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Thursday, October 23, 2014

IMAGINE THERE IS NO NEP

Dr Wong Chin Huat
For many members of ethnic minorities, if there is no New Economic Policy (NEP), then all the people will be living in peace.
Wong Chin Huat, TMI
The reality is more complicated than this. Doing the NEP may just do away state partiality, but not socio-economic inequality.  And we need an alternative to do away both.
What’s wrong with the NEP?
Many people like to argue that the design of the NEP was good, only its implementation was bad. I respectfully disagree.
For me, the intention of many – but definitely not all – to have and support the NEP was good, but its design and its implementation were flawed.
The road to hell is paved with good intentions, if you like.
So, what’s wrong with the NEP? The NEP was flawed in three ways.
Flaw 1: statist assumption
First, like all statist projects, the NEP was based on the assumption the state was benevolent and selfless, and had no mechanism to check the “agency problem” of its executors.
The very core idea of the NEP, which was firmly planted in 1946 and lives on after its technical conclusion in 1990, was that state partiality can check the excess of socio-economic inequality. Unfortunately, even in pragmatic sense, two wrongs don’t make a right.
Prime Minister Datuk Seri Najib Razak just claimed that Bumiputeras only effectively controlled 10% of corporate share.
And according to Dr Muhammed Abdul Khalid in a 2002 article titled “Anti-poverty plans are colour-blind”, the poverty rate for the Bumiputera was 5.3% as compared with that of only 0.6% for the Chinese.
Even when comparing the bottom 10% of each ethnic group, the Malays’ average household income was only about 70% of that of the Chinese.
The simple question to ask: how can the powerful NEP state fail to help the Malays, both in building a competent and self-reliant capitalist class and lifting the Malays out of poverty after 45 years?
Has the state done all it can? Or does it fail because it has not extracted more from the minorities or hold them back enough? Or is the failure caused by some sabotages by the evil Jews and the evil Americans?
The more convincing answer to me is misplaced incentives.
First, economically, the uncompetitive nature of Umno’s electoral one-party state allows the ethnic champions and guardians to steal what they are supposed to protect. If you can only count on me to advance your interests, what don’t I take a cut?
Second, politically and most detrimentally, the economic independence of Malays will gradually eliminate the political dependence of Umno.
Think of it this way: if ghosts are forever gone, ghost-busters will be out of job.
Similarly, if a cat is kept fundamentally to catch mice, then the cat must be able to catch enough mice to impress the masters. However, if the cat eliminates the mice population, it will be the victim of its own success. As its usefulness end, all its mistakes and nuisances may become intolerable.

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