Politics and the Economy — Amir

The past week’s bloodbath in global capital markets is a startling reminder to investors that political risk is a very serious business. What started as a political grid-lock between opposing political parties was made worst by a minority pressure group holding the debt-ceiling hostage to push through their one-dimensional political agenda based on false facts and a very skewed vision of how their country should be run.

As a result, the US credit rating was downgraded, and investor confidence was badly shaken across the globe, jeopardizing the already fragile global economic growth and inching many economies closer to a double-dip recession.

This episode served as a grim reminder that even in the most advanced economies; politics still does have real impact on the economy. For a developing country like Malaysia, this is even more so the case. We also see the danger that lies when minority political pressure groups flex their muscles in a dysfunctional political system.

Leveraging on the deep inter-connectivity between politics and the economy, Prime Minister Najib Razak, who came to office at a time when confidence in politics was at an all-time low especially in his ruling coalition, BN, he chose to fix the economy and government delivery system rather than spending time reforming the political system. His logic was intuitive: fix the economy and improve bureaucratic efficiency, then spend the political capital gained to fix our feudal and inefficient political system.

This logic is perfectly fine, only that it is highly ironic- Dato’ Sri Najib won the mandate from his party, UMNO in the party elections in 2009 but not from the country. He inherited the government from his predecessor Tun Abdullah Badawi and is yet to win a general election. Shouldn’t he prioritize party reforms before tackling national policy issues?

Indeed, his strategy is indeed a master-stroke: changing politics using the neutral tools of economic policy. It is a faster way to get results- economic numbers are easier to ascertain than approval ratings. At the same time economic reforms means real changes for real people. Focusing on political reforms would have been time consuming, it is better to pick your fights and focus on the alphabet soups of the ETP, GTP, NKRA, NKEA.

However, the Malaysian political landscape has changed since 2008. We see on both sides of the political divide, there are powerful minority groups which hold Malaysia’s economic growth hostage for the sake of advancing their intransigent version of Malaysia. These groups have a dichotomous vision of how this country should be run, so much so they create false facts to support their opinion. On one side you have the Malay agenda through Perkasa- and on the other you have different liberal voices ( there’s never a single dominant group, which is a fact of life for liberals) for its version of Malaysia for all. Both sides embrace the concept of ideological purity- one for the race, the other for the country when in reality, Malaysia is neither.

These two groupings are the ones lambasting PM Najib’s economic plans, simply because it doesn’t fit with their opinion and it doesn’t match their self-created facts. Indeed, minority voices are now setting the agenda in Malaysia, and with this, economic tools may also be less potent to address economic issues, what more to reform the political system.

Moreover, it doesn’t help that the grandiose ETP, GTP, lack clear strategy on winning over people and individuals. When you dissect the plans, first question you may ask- what’s in it for me?

In the time when food inflation and stagnating wages are the major concerns, shoving ETP down the people’s throats, may even bring about riots of London’s scale.

At the end of the day, economic tools alone won’t be sufficient to bring about reforms that this country so badly needs. What we need clear and decisive leadership in that direction. Dato’ Sri Najib has taken steps in that direction, and he should follow through for the sake of our nation.

*This piece is the personal opinion or view of the writer. The NRC11 does not endorse this view unless specified.