NEP - MALAYSIANS 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.

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)

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. Courtesy of Nut Graph