WE had previously advocated in this newspaper the need for an economic model to frame the future direction of the economy. This was when the government appeared to be foundering on its economic plan. Kudos to the government. Today we have that model — Shared Prosperity.
Prime Minister Tun Dr Mahathir Mohamad had been alluding to the broad outlines of what shared prosperity means in his past speeches on wealth creation and distribution. It was in his address last week to mark the first anniversary of the Pakatan Harapan government that Dr Mahathir crisply delivered the government’s socio-economic strategy.
The World Bank has a similar mantra. It obligates the bank to “end extreme poverty and promote shared prosperity”. The 1971 New Economic Policy extolled a similar virtue, only to have an overzealous public service subverting its original agenda. Similarly, the 2010 New Economic Model championed inclusive growth. But that agenda too was shunted to the backwaters as economic far-sightedness was sacrificed at the altar of political pragmatism.
Shared Prosperity as a concept may be hardly new. But its articulation is portentous. It makes a clear break with the past. It challenges old mental frames on income distribution. It will put the country “on a sustainable and equitable growth path to deliver benefits for every class, race and geographic location”.
This strong commitment binds the government to display the requisite political will to tear away from the previous paradigm that had overshadowed the economy over the past 50 years.
What does it take to bring about shared prosperity? Capitalism, left to its own devices, may not be able to deliver greater equity in income distribution. If anything, it will accentuate inequality as the rich get richer while the poor poorer. In his 2014 book, Capital in the 21st Century, Thomas Piketty offers a reason for that disparity. The rate of return on capital is almost always more than double labour’s.
To reduce the ever-widening wealth gap, Piketty calls for wealth taxes on the rich. Similarly, Nobel Laureate Paul Krugman, in his 2007 book, The Conscience of a Liberal, argues that markets are not self-correcting. Of itself, the private sector cannot be trusted to bring about greater equity in income distribution. The steady hand of the state is required to do that.
Political action can be instituted through taxing the rich and introducing safety nets for the poor.
To do so, the economy must grow. Otherwise there may not be much to redistribute. In a recent study of 118 countries, the World Bank found that the rise in average incomes from economic growth produces 75 per cent increase in the average incomes of the bottom 40 per cent of society. Sustaining high rates of economic growth is therefore fundamental to promoting shared prosperity.
A healthily growing economy will require an appropriate “life-support”. Although they may not directly solve inequality in society, world-class education, social spending, productivity growth, technological advancement and innovation and institutional reform for good governance will surely contribute to growth and, through that, shared prosperity.
The government draws its strength and hope from its citizens. A nation is only as strong as the people’s will to make it so. For shared prosperity to work therefore, the people must subscribe to it.
I was once told this heart-warming story. It bodes well for shared prosperity. Two buddies, Sharifah and Mei Leng, (not their real names), went overseas to pursue their education. Sharifah won a Public Service Department, or JPA, scholarship but Mei Leng, who had similar exam results as Sharifah, failed to secure one. In her innocence, Sharifah dragged Mei Leng along to inquire from the local JPA office as to why the latter was not given a scholarship as well.
A strategy is as good as its execution. Much of that will depend on the public service as policy success depends on how well the public service executes a policy.
The concept should not be hijacked to serve narrow sectarian interests. As with politicians, public servants too will have to demonstrate administrative will in implementing this moral principle. It will call for a thorough mindset change and an indomitable spirit of fairness and impartiality.
Racial rhetoric can undo this progression to a just society. Any insecurity or anxiety by any community of the risk of its exclusion from its fair benefits from economic growth may well spell doom for this noble aim and cause a social fracture.
Can the government muster the political will to implement its commitment or will the new model remain merely a bluster? Will it succumb to partisan interests for the sake of electoral prospects or will it do justice to the next generation?
The government has not shied away from upholding a universal principle of justice. What now matters is that the government does it well and does not waver in it commitment. It should then leave it to the better judgement of the citizens at the ballot box.
As Chuck Moorman, a professional American baseball star, once said: “Doing what is right, fair and honourable is more important than winning or losing.”
The writer is a former public servant, teaches at the Graduate School of Business, Universiti Kebangsaan Malaysia