Saturday, October 16, 2021

Economics, Malaysia, and Economic Growth

Economics is broken because other than Hernando de Soto's work, it fails to account for politics and sociology. One of the field's most egregious mistakes is assuming protectionism always equals failure within a globalized trading paradigm--or that slower economic growth is necessarily inferior to faster growth. Post-WWII, debt within allied Western nations created an interdependent system facilitating common goals and knowledge transfers. Meanwhile, in formerly colonized countries, most residents remained poor during as well as after colonization, and the Asian financial crisis of 1997-1998 confirmed a distrust of Western finance. 

When judging formerly colonized countries like Malaysia, one must remember just how poor the natives were. According to Tun Dr. Mahathir, "The country's per capita income in 1957, the year of Independence, was less than USD350. Under British colonial rule more than 70% of the population lived below the poverty line... there were only about 100 university graduates in the whole country." If an Asian country associated Western influence with mismanagement--not an illogical conclusion after the Vietnam War--then it would prefer homegrown businesses over FDI, even if slower growth resulted. 

Why so much misunderstanding? When globalized trade focuses on things rather than people, cross-cultural understanding cannot succeed except on a superficial level. In a debt-soaked world, will the 22nd century be different?

© Matthew Mehdi Rafat (2021)