Addressing inequality: Towards needs-based affirmative action

The most basic form of democratic decision-making is the exercise of majority rule, a binary concept whereby the option that gains more than half the votes is chosen. However, this simplistic model, in use in most legislatures throughout the world including ours, can easily lead to majoritarianism, or simply put, the "tyranny of the majority".

In such a situation, particularly in the absence of legal safeguards, political minorities risk the danger of being oppressed, be they minorities of race, gender or class. This is especially relevant to a multi-ethnic, multi-religious society such as ours, comprising of various ethnic groups co-existing alongside the majority Bumiputeras (most of whom are Malay-Muslims), which make up over 50 per cent of the population.

Such a delicate ethno-religious situation thus requires a kind of democracy that is more intuitive and just, which not only serves the wants and needs of the majority, but which also protects the rights and needs of the minorities. This balance is critical and must be maintained in order to provide the necessary space and opportunities for every citizen to achieve their optimal potential and ambitions.

In other words, the state must ensure the provision of social mobility. This goes beyond merely providing the required space and infrastructure, and then allowing nature to take its course. Such a liberal concept is problematic because it is unfair insofar as the world is unfair.

I refer here to the issue of income inequality. It has been traditionally accepted that inequality is a natural by-product of economic growth because healthy competition and meritocracy would result in unequal outcomes. After all, it makes sense that those who work harder and smarter than the rest would reap more benefit than those who aren't as competitive. In short, income inequality reflects a well-functioning market economy.

However, recent empirical evidence produced by mainstream research has pointed out that income inequality may not be sustainable as far as long-term economic stability and growth is concerned. This is because income inequality will invariably result in the gross concentration of wealth at the top, and consequently weakening effective demand at the bottom. As we have seen in recent times, this may translate into loose monetary policy and unsustainable debt as the masses at the bottom struggle to keep up.

At the same time, income inequality also creates a vicious cycle of disenfranchisement as quality education, healthcare, economic opportunities and ultimately social mobility begins to edge further and further away from the reach of the masses. In other words, not only do the rich get richer, the poor will get poorer, both materially and socially.

Hence, the role of the state is extremely important in rebalancing inequality through income redistribution, not only to ensure the welfare of the people, but also to facilitate growth. The macro concept is simple enough - the healthier the population, the more educated they are and the more they earn, the stronger consumer demand becomes and the more sustainable the economy will be. For proof of concept, one only has to look at the Scandinavian model which has produced strong, resilient economic growth through equitable income redistribution.

Now, coming back to the Malaysian situation. We currently suffer from one of the highest levels of income inequality in the region. With a GINI coefficient of 0.4621, we suffer from the widest income gap in Southeast Asia. The bottom 40 per cent of Malaysian income earners earn a total of 14.3 per cent of total income while the top 20 per cent commands nearly half or 50 per cent.

Thus, while it is not difficult to argue for the need for some kind of redistributive policy, it is not as simple as one would think given the complicated nature of Malaysia's polity, ethnic diversity and colonial history.

Post-1969, the Malaysian government recognized the need to address vast socio-economic inequalities that were apparent along racial lines, whereby the Bumiputeras, despite being the majority, only owned an equity share of 2.4 per cent of the economy, compared to the dominant Chinese, which made up the bulk of the capitalist class. Faced with a situation that would unlikely correct itself owing to the general lack of qualifications and social capital amongst the Malay populace, the New Economic Policy (NEP) was devised to address this gap.

The NEP entailed a two-pronged approach, namely: (1) the eradication of poverty regardless of race; and (2) the restructuring of society to eliminate the identification of race with economic function. The former took the form of rural development and poverty eradication programmes while the latter manifested as positive discrimination in favour of the Bumiputeras via education and employment quotas, government procurement policies, as well as corporate equity requirements on publicly-listed firms.

After two decades of the NEP, poverty was successfully reduced from 49.3 per cent in 1970 to single digits today. Local ownership of corporate equity also increased at the expense of foreigners while the Bumiputera share grew tenfold to about 20 per cent according to official data.

However, critics point out that while the NEP managed to lift a significant portion of our population out of the poverty trap and create a sizable and urbane Malay middle class, it has over the years also been used and abused not only to enrich a small elite class of Malay capitalists, but also as a tool of patronage.

Under the guise of the NEP, privatization, property ownership, corporate listing requirements, senior public positions, and even education opportunities were captured and monopolized by those in power - all made kosher by the standard line of "helping the Malays".

As a result, a handful of Malay millionaires and billionaires were created while the average Bumiputera remains trapped with little prospect of social mobility. According to the Federal Government's New Economic Model, the bottom 40 per cent of Malaysian households earn an average household income of RM1,500 a month, with the Bumiputeras making up close to three-quarters of this number.

While inter-ethnic inequality has indeed been reduced, the intra-ethnic gap has widened by leaps and bounds. State monopoly capitalism now pervades, while the private sector is increasingly crowded out. In short, the NEP's intended purpose of addressing poverty and increasing Malay participation in the economy has given way to corruption, cronyism and abuse of power for the benefit of the ruling capitalist class. This has occurred principally because of the radicalized nature of the affirmative action policy, which allows special entitlements based solely on one requirement: race.

Hence, what is needed is not the dismantling of affirmative action, but a reorientation of the policy from race-based to needs-based. This will ensure positive discrimination not in favour of a certain race, which has been easily abused, but instead in favour of those who truly require support and assistance.

In particular, attention must be focused on the marginalized, such as the Orang Asli, the Bumiputeras of Sabah and Sarawak, other ethnic and religious minorities, and those in the lower income groups, in order to help them compete and in turn contribute towards the development of our nation.

We also need an economic agenda that recognizes the problem of income inequality, and seeks to alleviate it by empowering those at the bottom, providing them with health, education and economic opportunities, regardless of race.

Most importantly, any kind of affirmative action must be implemented in a transparent and accountable manner, so as to reduce the scope for corruption and cronyism.

In this pivotal moment of our country's development, it is critical that we embark on a new, inclusive national policy that is able to target and support the most vulnerable in our society. The failure to address this successfully will render any economic development meaningless, as its benefits will be invariably reaped by a select few.

After all, as Nelson Mandela once wrote, "a nation should not be judged by how it treats its highest citizens, but it's lowest ones". – September 14, 2013.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.