Malaysia and the myth of self-regulating markets; Malaysian Eclipse: Economic Crisis and Recovery.

Author:Miller, John A.

Malaysian Eclipse: Economic Crisis and Recovery

Jomo K. S., ed.

London and New York: Zed Books, 2001.

It seems altogether fitting that Malaysian Eclipse edited by Jomo K. S., the Malaysian political economist and long-time critic of Kuala Lumpur officialdom, would appear in the same year that Beacon Press reissued The Great Transformation. In his forward to this new edition of the renowned economic historian Karl Polanyi's classic study of the myth of self-regulating markets, Joseph S riglitz, the Nobel-prize-winning former chief economist of the World Bank, calls the East Asian economic crisis of 1997-98 "the most dramatic illustration of the failure of self-regulating markets." (1)

The myth of self-regulating markets is the topic of the Malaysian Eclipse as well. What Jomo and his coauthors write about the Malaysian experience with the neoliberal agenda, especially financial and capital market liberalization, will be instructive to those who study economic development in East Asia and elsewhere.

Malaysia is especially well suited for the study of the effects of financial liberalization and of "self-regulating" markets on economic development. First, as the World Bank's East Asian miracle report pointed out nearly a decade ago, Malaysia, Thailand, and Indonesia, the second generation NICs (newly industrializing countries) of Southeast Asia, relied more heavily on markets and less heavily on government interventions than had the first generation of East Asian NICs especially South Korea. (2)

Second, Malaysia was a favorite destination of financial capital, capturing more of the capital that flowed into the newly emerging markets during the 1990s than any other developing economy.

Third, Malaysia oversaw its recovery not with International Monetary Fund- administered austerity measures but with its own policies that included a highly controversial experiment with capital controls. That move made Malaysia, and especially its firebrand prime minister Mohammed Mahathir, an object of derision in orthodox financial circles but a champion for others seeking an alternative to financial market-dictated economic development.

Jomo is a well-established voice in the Malaysian political debate. He is the author of a veritable bookshelf full of studies of Malaysian economic development that seemingly cover each turn in Malaysian public policy since the mid-1980s. Economic journalists and researchers regularly seek him out for a critical assessment of Malaysian economic policy. That was certainly true for economic journalist James Goodno and myself when we were conducting research on the limits of poverty alleviation in Malaysia for the book we are writing about rapid growth, economic crisis, and poverty in Southeast Asia.

This collection of essays, all but one authored or coauthored by Jomo, provides the kind of convincing and nuanced analysis that journalists and economists have come to expect from him. To be sure, Malaysian Eclipse is critical of the free-market ideology of the International Monetary Fund (IMF), the U.S. Treasury, and the economics profession. But it is also damning of the conspiracy theories and self-serving rhetoric of economic nationalism offered up by Prime Minister Mahathir, frank in its assessment of the limits of capital controls, and fully cognizant of the corroding effect of cronyism on the Malaysian economy.

Mahathir has served as Malaysia's prime minister for two decades now. Through skillful political manipulation, he has held together a coalition of ethnic Malays, the majority population, and the ethnic Chinese business class in a national alliance dominated by the United Malays National Organization (UMNO). While fairly regular multiparty elections have forced some accountability upon him, Mahathir's authoritarian rule has amassed power in the executive branch and used an internal security act to jail opponents. An emerging Malay bourgeoisie has benefited from his political patronage. At the same time, Mahathir has been a long-time advocate of privatization, a fact that should not be obscured by his railing against international speculators during the 1997-98 economic crisis or Malaysia's experiment with capital...

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