Geoeconomic challenges for Madani economy Malaysia

20th September 2023

(updated 18/02/2024)

Preamble

On 20th September 2023, in celebration of its 100th year anniversary event, the Kuala Lumpur Selangor Chinese Assembly Hall (KLSCAH) organised a National Affairs Conference where the dons of the country’s politico-economics: Professor K.S. Jomo, Professor Edmund Terence Gomez and Dr. Muhammed Abdul Khalid expanded from their various academic papers to an audience of KLSCAH constituent members, the media and academia.

What were presented at the Conference have been explored in this site and exposed on other platforms, too; this essay shall tepidly traverse the geoeconomic landscape on an Madani economy Malaysia approach.

1] Neocolonialism to the emergence of Financialisation ethnocapitalism

Jomo began his presentation to articulate the existence of a neocolonial economy – whence 70% of national wealth was owned and controlled by foreign enterprises – at the time Malaya gained her independence to the present challenges in an era with the end of trade liberalisation under a Cold War 2.0 regime  where countries have to remain steadfast to not only non-aligned  but pacifists to the resonnance drums of war, and whence the state of a nation has to retain, and maintain, an economic nationalism in capital deployment and to privilige domestic investments than to rely on foreign direct investments (FDI), and whence the management of a national economy has to be of a more progressive role than to be dependent of The Triad  monopoly-capital inflows to be captured by the technological elements of the infrastructural information systems platforms, (see Global Research, Sept 2023, G77 to reject digital monopolies; STORM March 2023, short-circuiting the rakyat; STORM January 2023, digitalisation-capitalism-and-smes) or even the Industrialisation 4.0 which the country does not have the process capacity nor the talented capability to attain those objectives.

Through the ownership and control of information, monopoly-capital dominates the digital capital, too. Capital accumulation permeates the entire production chain but through soft elements in the ownership of patents, copyrights, brands and logistical systems impoverishing the poors but enrich the bourgeoisie class by way of   financialization capitalism. It was such that by the decade leading up to 2019, the largest 100 firms in the world had increased their total market capitalisation by US$12.7 trillion. A third of that increase (US$4.2 trillion) can be said to be accounted for by just seven firms: Facebook, Amazon, Apple, Alphabet, Microsoft (the famous quintet ‘FAAAM’), Alibaba, and Tencent as enabled and enhanced by digital technologies: 

In the country, there is a growing centralisation of political and economic power in the Office of the Prime Minister and the Minister of Finance with a confluence of influence of the state over the GLCs that have the concentration of capital and accumulation of capital as Gomez laid out in Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia, and more importantly, by offering higher dividend returns, cooperating closely with those local corporate capital that have connections to Global North monopoly-capitalists and through  internationalising their operations, they successfully link up electrical and electronic small manufacturing enterprises (SME) with products assembly, supplies and logistics competitiveness into the Global North supply chains.

Some of the input to the local Digital Infrastructure or DI is the physical medium, the infrastructure through which the traffic generated by the internet flows. This includes everything from telephone wires, cables (including optic fiber and submarine cables) to microwaves, satellites, and mobile technology such as fifth-generation (5G) mobile networks, IoT, and servers as well. On the server-side, major companies like Amazon or Microsoft stepped in to build and provide this growing digital infrastructure known as “the cloud”. Besides cables, cloud, and other things mentioned above, the data centers (hardware and software) and their administration is also a part of wide digital infrastructure work; see STORM Feb. 2023, deepening infrastructural platforms stronghold.

The later stages of the New Economic Policy (NEP), as Gomez reiterated, only reinforced a government-intervened economy besides the emergence of monopoly financialisation capitalism with the formation of government-linked companies (GLCs), and kleptocracy within an entrenched ethnocapitalism environment that most of the time collaborated, and colluded, with Global North monopoly-capital – in an age of new economic imperialism, (Suwandi, 2018).

Thus, after gaining political independence, the economic state of a nation is still being dominated (45%) by foreign-owned enterprise; see Gomez’s last line bottom right column presentation slide above.

As an instance, M&E vendors like AIDA, SKF, Cohu, VAT, Oerlikon Balzers, Favelle Favco, Bromma, Vitrox, etc.; presently, Digi, Nestles and British American Tobacco are, by market capitalisation, leading the list of foreign companies that dominate the local businesses nowadays, see  STORM 2021, Dominance of Financial-Monopoly Capitalism.

A TNC can be a 100% foreign-equity company; and there are over 5000 such sendiran berhad in the country, commanding an overarching external ownership and control of the national economy, (Charles Brophy, Ownership and control in 21st century Malaysia, newmandala, 17/01/2018; Puthucheary 1960) .

2] Shared Community Wealth or Poverty of a Nation

Khalid pointed out that with the wholesome withdrawal of the Employee’s Provident Fund (more than $145 Billion) during the Covid-19 pandemic.

The country has more than 2 million below the poverty line, with Sarawak consisting 1 in 10 under the poverty line, Sabah the poorest state, and where the vulnerability is widespread because even in states like Selangor and Penang having 14% and 15% of their populace being in the poverty category.

The fact that many rakyat2  had not attained parity despite +60 years of neo-liberal enforced economic development is the existence of a new class of compradore capitalist nurtured by political elites.

It also come to pass that throughout Malaysia’s post-NEP economic history, and including the National Development Policy (NDP) (1990-2000) and National Vision Policy (2000-2010) – the inclusiveness agenda continues in the New Economic Model (2010-2020), where the policy goal is for Malaysia to become a high-income country by 2020 as well as sustainable and inclusive whereby the latter is defined as “enabling all communities to fully benefit from the wealth of the country” (National Economic Advisory Council, 2010) – the economic development processes have not bear out to support an equitable progressive domain.

It has come to a situation where many a B20 malay child shall have only 1% of his/her generation peers being able to attain socio-economic mobility migration upwards; see Khalid lse research paper.

This economic nationalism posturing capriciously as affirmative action policy differs from those of other countries. It is “the politically dominant majority group which introduces preferential policies to raise its economic status as against that of an economically more advanced minorities“.

[see Puthucheary seminal work, written while in a prison, on the Ownership and Control of the Malaysian Economy, and the continuous in-depth studies by Gomez, with Jomo and Lim Mah Hui – collectively critical of  selective privatisation and bumiputera equity quotas, and in the promotion of money politics that are acutely detrimental to national economic development; read also the  50 years NEO hasn’t worked and those articles in  NLM#10.]

We are also at a juncture where the GLCs being money-suckling, their existence has had hindered the development of the true bumi enterpreneur class, as aspiring bumi enterpreneurs are either enticed into taking short cut to wealth through lucrative projects with high-priced and high-profit margins that inevitably in any long-term infrastructure project exhausted and expired them. However, once on board, very few bumi contractors would ever disembark from the enticing gravy train.

Any wonder then that despite 40-odd years of bumiputra policies and assistance to the bumis in the construction industry, there is not a single successful bumi contractor?

Ahmad Zaki Bhd, the most “successful” or prominent 100% bumi contractor listed on KLSE is on the verge of bankruptcy, while Panzana Enterprise SB a 35 years old 100% bumi contractor with good track records is in ICU after being stabbed in the back by Turnpike Synergy, a subsidiary of Prolintas which is 100% owned by PNB – a financial capitalism entity under a sovereign fund management.

3] The Challenges

i) Gomez opined that one has to clean up the GLCs so that there is public governance without resource wastefulness, and to curb rampant corruption so that there would be no pandering to the political and capital powerful forces. Otherwise, as it is – the Ministry of Finance has hydra-like tentacles to own and control various types, categories and identities of GLCs entities.

GLCs and GLICs (government-linked investment corporations) collectively controlled 68% of the Kuala Luimpur Stock Exchange: commanding more than RM$440 Billion in total assets. Further, this overwhelming overall control of government agencies and state corporations is connected to the Prime Minister Department and the Ministry of Finance :

Read Capitalism State Corporations, newleftmalaysia 30/11/2021; a Gomez presentation slide on 20/09/23 @trx has an even more intrigued web-complexity of MoF control.

ii) There is an existential need to protect the informal sector zero-hour labour where the social security elements should be holistically implemented to ensure a socio-economic wellbeing safety net rather than exploiting, and short-circuiting digital platform workers ;

iii) with the increasing cooperation between nation states, the public state corporations SOE-SOE relations need to be better redefined, and key actors must be held responsible otherwise ecological disasters will occur like the Melaka Gateway and Lynas rare-earth extractions pollution; see also Raub gold mining and Malmut copper mining.

iv) what new banking roles could be promoted by Bank Negara Malaysia as a banker intermediation between SMEs and the Big Bank which have a tendency to collarise transactions to the disadvantages of small firms, and where there is a powerful banker class attached to the financialisation capitalism in the country.

The financial oligarchs and capital rentiers are so dominant that it is truly an  ethnocapital assertion in the national banking sector.

v) with an encirclement of China, an imminent US-CHINA conflict arising, (RAND Corp. 2021) in what ways would a pacifistic Non-Aligned posture shall position the country foreign affairs, and her foreign trade which contributed in 2022 140.75% to the gross domestic product has to be geostrategically assessed, too, especially with possibly decoupling and fractionalisation of global commodity chains.

Indeed, it is also at a period when Malaysia’s economy only grew 3.7% in 2023, according to Bank Negara Malaysia data, coming in below the target of 4% to 5% due to “prolonged weakness” of external demand. The annual result was far off the 8.7% pace recorded for the previous year, (asia-nikkei, 16th. February 2024; as was concurred by AHAM Capital Malaysia.

EPILOGUE

We have come a long way from private enterprises to privatisation to GLCs in a capital-endowed environment that is no more than neoliberal policies with neoimperialism in context that indebted a nation in a dependency syndrome.

Can we do better?

World Bank and DRC have identified the whole-of-government and whole-of-society approach in any economic development endeavour – and Malaysia has to do sama².

Long-term – strategically – we need to visionise on building communal  organizations and governance to step onto a progressive path  beyond capitalism and the capitalist state to TAPAO economic development and socioeconomic management, and towards a socialist undertaking that shall benefit everyone than the very few.

---

 RELATED READINGS

The MADANI Conversation

The MADANI Economics Narrative

MADANI in a Defractionalised Geoeconomy

Madani Model towards economic development sustainability

PRAXIS with structural sustainability in economic development practices

 

A conversation with the MADANI Economic Narrative

1st August 2023

PREAMBLE

The cacophony on orchestrating the Madani Economic Narrative ( MEN) is overwhelming loud, with the Malaysia Institute of Economic Research (MIER) not likely to hold the baton too soon.

The symphony of disagreements on MEN has stretched from the theological aspect within a secular society (Bakri; Tajuddin; Hunter) with an uncertain economic Islamic impact upon non-muslims (Ignatius; Ramakrishnan), to the complications of managing complexity in developmental execution (UNICEF; World Bank, 2022; and World Bank, 2019); STORM; Ramesh Chander, Murray Hunter, and Lim Teck Ghee) while trying to achieve a post-ABIM script (Mohktar).

Whether the Madani precepts alone can serve as the pillars of a grand nation-building project when a rumah in a kampung built on a capital-muddied stilted foundation likely to collapse at any time under a neoliberalism policy regime, is due for a conversation.

This is appropriate time because even an neoliberal institution – which was in the country prior to her independence as the International Bank for Reconstruction and Development (IBRD precursor to the World Bank) – has once again expressed the multifaceted problems facing the economic state of a nation:

These uncomfortable situational conditions are further decimated by the MIDF Research data which maintained its forecast that Malaysia’s GDP growth will moderate at 4.2% in 2023 (2022: 8.7%), weighed down by uninspiring external trade performance as real export of goods is predicted to contract by 2.8% (2022: +11.1), reflecting weakness in regional and global demand.

The 2nd August 2023 economic brief indicated that Malaysia’s S&P Global Manufacturing PMI recorded at 47.8 in July 2023 (June 2023: 47.7), marking 11 straight months of contraction which was mainly attributable to a significant dip in new orders, as demand has consecutively paced down for the last 11 months, (theedgemalaysia 2/8/23

I] THE POVERTY PROBLEMS

The successful implementation of Madani depends on reaching of targeted area poverty alleviation objectives (TAPAO) which shall rest upon the genre of structural changes to be adopted, the availability of debt financing in economic development, the wholeheartedly adherence to sound economic developmental praxis and a faithfulness to the core MADANI implementation principles

The Madani Challenges facing this state of nation were familiar issues covering +65 years in the development of underdevelopment of a nation where poverty, inequality, and marginalisation are predominant. As late as 2015, the Malaysia poverty rate was 4.80% which is the percentage of the population living on less than US$5.50 a day, (World Bank).

This is ardently expressed by Khalid research paper at the London School of Economics and Political Science, where presented, the disparity among the Malay community – the top 1% – is very much acute then as it is likely to be accentuated:

The most important implication is that although the middle 40 per cent and the bottom 50 per cent benefited significantly from economic growth, the Bumiputera in the top income groups (the top 1 per cent and the 10 per cent) benefited the most from economic growth. In sharp contrast, the income of the Chinese in the top income groups deteriorated. In a way, the strong growth in high-income Bumiputera occurred at the cost of a decrease in Chinese and the slow growth of Indians in the top income groups; Khalid,  Income Inequality and Ethnic Cleavages in Malaysia: Evidence from Distributional National Accounts (1984-2014), World Inequality Database, working paper No. 2019/09.

The World Bank Report has this to say:

“The bulk of inequality today can be explained by differences in socio-economic factors within ethnic groups rather than differences across groups. It is time to bring all Malaysians within the ambit of greater economic opportunity.”

The need to update Malaysia’s inclusiveness strategies reflects both new realities and new challenges. The new reality is that poverty is no longer the key issue when thinking about inclusive growth. Poverty still exists—and pockets of poverty remain deep and concentrated—but inequality is now in the spotlight and is presenting a tremendous challenge. The other new reality is that inequality is no longer what it was four decades ago. Nowadays over 90 percent of the level of inequality is explained by differences  within ethnic groups  rather than differences between these groups. Individual socio-economic characteristics, such as activity status, sector of employment, urban versus rural stratum, and educational levels in different geographical locations are despairingly displayed.

II] REQUISITE STRUCTURAL CHANGES

This leads to the next step that demands structuring the economy for sustainable development.

To undertake this task, according to Philip Schellekens, lead author of the Malaysia Economic Monitor, (World Bank, 2010).

“The dual approach in the Economic Transformation Program of combining cross-cutting policies with private sector-led projects provides an excellent platform. The proof of the pudding, however, will be in the consistent execution of policy reforms,” he said. “Also, until solid implementation of policy reforms is seen there is unlikely to be a groundswell of positive sentiment of foreign investors towards Malaysia.” (World Bank 2010, ibid).

The November 2010 issue of the Malaysia Economic Monitor offered another analysis of where Malaysia is today and where it could go tomorrow by updating its inclusiveness strategies. “Our recommendations on this highly charged topic do not come out of the blue — they are based on a detailed analytical study of the latest household income, labour force, and enterprise surveys, which the authorities have made available to our team. We are also leveraging on the experiences of other countries around the world, who have addressed or are coping with similar challenges.”

The implementation of an economic development plan requires the proficiency and professionalism of the public sector. This is where the effectiveness from the public service is under constant, and continuous, doubts.

At a time when the emoluments and the retirement charges of the public sector constitute  31.2% of the RM$372.340 million Budget 2023 announced on 7th. October, 2022 (which excludes  contingency reserves yet-to-be disclosed) in the operating expenditure which are equivalent to the 32.8% of development expenditure for socio-economic programs and projects, including subsidies and social assistance – there is more than much concern on the performance and productivity of our civil servants whom,some alluded, to performing  money-laundering.

This is heading a grueling question on total government debt and liabilities as of June 2022 which is estimated to be at RM$1.42 trillion and will rise further; indeed, it was announced on 17th. January 2023 that the national debt including liabilities has reached RM$1.5 trillion. Total debt and liabilities are already  82 per cent of GDP, (read STORM October 2022, Underdevelopment of Development – consolidation of financial monopoly-capitalism).

As a share of revenue, a review done by the World Bank as far back as in 2011 has had found that Malaysia was spending about 27 percent of its revenues on salaries and wages/personal emoluments in 2009, significantly more than in some of the higher-income countries it aspires to emulate such as Canada (13.7 percent); Norway (12.5 percent); Australia (10.6 percent); and South Korea (9.6 percent).

In fact, by 2018, this percentage has increased to 34.3 percent for Malaysia, (see World Bank (2019).  Malaysia Economic Monitor: Re-energizing the Public Service).

This is an extract from the World Bank 2019 Report on the challenges Malaysia has to confront to fulfill rakyat2 expections:

Can productivity performance objectives be executable or even achievable?

The second major restructuring requisite is the generation of government revenue to implement economic development programmes whilst supporting a top heavy, and inefficient, public sector – at a time when national fiscal revenue space is narrowing:

III] FINANCING ECONOMIC DEVELOPMENT

With those underlying facts, the key task is to source funds for economic development. This is well explored in (STORM 2023, Debt financing towards progressive economic path) where the nuances of the conversation are that since expenditures are already at high levels; and secondly, other operating expenditures components such as supplies and  services, and grants and transfers have been on a declining trend or are already at low levels, therefore, the  government’s current fiscal consolidation plan would have to include – besides restructuring Petronas, Khazanah and the GLCs -a higher revenue collection target that should coverage of a windfall tax on industries , according to Khazanah Research Institute senior advisor  Professor Dr Jomo Kwame Sundaram.

“This is precisely the time when you must reform taxes as you have it (windfall tax) all the time amid extraordinarily high petroleum prices or palm oil prices.” 

This is concurred by Institute of Malaysian and International Studies research fellow Dr Muhammed Abdul Khalid who pointed out that policy-makers tend to ignore the imposition of capital gains tax when it comes to the issue of tax reform.

Even Bank Negara Malaysia (BNM) assistant governor Dr Norhana Endut noted that the government’s tax collection capacity had not kept pace with the economic growth, at a time when the manufacturing sector is moderating on its p erformance:

IV] PRAXIS IN ECONOMIC REJUVENATION

The economic development of a nation demands that its goal to attain high-income and developed nation status while ensuring that shared prosperity is also sustainable.

As one of the many Global South countries, Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010. Openness to trade and investment has been instrumental in employment creation and income growth, with about 40% of jobs in Malaysia linked to export activities.

A government is always confronted with difficult decisions about appropriate measures under unforeseenable situations or in a crisis: what restrictions to impose and when to loosen them, where money will be spent and how it will be raised, and how to coordinate tasks between states and enable community cooperation.

These decisions have to take into account public health recommendations, economic considerations, and political constraints. Just as the policy responses varied  – from the 2007–08 Global Financial Crisis, the dotcom 2002 burst and the Asian Financial Crisis in 1997 –  so do national policy responses to the COVID-19 pandemic should differ for health, economic, and political reasons.

Play Politics

Why does the advice of independent consultants, analysts, and the academic go so often unheeded?

Political economy is about how politics affects the economy and the economy affects politics that Governments try to prime the economy before elections. However,  business cycles are also creating ebbs and flows of economic activity and the circuitry of capital distribution around elections whence economic conditions have a powerful impact on elections. Politicians would manipulate these economic parameters to woo voters to gain political advantages, and contesting capital tries to support politicians.

Where are we now?

There is a cohort of powerful interests in favour of international trade and foreign investment. The world’s transnational corporations and international banks depend on an open flow of goods and capital. These are the monopoly-capitalists and the financial capitalists. This is especially the case today, when the world’s largest companies depend on complex global supply chains. A typical transnational corporation produces parts and components in dozens of countries, assembles them in dozens more, and sells the final products everywhere. Trade tariffs create barriers with these supply chains, thus the world’s largest companies are biggest supporters of freer trade.

That is why there is a need for perpetuating the mass of special and general interests in society so that these social institutions play a major role in national policymaking. The ways in which societies organize themselves – through and by economic sector, ethnicity, and importantly at this juncture of our political awareness, the class factor, shall affect how we would like to restructure our politics.

Definitely, political institutions have to mediate the pressures constituents bring to bear on them;  even oligarch rulers have to pay attention to at least some part of public opinion. Political economists call this the “selectorate,” that portion of the population that matters to policymakers. In an authoritarian regime, this could be an economic elites or the ruling class or the armed forces. In an electoral democracy it would be voters and interest groups. No matter who matters, policymakers need rakyat2 support to stay in office.

In building an equity society with socialism as the dominant foundation, we must do all we can to develop the productive forces and gradually eliminate poverty, constantly raising the people’s living standards. Only when this outcome is achieved and there is significant prosperity for all will it become possible to begin the shift to advanced stage of an economy that is highly developed and where there is overwhelming material abundance. Only by this process that we shall be able to apply the principle of from each according to his ability, to each according to his needs.

To achieve this process, there is a need on genuine planning and genuine democracy where these are through the constitution of power from the bottom of society. It is only in this way that a progressive socioeconomic society, and its healthy and well-being domain, becomes irreversible.

Towards this process in striving the Socialism with Malaysian characteristics goal, there shall be a combination of planning and markets forming the basic socialist economic system. Second, we need to keep in mind the dialectical relation between ownership and the liberation of the productive forces that shall entail, then 

(1) the system contains a multiplicity of components, but public ownership remains the core economic driver, with corporate capitals supplementing capital formation but without undue surplus value extracted from labour; 

(2) while both state owned and private enterprises must be viable, their main objective is not profit at all costs, but social benefit that meets  ‘people-centred’ needs from appropriate shelter, education equity to community-base healthcare, harnessing modern technologies towards social needs;

(3) it employs the primary socialist principle of from each according to ability and to each according to work, limiting exploitation and wealth polarisation, and ensuring common prosperity and wealth sharing for every rakyat2  wellbeing;  

(4) the primary value should always be ‘socialist collectivism’ – gotong royong community-based than bourgeois individualism and inflicted neoliberalism ethos.

Therefore, as applied under a TAPAO approach, it would be sizing and averaging rural per capita income besides focusing on the country’s hinterlands, especially the mountainous interiors of Sarawak and Sabah.

Refining the geographical target of poverty reduction programs is a necessity. The TAPAO needs to shift from daerah² to  kampung²  including more likely
some outside the list of poverty-stricken daerah, too. Collectively, those designated kampung²  (villages) may cover
a certain high percent of the country’s rural poor. Designated villages could then apply for projects to support local production and infrastructure (including makan-pada-kerja : food-for-work programs, worker training, and agribusiness development comprising technology extension services; not to be neglected, government-linked investments in social infrastructure (schools, clinics, community and recreation centers), with a particular strong participatory community-based self-help gotong-royong approach.

V] MADANI IMPLEMENTATION PRINCIPLES

For the SCRIPT in Madani Malaysia to be successful, in term of implementation and sustainability of a progressive politico-economic developmental praxis, working-class unity has to be consolidated.

It can only be further solidified if the tenet of divisive divisions by capitalism is better understood both in theory and in practice. Hence, we argue for a comprehensive yet bold project that is based on TAPAO that goes beyond its ethos as a renewal of an socialist ideal with Malaysian characteristics in order to take full account of the struggle of the labour movement.

Within the context of Malaysia development of underdevelopment – glaringly as in the cases of northeastern states in semanjung  and the Borneo states of Sabah and Sarawak, and the many urban poors in the country as documented by the World Bank and  UNICEF, we are witnessing the relational inequality generated. This is further reproduced by labour superexploitation and relational surplus value whence labour superexploitation is the essence of capitalism as neoliberalism is imperialism, too.

For Malaysia politico-economic model to be successful, and sustainable, the core issue of contradiction between capital and labour needs to be resolved with a Madani trustful outreach.

More so, after ethnocapital has owned, controlling and dominated the Malaysia resources, it is appropriate period of a new era under an unity governance to present a new narrative on Malaysian labour working cohesively and collaboratively – at this particular junction of a historical period – with capital to a shared prosperity domain under a common wealth practice for labour, too.

For one main obvious reality of capitalism is that massive poverty across the Global South is not the result of some local insufficiency (resources or skill talent) but rather due to the functioning of neocolonialism perpertuated by liberal economic policies as neoimperialism where the ongoing effects of  dependency on financialisation capitalism need to be tamed.

The haemorrhage to present economy is the resulting outcome  of those extractive institutional forces since post-independence, accelerated by succeeding regimes in governance with odious practices, and as articulated by Prof  Kamal Hassan  in Corruption and Hypocrisy in Malay Muslim Politics while Khalid’s London School of Economics and Political Science research has pinpointed the class structure-laden beneficiaries to their enduring enterprises.

The trust between labour and capital has to be firmed up solidly in fulfillment of a Madani Malaysia – more so when 98.5% of businesses are the SMEs contributing 36% of the national GDP where labour is important as capital because it provides employment for 7.3 million people – nearly half of the country’s workforce.

EPILOGUE

In short, we need to modify, adapt, and contextualize a conversation with our preceding political-economic reform agenda, and while trying to calibrate the sequence of, and the dimensions for, economic reforms – we seek to ask the pertinent question: have we really restructured the stagnated, and a doomed, national economy, ever ?

We need to be in the threshold of a new sovereignty re-imaging a New Malaysia positioning an entity adhering a New Narrative to perform New Politics for the generasi muda.

---

RELATED READINGS

SIRED

TAPAO

PRAXIS

Renewal of the Socialist Ideal

Financialisation capitalism ramifications

Economic Development with sustainability

UNDERDEVELOPMENT UNDER MONOPOLY-CAPITALISM

1] INTRODUCTION

Incorporating Lenin’s concepts of imperialism and international class conflict into the theory of economic growth and stagnation, the Global South, predominantly low developing countries (LDCs) were in the clutch of Global North Western economic and political domination, especially during the colonial period.

Capitalism arose not through the growth of small competitive firms at home-country but through the transfer from abroad of advanced monopolistic businesses with monopoly-capital attachment and or alignment. When capitalism took hold, the bourgeoisie (the corporate capital and compradore capitalists) in country, seeked allies among other classes, initially with monopoly-capitalism in Global North, and post-1957 increasingly adopted an economic nationalism construct to engender a cohort of ethnocratic kleptocrates, and subsequently tapped upon emerging rise of the ethnocapital clientel capitalism class.

2] FROM NEOLIBERAL POINTS

What often not stated that economic development in underdeveloped countries is profoundly goodness to the dominant interests in the advanced capitalist countries. The “backwardness” of the developing world is not infrequently hidden as the rich hinterland of the highly developed Global North capitalist West to be “developed”, but exploited.

Development discipline tends to frame within the bounds of national territorial boundaries of a nation-state. The primary theories then regard development based on stages of growth, diffusionism, and modernization-developmentalist with paradigm’s proponents from Rostow (1960), Pye (1962), Parsons (1964) to Hoselitz (1960), Lerner (1965), and McClelland (1967) contending that socio-economic progress (or the lack of it) was due to the presence (or absence) of resource, institutional or psychological-sociological cultural ingredients in each respective nation-state that were necessary for development to occur. Early development understanding posits an ideal developed society couched on a Western value framework.

We have the ‘Washington Consensus’, first articulated by World Bank economist John Williamson, focusing on a neo-liberalization thrust in trade, investment and the financial sector and the deregulation and privatization of nationalized industries. Often the conditionalities are attached without due regard for the borrower countries’ individual resulting in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under The World Bank and its International Monetary Fund packages. These “packages” have negative social outcomes such as reduced investment in public health and education, but still have sufficient capital expenditure beneficial to local compradors, industrial-capitalists and later ruling regimes’ ethnocapital as well as definitely monopoly-capitalists globally.

We may also can have a premise where a country is poor because it was previously so poor that it could not save and invest as once justified by Jeffrey Sachs (2005) primarily ‘Poverty itself is the cause of economic stagnation.’

But the “low saving rate” whatever accumulated surplus had already expropated by colonial masters, (see Amin and Calwell; Utsa Patnaik and Prabhat Patnaik; Samir Amin; Andrè Gunter Frank)

Sach’s premise followed closely to the vicious circle theory as presented by Ragnar Nurkse in his 1953 book- The Problems of Capital Formation in Underdeveloped Countries – where poverty perpetuates itself in mutually reinforcing vicious circles on both the supply and demand sides. In fact, low per capita income is both the cause and the effect of poverty whence, however, through settlement colonialism, and later within neo-colonialism, the wealth of nations had been expropriated many times again and again.

On the other had, Rosenstein-Rodan was of the opinion that a major indivisibility lies in infrastructure, such as power, transport and communications. This basic social capital should reduce costs to other industries. The IBRD (the former World Bank’s International Bank for Reconstruction and Development) encouraged a country like Malaysia to borrow large loans to construct these high-cost infrastructure, tied to “packages”, resulting to consequent indebtedness and a stagnant economy when the Asian Financial Crisis and Global Financial Crisis came visitings.

Then, we have Hischman’s view that low-income countries need a development strategy that spurs invest­ment decisions. He suggests that since physical resources and managerial skills and abilities are scarce in LDCs, a big push is sensible only in strategically selected industries within the economy. Growth is then likely to spread from one sector to another (similar to Rostow’s concept of leading and lagging sectors); thus, Malaysia went for industrialization, but with poor labour employment by TNCs, labour alienation and union bustings and an under-developed and unsettled peasantry.

According to Hirschman, agriculture does not necessarily would stimulate linkage formation so directly as other industries. However, it is not that accurate to say that exertion in Malaysia where large agrobusiness Big Farms are benefitting Caterpillar and John Deere. In the process, envisaged in the midst of the Vietnam war, the FELDA (Federal Land Development Authority) schemes is a corridor sanitarian to corral rural Malay communities with modern built-in infrastructure –  with clinics, schools, roads and bridges – ensuring subsistence dependence loyalty to the ruling class and a transnational corporation domain that is technological-based in FTZs and EFTZs to mop-up precarious labor (see Precarious Labor in Industrialization Capitalism and Precarious Labour in a Digitalised Economy; refer to Hao Qi, (Sept 2019), “Semi-proletarianization in a Dual Economy: the Case of China”, Review of Radical Political Economics, to forestall possible Urban-Agrarian collaboration and cooperation for revolutionary changes towards a new political economy in Malaysia.

3] NEO-IMPERIALISM UNDER MONOPOLY-CAPITALISM

That what is widely referred to as neoliberal globalization in the twenty-first century is in fact a historical product of the shift to global monopoly-finance capital or what Samir Amin calls the imperialism of “generalized-monopoly capitalism.”

Since the 1974-1975 recession, there was a growth rate slowdown in advanced capitalist economies with hurtful economic effects on the poorest countries. Scouting for wider markets to sustain capitalism, a proliferation of corporations begins setting up assembly lines across borders in different nations, especially the developing countries – the Global South – where in 2010, more than half of all foreign direct investment (FDI) went to third world and transition economies. With this strategic positioning in place, and world production dominated by a relatively few transnational corporations (TNC) exercising considerable monopoly power over states and labour, the migration towards the international concentration of capital clearly reflected on the work of Lenin (Imperialism, the Highest Stage of Capitalism, New York: International Publishers, 1939) and, on the other hand, confirms Amin’s imperialism of generalized-monopoly capitalism and Emmanuel’s  unequal exchange under Neo-Imperialism.

Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala contended in the New Political Economy – published online: 30 Mar 2021 – that wealth drain from the Global South remains a significant feature of the world economy in the post-colonial era; rich countries continue to rely on imperial forms of appropriation to sustain their high levels of income and consumption. The Global North appropriated from the Global South commodities worth US$2.2 trillion in Northern prices that are enough to end extreme poverty 15 times over. Over the 1960–2018 period studied, the value drain from the Global South totalled US$62 trillion (constant 2011 dollars), or US$152 trillion when accounting for the Global South countries’ lost growth. Indeed, it is found that the appropriation through unequal exchange represents up to 7% of Global North’s GDP and 9% of Global South GDP.

During this era in imperialism of generalized-monopoly capitalism, there is a shift of manufacturing industry from the Global North to the Global South. In 1980 the share of world industrial employment of developing countries had risen to 52 percent; by 2012 this had increased to 83 percent. By 2013, 61 percent of the total worldwide inward flow of foreign direct investment (FDI) was in developing and transitional economies, up from 33 percent in 2006 and 51 percent in 2010.

Thus, by the twenty-first century imperialism is thus taking on a new, more developed phase related to the globalization of production and finance.

4] THE MARXISM PERSPECTIVE

The disparity in wealth-sharing can be perceived in another frame. A part of the imperialist rent remains in the peripheral country and is not transferred to the center, but constitutes rather a payment to local ruling classes for their roles in the globalization game. About $21 trillion of this global tribute, meanwhile, is currently parked abroad in tax-haven islands, “the fortified refuge of Big Finance”,  see  International Consortium of Investigative Journalists on their Fin-Tech files, and the Guardian,  “£13tn Hoard Hidden from Taxman by Global Elite” July 21, 2012, and Nicholas Shaxson, Treasure Islands (London: Palgrave Macmillan, 2011), 7.

Marx (1818-83) had professed that the capitalist system would – in the initial stage grow due to increased profit (surplus value which was the result of exploitation of labour) – but would also pro­vide funds for accumulation. Owing to the fact that since wages were pegged at the subsistence level, due to the existence of a huge reserve army of unemployed, the capitalists would suffer from a realisation crisis. They would not be able to realise the profits embodied in already produced goods. And, according to Marx, the under consumption of the masses is the root cause of all crises.

Inevitably, Neo-Imperial domain of monopoly-capitalism in international concentration of capital would give birth to the introduction of international monopoly-finance capital that ensues the emergence of financialization capitalism (see John Bellamy Foster, The Financialization of Accumulation, Monthly Review vol:62, issue 05 October 2010). Financialization capitalism becomes prominent because the TNCs are unable to find sufficient investment outlets for their huge economic surpluses from production, increasingly turn to speculation within the global financial sphere, (see John Bellamy Foster and Fred Magdoff, The Great Financial Crisis (New York: Monthly Review Press, 2009).

This historical trend is basically following the trend in the capitalism route to a pathway from monopoly-capitalism to neo-imperialism:

Firstly, with a slowing down of the overall rate of growth among developed countries in Global North, followed by secondly, the internationalisation of monopolistic transnational corporations (TNCs) especially crossing borders to third world countries in the Global South, and then the introduction of, and emergence in, the “capital accumulation process” or financialization capitalism

5] TOWARDS A SOCIALISM HORIZON

If one were to take on the classical theory of David Ricardo (1772-1823), then a pessimistic view about the possibility of sustained economic growth would also surface. For Ricardo, who expressed that with little continu­ing technical progress, growth was limited by scarcity of land. The major tenet of Ricardo’s underlying understanding lies with the law of diminishing returns.

The central theme in the diminishing returns concept is that owing to population growth and a fixed supply of land would threaten economic growth. Ricardo believed that only technical change or improved production techniques (which might not likely to happen) to avert, possibly temporarily, the operation of the law of di­minishing returns. Therefore, increasing capital was seen as the only way to offset this long-run threat.

However, any fall in the rate of capital accumulation would lead to eventual stagnation. Ricardian stagnation might result in a Marxian scenario, in which wages and investment would be maintained only if property were confiscated by society and payments to private capitalists and landlords stopped.

Marx, in fact, made certain predictions about the growth, maturity and stagnation of capital­ism. He predicted that the capitalist system would ultimately collapse for want of markets and would yield place to socialism.

Unfortunately, history has not obliged Marx. The year 1989 saw the collapse of socialism (especially in erstwhile USSR and its satellite countries) and with it the abandonment of the centralised planning system and the emergence of newborn post-socialist countries.

All these countries have embraced the market system which is now thought to be a more efficient mecha­nism for solving society’s economic problems, promoting faster economic growth and improv­ing the living standards of the people.

That is, until the financial crisis of 2007–2008, also known as the Global Financial Crisis (GFC 2007/8), that was of such a severe worldwide economic crisis until the present COVID-19 recession, that many economists considered this Ecological-Epidemiological-Economic crisis to be the most serious financial crisis since the Great Depression.

China, on the other hand, went the other way in 1989, when she went for market opening in terms of trade, but was much more cautious in terms of capital account liberalisation, adopting a strong developmental state and gradualism in policy implementation.

Between authoritarianism and the growing role of government under the post-war Keynesian philosophy, the neo-liberal ideology had idolised free markets, but ignored (politically) the growing negative effects of social inequality, climate change, human identity crisis in the face of insecurities from technological disruption, massive human migration and geopolitical rivalries as even Tan Sri Andrew Sheng, formerly of World Bank, Hong Kong Monetary Authority and Bank Negara Malaysia, now agreed.

The only way out of the impasse may be a proletariat and peasant revolution, say expropriating (FELDA) land and (ethnocractic) capital, and establishing a new regime based on collective effort, sharing of distributed wealth and the creed of the pre­dominance of interests of society over the interests of a selected ethnocapital few.

---

More MALAYSIAN MANUSCRIPTS

---