The UK’s decision to exit the European Union (EU), popularly known as Brexit, came about after a referendum called by the Conservative government, which had sought a mandate to continue staying in the bloc. Then prime minister David Cameron was addressing dissent from within his own party, but that dissent would not have been enough to get the result it eventually did without gaining the support of those outside the party.
In the end, the outcome was carried by a backlash from people who feared for their future and livelihood. They had equated being part of the EU with its unified labour market and labour mobility. They had believed that there would be increased competition for their jobs and a drain on Britain’s dwindling fiscal resources — the public largesse they depend on.
These are the people who felt that they have not benefited from the European common market — indeed, they felt marginalised by it and wanted none of it. They see “foreigners” and “migrants” — the result of a common market — as threats. Thus, supporters of the Labour Party ended up joining the EU dissenters in the Conservative Party to vote for Brexit.
Inequalities abound in this globalised world and the so-called losers in this game are showing their disaffection where they are. The economy can be global, but politics is almost always a domestic affair. These sorts of discordant local political responses to what are seemingly global economic phenomena will be more common, and managing them will require balanced and firm leadership. Otherwise, the local political response would be detrimental to their very own economic interests.
The same sorts of dynamics are at play in the upcoming US elections where politics has always been defined by the debate on the role and boundary of government in the daily lives of Americans. The Republicans and Democrats have typically positioned themselves on opposite ends of this debate with the former being advocates of a smaller role for government.
There is, however, a growing apathy towards the political process in the US. Budgetary and legislative gridlock resulting from the perceived partisanship and bickering has angered the electorate, especially those who increasingly feel economically marginalised. Trade and globalisation of the economy are seen as forces that have not benefited the working class, and the government is seen as acting in the interests of big businesses — an anodyne argument that has become popular.
This anti-establishment sentiment has been exploited by an unlikely candidate — an uncouth billionaire using the Republican platform but campaigning with a “we can be great again” slogan, which is supported by many who would typically back the Democrats. So, the party of small government is selling a bigger, brasher government to those who feel marginalised, not on any economic or ideological platform but by exploiting the sentiments of race, religion, immigration and sheer bigotry.
In Malaysia, we are overtly racial, and with racial sentiments come the attending religious sensitivities and all sorts of chauvinism. We are less hypocritical in that sense, but we may be somewhat handicapped by this racial politics in solving problems of inequality — an inevitable outcome of globalisation.
Politics in Malaysia is never an ideological contest around abstract concepts of government, governance or citizenship. It is also not about class — capital versus labour, or the haves versus the have-nots. It, rather unfortunately, has always been couched in racial terms and the language of politics too is racial. Even the political party advocating a theocratic Islamic state is essentially a group with a Malay, instead of the universal Islamic world, view.
As is the case everywhere else, globalisation has had an uneven effect on Malaysians — marginalising those who are not adequately endowed to participate and rewarding, perhaps excessively so in instances, those who are able to participate in or exploit the opportunities created by globalisation.
Malaysia also underwent what is in effect an integration of regional labour markets — as was the case when Britain joined the EU — when almost a fifth of our workforce was made up of migrants. More so than in Britain, there is now a dependence on these foreign workers in Malaysia, although their presence has depressed wages for less educated Malaysians — a major source of inequality apart from other structural issues.
The resulting inequality is rather colourless, differing only in their proportions. Statistics show that intra-racial variations are larger than inter-racial variations — evidence pointing towards inequalities becoming colourless and racial politics is just not the way to go to address inequality. But since the political marketplace demands solutions to inequality, we, nonetheless, embark on addressing it through racial politics, the only thing we have.
Such race-based political competition will necessarily pander to racial sentiments and come up with similarly blinkered solutions. We have seen a few of these. There is a dearth of policy to address those displaced by the global dynamics or on how to adopt a more forward posture of exploiting the opportunities. It is that vacuum, that lack of leadership, that lends credence to chauvinist views. Thus, we see unlikely personalities occupying the public space, appearing and sounding boorish while spewing out nonsensical stuff.
If we remove the racial lenses, things can become clearer. Some policy decisions have indeed been good. The subsidy rationalisation programme is an example of clear thinking. If price subsidies are meant for the poor, then certainly the bulk of the subsidies — for diesel, petrol and gas — are not enjoyed by this group and should be removed and replaced by more targeted programmes. The easy way is a cash transfer à la BR1M, but other types of safety net schemes can also be implemented.
If national and publicly funded schools are seen as what they are — places to educate every Malaysian child — then they should be manned by the best teachers we can find. On a per capita basis, more public resources should be allocated to primary and secondary education than to tertiary education, which is not the case now. Basic education is the great leveller deserving of public funds.
Public support for tertiary education should give priority to those from the lower income group. There cannot be uniform public support as that would favour those with higher income who should shoulder the burden themselves. Today, the price paid for public higher education and public support for tertiary education are the same for both poor and well-off students. While foreign students pay more, they still pay below cost: Public funds are effectively subsidising foreign students in public universities and they are not likely to be poor.
It is the same with the fully boarding secondary schools — there are quite a number of them as they have proliferated over the years. Clearly, the per capita cost for these schools are much higher than daily schools. If the logic of public funds should prioritise the lower income group is to be applied, then boarding schools should be the preserve of those from the lower income group who have demonstrated academic potential regardless of who they are. They are the ones with the most need of upward mobility.
Another major distortion in our economy is the ridiculously high car ownership, which has aggravated the inequality issue. Too much is spent on car loans and maintenance, resulting in a much lowered household disposable income, thereby affecting the quality of life via reduced consumption and savings. This is tied to the issue of household indebtedness as well. Without such surplus, these households are condemned to never owning physical or financial assets — another major source of inequality.
Car ownership should be discouraged. Improving the public transport system is, therefore, the right policy call, and a lot of resources have been allocated to both the railway double tracking and light rail transit/mass rapid transit projects, the backbone of the system. But even these are out of reach of those in the lower half as they depend more on buses. So, more resources should be allocated to developing an efficient and dependable bus system if we are to address inequality as well as the connectivity issue of public transport.
The point of these examples is that inequality can quite simply be exploited towards ends that will not address the problem. There can also be instances where the intention is right but the popularity premium in political contests can lead to the prescription of bad medicine, at the expense of the recipient or fiscal prudence. The 2008 subprime crisis in the US is an example of this sort of populism.
More urgently perhaps, we must realise that approaching policymaking with racial lenses is not only outmoded but also a hindrance to finding a solution to the inequality issue. It is the marginalised who will suffer the most if this continues.
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.
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