government corporations, will prefer to take examinations with such certification boards rather than at other boards. Thus, by “moral influence” rather than legislation, the government can influence the education standards of the nation.

Further, since this isn’t by legislation, if government companies are run incompetently or subpar, or they gain a notorious reputation for inefficiency, then private companies will be free to hire people on the basis of other certifications which better identify competent employees, etc, and the government itself can learn from such companies and alter their own hiring practices and standards to improve their own efficiency.

This point can be made, without loss of generality, to basically any other components of a business, whether it be regulatory certification, food standards, etc, the government can morally influence other companies by their choice of which regulatory company or certification they want to use, and which suppliers they want to patronise, etc.

Naturally, like contemporary DEI and ESG requirements, there’s nothing preventing the government from instituting further “higher standards” for running businesses (but hopefully for less Woke ideologies), but DEI and ESG requirements itself shows how powerful moral influence can be when wielded by corporations itself without central legislation (and even if it meant the loss of profitability), imagine the impact government owned enterprises can have if they were uniformly to adopt the same best practices across the board. Thus, there’s nothing to prevent government owned corporations of essential services and utilities to be run at a less than optimal profitability for social externalities, e.g. running transportation at lower profit margins to make it more affordable for commuters, running hospitals at very low rates, or even at balanced budgets, to provide for the poor. There’s no worry here about “crowding out” private forces as such government transport companies and medical services would be merely one company among many other companies. Even if the government runs these at lower cost, there would still be private hospitals with better services and more expensive treatments for those who can afford it.

As such, I call this scheme “Confucian Capitalism”, where the government is an equal economic agent under free market rules like everyone else, but because of their sheer scale and size, can morally influence other companies by their examples.

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