Quoted from the OP:
"Very early on I had a developer from the Netherlands who wanted 40 USD per hour. I mean c'mon. I respect that you live in NL (I used to live there as well and paid the 53% income tax myself) but here on Upwork you're competing with the whole world. So no way I'm engaging him for that price. -- That cuts it down to two developer, both from India. Now I understand that the times when India was cheap are long over. But for 13.33 and 16.66 USD respectively I can get a local programmer here in Singapore --"
I think what you saw happen here is exactly what you said freelancers here do - competing with the whole world. And obviously these freelancers realized that if they did not live in India, they would be paid way more for the skills they have, so they increased their price. Basically, the global market of UpWork is working just fine, it just worked against you.
If you want to hire someone from India or Philipines or what ever the new fad country for cheap labour is, then you best go to that country. In the internet, smart people get wise.
I have to question the accuracy of the OP's statement. I have travelled extensively throughout Asia, having also spent some time in Singapore.
Singapore is a top 3 cost of living country with a median income around 100k. Cost of living is through the roof, and I
am a New Yorker, so I am familiar with high living costs.
Nevertheless, I have hired a low cost developer before and it was a total disaster. We ended up having to go to a US based developer who essentially told us the code was unusable. We lost time and a substantial sum of money.
At the end of the day, you get what you pay for....