Sieg Heil Economics-2

Noble objectives, disappointing results.

Malaysia's version of the New Deal began operating since 1970. Officially, we knew the deal by the name of NEP which ended formally in 1970. The same idea continues today in various forms of 'planning institutions' but each carrying with them, the same seeds with a common ancestry- the idea of enlarged government participation in the economy. We can also call this tendency, the collectivist mindset.

When the NEP ended officially in 1990, the inherited collectivist mindset came up with a new economic agenda. It was succeeded for example by the New National Development Policy and now the New National Agenda. Even now, collectivist tendencies lie behind the formation of the various corridors that's enveloping almost the whole of Malaysia. They are in reality, specific forms of enlarged government involvement in the economy. They share the common trait of bearing the same collectivist tendency.

Hayek warned of this tendency in his discussion on the Omnipotent Elected Assembly. It means the people who have governmental powers confer unto themselves the authority to be the final arbiters of the destiny of the rest.

Before we go on, we need to ask this question: are the Malays against market economy? If left on their own, every Malay would wish to pursue the economic vocation that interests them and hence they remain true to Adam Smith's- each pursuing their own interests. They can accept free market economy but in practice, they wish exceptions to be made for them. Why so? Because they command majority political support and as Hayek pointed out in a lecture in 1973:-

Majority rule and special interests

The reason is that it is now generally taken for granted that in a democracy the powers of the majority must be unlimited, and that a government with unlimited powers will be forced, to secure the continued support of a majority, to use its unlimited powers in the service of special interests - such groups as particular traders, 'the inhabitants of particular regions, etc. We shall see this most clearly if we consider the situation in a community in which the mass of the people are in favour of a market order and against government direction, but, as will normally happen, most of the groups wish an exception to be made in their favour.

F.A Hayek, Economic Freedom And Representative Government, Fourth Wincott Memorial Lecture delivered at The Royal Society of Arts 31 October, 1973

Given the wishes of the majority, who could stand a chance for making even a preliminary suggestion that we unload the siege mentality? The political reality would be more in tandem with what Hayek said in the same lecture:-

In such conditions a political party hoping to achieve and maintain power will have little choice but to use its powers to buy the support of particular groups. They will do so not because the majority is interventionist, but because the ruling party would not retain a majority if it did not buy the support of particular groups by the promise of special advantages. This means in practice that even a statesman wholly devoted to the common interest of all the citizens will be under the constant necessity of satisfying special interests, because only thus will he be able to retain the support of a majority which he needs to achieve what is really important to him.

The majority is not interventionist. This lends credence to our own estimation that Malays are not anti market economy. Tun Razak, the architect of NEP gave a finite time span for the NEP because he knew the majority is not interventionist. That leaves only one reason why collectivist tendencies in our economy continue. The ruling party will not stay in power without the promise of special advantages as THE form of purchase to secure the support of particular groups. Note here, the support of particular groups, not the support of the majority.

The concept of 1Malaysia or the breaking up of the siege mentality stand in the way of the interests of particular groups. What is required of the PM is the indomitable will of a Mahathir with a humane face. He has the comforting assurance that the majority is not interventionist.

The root solution to solving the Malay economic problem lies then with the dismantling of the very structures which we have created that have proven to be holding back the Malays in general. The PM appears to have an understanding about this root solution but must tread gingerly. Similarly calls to break away from the siege mentality must be tempered with prudence in order to avoid becoming a casualty to the wishes of the particular special interest groups