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Sakmongkol ak 47

Friday 27 November 2009

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


Peter,  27 November 2009 at 19:06  

Say what you all like... NEP or derivatives of it is here to stay forever.

One cannot change an entire community so used to the goodies. So Malaysia will continue to bear the burden of this uncompetitive environment till end of times.

The question is how low and behind we would be when the end day comes. As it is, it is all the way downslide in every aspect of everything from education to brain drain.

For every action there is always a reaction.

Let's be practical about it. The entire mindset by an entire community is too ingrained to be changed.

The slide will continue but bearable so long as we have to "golden gooose ... oil" to bear all the inefficiencis and the corruptions and the wastages.

Just live with it.

Who cares .. guys like us can still make a living especially with a borderless world. In fact if we are to sum up the wealth of all who migraged plus those who stayed behind, the gain in wealth is still in positive territory. It is just where you earn your money.

For the 750,000 professionals overseas these guys are making good money and enjoying life.

The problem is these professionals are helping other countries to grow to world class status and helping the people to get good income as a result while we are still going backwards.

One need only to compare our real income today compared to yesteryears , you would know.

As for me, I am a global man.. so it bothers me little.

samsaimon,  27 November 2009 at 21:06  

Dato' Sak,

Selamat Hari Raya EidulAdha buat Dato' sekeluarga.


kuldeep 27 November 2009 at 21:11  

Great words Peter..ur the man.The global man employed by a global company..not because of your "race" but because of your pure talents and capabilities.

Malaysia can go bust for all you care.

And the reason is cos of the multitudes of Bumiputera incompetents parading themselves as the real deal.

Its so simple to make such broad brushed assumptions.The truth lies somewhere in between.

Mandarin speaking candidates preferred.

Anonymous,  27 November 2009 at 22:15  

From Peter,
"For the 750,000 professionals overseas these guys are making good money and enjoying life.

The problem is these professionals are helping other countries to grow to world class status and helping the people to get good income as a result while we are still going backwards."

My son is one of those 750,000. With a Master of Econs. from a premier university in Australia, he is very much a part of a global team contributing to the advancement of Singapore and the UK. His talent and enthusiasm would be totally stifled back home in Malaysia.

Anonymous,  29 November 2009 at 00:15  

I must say that Prof Hayek really hit the nail on the head. Personally, I feel this will begin to collapse in about 3-4 years time. The reason is down to Government spending in order to cater to the special interest. As it stands public debt is RM 360 billion growing between RM 30-40 billion a year . In 3-4 years time, it would look something like touching RM 500 billion. I feel this is a psychological tipping point. Thats just my thoughts

Suci Dalam Debu 29 November 2009 at 20:31  


Hapuskan NEP dalam bentuk yang tersedia. Bantulah semua tak kira bulu.

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