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Article
 Redressing imbalance
Professsor Ozay Mehmet |
| PREFACE In trying to redress the (racial) imbalance, it will be necessary lo concentrate your efforts on the Malays, to bring out more Malay entrepreneurs and to bring out and to make Malay millionaires, if you like, so that the number of Malays who are rich equals the number of Chinese who are rich . . . Mohammed Mahathir, Prime Minister of Malaysia THIS STUDY IS ABOUT the distribution of economic rewards resulting from a rapid process of income growth. Malaysia represents a successful case of a developing country which has achieved an impressive and sustained rate of growth in the last quarter century. I his success, however, must be qualified by a failure to eradicate mass poverty and equalise opportunity for all. The central argument of this study is that the ruling elites, in assuming the role of trustees, have emerged as a cartel. In the process, they have effectively cornered economic planning and decision-making, to enrich themselves while paying lip-service to poverty eradication. Inter-racial income inequality, historically a major source of conflict in multi-racial Malaysia, is now being replaced by widening intra-ethnic inequality, especially among the Malays. Cartels, whether of producers or of ruling elites, possess certain characteristics in common. They have a small membership, and a monopoly over vital information about prices, markets and business opportunities. Members of cartels can strike mutually enriching deals by influence peddling and exchanging vital information unavailable to the general public. Thus, contracts to modernise telecommunications may be awarded lo privileged members of ruling elites; foreign investors and multinational corporations seeking approval to go into business may be matched in joint ventures with military or political networks; public enterprises may be 'privatised' by being handed over to private interests linked to the ruling elites. Making millionaires by patronage is not only inconsistent with the rules of fair play; it is also contrary to the rules of economic efficiency in as much as chosen entrepreneurs may mismanage those resources placed under their control. |
| Malaysian economic development is
a particularly appropriate case to
study the effective influence of cartel-like networks over economic
planning and policy. Since 1970 Malaysia has adopted a New Economic
Policy (NEP) which, as we shall see, is a strategy of development by
trusteeship. Two major objectives of the NEP have been: (1) poverty
eradication, and (2) socio-economic restructuring. Cartel-like
domination of the NEP by interlocking networks of ruling elites has had
but a marginal net impact on poverty-eradication up to 1983 while
concentrating income and wealth among trustees and their associates.
This implies that the modalities of distribution of additional income,
realised during the successful Malaysian growth performance, can be
considered as a Zero-Sum Game in the sense that mass poverty at the
bottom is a necessary condition for income and wealth concentration at
the top. The important implication of this analysis is that the presumed conflict between equity and growth is, in reality, a problem of economic exploitation. This is not necessarily class-based exploitation, as Neo-Marxist analysts would argue. More conventionally and simply, it is underpayment of the weaker, the unorganised and the under-privileged by the powerful, the organised and the well-connected. For example, unorganised workers may be exploited in labour markets by cheap labour policies. The underpayment of labour results in quasi-rents as unearned incomes which accrue to members of cartel-like networks. The roots of economic exploitation in Malaysia lie in colonialism. Many of its instruments, such as a policy of cheap labour, have been left intact by trustees who, in many ways, are successors of the colonial elite.1 In the colonial era the economic surplus was drained away to London; under post-lndependen' trusteeship it has tended to enrich the trustees. In a fundamental sense, therefore, persistent poverty in Malaysia stems from the fact that, despite more than 25 years of political independence, the country's economy is still managed in an inherently colonial manner. This study is undertaken in a positivist, reformist framework. It evaluates the performance of the NEP as a basis for policy options, especially in view of the fact that the NEP time-frame will expire in 1990. Its central theme is that the way to ameliorate poverty is through more competition in markets and more fairness in economic policy. For example, terminating cheap labour policies would end de factp colonialism in the planatation sector, expanding the labour share of the national income anad helping to alleviate poverty. Fairmess in economic policy reuires that state assistance should be provided only to those who need it, reagrdless of race. One of the most critical preconditions of the transition from a cartel-dominated environment to one of more competition and greater fairness, is information, not only about markets and opportunities, but also about the decision-making process itself. For development projects are approved not only on the basis of technical and economic criteria, but also on what are euphemistically called 'institutional' factors. Paramount among the latter are the key political and bureaucratic decision-makers and a network of influential, special interest groups, which, in Chapter 6, are defined as 'distributional coalitions'. Who make up these networks and coalitions? By what techniques do they seek to influence economic policy and planning to bias the distribution process in their own favour? |
| The theory of cartels
underscores
the fact that collusive behaviour
requires secrecy and control of information for optimal timing of
mutually profitable deals. Therefore, it is not surprising that in
studies of economic development, there has been too little attention
paid to the control strategies and the inner workings of cartel-like
groups and their domination of the growth and distribution process.
This study seeks to make a small contribution towards filling this
large gap. Many individuals and institutions have contributed, in various ways. to this studv and 1 wish to record my appreciation to them all. In particular, 1 would like to express my gratiuide to Royal Professor Ungku Aziz., Vice-Chancellor oi the University of Malaya, and Professor Yip Yat Hoong, Dean oi the Institute of Advanced Studies at that University, for inviting me as a Visiting Professor during 1983/84 which gave me the opportunity to conduct the necessary research for the study. This Visiting Professorship was made possible by a Leave Fellowship granted by the Social Sciences and Humanities Research Council of Canada, which had also provided research grants for field work in Malaysia in 1980 and 1981. 1 am also grateful to the International Development Research Centre, Ottawa for a research gram through the University of Malaya which financed the survey of 1982/83 graduates reported in Chapter 5. In Malaysia, 1 wish to record my thanks for help, advice and critical comment to Jonio K. Sundaram, Leo Frederick, Sritua Ariel', Rick Shand, Mavis and James Puthucheary, Seih Mei Ling, Paul Chan, S. Husin Ali, R. Thillainathan, Ton Kin Woon, David Gibbons, Abu Asmara, Saleh Kayakoti, A. Navarnukundan and Alias Mohammed, among others. 1 owe a special word of thanks to Koh Kok Eng for computational work. Of course, none can be held accountable in any way for my opinions or interpretations. In Canada, 1 would like to acknowledge the helpful comments of Martin Rudner, Richard Stubbs, Susan McLellan and my graduate students at the University of Ottawa and Carleton University. Gregg Vaz provided editorial assistance. Last, but not least, 1 owe my wife and my children a huge debt of gratitude for their tolerance and understanding during the long months of research and writing. The publication of this study has been assisted financially by the Faculty of Administration and the Institute of International Development and Cooperation, University of Ottawa.# Notes 1. Ozay Mehmet, Economic Planning uml Social Justice in Developing Countries, Crooni Helm, London, 1978, Chapter 5: 'Malaysia: from Colonial io Bumiputera Elitism*. From the 'Preface to Development in Malysia' by Ozay Mehmet, Professor, International Affairs, Carleton University, Ottawa, Ont. Canada Croom Helm 1986 Go to the top |
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