MALAYSIA has a lot to be proud of.
Over the last six decades for a multi-ethnic, multi-cultural and multi religious nation Malaysia has still been able to deliver a relatively good and consistent development path.
Average gross domestic product (GDP) growth for the last six decades is around 6%. Poverty rates have reduced dramatically over the last fifty years and even with the recent re-alignment upwards of the poverty line income (PLI) threshold to RM2,208 per household, our poverty rate is at a manageable 4.6 per cent.
We can be confident that absolute poverty can be tackled again. While official Gini Coefficient figures show improvement in inequality over the decades, there are some areas of concern such as 'wealth inequalities' between the haves and have-nots as well as regional concerns for example between West and East Malaysia.
Malaysia is basically a 'capitalist' system and has always had a market economy. Private property and private financial capital are recognised and play an important part in the Malaysian economic system.
However, the share of wages as a percentage of GDP is still only 37-38 per cent, much lower than our neighbours such as Indonesia, Thailand and Singapore. The irony of this is that while 'equity' has been a major concern in Malaysia for the last six decades, it has taken an overly 'ethnic dimension' and has led to some aspects being neglected.
'National unity' has always been at the forefront of all economic plans in Malaysia. The New Economic Policy (1971-1990), the National Development Policy (1991-2000), the National Vision Policy (2001-2010) and the National Transformation Policy (2011-2020) all directly or indirectly have national unity as the overall target.
Malaysia also had its Vision 2020 goal of becoming a 'fully developed nation, according to its own mould' by 2020. It is argued that in order to help achieve this 'national unity' Malaysia needs Social Market Economy (SocME) reforms.
Malaysia has undergone various phases of 'liberal' market reforms (1960s and mid-1980s) as well as direct-government intervention in the economy (1970s). The outcome has been 'mixed'. While growth figures may have been relatively high in the past, this is no longer the case. The old-liberal market ways cannot be the way forward.
The global agenda of sustainable development requires a fresh face. While GLCs and GLICs are the main actors in 'Malaysian Capitalism', there is a need for both public and private sectors to embrace a new reform agenda that focuses on growth with equity.
Malaysia has seen a significant decline in average GDP growth over the last 3 decades from an average of 7.2 per cent in the 1990s to just 4 per cent in the 2010s. Equity targets are already complicated in economies that have robust growth, what more when the pie is not growing or growing at a smaller rate or shrinking as we experienced in 2020.
This is where Malaysia can and should learn from the SocME approach. To be clear no direct import of this model is possible or even advocated. However, selected SocME reforms are the way to go.
There are three basic principles of a SocME that are very relevant. These are the principles of the social individual, solidarity and subsidiarity. The social individual is the core of the SocME. While the individual is still the focus in the SocME, this social individual realises that he/she is part of a society and thus makes decisions that not only considers his/her own interest but also the interest of others in society.
Social economics and social finance are examples of how better decisions for everyone can be made. Thinking of others becomes part of the SocME. Malaysia needs this fundamental shift in paradigm. We have seen how 'greed based individual maximization behaviour' has led to crisis after crisis. Can we not learn?
The principle of solidarity is based on the centrality of the dignity of all human beings. While private property and private enterprise is fully recognised, economic decisions must treat all workers and the less fortunate fairly. No one should be left behind or left in a condition that does not recognise the dignity of human beings.
The recent announcement by the Minister of Finance (May 22) that the government is looking at revamping its existing social security net is good news. As the Bank Negara Annual Report 2020 states there is too much reliance on transfer payments coupled with the inadequate retirement schemes (EPF and Pensions).
Hence, an effective and equitable national social insurance scheme must be seriously considered for the future, especially to those at the bottom end. This will have to involve a higher allocation to the social sector in every annual budget as well as every Malaysia Plan. To show its importance, annual budgets could also present figures that are allocated to this 'social budget'.
The SocME model also puts forward the central principle of subsidiarity. According to this principle, every individual is responsible for his own well-being and that of his/her dependents. No able, working individual should shun his responsibility in society. The hand that gives is better than the hand that receives.
It is only when the individual is not able to cater for his own well-being that the community comes in to support him. Only after this does the state come in to support those communities that cannot support themselves. This beautiful principle of subsidiarity creates responsible and accountable individuals and communities.
In order for these principles to work, the SocME model requires the highest governance standards. Markets must be based on certain social rules. The SocME model requires a type of 'ordered markets' that is, markets that adhere to well-established and implemented rules and norms.
Not only should there be transparency and full public accountability, there must be open debate and dialogue to ensure that no one is left out. This requires Malaysia and Malaysians to instil a high degree of discipline and order.
This discipline and order is not alien to all Asian cultures that are found in Malaysia. However, these traditions have somehow been eroded over time. The Social Market Economy can provide some lessons and examples for us to move forward to a better Malaysia for all.
The writer is Professor at the Department of Economics, International Islamic University Malaysia