The Road to Prosperity

Malaysia is a case that mirrors a controlled test situation. We have different races here in Malaysia. But operating under different enabling control environments has produced differing economic results. Malays operate basically under an environment of over political intervention (direct and indirect) while non Malays, especially Chinese operate under a control environment, relatively free from government intervention. What were the outcomes of these differing environments? Malays lag behind in the economic race while Chinese as a whole has surged ahead. They have accomplished more even under a period of determined and deliberate government intervention that has favoured the Malays while more or less leaving them alone.

Can the differing outcomes be explained by cultural reasons? The oft repeated reason is the Chinese has had thousand of years cultural training. That makes them predisposed to excel in commerce. The problem with this reasoning is that the cultural values compatible to commerce are also teachable and learnable traits. These were no means unique to the Chinese alone.

There is a more practical explanation to the differences. I would simply put it as two different operating political environments.

Malays operate under an environment where collectivist ideas prevail. Under this environment, the main elements included centralised planning for Malays, indirect intervention in the form of rules and regulations, quotas, departmental directions, barely disguised transfer programs etc. These were done under the name of equality and eradication of poverty. In reality, these produced as stated by Milton Friedman in his preface to Hayek's The Road to Serfdom- an erratic and contradictory melange of subsidies to special interest groups. In an earlier article, I have pointed out that the 30% equity allocation rule has benefited largely the special interest groups- the elite and the putras in the bumis.

The signals supporting the dismantling of hurdles to better economic growth to Malays were already there to be seen. Despite the operation of the NEP and NEP successor polices, the lot of the Malays has remained lacklustre. Despite direct and indirect government intervention, the economic lot hasn't improved. Malays remained largely behind the economic success of the Chinese. Wealth disparities within the Malay community have widened.

The logical step is to dismantle certain derelict edifices of the interventionist policies. This has been met with stiff opposition. Even the abolition of one ministry seen to be directly in charge of Malay economic interests was met with voluble opposition. Instead we have energised calls to have more application of regulatory and interventionist measures considered as insufficient thus far. Many of us fall back to the Khir Toyo-esque arguments; we lost Selangor because we did not implement as much Malayness as we should, we lost because we did not implement as much Islam as we should. Hence, we underperformed because we did not implement more regulations. We held back.

Our experience in the last 20 years has confirmed the ascension of capitalism. India experienced fastest growth when it started dismantling many of the regulatory hurdles. India decided to dismantle many of the ideas set by the much loved J. Nehru and when they did, it wasn't out of debunking or demonising Nehru, but carried out because the Nehru approach wasn't right.

China emerged as an economic superpower when it shed much of the collectivist tendencies of Communism. They did so not to despoil Mao's ideas but they carried out policies suited to the needs of the people. What China did would probably be more appropriate in a let a thousand flowers bloom setting. Taiwan and Hong Kong continued to surge ahead because they embraced the direction offered through voluntary cooperation of individuals.

The historical paths of these countries should provide us with an object lesson that coordination of men's economic activities through commissarish directions and through voluntary cooperation are roads going in very different directions. The first leads to serfdom, the second to liberation. Central direction has also proven to be a road to more dissatisfaction for the Malay man. When people are allowed to pursue their own economic self interests- that choice has led to less poverty.