Are The Malays Able To Catch Up? part II

Why, why, WHY?

Alright, I know in my previous post I said that I'll touch more on how we can help the Malays and our country as a whole. However, after talking to certain people and reading certain blogs, I've realised that there are still a lot of Malaysians out there who are asking, 'Why even bother implementing the NEP/NDP in the first place? Why do the Malays need help since they are perfectly capable? Why did Tom Cruise ditch beautiful Nicole Kidman for plain-jane Katie Holmes?'.

Oh the questions!

Faced with such questions, I think it is my duty as a patriotic, Negaraku-singing, flag-waving Malaysian to share a little on why I think it is crucial to help the Malays increase their overall standard of living. And how by doing so, we can help our country avoid obsolescence in todays globalized world.

Ahhh...I like the sound of that last sentence, Joseph Stigiltz would have been proud.


Crash, Bang, Boom - A History Lesson

In order to understand why help is needed, let's take a little detour.

Anybody remember the Great Depression of 1929? Call it what you want - Black Friday, the Great Stock Market Crash, the Great Depression - the fact is, it happened and it wiped out more than one third of America's wealth and equity. This severely affected not only America, but the world as a whole.

The Great Depression can be attributed to several factors. The after effects of World War I, over-protectionist policies by the US Government and an over-inflated stock market being some of the factors. However, one of the main factors which caused the Great Depression, in my opinion, is this - the unequal distribution of wealth. The huge gap between the have's and the have-nots. When a country faces such a situation - as America did during the 1900's and Malaysia, during the mid 20th century where less then 30% of the country held 98% of the wealth - it risks becoming an economic basket case.

Why is that so? Basically because for a country to grow, it needs to rely on 2 basic drivers, or catalysts if you may. One would be an export driven growth, and the example would be Japan which grew at an astonishing pace during the period after World War II due to its amazing ability to manufacture and export must-have goods such as the walkman, colour TVs and soiled female underwear. The second would be growth driven by domestic consumption, as exemplified by the USA. A country which by the way, is famous not only for its horrendously obese population and ostentatious, gas-guzzling, environment polluting SUVs; but for its population's insatiable appetite for all things material.

These are the 2 main drivers of growth, however history has taught us that in the long run, it is better to rely more on domestic consumption than on exports. I won't go into the details on why it is so, but if you need proof, just take a look at what happened to Japan during the 80s and 90s. Not pretty indeed.

So okay, we've decided that growth via domestic consumption is desirable. What has this got to do with the gap between the rich and the poor? Look at it this way, a person who earns RM1 million a year can't be expected to consume 100 times more than a person who earns RM10,000 a year. He can't be expected to eat 100 times more rice, to buy a hundred times more clothes and accessories and to buy a hundred times more cars. Makes sense right? So what happens when all the wealth in the country is concentrated in the hands of a few groups of people? The consumption of the poorer segment of the country will decrease, but the consumption of the richer segment cannot be expected to rise in tandem. The result? A country which consumes less and less as time goes by.


Malaysia in the 1950s and 1960s

Now that we're done with the history lesson, lets just imagine for awhile that you are the Prime Minister of Malaysia during the fragile era of the 50s and 60s. Your finance minister approaches you with a socio-economic report, and it doesn't look good. The income gap between the top 20% with the bottom 40% of the country is growing ever wider. Not only will this affect the domestic consumption of your country, making it an unattractive destination for foreign capital, but you also fear (rightly so) that it will lead to social and political unrest. You feel your head begin to ache as you struggle with the situation. You know that if this continues on, all Malaysians irregardless of race and wealth will be screwed in the long run. You realise that you in your capacity as a Prime Minister, have to create a sustainable and viable middle-class society in your country, and to do so, the living standards of the bottom 40% have to be increased.

After further discussions with your advisors, and countless hours spent poring over demographics charts, you realise that the bottom 40% of your country was made up almost entirely of Malays. Past records show that this trend isn't improving.

You can feel it now, a tightness in your chest. It was never going to be easy. You have two options to choose from. Either you leave things be, and risk your country becoming an economic backwater in a few decades time, or you take steps to rectify the situation.

Imagine if you are put in that situation. What would you do?

I know what you would do, and frankly speaking, you know it too.