Economic Development, Who is It For?
Reflecting on poverty, inequality and the purpose of economic development in Malaysia
The past month has had economic headlines dominating media coverage, with the tabling of the 12th Malaysia Plan and the release of the Pandora Papers. The former features more of the same development rhetoric with some tweaks here and there. The latter surprising few, given the country’s very public history with political corruption. All this against a backdrop of a nation rich enough to vaccinate most of its population ahead of other developing countries, yet seemingly too poor to deliver meaningful aid to a struggling population. As the country continues to grapple with a post-pandemic recovery, it’s worth asking, now more than ever, what is the purpose of economic development? And more presciently, who does development in Malaysia really serve?
What is the point of economic development?
Standard narratives of economic development suggest that when a country’s economy expands, the living standards of its citizen will improve. This supposedly happens when businesses invest in buying capital in the form of raw materials and equipment and hire labour to turn those into products for sale. Capital comes from banks or government institutions, which get their money from the people through savings and taxes. The business’ investment generates demand for some goods and supplies for others as well as creates employment. The social wealth created under this system, distributed through salaries and government welfare, is said to be enjoyed by all to some extent and allow for the realisation of human potential through leisure or greater opportunities. Essentially, we are told that this system leads to better lives.
Within the framework of the present system, broadly known as capitalism, things appear to have broken down badly. Even before the Covid-19 pandemic, deprivation and poverty persisted in our society. The nation’s wealth that is collectively created by all has not reached the neediest among us. Our national poverty has risen from 5.6% to 8.4%, essentially, 1 in every 10 Malaysians. Back in 2017, Bank Negara data showed that only 1 in 10 Malaysians can survive more than six months if they lose their main source of income. We could go on and on like this about to unemployment (especially graduate unemployment), job precarity, lack of a meaningful social safety net, and right now, how the pandemic makes every single one of these measures exponentially worse.
Yet, Malaysia does well on broad indicators. We are still the most prosperous large country in Southeast Asia per capita (leaving out small countries like Singapore and Brunei). Among our neighbours, we are still expected the grow our economy and recover well ahead of everyone else. The ultra-wealthy in Malaysia saw their fortunes increase by 14% under this pandemic. Many companies, often large local and foreign firms, were allowed to operate under the most recent lockdown while small and medium businesses were left to fend for themselves. The inequality is plain for anyone to see.
However, it would be misleading to lay all these failures purely on the Malaysian government. It is easy, especially in our context, to see the economic elites and political elites as exactly the same. After all, many politicians engage in business and many business people take part in politics. But this is the case in all major economies around the world, elites are produced and reproduced within a system that is flawed at its core. Ultimately, economic growth fails ordinary Malaysians because capitalism tends towards the enriching of the few at the expense of the many. The political class and state agencies facilitate this enrichment while partaking in it themselves.
No room for human flourishing under persistent poverty and privation
Because of these failures, the future for many Malaysians looks bleak. The poverty, previously hidden by official figures, has been deepened and expanded by the pandemic. While we have not seen widespread hunger like in other countries, it a certainly a reality for many among us who do not earn a stable income. The youth cannot find dignified jobs that would give them the prospect for a good life, let alone make a decent living. A large section of university and college graduates are unemployed while being burdened with student debt, taken on with the promise of better incomes and social mobility.
Under these conditions, one can hardly expect to be happy or even content. Yet the stated goal of our economic system is a better life, and implicitly the realisation of human potential mentioned earlier. A vision of this realisation is best laid out in the following quote on the two definitions of human flourishing:
The restrictive meaning of human flourishing concerns the absence of deficits that undermine ordinary human functioning. This includes things like hunger and other material deprivations, ill-health, social isolation, and the psychological harms of social stigma. … The expansive idea of flourishing refers to the various ways in which people are able to develop and exercise their talents and capacities, or, to use another expression, to realize their individual potentials. - Envisioning Real Utopias, Erik Olin Wright
What this means in practice is that everyone is afforded the time and resources for personal interests like arts or sports, for the development of those interests into skills and talents, not for the pursuit of money but merely for the joy of mastery and intellectual growth. To achieve this vision of human flourishing, more leisure time would be needed. For that to be realised, the number of working hours required must be reduced, and for that, the system needed to be changed.
Reforming capitalism will not be enough
Many will step forward to say that capitalism can be reformed to realise this dream. They might point to the social-democratic Scandinavian countries — which I would say is riven with contradictions and is not sustainable long term. And, of course, the claims that economic development under capitalism has lifted millions out of poverty — think China in the recent years. Yet, in most advanced capitalist economies, they have failed to deliver on its promise of better incomes and more leisure time. Socialist nations, born out of backward economies and trapped within the capitalist world-system, are prevented from achieving this promise in the short to medium term.
Nonetheless, the struggle for this vision of the future must proceed if we believe every person should be entitled to a good life. In Malaysia, it is clear that changing the political elites every five years (or less these days) will not transform the system in this direction. Our state and economy need to be radically altered if development is to achieve these objectives.
Wright lays out the challenges before us. The first and most crucial condition:
“The elimination of material deprivation and poverty are, of course, essential conditions for the full realization and exercise of human potentials, but it is the realization of such potentials that is core of the emancipatory ideal for socialists. This, then, is what I mean by the expansive sense of “human flourishing”: the realization and exercise of the talents and potentials of individuals.”
And as an extension to that, why capitalism must be eliminated:
“First, the large inequalities generated by capitalism in access to the material conditions for living flourishing lives; second, inequalities in access to interesting and challenging work; and third, the destructive effects on the possibilities of flourishing generated by hyper-competition." - Envisioning Real Utopias, Erik Olin Wright