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NEP: A historical mistake

Updated 12.55pm, 16 June 2010

THE greatest political myth in Malaysia is that Malay Malaysians and other bumiputera owe their success or improved living standards to three things: the New Economic Policy (NEP), Umno and the 13 May 1969 clashes. Without 13 May, Umno would not have been resurrected and obviously, there would not be the NEP.

Myths are not lies. A myth is only a half-truth or misinterpretation of truth. It is not that Malay Malaysians have not gained from the NEP’s implementation. It is instead that Malay Malaysians could have gained more if the nation had chosen other paths after the 1969 racial clashes.

In that sense then, Malay Malaysians owe nothing to Umno and the NEP. In fact, the NEP was a historical mistake. Is this argument speculative? Yes. But it is no more speculative than claims that Malay Malaysians could not have been successful and affluent if not for Umno.

Free market flaws

That the NEP was a historical mistake can be argued by looking at the conditions a young Malaysia faced in the late 1960s. By then, the laissez-faire or free-market model was no longer sustainable for our nation.

Even if the Alliance did not lose control of Penang, Selangor and Perak in the 1969 elections, the poor’s demand for economic redistribution would still have grown stronger by the day. For certain, the Malay electorate’s disenchantment was on the rise in the late 1960s. Of the total votes in the peninsula in 1969, there was a swing from 15% to 24% from Umno/Alliance to PAS [updated] most likely among Malay Malaysian voters. The support for non-Malay-based opposition parties among peninsular voters, meanwhile, remained unchanged at 26%.

Later incidents like the 1973 starvation of Baling farmers were pointed indicators of flaws within the laissez-faire model. This model would sooner or later have been terminated by a class revolt if an ethnic riot had not occurred.

Meritocracy vs affirmative action

How did meritocracy – the distribution of wealth in a free market which rewards individuals on their merit – fail?

Firstly, competition requires level playing fields. Hence, if certain groups are historically or structurally discriminated or marginalised, such as India’s lower castes or African Americans, their potential cannot be unleashed. Competition that is not moderated may mean that the weak can never move upward in society.

Secondly, even uncompetitive people deserve to live. You don’t let people starve simply because they are less productive. Competitiveness or productivity is required only of the competent. Social Darwinism, if you like, has to give way to fraternity.

Cherry tree

Why are certain quarters being cherry-picked for special rights and privileges? (Pic by madazii / sxc.hu)

These two flaws of meritocracy need two different policy tools: affirmative action and a welfare state. Affirmative action, which is more often based on non-socio-economic criteria like ethnicity, gender, disabilities and urban-rural divide, is meant to help minorities who are specifically disadvantaged.

In contrast, however, if the disadvantaged group constitutes a majority such as in Malaysia, then a welfare state would be needed to redistribute society’s wealth towards the economically weak through for example, subsidies or direct handouts.

For example, if some university places are reserved for poor students, poor rural students may systematically lose out to poor urban students because rural schools are worse equipped. Similarly, rich rural students will systematically lose to their urban counterparts.

To correct this, rural schools should be given some weightage on top of family income. However, if 80% of the students are rural, then improving all rural schools is more important than cherry-picking a few smarter rural kids.

Alternatives to NEP

At first glance, the NEP’s two-pronged goal of “restructuring society” and “eradication of poverty” seems to be the answer to the flaws of a naïve meritocracy. In reality, these are competing ends. Additionally, we may have at least three policy alternatives to the NEP depending on how we rank class and ethnicity.

First, if we care only about poverty, then all poor should be helped regardless of ethnicity. The poorer they are, the more help they should receive. This would result in a welfare state with means test programmes. Since Malay Malaysians constitute the poor’s majority, the wealth gap between Malays and non-Malay Malaysians will eventually narrow.

Over time, absolute poverty should disappear within both these groups, while relative poverty would also be reduced. But a welfare state incurs high tax, which may arguably inhibit the incentives of both the tax-paying rich and the subsidised poor to work hard. This would lead to public debates based on left- or right-wing economic policies, instead of based on communalism.

Now, what if we think the historical injustice suffered by the Malays/bumiputera was simply too colossal and deserved targeted treatment?

A second model could help the Malay Malaysians but prioritise the poor among them. As wealth is transferred from rich non-Malay to poor Malay Malaysians, over time, the wealth gap between the Malays and the non-Malays would narrow. Ethnic riots would no longer be fueled by economic disparity.

However, the Malay Malaysian business and professional class may take longer to grow. Also, overall, society may lack entrepreneurship and economic drive, and the rich may rise against this “ethno-welfare state”.

A third model helps the Malay Malaysian but prioritises the able among them, resulting in an ethno-meritocracy, if you like. Over time, the potentials of able Malay Malaysians would be unleashed so that affirmative action would no longer be needed. The nation would likely be more competitive, but the wealth gap among Malay Malaysians would also become larger. Hence, class differences between the rich and poor Malay Malaysians may lead to left-right representation that cuts across ethnic boundaries.

Brain drain (Pic by Nick Choo)

Brain drain (Pic by Nick Choo)

In brief, had the merit or need criteria been followed faithfully, after 40 years, the ethno-religious divide in Malaysia should have given way to economic left-right contestation. Malaysia would either have faced uncompetitiveness or inequality, but not both.

What is the NEP?

Clearly, the NEP is none of the three models above. Malaysia today is uncompetitive internationally, with a brain drain that is apparent in all ethnic groups. Even the wealth gap has grown larger, not only among all Malaysians, but significantly among Malay Malaysians, too.

Gini Coefficient* in Malaya/Malaysia

Overall MalayMalaysian ChineseMalaysian IndianMalaysian
1957/58 0.412 0.342 0.374 0.347
1967/68 0.444 0.400 0.391 0.403
1970 0.502 0.466 0.455 0.463
1976 0.526 0.494 0.505 0.458
1979 0.493 0.488 0.470 0.460
1984 0.480 0.469 0.452 0.417
1987 0.458 0.447 0.428 0.402
1990 0.446 0.428 0.423 0.394
1995 0.4560 n.a. n.a. n.a.
1997 0.4586 0.4495 0.4188 0.4092

*The Gini coefficient indicates equality,
with 0 symbolising perfect equality and 1 perfect inequality.
Sources: Malaya/Malaysia Plans (compiled by Dr Lim Teck Ghee)

Why? The NEP’s spirit is not about religiously helping all able or needy Malay Malaysians. It is about helping the party faithful and cronies. They get prioritised among the able and the needy.

Sometimes, even the undeserving get their way. A former KTM worker – Datuk Zakaria Md Deros – could afford to build a palace with his state assemblyperson salary. Elsewhere, high-ranking Petaling Jaya City Council officers are allowed to buy low-cost flats.

Why should able and needy Malay Malaysians be thankful if they are sidelined by the NEP? They would have got their rightful share under a welfare state or an “ethno-meritocracy”.

Even those cherry-picked or fast-tracked by Umno need not be grateful if they are genuinely needy or able. They would have made it anyway under a welfare state or an “ethno-meritocracy”.

Hence, all Malay Malaysians who genuinely deserve state assistance either based on need or merit owe Umno and the state nothing. They deserve to be helped, just like deserving non-Malay Malaysians. As such, ending the NEP is not about giving less to Malay Malaysians. It’s really about all deserving Malaysians – especially those marginalised Malay Malaysians – getting more, not less.

A political scientist by training and a journalism lecturer by trade, Wong Chin Huat believes in calling a spade a spade. He dedicates this article to The Nut Graph’s columns and comments editor, Shanon Shah, who is leaving to pursue his studies.

[Editor’s note: Going forward, Wong Chin Huat’s Uncommon Sense will continue in a question and answer format.]

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21 Responses to “NEP: A historical mistake”

  1. dreamingsteven says:

    I agree with the author that this article is purely speculative. There is no way for him to prove that his three suggested models will work as he cannot produce evidence of it working elsewhere. Hence, this article remains just a cheap exercise in banging BN without offering any real, detailed workable solutions.

    • chinhuatw says:

      Countries with a disadvantaged majority are very rare. South Africa is another one, which has followed the Malaysian example.

      Depending on how you draw the line, India may also have an advantaged majority, but the proposal to expand the coverage of reservation from the most disadvantaged castes and tribes to the next disadvantaged groups – Other Backward Classes – has caused a lot of controversies. Fundamentally, how much competition you will have if the reservation net gets cast wider and wider?

      http://www.time.com/time/world/article/0,8599,1198102,00.html

      There are even more fundamental critiques against affirmative action too, amongst others by an African-American economist Thomas Sowell. http://www.amazon.com/Affirmative-Action-Around-World-Empirical/dp/0300101996

      The point of my article is really simple: to challenge the myth that NEP was good for Malay [Malaysians] and that Malay [Malaysians] owe their success to NEP.

      Could you convince us why NEP in theory at least would benefit the able Malay [Malaysians] more than an “ethno-meritocracy”, or the poor Malay [Malaysians] more than an “ethno-welfare state”?

      Why should there be purely objective criteria of merit or need to rule out partisan/clannish/familial/alma mater preferential treatment? Why should politicians and bureaucrats be given so much discretion? Why is poverty data treated as national secrets?

      Have we not come across Malay Malaysians who complained about being discriminated on political or other grounds?

  2. spill says:

    @Chin Huat,

    Have you ever considered the spillover effects of NEP… I wonder where all these “NEP-ed rich Malays” spent their money ????

    • chinhuatw says:

      Yes, I did consider. But a spillover effect can happen in the third model – ethnic-meritocracy – too! So, NEP is still inferior in this sense.

      To argue against my proposition, one would need to demonstrate that partisan preference brings more goods than merit or need.

      What differs my position from the libertarians or pure free marketers is that I do not oppose state intervention. I merely oppose the way the state intervenes. Specifically, I am against discretion when political elites are not checked by own ideals or public scrutiny.

  3. ong says:

    Good comparisons of possible alternatives to NEP, an essentially politically-motivated instrument which exploits historical economic problems facing Malay Malaysians. At the end both areas see failures: Economically, only politically-linked cronies benefit instead of the needy and those who are able.

    At the same time there is a glaring political failure: Umno still needs to depend on repressive measures, censorship and repeated threats of ethnic violence [stay in] political power. Both failures are not sustainable: the concentrating of wealth into a few cronies’ hands (for political ends) will frustrate the wider Bumiputra communities (economic problem) especially those who are in East Malaysia, who could play important roles in the nation’s politics soon.

    Politically, the cost of buying support from cronies/`political contractors’ – which is what Umno depends on for its `popularity’, will [increase]. There are natural limits to both these unsustainable trends. Put simply the elitist Umno formula is not working – thus delivering an abnormal politically repressive and economically unproductive society that we see today!

    A better alternative would be to build genuine popularity among the wider population through democratisation (addressing cronies’/warlord pressures – a political issue) and an economic policy which finds the best synergies between the economically more competitive groups and those genuinely in need of assistance. Currently, both are constrained. The competitive groups are not tapped as the nation’s assets and those who are poor are not given help to unleash their potentials!

    It is a simple challenge to Malaysians’ imagination!

  4. Exterminator says:

    Simply put, its crony capitalism by Umno. But then how to remove cronies? Somehow Bernard Shaw is damn right when he said half of the people in the world are of no use and must be removed to conserve resources. But he never mentioned what type of useless people [he meant] or [the] method of removal. Hitler picked it up but in the end there were just not enough bullets to remove all the Jews. Here, our bullet is the vote, and the common fight for justice [is] to remove the useless cronies.

  5. Peter says:

    We just need to see the results of what is happening in this country to convince anyone that the current model cannot work.

    You guys talk about national level and the need to be affirmative to bring up one race at the expense of another. What happened? At the local level when one faces unfairness in his/her own level or finds advancement within an organisation(e.g. GLCs or government ) is rotten to the core, how would he/she reacts? These guys leave the country or avoid such companies in the country.

    What happens? You see any GLC making lots of money or losing lots and lots of money? You see private companies losing that kind of money? No. When good guys work for good companies that company prospers and contributes. When a company is run by affirmative action and not based on meritocracy and promotes for the sake of promoting to be in line with NEP… what happens? The company collapses because no sane good guys will stay. They leave and do you think they care about NEP?

    So in the end, it is not even a zero sum game where one loses, another gains. It is a negative game where one loses far more than the gains made by the other.

    That is what is happening to Malaysia.

    The net losses is so very great even a resource-rich country like ours, once among the richest in S.E. Asia, faces bankcruptcy.

    The NEP should be based on training and empowering the lower income, disadvantaged groups, irrespective of race and religion. That way no one feels the loss. GLCs cannot promote staff without merit. There should not be quotas in work places.

    Only then can a real economy move. Until that happens at ground level where individual managers or GLCs start to be fair to all, the country will be losing , losing and losing to its neighbours. The downfall actually started from the day NEP started many years ago. If not, Malaysia would be better than Singapore.

    We remember the times before the NEP, Malaysia was one of the top in the region on par with Singapore. The ringgit and the Sing dollar. MAS and SIA, all same level. The drop started soon after that to today and we are still dropping behind.

    It continues. An entire generation of corrective measures will not bring back our past glory. The worse thing is that no corrective measures can be implemented. When an entire community is so used to easy money, who dares to oppose it? No one.

  6. focussed08 says:

    Those non-deserving and well-to-do devious Malay Malaysians will never allow the NEP to be abandoned lest they will lose out on easy money.

    Why should they give up something which they could get for nothing? They are there to claim what they can squeeze out of the NEP – who cares about the poor and deserving Malay Malaysians, let alone the poor and deserving non-Malay Malaysians!

    These leeches/scumbags are there to maximise their personal wealth at all cost as long as it benefits them. To them, it’s only ……”I, myself and me!” Who cares about the rest?

    That’s why they will fight tooth and nail for the retention of the NEP, their passport to a life of abundance. They will use their Ketuanan Melayu catch-cry and the brandishing of their kerises or threats to secure their share of easy money – observe and you will see…it’s happening all the time!

  7. Merah Silu says:

    A historical mistake? The main historical mistake, in my view, and in fact the biggest mistake ever made by Malays, was to grant citizenship to Chinese and Indians after the British left in 1957. In normal cases, you could allow 3%-5% of these immigrants to become citizens, but 35%-40%? It was too much, and more so with their alien culture and lifestyle. That was a fatal mistake, and due to that we are having all kinds of problems including polarisation, racism, and unhappiness on many economic policies.

    The NEP was formulated, to certain extent, to overcome this mistake. But it is too late. You cannot just change and create a new bangsa Melayu who are modern and competitive within a decade or two. In fact, it needs more decades if not centuries. More so when there a sizable part of the population, almost half, belongs to “invasive species”. These immigrants survive in the adopted country as many policies are in their favour. The Malays, as in the case of many natives in former British colonies, need more time to adjust. They inherit cultures and lifestyles that require more time to prepare them to be a modern and competitive society.

    Look at the education sector. With the right planning, there is a lot of progress and there are sizable intellectuals among the Malays now. Without these Chinese and Indians as citizens in this country, these sizable Malays could come up with their own formula to manage the resources of the country progressively, and perhaps could become a modern and competitive society now. However, with the Chinese and Indians who are also citizen of this country, they are now having many constraints to deal with. They were given too short time to prepare themselves to be modern and competitive society. In the end, opportunities for shortcuts were made available. But these are not real and are just short term. Politicians, in particular, grabbed the opportunities to become rich for their own benefit. And they were “assisted”, mainly through bribery, largely by these “competitive” immigrants.

    Over time the situation becomes more difficult for genuine and intellectual Malays to be in front line to steer the transformation of Malays as a modern and competitive society. These new and adopted citizens, particularly the Chinese, have already grabbed most of the opportunities and are in control of many aspects of economic activities. Without new and more creative formulas, the situation will become more difficult.

    I therefore strongly believe that what had happened prior to 1957 with acceptance of a large number of Chinese and Indians is considered THE historical mistake. Without them, the Malays would not share the wealth of this country, and on their own style, could make a large progress to become a society that we can be proud of.

    • chinhuatw says:

      So, what should have been done in 1957 in place of the historical mistake? Keeping half of the population as aliens, or getting rid of them? Please enlighten us.

    • Wilson Wong says:

      “Without them, the Malays would not share the wealth of this country, and on their own style, could make a large progress to become a society that we can be proud of.”

      Wow. Talk about banishing non-Malay [Malaysians] (which would include the indigenous populations of the Orang Asli and the Borneo tribes).

      Following your line of argument, Christopher Columbus’s encounter with North America is therefore also construed as a historical mistake.

  8. Ellese A says:

    This is why I find Wong’s writing always highly speculative and lack depth. He likes to jump points and the conclusion just does not follow.

    This is how he argued. He said there are three models which if we follow either lead to “uncompetitiveness or inequality, but not both”

    He then argued that NEP is neither and is much worse. He wrote that “Malaysia today is uncompetitive internationally”. Then he used the Gini Coefficient to show we’re unequal. Then he rambled that NEP gave only to cronies and people would have gotten the benefit had Malaysia followed “a welfare state or an “ethno-meritocracy” model.

    Amazing logic. First, what does he mean Malaysia is “internationally uncompetitive”? This is too sweeping a statement without support. I can easily debunk his whole article to say that on the basis of the global competitive report which states that our ranking is among the top 25 nations in the world even outpacing developed countries like Ireland and Italy, we are competitive internationally. By using his shallow analytical logic, I can easily argue that since Malaysia is very competitive with NEP, then NEP is much superior to any of his three models. By the same shallow argument I can also argue that its because of the NEP that we became competitive.

    On his inequality argument, his data actually shows a reduction in the gini coefficient. When NEP was introduced in 69/70 the coefficient is 0.5. His data for 1997 shows a reduction to 0.45. By this token I can easily argue that NEP brought down inequality. I totally dont follow his argument. In fact I think he’s trying to hoodwink me.

    I have not even commented on the comparative success of his so called “welfare state or an “ethno-meritocracy” as practiced in this world with NEP, which at least he should have done. I am upset how Nutgraph is able to produce this type of article. Wong time and again demeans the academic status he held. Why cant he just be objective and provide clear support.

    I hope you can publish my commentary. Let him reply. Previously some of my comments have been censored which I hope would not happen here.

    • chinhuatw says:

      Dear Ellesse,

      Thanks for your comment. I have been waiting for it for I think we need a very frank discussion about such a topic.

      I definitely defend your right to criticise me. (I have responded to your previous comment on “The Moon Rises”, please check. It was late because I was very busy and traveling then.)

      I am still traveling and may not be able to find some links to support my points now. So let me reply to just one of your critiques now.

      On the impact of NEP on inequality, you used the data presented to claim NEP actually reduced Gini Coefficient from 0.5 in 1970 to 0.45 in 1997.

      Let’s look at the full picture and begin with the inequality amongst the Malay [Malaysians]. The intra-ethnic Gini coefficient rose from 0.342 to 0.400 on the eve of May 13 and to 0.466 immediately after. The similar patterns were found for the Chinese and Indian Malaysians. That supported exactly my claim that the free market model will not be sustainable. It has not only perpetuated inter-ethnic inequality, but also worsened the wealth gap within each community.

      Now, did NEP solve that problem? Intra-Malay inequality continued to grow and reached its height at 1976 (0.494). It came down slowly in the 80s but remained much higher than the pre-1969 level (0.40) let alone the Merdeka-years level (0.342).

      What went wrong? Was this failure in reducing intra-Malay inequality despite the NEP or simply because of the NEP (vis-a-vis a more welfare state model)?

      Please enlighten us.

      • Ellese A says:

        Dear Chin Huat,

        Thank you for replying. Actually I cannot follow your argument. You are the one making the hypothesis that NEP has correlation based on the Gini co-efficient. Based on the overall Gini, there’s definitely a reduction in the numbers after NEP was introduced. You cannot deny this fact. Then in your reply you wanted to rely on intra-ethnic Gini co-efficient data. This again cannot explain why from ’76 there’s a reduction in the numbers despite NEP being implemented aggressively. Then you refer to 0.34 numbers of the Merdeka years. This last comparison is unrelated to NEP as NEP was introduced after 1969. In fact I can easily argue without NEP after Merdeka years the inequality became worse.

        So you tell me how from that data, you have arrived at the conclusion that the NEP made things worse. The only explanation on how you can actually produce this sad piece of writing to me is that you are driven by partisanship and are blind to objectivity.

        • chinhuatw says:

          Ellesse,

          I won’t call names.

          With regards to the Gini Coefficients above, I will state my arguments simply and leave it to the readers to judge if I have failed as a political scientist, or my arguments have been deliberately distorted and misrepresented.

          1. The meritocracy model was not tenable by 1970s and would have to give way to other policy alternatives (Paragraph 6). Inequality rose for all groups.

          Fact 1: Gini-coefficient rose from 1956/7 to 1967/8 1970:
          Overall 0.412 -> 0.444 -> 0.502
          Malay Malaysian 0.342 -> 0.400 -> 0.466
          Chinese Malaysian 0.374 -> 0.391 -> 0.455
          Indian Malaysian 0.347 -> 0.403 -> 0.463

          2. The NEP was supposed to reduce the inequality both between and within ethnic groups. If it has worked, it should have reduced inequality and brought it closer to the early Independence years. (paragraph 22)

          Fact 2: Gini-coefficient rose higher on the sixth year of NEP (1976) except for the Indian Malaysians. How do you explain the growing wealth gap “despite” the NEP?

          Overall 0.502 -> 0.526
          Malay Malaysian 0.466 -> 0.494
          Chinese Malaysian 0.455 -> 0.505
          Indian Malaysian 0.463 -> 0.458

          Fact 3: Overall and intra-ethnic inequality started to fall from 1979 to 1990 but rose again by 1997 (except for the Chinese Malaysians) and remained much higher than the 1956/7 level.

          Overall 0.493 -> 0.446 -> 0.4586
          Malay Malaysian 0.488 -> 0.428 -> 0.4495
          Chinese Malaysian 0.470 -> 0.423 -> 0.4188
          Indian Malaysian 0.460 -> 0.394 -> 0.4092

          You may argue that the official NEP ended in 1990 and the rise in inequality could have been caused by the East Asian Financial Crisis (and blame it on Soros, so easy, right?), but this does not explain away my next criticism.

          3. The NEP has often helped the wrong Malay Malaysians (paragraphs 23 and 24).

          Fact 4: Inequality within the Malay Malaysians has consistently increased as compared to the Chinese and Indian Malaysians since 1979 whereas it was the lowest at the time of independence.

          1957/58 C 0.374 > I 0.347 > M 0.342
          1967/68 I 0.403 > M 0.400 > C 0.391
          1970 M 0.466 > I 0.463 > C 0.455
          1976 C 0.505 > M 0.494 > I 0.458
          1979 M 0.488 > C 0.470 > I 0.460
          1984 M 0.469 > C 0.452 > I 0.417
          1987 M 0.447 > C 0.428 > I 0.402
          1990 M 0.428 > C 0.423 > I 0.394
          1997 M 0.4495 > C 0.4188 > I 0.4092

          Why must wealth gap (by derivation, relative poverty) amongst the Malay Malaysians grow higher than other ethnic groups? Should the needy Malay Malaysians feel grateful to NEP – which is my main message?

          ***

          You accuse me of being driven by partisanship. Does objectivity mean that one should be blind to the obvious flaws of the NEP?

          Would you share some data to “objectively” rebut my criticism and prove that the NEP has not worsened intra-Malay inequality and so, the Malay Malaysians do owe the NEP a big favour?

          The best way to prove us wrong is to disclose all official data on poverty reduction. Then whatever partisan bias this author has would be exposed completely.

          If you are just going repeat your wild accusation, I will certainly respect your freedom of expression but will not waste my time to rebut you on this.

          • Ellese A says:

            Thanks for replying, Chin Huat. I didn’t see your comments earlier. Despite your explanation, you have not shown the nexus between the Gini coefficient and NEP. It’s pure conjecture and I don’t understand why you can’t provide more empirical evidence. The data given can be interpreted in many ways. Your hypothesis is that we regressed since NEP was introduced. But data from 1970 showed improvement. That is a fact. Now as with all acquired data, there are anomalies. It’s for you to show that all these data are consistent to support your theory. You must use all the data. You can’t use anomalies to come to a conclusion and ignore data unfavourable to you. This is a funny way of proving a hypothesis.

  9. Rhan says:

    CH, what about Indonesia? I partly blame it on Harry that created the insecure feeling, and the greed of the elite. NEP makes sense to me, however, the leaders didn’t devise a mechanism to make adjustments and how to end it. Regardless which model, we can’t guarantee it didn’t skew from its original plan, we are in very bad luck not to have a truly visionary leaders, especially during the 22 years reign.

  10. Greg Lopez says:

    It is important to note that the NEP pushes to the extreme the interpretation of “Malay rights” which was introduced by the British in the area of scholarships, positions in the civil service, business licenses and land.

    The NEP is unreasonable as it is deterministic without ensuring “efficacy or efficiency”. For example, the 30% equity criterion can be easily met by the government if the 30% shares in the stock market is given to Ibrahim Ali. Does this solve the Malay problem. No! But this is currently what is happening with shares being held by Umno proxies.

    What is needed is universal standards: e.g. ensuring a poverty level that resolves inequality, labour rights, progressive taxation policies, educational opportunities based on diversity (income status, regional, cultural and religious, differing talents) and merit, etc.

    http://greglopez.wordpress.com/2010/04/30/diversity-breeds-excellence/

    This will move Malaysia to concepts implemented by successful countries which are also multi-racial.

    p.s. A note to Merah Silu – this is the 21st century. Your suggestion of not giving non-Malays citizenship (in 1957) would put you in league with Zionists in Israel, Supremacists (KKK) in the US and White Australia policy of the 70s. Do you agree with these policies?

  11. kahseng says:

    Ha ha, Chin Huat, no need to apologize for being speculative. You only need to stand on your reasoning. (Not that I agree with all the points in this article.) Congratulations to you too for having plenty of “fans” who just love to put you down.

    In political economy, there are things that are seen and not seen. Just because something did not turn up (say if someone had assassinated Isaac Newton at age 20) doesn’t mean we would not have lost all the progress that would follow.

    When NEP destroys Malaysia’s wealth, it doesn’t mean the waste and loss do not exist. Just look at South Korea, Taiwan, and Singapore to get an idea.

    We are in the realm of epistemology – the knowledge about knowledge. People don’t know what they don’t know; they don’t know what they miss. You have done a better job than many others combined to bring out the nearly unknowable.

    This concept of “what is not seen does exist” was expounded 150 years ago in the delightful articles by Bastiat (friend of Cobden):

    1. “Broken Window”, first of many articles on this topic. http://mises.org/daily/3804

    2. Background review, http://mises.org/store/Bastiat-Collection-P427.aspx?utm_source=Mises_Daily&utm_medium=Embedded_Link&utm_campaign=Item_in_Daily

    3. Review of how Hazlitt expanded on this: “bastiat does not go far enough” http://mises.org/daily/3860

    4. Review of Hazlitt’s “Economics in one lesson” published 60 years ago http://mises.org/daily/3102

  12. kahseng says:

    A quote from Bastiat link #3 above, about what your detractors might call “speculative,” simply because the alternative to NEP is “unseen”:

    “In his twelve essays, Bastiat methodically reveals the fallacies in the established political doctrine of his day by identifying what proponents failed to consider (the unseen) in the policies they advocated. He demonstrates how the failure to account for unseen effects led to economic conclusions that were not valid. Sometimes we do not see the negative effects of a visible positive event, and at other times, we do not see the positive effects of a visible negative event. In other words, we often see the benefits and not the harm, such as the harm coming from taxes. At other times we see the harm and not the benefits, as when using labor-saving machines.”

    This relates to your first three paragraphs, where you nearly apologise for being speculative, probably in anticipation of the personal attacks your loyal dissidents would lay on you about being “speculative” – to shut you up.

    I don’t quite agree with your “failure of free market” premise, but that’s another argument for another day.

  13. chinhuatw says:

    Dear Elesse.

    I have shown you that NEP has not improved inequality especially amongst the Malay Malaysians. These are no anomalies. The Gini coefficients are an indicator of overall inequality.

    I am putting forward a proposition to challenge what I see as a myth that the NEP has helped the Malays tremendously and they should be grateful to it. (The merit of such thought experiment is already explained by Kah Seng who did not agree with me completely on my position on NEP.)

    I stand to be corrected. Whether my position is right or the Umno-controlled mainstream position is right, we surely need more data – Gini coefficient by state or even district. But I understand poverty data has been treated as official secrets. Why is this so?

    I presume you care about poverty amongst Malay Malaysians as much as I do, or even more.

    Would you then join me to call for a Royal Commission to study the impact of NEP on inequality (sounding repetitive to all the official reports that should have provided the picture) or for all official data on poverty to be declassified? Would you want to see the truth unearthed?


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