Malaysia in the Era of Globalization #89


Chapter11: Embracing Free Enterprise

Let there be amongst you traffic and trade by mutual goodwill.
Surah An-Nisaa (The Women) (4:29)

When you are lost, goes an old Malay saying, revert to the source. That seems to be Malaysia’s new economic strategy following the Asian economic crisis of 1997. Buffeted by the turmoil of globalization and open markets, Malaysians yearn for the simpler days of fixed exchange rates and controlled commerce. Some even suggest regressing to the old days of bartering! But as in the jungle, the path back is often overgrown, and one could just as easily get lost in retreating. Malaysia is better off preparing for the new realities of open markets and globalization, instead of retreating to some imagined good old days of yore.

With the collapse of communism free enterprise remains the only viable economic system. It is successful because it has proven to bring the greatest prosperity to the largest number of people. Many have sought a “third way,” a mid course or a bridging between free enterprise and state planning. Alas, there is no such alternative.

Free enterprise or capitalism, in the traditional definition, is an economic system based on the private ownership of the “means of production” and in which profits can be acquired through investment of capital and employment of labor. This is in contrast to socialism and communism where the state owns the “means of production,” and also your labor. In free enterprise there is private ownership of properties, while in socialism and communism, everything belongs to the state. In Islam of course everything belongs to Allah, man is only His trustee (“vice regent”) on earth. Only God can revoke this trust (presumably upon one’s death). Nowhere in the Koran is it stated that Allah has substituted the state for humans for the trusteeship of the earth. In this regard, capitalism rather than socialism or communism is closer to Islam. Besides, the atheism of communism is the very antithesis of Islam.

With capitalism you are rewarded for your efforts and ingenuity; with socialism, the all-powerful state decides how much you deserve or should get. To use a biblical phraseology, with free enterprise you reap what you sow; with communism, to each his due or according to his needs. To revert to my familiar bovine analogy, imagine you have two cows. With socialism, in the spirit of equality, you are required to give one to your neighbor; in communism, you must give both to the state and it may in turn give you some milk in return; with capitalism, you sell one cow and buy a bull. (If you are a real entrepreneur you simply let your cows loose amongst your neighbor’s bull!) Real world experience proves that over time the capitalistic system produces the greatest number of cows.

The failures of communism and socialism are now self-evident. The old defunct Soviet empire is only the most dramatic example. But remnants of that ideology are still alive and kicking to inflict their damage on the economies of many countries, Malaysia included. Present-day stagnant India with its ubiquitous “Permit Raj” is an ever-ready sorry reminder of the dangers of central planning and big government.