Disparities that Threaten 1Malaysia

BY CHANDRA MUZAFFAR

Published in The Star

Tuesday February 24, 2015

WHEN Yayasan 1Malaysia was launched in July 2009, it identified five major challenges to national solidarity and cohesion, among them growing socio-economic disparities.

In the last six years, the Government has made a number of efforts to reduce these disparities. A minimum wage has been established. There is an attempt to raise the educational level of the workforce, about 70% of whom have only an SPM.

Labour skills are also being upgraded. The over-dependence upon foreign labour is recognised as a problem.

A national education blueprint for schools seeks to improve the quality of primary and secondary education.

The public healthcare programme is under review to ensure that it continues to be affordable for the lower-income strata of society, while enhancing its quality.

Public housing programmes for the lower and middle-income groups have been accelerated. There has been an expansion of child-care centres in the work-place in both the public and private sectors.

In Sabah and Sarawak in particular, there is a massive drive to build more roads, bridges and other infrastructure facilities in order to create an environment that will enable the poor to free themselves from the clutches of underdevelopment.

Measures are also being undertaken from time to time to curb inflation and to check the cost of living. 1Malaysia shopping outlets and other modes of assistance are directed towards this goal. A concerted endeavour is now under way to reduce the prices of food items and other consumer products.

While all this is commendable, the fact remains that socio-economic disparities in the country are still as serious as ever. The bottom 40% of the population is still struggling to make ends meet. With low incomes (a monthly household income of less than RM3,000), hardly any wealth assets, limited educational levels and restricted upward social mobility, individuals trapped in this category face a bleak future.

Their plight which has been known to social activists and observers for some time now has been highlighted in the first Malaysia Human Development Report (MHDR) made public in November 2014. It is perhaps the most comprehensive review of the performance of the Malaysian economy since the introduction of the New Economic Policy (NEP) in 1971.

It is a pity that it has not been given as much prominence as it deserves in the media and within political, business, labour and academic circles.

The MHDR notes that bumiputra minorities in Sabah and Sarawak and theorang asli of peninsular Malaysia remain the most vulnerable ethnic groups in Malaysia. It boldly states that the distribution of wealth in the country is extremely skewed and is concentrated at the top.

Asset inequality is nearly double that of income inequality. The relative income gap between the rich and the poor has not changed in 20 years.

The MHDR laments that wages as a share of national income has decreased despite the sharp increase of corporate profits to national income. The nation’s middle class has remained at 20% of total households and has not improved significantly over the last two decades in spite of continuous economic growth.

Though women are better educated now, they earn less than men at every level of the job spectrum. Male-female wage disparity is greatest at top-end jobs but even for occupations where women dominate in services and in clerical work, men still earn a higher wage for doing similar work.

Since increasing inequalities have become a global trend, part of the explanation lies in the global economy to which Malaysia is inextricably linked.

As transnational corporations began to spread their tentacles all over the world from the 1950s onwards, they pushed for the unfettered flow of capital across national boundaries and the removal of government controls.

In their drive against regulations and controls, big banks in the industrial economies were their solid allies. Their mission was facilitated by the abolition of the fixed rates of exchange between the principal Western economies in the 1970s, which led to the demise of the Bretton Woods accord.

This was the beginning of the rise of what later came to be called “neo-liberal capitalism”, a powerful global phenomenon to which every economy, especially open market economies, had no choice but to adjust.

By the early 1990s, some of the primary features of this capitalism – liberalisation, deregulation and privatisation – had become established characteristics of the Malaysian economy. It was capitalism that skewed the distribution of wealth, concentrating it in the hands of a few.

Domestic forces also pushed the Malaysian economy in the direction of greater concentration of wealth within the elite stratum. The elites in the 1980s onwards were convinced that capitalism had to rule the roost and a Malay capitalist coterie was therefore essential for the well-being of the community.

The privatisation of state enterprises was one of the ways of achieving this goal. Non-Malay capitalists, on the other hand, suspicious of state support for the Malays, were keen on “rolling back the state,” the credo of the champions of neo-liberal capitalism, and obtained some concessions by way of liberalisation and de-regulation.

Over the decades, powerful vested interests have grown around the focal points of capitalism in the economy, which are to perpetuate and enhance the space and scope for wealth accumulation. They have often opposed even the slightest move to redistribute wealth or raise incomes.

Since the state is more partial to their position – the rich almost always possess more clout – justice for the poor and powerless takes a back seat. One of the consequences of this has been the decline of wages as a share of national income.

The situation has been exacerbated in the last three decades by the huge influx of foreign workers into the country, from a number of Asian countries. Their low wages impact upon the entire wage structure, especially in relation to the lower strata of society.

In order to reduce disparities, the MHDR comes up with several options. Some seek to build upon what the Government has been striving to do.

Others aim to introduce new approaches with the overriding goal of achieving inclusive, sustainable growth and social justice. This in turn would contribute towards national unity and solidarity.

The MHDR calls for a people-centred economy distinguished by “a bottom-up approach of decentralised growth. This would create urban agglomerations by concentrating activities to produce the necessary economic density for rapid and inclusive growth”.

Creating better access to formal credit channels for the small and medium enterprises sector would be part of this approach. One should perhaps add that encouraging the formation of community-based cooperatives would also boost bottom-up growth with equity.

The MHDR also observes that income gaps within communities have become more serious than those between communities.

The leader of the MHDR team, Dr Kamal Salih, even suggests, “Income inequalities then become essentially a question of class.”

The logic of recognising this reality would be to set aside ethnic considerations in matters of social justice and instead emphasise need – the needs of the poor and powerless, irrespective of who they are.

This would be in consonance with the first goal of the NEP itself. Ability and excellence should be rewarded, regardless of ethnicity.

We have now arrived at a point where, in almost all fields of human endeavour, we come across outstanding performers from all communities. A notable example of this would be the presence of a multitude of accomplished Malay doctors in various specialisations when, 45 years ago, there was an abysmal dearth of such individuals.

Indeed, a commitment to values such as justice and human dignity should be at the heart of our struggle to reduce disparities.

If justice for all, if the dignity of the entire human family, is the passion that drives us – especially those who wield power and influence – there would be no glaring disparities in the global economy, which in turn are mirrored in the domestic economy. The struggle against the subversion of values such as dignity and justice is the struggle to protect the spiritual-moral essence of life.

> Dr Chandra Muzaffar is the Chairman of the Board of Trustees of Yayasan 1Malaysia. The views expressed here are entirely his own.