The dynamics of democracy have so far been inadequate to counter inequality
The French economist Thomas Piketty, the author of the best-selling book, Capital in the Twenty-first Century, studies inequality. The book comes to some interesting conclusions, one of which is that returns on capital typically outpace overall economic growth. Thus, the owner of capital enjoys a greater increase in wealth than one who has only labour to offer and earns wages whose growth rate typically reflects overall economic growth as an upper bound. Inequality, therefore, worsens between those who own capital and those who do not.
In a recent monograph (January 2018), Piketty asked, “If inequality is on the rise, why hasn’t democracy been able to address it? Why are we seeing the rise of xenophobic populism and identity politics instead of class-based politics?” The monograph, titled “Brahmin Left vs Merchant Right: Rising Inequality and the Changing Structure of Political Conflict”, is very suggestive and contains some thought-provoking facts.
In the typical left-right political spectrum demarcation, the left will be concerned about labour’s share of production income and issues of the distribution of wealth. It will be populated by liberals, unionists and members of unions, the working class — the proletariat, to use a Marxian term.
The right, on the other hand, is the Marxian bourgeoisie, the landed gentry and capital owners involved in the production of goods and services. They are conservatives, nationalists who are more interested in the creation of wealth and in preserving and perpetuating it.
What Piketty observes is that the left is increasingly dominated by the elite of society, its leaders coming from the successful in society, thereby also attracting support from the more educated among the electorate. The left is more cosmopolitan, more accepting of diversity and the idea of a globalised world. The ideals of social justice remain but the language used in the discourse and the means to achieve it alienate it from the marginalised.
Election data and electorate demographics in France, the UK and the US show this shift. Political parties of the left no longer represent the working and lower-middle classes. If the educated elite vote for the left and the wealthy vote for the right, the marginalised see status quo politics as a failure and find anti-establishment politics attractive, although the latter and its economics are ineffective, if not altogether detrimental to solving inequality. The sad conclusion is that the dynamics of democracy have so far been inadequate to counter inequality.
Malaysian politics never really developed this left-right divide. National consciousness and anti-colonialism were absent until the 20th century. The Malays were largely feudal in their values and social structure, although the early Malay nationalists were leftists with a class-based paradigm rather than one based on race. Similarly, much earlier, unionists in Singapore and Penang, who were predominantly non-Malay, were left-leaning as well. Advocacy of workers’ rights in an exploitative colonial economy was the natural political response.
However, pre-Merdeka Malayan politics dealt leftist politics a big blow because of the Malayan Communist Party. It was not so much the Marxian or even the Maoist ideology — its economics and politics — that became toxic. It was the communist armed insurgency during Emergency that gave the left a bad name and communism’s bad name coloured everything left — from its intellectual foundation in Marxian economics to its politics. Leftist political and economic ideologies were made synonymous with radicalism and a threat to national security.
This demonisation of everything left permeated the national psyche and national institutions — from security institutions such as the police to universities — were starkly coloured by it. We became a much more closed society as a result, living in a false, simplified construct when the reality was much more complex and possibly more enriching. Our politics and even our polemics became constrained and muted, which inevitably brought down the level of robustness of the political marketplace.
Devoid of debates on ideology and ideas of what government and public governance are all about, politics became about “service” — not the type of service legislators contribute towards making laws and public policy debate but service to the constituents, about what can be given to them, about patronage. Oftentimes, service also involved seeking exception from regulations and even the law. Getting things and getting around things became associated with service to the constituency. Such was the political culture and contests.
Although we have basically eradicated absolute poverty, the problem of inequality persists and, as highlighted by Piketty and others, there is a real issue of the effectiveness of democratic political response to inequality. Economic nationalism and a retreat from globalisation are not an option for a small, open economy like Malaysia. Notwithstanding Piketty’s conclusion that the traditional left has failed to represent those at the shorter end of economic growth, there is, in my view, a case to be made for a clearer but more diverse political divide because such diversity enriches the debate and while things can be fractious, the debates will be better defined and the decisions reached will be more robust and well considered.
Alas, communist China, that symbol of the extreme left, became the largest economy in the world by riding the capitalist beast. It is seen in a different light today. These so-called communists embraced capitalist economics and are expanding their geopolitical footprint by using this new-found economic prowess. Unlike the Dutch or the English who used private capital and enterprise with sovereign patronage to expand their global footprint, the China model is the reverse: it is the sovereign that is spearheading the foreign economic beachhead.
Chinese state capitalism — both debt and equity — are now welcomed in Malaysia and in many parts of the world. The communist label has presumably been de-stigmatised. I am sure I can now bring back Edgar Snow’s Red Star over China in my hand luggage and not have it confiscated by the authorities. Some 40 years ago, it was confiscated presumably because of the somewhat complimentary view the author had of the communist-led Long March in China. Maybe it was just the red star.
Marxian and heterodox economics and, more generally, the economics of dis-equilibrium and market failures — characteristics of the political left — should be able to enrich the debate on inequality. This, coming from an economist with very strong neoclassical leanings. It is just a recognition that the Marxian framework of looking at distribution of income to factors of production, especially to labour, is at the heart of understanding the sources of inequality today. The dark shadow cast on leftist politics should be lifted as the country can be invigorated by the injection of politics that moves beyond race and religion. At any rate, inequality is now more an intra-race phenomenon than it is an interracial one. It is a phenomenon that is the result of starting points, available help and opportunities along the way and it applies to everyone.
I cannot help but think that there is a missing left because there is, at the same time, a missing right. Malaysian politics has been dominated by a strong government presence but one with largely pro-market policies, an oxymoron from the perspective of the right-left characterisation of the political spectrum. The political discourse was not, and still is not, about the contest of ideas on solving problems; it is mainly about identity — racial and religious — dominated by the imposition of views based on notions of beliefs and rights, not by how ideas and policy prescriptions can make life better for targeted individuals and for society at large.
Identity and sectarian politics will not address this worsening inequality and, eventually, this inequality will be both destabilising and detrimental to long-run economic growth. The political response to inequality cannot be more xenophobic identity-based politics that tries to be populist to those feeling marginalised, as we are seeing in Trump’s America, for example. The Canadian and French outcomes seem more amenable.
Having said all of the above, I should also point out the critiques of conclusions reached by Piketty. Economists such as Daron Acemoglou of Why Nations Fail fame opined that Piketty does not place enough emphasis on race and how politics can create a voice for the marginalised by appealing to their racial bias instead of addressing the fundamental economic problem.
The political marketplace is a mix of emotions and thought, which is why it is a contest of hearts and minds. It is the balance that is important. We shall see what happens in the upcoming election.
Dr Nungsari Radhi is an economist and managing director of Prokhas Sdn Bhd, a Ministry of Finance advisory company.
The views expressed here are his own.