We were never on the right track pre-1969, so let's choose the right one now

I READ with interest the news reports based on excerpts from Robert Kuok’s new memoir. He made fine observations on the surge of ethno-nationalism in the late 1960s and its lasting consequences. It is also heartwarming to know a time when public officials can reject carrying out a favour for their superior without having to face any consequences. There are two things that need to be pointed out, however, lest we drown in a nostalgia that never was.


The Tunku administration, class, and inequality

It should come as no surprise that a businessman lavished praise on the first prime minister. The Tunku administration (1957-1970) was a liberal government, which was happy to let the capitalists run the economy. Distribution was not a major concern, which is surprising for a newly independent state. As a result, by the late 1960s, inequality rose among all ethnic groups.

The higher the gini coefficient, the more unequal the group is. – Source: Roslan (2001) p9, based on Perumal (1989) and Snodgrass (1980)

Shockingly, 10 years after the independence proclamation, the median household income not only didn’t improve. It dropped from RM156 to RM154.

The mean income improved (from RM215 to RM240), but the median income dropped. This suggests that while there has been a growth in wealth, there is an uneven distribution of wealth. This is collaborated by the distribution of household income.

The top 20% held 48.6% of the household income share in 1957/58, which rose to 51.3% and 55.9% in 1967/68 and 1970, respectively. In the same period, the middle 40% saw their share decline from 35.5% to 34.4% and 32.5%, respectively. Worse still, the bottom 40% saw their share fall from 15.9% to 14.3% and finally, a mere 11.6%.

The upper class was getting more prosperous while the remaining 80% of the population saw their fortunes stagnate and their share of the nation’s wealth getting smaller. Only the upper class would have been surprised when the rest of the population repudiated the status quo in 1969.

Tunku’s administration didn’t deliver enough and in time. The liberal governance model was satisfying to the capitalists who have access and resources to seize the opportunities, but for those without capital, it didn’t lift them up.

Taxation and paying your fair share

Kuok said, “I was hell-bent on helping to develop the nation: that’s why I went into shipping, into steel – anything they asked of me”.

He also mentioned that he decided to move to Hong Kong because of their low taxes. He stressed that, “Why would I want to hire an army of lawyers and accountants to avoid taxation? I should stress that I had not – and indeed, have not – lost one iota of my affection for Singapore. It is simply that it made more sense to base my operations in a low-tax jurisdiction like Hong Kong”.

In essence, the rich didn’t want to pay their share.

Bloomberg puts Kuok’s net worth at US$18.6 billion (RM76.51 billion). For someone that has so much, it is hard to believe that he is “hell-bent on helping to develop the nation” and simultaneously relocated elsewhere to avoid paying some taxes to the Malaysian state to distribute wealth and public goods. Of course, there is a problem of trust with what the state does with our money, but is that good enough reason to avoid paying for public expenditure altogether? It seems commonsensical to one individual to avoid paying tax whenever he or she can, but that is predicated upon the fact that other people do not all do the same.

One individual doesn’t pay tax and the whole public delivery system still survives because others do pay taxes. What if everyone had the capacity of the rich to avoid paying taxes? Will schools still be funded, our teachers paid well and on time, our roads maintained? At some point or another, everyone benefits from investment in public goods and public infrastructure – even the ones that are rich and avoid paying taxes. Paying your fair share is a responsible thing to do, but capitalism does not encourage this.

Another reason given by the rich against paying tax is the need to build up cash reserves to cope with margin calls if trading turns bad. But do the rich happily pay taxes when trading is good, or continue to devise ways to reduce or avoid paying their share?

Kuok mentioned that capitalism is “the way forward in life” and “a wonderful creature”. But his story demonstrates precisely what is wrong with capitalism. This doesn’t imply anything negative on the part of his character. Far from it, the finger is pointing at the structure he praised: unrestrained capitalism and the liberal governance model.

Capitalism is not just “very hostile” and “ruthless”. It is structurally problematic and doesn’t always provide the incentives to do what’s good for society. Even more so, sometimes it provides perverse incentives to do what’s bad for the society in return for what’s good for the individuals.

In the contemporary period, there is clearly a problem with this country’s fixation on the pursuit of social justice through an ethnic-based approach, which has become more of an ethno-supremacy than an affirmative action. But capitalism is not the solution.

Going back to the laissez-faire model, and seeing no problem with rising inequality and the capture of wealth by the upper class, isn’t going to solve our problems. A liberal governance model that gives unobstructed leeway to capitalists, who emphasise profit over distribution and growth over equity, will widen the inequality within and between groups segmented by class, ethnicity and, increasingly, religion. History tells us this will not end well for everyone.

We may be on the wrong track post-1969. But it doesn’t mean we were on the right track pre-1969. The task for our time is not first and foremost to lift the train and put it back on reverse or some track we assumed to have had universal consensus. It’s to think about where we want to go as a nation, and ask “So, which track?” – November 27, 2017.

* Ooi Kok Hin is an analyst at Penang Institute.

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  • Come on-lah! As non-Bumis, they had to be very circumspect in their speech and writings. The real unsaid reason he moved to Hong Kong is NEP, the same reason many left Malaysia. Consider how unbelievably thin and tiny was Lim Goh Tong's autobiography and Lim Chong Eu refusal to write about his life at all and you will understand why they brought a lot of secrets with them to their graves ..... and Malaysian history that much poorer.for it ....

    Posted 4 years ago by Malaysian First · Reply

  • We do not have good leaders, none with good foresights and care for the rakyat, but too many who resort to enrich themselves.

    Posted 4 years ago by Tanahair Ku · Reply

  • "Where do we want to go as a nation?" could be a dangerous question to ask. Because 67% are molded in the mindset of an old religion created in a tribalistic environment whose book is framed in contradictions and which has remained unreformed for over a 1000 years. The majoritarian view will urge for a society set in their anachronistic ways. The 1957 constitution and its pre-1957 foundations I.e. the Reid Report, will make a better starting points. Push for a return to the original constitution minus the 1969-1971 and 1988 and subsequent amendments that tried to change its secular character and help entrench the 60-year-old regime in power. If a majority fight for a restoration of the 1957 constitution, that will be a good start

    Posted 4 years ago by James Dean · Reply