Mahathir Failed the Malaysian Economy

Mahathir Failed the Malaysian Economy
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Written by johnleemk on 7:58:11 pm Sep 2, 2007.
Categories: Malaysian Government, Malaysian Economy
One logical fallacy which crops up very commonly is that of assuming correlation implies causation. (In other words, we see two things are related — for instance, that the areas with most sick people are the areas with most doctors — and assume one causes the other, thus executing all doctors for causing illness.)

Unfortunately, despite the humorous example, this is a fallacy many frequently commit. When it comes to assessing Malaysian politics and policies, Malaysians are no exception.

The overrated Mahathir administration is one such example. People often make a huge fuss about how Mahathir supposedly grew the Malaysian economy.

A reasonable parallel (which I see no reason to ignore) is that of American politics, where Ronald Reagan is credited for an American economic revival in the 1980s, or alternatively, Bill Clinton is credited for the economic boom of the 1990s.

Critics of either stance point out that many policies have a time lag, meaning the Clinton boom is attributable to Reagan, while the economic woes early in the Bush presidency were Clinton's fault. On the other hand, some chuckle, this would mean that Reagan's boom would be due to his predecessor — a president perceived as a lame duck, Jimmy Carter.

The moral is simple: there is no simple way to correlate political leadership with economic performance. Whether or not you credit the current leadership, or credit the past leadership because of a time lag, you will often find you have as many misses as you do hits.

So, why should we suggest that Mahathir is responsible for the boom of his administration? If so, should he not at least take some blame for the economic woes of the mid-1980s, as well as 1997?

There is, after all, evidence to suggest that visionary leaders like Tun Abdul Razak may have laid the foundations for Mahathir's success, and all he had to do was avoid messing anything up too badly. In the 1970s, foreign business leaders were already being impressed by Malaysian economic policies and progress — there is one anecdote of a businessman being amazed when a waitress in Penang whipped out an electronic calculator to total his bill.

If anything, a significant body of evidence exists that we were swept up with, and likewise swept away, by global and regional economic conditions, where the rising tide would lift all boats. In other words, there was a correlation between Mahathir's term in office and our economic performance, but one did not cause the other.

Our country made significant economic headway at the same time as our neighbours, such as Singapore, Taiwan and South Korea did. Even Indonesia was carried along, to some degree.

Likewise, when the crash hit, all of us in this region sunk. Only the degree differed; Indonesia was worst-hit, while we bounced back a little, and the rest recovered for the most part.

Wouldn't this indicate that structural factors were responsible for all countries' rise? Commentators from the era of the "Asian miracle" and the post-crisis era have found plentiful evidence to indicate such, namely rising globalisation and the East Asian region turning into the world's factory.

Likewise, all countries fell after imprudence on the part of the Thais led to a loss of confidence in the Thai economy, and thus a lack of investor confidence in East Asian economies in general. Most countries also had similar fundamental problems, such as state-owned and state-protected companies rendered incredibly inefficient by corruption and lack of competition.

So, why should we be crediting Mahathir for something that wasn't really his doing? Almost anyone could have led Malaysia to some degree of economic success, provided he wasn't stupid enough to run the country the way, say, Myanmar, North Korea or Vietnam were managed.

You could say Mahathir could have been worse, and run the country like Suharto, whose "success" with Indonesia was blatantly a hoax. But he could have been so much better, and that is what matters — this introduces the economic concept of opportunity cost. The true value of something is what you had to give up, what you had the opportunity to do and gain, but did not take advantage of.

The fact is, the opportunity cost of taking Mahathir on was immense. Bear in mind that our economic success paled in comparison with that of South Korea, Taiwan, and yes, the neighbour we love to hate, Singapore.

Now, this might be reasonable if these countries had more innate advantages than we did. But they don't. They are located in inhospitable locations (except possibly Singapore), while we are positioned nicely for international trade — Melaka is still around, and it certainly was a nice port for the region until Singapore came along.

Two of these three countries have a smaller population than us. All of them live in varying degrees of threats from hostile neighbours, potentially frightening investors. None of them have any significant natural resources, while we have oil, bountiful forests, natural tourist destinations, and the like. We have a lot more land mass than they do — we are actually larger than the United Kingdom.

We have the advantages of people from varying cultural backgrounds, and thus different mindsets and thought patterns, allowing us to approach problems from new perspectives; they are largely homogenous nations. Our people generally have a better command of English than these other countries, except Singapore.

In other words, in most cases — except with Singapore — we have virtually every reason to have been ahead of these countries, and to remain ahead today. Yet, during our peak time, we were still lagging behind these countries!

South Korean entertainers have swept the globe; Korean cars and appliances have penetrated the marketplace in developed countries. Taiwanese-built and -designed electronics power millions of appliances and devices around the world. Singapore — well, I hardly need to recapitulate its economic success, do I?

Why should we be crediting Mahathir for our economic rise? Unless he'd been as madly corrupt as Suharto, instead of moderately corrupt, or a crazy dictator like Kim Jong-Il, we'd have gotten where we were anyway. He had the potential to take us to greater heights, but never realised that potential.

Should we credit Mahathir for his radical policies post-crisis? To an extent, yes. But bear in mind that while all three countries have regained their economic footing and moved even further ahead, we have barely recovered to our pre-crisis economic strength.

What should we credit Mahathir for then? For not being a corrupt idiot like Suharto or Kim Jong-Il? I suppose so, yes. But it is difficult to credit him for anything significantly more than that.

The fact is, as an economic leader, Mahathir failed. It's not any simpler than that. We have every reason to be ahead of these other countries today. Instead, we are playing catch-up, and continue to pitifully justify our failures. We have not lived up to our full economic potential; we have grown, but we have not grown as we should have had. For this, the blame must be laid at Mahathir's feet.