January 26, 2012
Embracing Free Enterprise
The remarkable thing about financing entrepreneurs and small businesses is that individually and in the aggregate, they would cost very little. The default rate for loans to small business and individual entrepreneurs very low, as demonstrated by the experience of Grameen Bank in Bangladesh. But the most important benefit of such a scheme is that it would encourage trade among ordinary Malays and teach them the value of business and free enterprise. This would help eradicate the ingrained mindset of forever waiting for the government or someone else to provide them with a pay cheque.
Once we have succeeded in producing such low level entrepreneurs then we could move up the ladder, to professionals and sub-professionals like accountants, lawyers, and engineers. From there, the government could then target the bigger contractors and major players. And with involvement at each level, the government would have better experience in assessing the risks and viability of the various individuals and proposals.
The difference between my plan and the government’s present strategy is that I let the market decide who should get the benefit of government help, not some all-knowing civil servant back in Kuala Lumpur. Further my plan is considerably cheaper and impacts many more people, in contrast to the present where billions are being lavishly squandered on the few. Lastly my plan will produce real entrepreneurs, not the armchair types that the Malay community currently have in abundance.
The remarkable observation about many successful companies of today is that they all started small. HP and Apple Computer were both started by engineers tinkering in their garages. No Washington official earmarked them for success.
Grooming entrepreneurs from below would prove more enduring and successful, in contrast to the present strategy of starting at the top.
My point is, we do not know where the next spark will come from. What is important is that we must create the conditions whereby should that spark ignite, it would start a chain of reactions far and beyond. This notion that some high and mighty bureaucrat or esteemed leader sitting in his air-conditioned office in Kuala Lumpur could pick industry winners, is pure bunk. And their track record proves it. The sooner Malaysian leaders disabuse themselves of this delusion the better it would be the nation.
One of the lessons of history is that no society that values order above everything else will encourage creativity among its citizenry. Such societies will be orderly all right, but they will not be creative or blazing new trails. The reverse is equally true, that is, without some degree of order, creativity will disappear.
The Chinese of the 15th Century had all the necessary ingredients that could lead them and the world into greater heights and to launch their own Industrial Revolution. They already had blast furnaces and piston bellows for making steel, discovered and used gunpowder, compass, paper and printing. But a mighty emperor ruled them; his edict was law and it could not be challenged. In his wisdom he declared that those were useless inventions and ordered their activities stopped. Being an orderly society, the Chinese meekly complied. Four hundred years later the Europeans would reinvent what the Chinese were doing routinely centuries earlier.
Unlike the Chinese, these enterprising Europeans, unrestrained by a God-like emperor, were able to tinker with their inventions and collectively they ushered Europe into the Industrial Revolution.
Consider the polar opposite of China: Russia immediately preceding the Bolshevik Revolution. The chaos of a dying empire produced a slew of luminaries in both the arts and sciences. In the world of music and arts there were Stravinsky, Tchaikovsky, and Kasimir; in literature Tolstoy, Dostoevski, and Chekov; and science Mendeleyev (periodic table) and Pavlov (physiology). Living in the chaos of a dying empire and unable to revolt against the powerful Czar, they bravely challenged orthodoxies in their own fields.
Had there been order and the Czar maintained his tight grip, he could have easily squashed these super achievers with their brash new ideas and creations. Creativity thrives in chaos but without some semblance of order, those Russians could not translate their brilliant innovations into a successful economy.
“To advance and use knowledge,” writes Lester Thurow, “a society needs the right combination of chaos and order.” Too much order (China) and you have stagnation; too much chaos (Pre Bolshevik Russia) and you would not be able to capitalise on those inventions. A contemporary example would be Japan (too much order that it stifles creativity) that now remains stagnant after a brief period of advancement, and America that thrives as it has found the right combination of chaos (freedom) and order.
What is true of economic and scientific activities is also true for the arts and other creative endeavours. As noted by my favourite poet Chairil Anwar, “In Art, vitality is the chaotic state; beauty the cosmic final state.”
These same dynamics between order and chaos also operate on the level of the individual: the tension between tradition and rebellion. Einstein’s early life had all the characteristics of a drop out: he quit school, renounced his citizenship, lived at the margins of society, and indeed regarded himself as a gypsy. Those early chaotic days belied his later genius.
His General Theory of Relativity, a unitarian concept, ironically brings order to the apparent chaos that is the universe.
Chairil Anwar thrived in the chaotic days of pre-independent Indonesia. His most well known poem “Aku” (Me!) reeks with this fearless expression of rugged individualism and irrepressible yearning for freedom. To quote:
Aku ini binatang jalang (I am but a wild animal)
Dari kumpulannya terbuang (Cut from its kind)
Dan aku akan lebih tidak perduli (and I should care even less)
Aku mahu hidup seribu tahun lagi!( I want to live for a thousand years!)
If there is indeed a Malaysian Chairil Anwar out there today, he would more likely have been kicked out of school; or if he ended up at the local university, he would have been long ago been detained under the ISA. But had he been born in America today, he would have earned millions writing lyrics for some hip hop groups or be lauded as the nation’s poet laureate.
It is for this reason (too much order) that I worry about young Malays attending religious schools. The emphasis there is on blindly following what is already established, with no room for critical thinking and independent thought. Any streak of independence is quickly stamped out. I do not expect to find future agents for change in Malay society to emerge from the present religious institutions.
Malaysia, and the Malay community in particular, has its fair share of the talented and enterprising. In their preoccupation for order and emphasis on conformity, Malaysian leaders are inadvertently snuffing out the independent spirits of their citizens.
Progress depends on those daring to challenge the existing order and push the envelope beyond. Malaysian leaders must not only tolerate diversity and differences in opinions among the citizens but also more importantly, encourage and celebrate those differences. We must encourage divergent viewpoints, as we will never know which one will prove to be right. Sadly the leaders confuse unity with unanimity. Malay unity does not and should not mean Malay unanimity.
I look askance at the control freaks currently in charge in Malaysia. They have a penchant for controlling everything and everyone. They would prefer that their followers be like sheep, bleeping to their every command and following them blindly.
It is a tribute to the enduring qualities of ordinary Malaysians that they are resisting to the best of their ability to maintain their spirit of merdeka (independence). Some openly rebel and end up being punished; others pay mere lip service to obedience, yet others affect embarrassing obsequiousness to the powers that be.
Events are with the people, not the leaders. With globalization and the spread of capitalism, the pace of these changes will hasten. It is for these reasons that I urge Malaysia to embrace free enterprise enthusiastically. But as Margaret Thatcher wisely observed in her book, Statecraft, there is a difference between doing something for pragmatic reasons (because they work) and doing so out of conviction. Mrs.Thatcher was driven by convictions that enabled her to transform Britain into a modern industrial state.
Capitalism has proven itself to be the best system to bring the greatest prosperity to the largest number of people. It is also compatible and consistent with our Islamic traditions. Islam began around free markets, and it is time we return to our roots. And do so with great conviction and enthusiasm.