Capital in Malaysia #1: Capital, Politics and Political Capitalism
This first article will outline what the series hopes to address over the the next issues, namely developing concepts of conglomerate capital and political capitalism in the Malaysian context
Deciding to write this series — hopefully, I follow through on more than this one instalment — was the result of a couple of different converging threads.
Political Capitalism
A recent article by Robert Brenner and Dylan Riley on American politics has stirred up debate among Western Marxists about the future of its political economy. Within the article, however, they posit a concept called “political capitalism” which may be useful to deploy in a Malaysian and possibly Southeast Asian context. The term is defined as a type of capitalism in which “raw political power, rather than productive investment, is the key determinant of the rate of return”. This has resonance here given that our economy is deeply political. But I want to attempt to understand it beyond the boring frame of corruption and cronyism to see how the system — specifically capitalism in Malaysia — functions.
For my master’s dissertation, I used Baran and Sweezy’s conception of monopoly capitalism to analyse Malaysia to less than satisfactory results. I was left with few theoretical tools to describe Malaysia’s capitalism that turned so much on its politics — particularly around factions in UMNO. Brenner and Riley, I feel, provide a starting point to link politics and economics in Malaysia from a Marxist perspective.
Conglomerate Capital as Political Capital
Another thread was the link between politics and slow economic growth — also a theme of my dissertation. I rely heavily on this one idea from Khoo Boo Teik to explain why private and state capitalists do not go into technologically-intensive and high-productivity sectors.
Some [conglomerates] operated in primary commodity production that could trace its competitiveness to colonial times, or in source-based industries where local sourcing was an obvious strength. Most of the conglomerates congregated in banking, resource exploitation, construction, property and real estate, gaming, tourism, transport, utilities and services, and selected import-substituting industries. These were precisely sectors in which state policies and protection made the difference between success and failure. The conglomerates adopted an almost standard business strategy (although not necessarily in the following order of activity): deal in property and real estate; build up construction capacity; lobby for infrastructural and utility works; secure a banking or finance arm, or a brokerage licence; buy up plantations; diversify into tourism; and enter newly privatised areas such as telecommunications and social services." — Khoo, page 193, The state and the market in Malaysian political economy in The political economy of South-East Asia: Conflicts, crises, and changes
The premise then is that because conglomerate capital is able to rely on the state for a stable rate of return — in exchange for political kickbacks and other forms of patronage, large amounts of capital and its generated surplus will remain in these ‘safe’ sectors. A possible explanation for the mythical ‘middle-income trap’ but more on that in a future article. Describing this form of capital in Malaysia simply as crony capitalism is too simplistic. I want to attempt to give flesh to the nature of this conglomerate capital whereby a logical explanation of why sectors like construction and hospitality are such favourites for politicians to hand out to their patrons and underlings arises.
Politics as the Source of Economic Stagnation
If I am successful at drawing links between politics and the economy — possibly using the two outlined concepts above, I may then be able to make the case that political institutions — political parties, the electoral system and parts of the state — are primarily responsibly for the constitution and reproduction of the Malaysian economy. From that, I would then try to argue that the current configuration of low-productivity sectors is a direct result of incentives surrounding electoral politics, and likely the machinery necessary for its smooth functioning.
Accounting for Other Factors
This series will focus mainly on describing the problem but may occasionally veer into possible alternatives and solutions to the current economic stagnation in Malaysia. To do this with a sufficient degree of depth and nuance, internal and external factors will need to be considered. The labour regime we inherited from the colonial authorities left a deep mark on how labour is organised — or disorganised — today. The banking and finance landscape — completely reconfigured after the 1997-8 Asian Financial Crisis — has significant implications for how capital reproduces itself and at whose behest it is allowed to do so. How Malaysia interfaces with global capitalism, through FDI and our outward investments, will have to be looked into if any solution is to be credible. Global economic conditions, particularly the proposed worldwide overcapacity in manufacturing put forth by Benanav, will be crucial in weighing possible paths forward to economic development.
Warning to the Reader and What’s Coming Up
The coming pieces in this series will be rather academic in nature compared to my usual writings on politics, democracy and ideology. I will try to deal with economic data and concepts that may require prior knowledge or more reading so you’ve been warned! My plan is to use these articles as the foundation for academic papers so some of these could feel like a data dump. I will try to condense more salient subjects in this series into a more accessible article under a different heading/title if my time allows for it.
I intend for the next article in this series to define political capitalism and the debates around the concept, contrasting it with competing ideas of monopoly capitalism, state capitalism and crony capitalism. Other intended topics will include developing a typology and mapping of Malaysian conglomerate capital, analysing our investment patterns and global financial flows, and argumentative playing out a number of development scenarios for Malaysia.