Shifting Alliances in the Corridors of Power


September 21, 2018

Opinion

Shifting Alliances in the Corridors of Power

 

The Pathetic Inheritors of the Corrupt UMNO Najib Legacy

COMMENT | Former minister Nazri Abdul Aziz is now brazenly saying out in the open that UMNO’s best-case scenario for future prospects is to support and team up with Anwar Ibrahim.

More than any party here by far, UMNO is a collection of fat cats.They reached their heights of obesity and opulence by sitting in the free-ride comforts of a government they never imagined losing control of.

Quite simply, almost all UMNO leaders have absolutely none of the integrity, experience, gumption, skill, drive, motivation, diligence, intelligence, passion, know-how, fibre, endurance (you get the idea) or interest really, required for being an effective or successful politician outside of the federal government.

All the UMNO fat cats really want is a shortcut that will take them from the cold rain, in which they now shiver and starve, back into the warm government mansion they grew up in, to purr and preen in comfort amidst their never-ending gravy train.

The path Nazri seems to be advocating offers exactly that, and all they apparently have to do is to create enough friction between Bersatu and PKR, and make sure that Anwar becomes the prime minister.

As detailed in Part 1 of this article, Anwar could conceivably then dump Bersatu in favour of UMNO – especially if he starts to feel that Prime Minister Dr Mahathir Mohamed may renege on his promise to hand over power.

Mahathir could of course react by calling for early elections. Perhaps it was in anticipation of such a scenario that Anwar started courting good relationships with the Malay rulers very early on, as a refusal by the palace to dissolve Parliament could complicate matters.

Mahathir taking pre-emptive measures?

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Needless to say, Mahathir is far too intelligent to let such an outflanking manoeuvre happen without a response, and calling for early elections is likely a last resort rather than the first line of defence.

I think this is the context of UMNO’s recent resignations – the post-Port Dickson timing of which could be no coincidence at all.

Not every UMNO person buys Nazri’s plan. Indeed, while most of the party members do favour the fat-cat shortcut back to power, there appears to be considerable differences of opinion as to which shortcut in particular is best.

The three main schools of thought seem to be: through PKR, through PAS, or through Bersatu.

Nazri is probably correct in pointing out that going through PAS makes pretty much no numerical or ideological sense whatsoever.

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Perhaps the likes of Mustapa Mohamed and Anifah Aman(pic, above) are leaning towards the Bersatu route.

This is an interesting response. If there is a sufficiently large migration from UMNO to Bersatu, this could basically make Bersatu the new UMNO in terms of their position in the coalition – a big, Malay party that everyone agrees will nominate the PM.

Splitting UMNO could also neutralise any effort by Anwar to use UMNO as a threat against Bersatu.

If large numbers of UMNO MPs join Bersatu, then the UMNO support may no longer be the same bargaining chip it currently is.

Then again, for all an outsider like me knows, Mustapa and Anifah could be the ones looking to join PKR.

Either way, those who have left clearly do not have faith in UMNO as a bloc, and appear to be seeking their futures elsewhere.

Two out of three

In summary, in this bizarre love triangle between Bersatu, PKR, and UMNO, almost any two-out-of-three combination essentially produces a workable win.

There are a number of other factors, and/or radical possibilities.

DAP will obviously play a big role, while PAS, PBB, Amanah, and Warisan will play slightly smaller ones. Then there is the Azmin Ali factor.

Only while writing this article did the scenario occur to me: Especially if Azmin loses the PKR Deputy President’s race, what’s to stop him from defecting over to Bersatu?

This solves a number of different problems for both Bersatu and Azmin.

If the PKR elections go on in its current trajectory, the bad blood between team Azmin and team Anwar may be irreconcilable, and Azmin’s position within PKR may no longer be tenable.

Azmin moving to Bersatu would give the party a more viable succession plan with regards to subsequent PMs (a Goh Chok Tong to Mukhriz Mahathir’s Lee Hsien Loong perhaps?), and the numbers that could follow Azmin would also, again, help with Bersatu’s low-in-parliamentary-seats problem.

An exodus from PKR to Bersatu would be even bigger if Bersatu goes multiracial – further reducing the role or need for a party like PKR.

These battle lines are perhaps already visible in the copious amount of columns, blog posts, and viral Whatsapp messages that are either very strongly pro- or anti-Anwar, suggesting a consolidated and coordinated effort.

The race factor

Needless to say, all of this is speculation – and a somewhat sensationalist one at that.

For all I know, we could see a smooth transition to Anwar becoming the next PM, a stable rota system put in place to determine future prime ministers, and Harapan continuing just the way it is, happy as a clam.

Or, it could all be unrecognisable inside a year. It’s hard to say.

All these seismic shifts are potentially possible in large part because ideology has almost never played a big role in modern Malaysian politics.

The only vital and somewhat ideological question is how much of a factor race should be in Malaysian politics. This may come into play, say if Umno MPs need to decide which new party they want to support.

Perhaps some see maintaining Malay supremacy as the priority, a goal which can only be achieved by supporting Bersatu or PAS, while others may prefer the PKR route.

Other than that, Malaysian politics can likely be said to be dominated more by personality politics than anything else. It often comes down to which feudal lord one likes better.

Transforming incentive structures

Of course, just because this is the way it is, doesn’t mean that this is the way it always needs to be. Changing the incentive structures and the architecture of our political system could largely eliminate the need for many of the conflicts above.

One radical way to drastically cut back on inter-party conflict (such as Bersatu and PKR fighting over long-term stewardship of the PM’s post), is simply for all Harapan parties to merge.

Many would cite mind-boggling logistical difficulties (true, no doubt), and extreme resistance to the idea by conservatives.

If we think about it though, what function does having multiple parties in the coalition actually serve?

The old BN model was simple, for the peninsular at least. We have one party for one race. If you are Malay and have a problem, go see UMNO; Chinese, look for MCA; Indian, MIC.

It was devilishly simple in its concept, but simply devilish in the divided Malaysia it eventually created.

What about the realities of today? Do we want to follow the old formula? Malays see Bersatu, Chinese see DAP, and Indians can see the new Malaysia Advancement Party?

A merged party will still have leaders and elected representatives from every community that voters will likely find approachable.

True, little Napoleons will perhaps find themselves with less power, but wouldn’t that be a good thing?

It’s a bold idea that is unlikely to see the light of day, but regardless, I do hope we keep looking to radical solutions to blaze paths forward and leave behind the endless internal politicking that takes up far too much time and energy of Malaysian politicians.

After all, all the intrigue and speculation is somewhat entertaining, but don’t we have a new Malaysia to govern?

YESTERDAY: Future PMs: Many possibilities within Bersatu, PKR and Umno triangle


NATHANIEL TAN is eager to serve.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Azmin Ali’s New Malay or A Remake of the 1965 Malay


September 8, 2018

Azmin Ali’s New Malay or A Remake of the 1965 Malay: It’s All Politics

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The Confused Dysfunctional Malay
“In closing, I would like to urge all thinking Malays to come together in forums and hold discourses about the New Malay beyond the congress’ simplistic resolutions. Let us debate and concretise the real values that will make this race a special contribution to civilisation.”Tajuddin Rasdi

If someone were to ask me what I thought about the recent Congress on the Future of the Bumiputeras and Nation 2018, I would have shot back a question: who was it meant for?

If it was meant for Pakatan Harapan (PH) to assure the Malays and fend off UMNO and PAS who are rallying the Malays under their “Malays are being threatened” mantra, I think UMNOno and PAS will be losing more members pretty soon, particularly those who are contractors and “kaki bodek” (sycophants).

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The New “Money Men”: Block Anwar Ibrahim-Rafizi Ramli Partnership

The message of the congress was loud and clear: PH will still support affirmative action in the economy to “help” the Malays achieve what was started in the New Economic Policy (NEP). This time, however, there will be no hanky-panky “Ali Baba Bujang Lapuk” stories about the implementation.

If the congress was a clarion call to position Prime Minister Dr Mahathir Mohamad and Economic Affairs Minister Mohamed Azmin Ali as the new “money men” who would ward off an Anwar Ibrahim-Rafizi Ramli gamble for power, it was a powerful statement of whose hands to kiss.

But if the congress was to paint a picture of a “New Malay”, as Azmin said, the whole thing was pathetic at best and embarrassing at worst. Why do I not share the euphoria of heralding the “Melayu Baru”? Simple. The “Melayu Baru” is soon to be “Melayu Lama”. Same old, same old.

My first salvo against the congress is the question on every non-Malay’s mind and that of the few thinking Malays. Didn’t the NEP of the previous government under our present leader Mahathir have any checks and double checks against the Ali Baba scenario? Were there not enough checks to ascertain whether the computer labs or stadiums could stand structurally? Is Mahathir admitting to his own carelessness or indifference?

Is the congress now trying to convince taxpayers that Malays are, again, to be given the trust to carry out projects with new measures of checks and double checks?

I may not be an administrator or a contractor but I know enough to say that there are, even now, procedures upon procedures for purchasing materials and awarding contracts. What happened then was that greedy, opportunistic Malays – including civil servants, elected officials and even professionals – took cuts and everybody became happy, even though the roofs of stadiums and laboratories collapsed.

As a taxpayer, I am not buying the assurances of Azmin or Mahathir regarding affirmative action for the “Melayu Baru”. To me, the only difference between the Melayu now in government and the Melayu then in power is the colour of their party symbols. My crystal ball says that the Melayu PH will be no different from the Melayu BN. Dua kali lima saja (the same).

My second salvo is my extreme disappointment that the congress did not outline the new values of the “Melayu Baru”. The speeches of Mahathir and Azmin and the question and answer session with Mahathir were one big fat near-zero on the values that would make the Malays a more civilised, enlightened and caring citizenry – a citizenry that others can look up to as well as have deep respect for.

Only in Anwar’s speech was there some inkling of this, but I will deal with that in my last point. I was hoping the congress might talk about the “Melayu Baru” having values of “keterbukaan” or openness. The Malays should be more open to new ideas of work culture, new interpretations of religious texts other than those of ignorant ustazs and officials, and new values of other cultures that can be adopted.

The opposite of this value is “kejumudan” which means the closing of the mind to new ideas and thoughts.

I would also have liked it if the congress had touched on the values of “kesederhanaan” or humility in which the Malays must get away from their superiority mindset. The opposite of this value is “ketakburan” or “kebongkakan” which signifies arrogance where one feels superior in every way to others. If a race feels like that, it will never learn anything from others.

Mahathir himself urged the Malays to learn from the Japanese work culture and the industrious nature of the Chinese. One weak point about Mahathir is that he is quick to isolate the traits he wants of a culture but does not recognise the underlying values stemming from that religion and that culture’s belief system.

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Malays, for instance, always look to their version of Islam as their guide and shun other thoughts and principles such as those in the Tao Te Ching or the Bhagavad Gita or Shintoism. But this is where the values of those cultures come from.

A good trait in a culture or community cannot be seen in isolation from its value system. This is also one reason why the NEP failed to distribute in a more meaningful manner the wealth cultivated by the few BN warlords.

I would also like to see the value of “keihsanan” or compassion towards all life becoming part of the everyday life of the “Melayu Baru”.

Do Azmin and company view projects and efficient management as the only key to the success of the economy of the New Malays? Any economic guru would point out that “keterbukaan”, “kesederhanaan” and “keihsanan” play a major role in how the economy is managed.

Mahathir himself alluded to the problem of education when he said our children were being taught to memorise information but possessed no real values to turn the information into meaningful products because religion was taught in a manner that had little value. The value of “keberusahawanan” as opposed to “ke-Ali-Babaan” has been touched on many times by Mahathir, who is genuinely disappointed with the Malays who cannot follow his own personal work-hard ethos.

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How will the Malays react to being part of a multiracial nation after the congress? Only Anwar alluded to it but he was given the least attention and time. Anwar is the author of the book “The Asian Renaissance”. I read it cover to cover 20 years ago when PKR was formed. I previously asked leaders of the party why they did not use the book as their “bible”. The answer is obvious after 20 years. The Malays are not ready for the new idea of a global civilisational construct based on the spiritual values of Eastern faiths.

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Make No Mistake: For Politics they are Malay First to remain in Power

Ninety nine percent of Malays want to be like Muhyiddin Yassin who once declared “I am Malay first, Malaysian second”. I think Anwar has the solution to the New Malays and it is in the book “The Asian Renaissance”. The first person who should read the book is Rafizi, followed by his lieutenants.

We Malays now have the wealth, intelligence and raw materials but we lack a wholesome value system which will make us a formidable global player. Alas, the Malays in PH, UMNO and PAS want to be “jaguh kampung” (village champions) and stay safe and snug under their own “tempurungs” (shells).

In closing, I would like to urge all thinking Malays to come together in forums and hold discourses about the New Malay beyond the congress’ simplistic resolutions. Let us debate and concretise the real values that will make this race a special contribution to civilisation.

Tajuddin Rasdi is a professor of Islamic architecture at UCSI University.

The views expressed are those of the author and do not necessarily reflect those of FMT.

Longing for a kinder, compassionate, more humane and freer Malaysia.


September 7, 2018

Tough Love: Longing for a kinder, compassionate, more humane and freer Malaysia.

by Zainah Anwar

http://www.thestar.com.my

THIS time last year, I wrote about my longing for a better Malaysia, and how my utter belief that this was possible would always triumph over my many moments of despair. There was just too much good in this country for us to ever give up hope.

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And this year, as we celebrate our 61st year of Merdeka, I am simply thrilled. Thrilled that what most people thought was impossible, became possible. Malaysia bucked the global trend and voted into power a reformist government, throwing out a kleptocratic government and a ruling party that had held uninterrupted power since independence in 1957.

The election of a reform-minded government that believes in an inclusive Malaysia and eschews the use of race and religion for political gain does not of course mean we are home free. It is important that we who voted for change remain vigilant that the Pakatan Harapan government delivers on its promises of transformation. And to do this transparently and in consultation with stakeholders.

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Malaysia’s autocrat turned reformer: at 93 can he deliver?

Politicians and voters now realise the power of the ballot box. It cannot be business as usual, replacing one set of economic and political elites with another set whose priorities will be to divide the spoils of victory.

As we welcome the first Merdeka and Malaysia Day under this new Malaysia, I have many wishes for the kind of country I want to live in.

First, I wish to see our ministers summon the political will and courage, and build their knowledge and strategies on how to deliver their reform agenda. And not least, how to stand their ground and defend what is just and what is right, in the face of opposition. We in civil society are tired of seeing too many ministers over the decades retreating in the face of criticism from ideologues, instead of defending a principled position.

Many NGOs, activists, academics, professionals who have long been working on issues such as human rights, women’s rights, education reform, poverty eradication, and economic justice, stand ready to support this government with the kinds of data, analysis, policy instruments, arguments and strategies needed to deliver on the reform agenda and build public support for this urgent necessity for change.

We want to see this government succeed in making this country a just home for all. We pray this government does not squander that goodwill.

Second, I wish to live in a kinder, compassionate, more humane Malaysia. It pains me to see the frenzy of hate, attacks, violence, demonisation of the LGBTIQ community in the country. Why this obsession with another citizen’s sexual orientation and gender identity? The debate is not about same-sex marriage or even about the halal or haram of their sexuality. It is about the right of LGBTIQ people to freedom of movement, their right to work, to health and to live a life free from violence. Why should that be contentious? They are citizens of this country and entitled to the same fundamental rights that other citizens enjoy.

It is obvious that the issue has been whipped up as a political tactic to generate hate and fear, spearheaded by those opposed to the reform agenda of the new government. So they stir up controversies in order to rebuild lost ground. And politicians fearful of losing popular support cave in, so quickly, so easily, so thoughtlessly.

How could a small, oppressed, and discriminated community who actually live in fear on a daily basis, and who long to live in peace and dignity ever pose a threat to Malaysian society? How could an all-knowing compassionate God ever condone cruelty against his own creations just because they are different? So let’s be confident in our faith and believe that if God really wanted all of us to be the same, he would have done so.

Third, I wish to see an end to corruption that has been long fuelled by the intricate web of business and politics in this country. Professor Terrence Gomez’s just released research findings on Government in Business reveal a mind-boggling labyrinth of thousands of GLCs at federal and state levels, most of them unlisted and thus, unscrutinised. There are of course GLCs that are professionally run. But many also serve as tools of patronage and as vehicles to provide politicians with monthly directors’ fees to support their political ambition – at best.

At worst, official investigations and media revelations of outright corruption, criminal breach of trust, and asset stripping display a spectacle of unbelievable greed and betrayal of trust.

Tun Dr Mahathir Mohamed himself has called such GLCs “monsters” that have deviated from their original noble intention of helping the poor.

The Head of the Council of Eminent Persons, Tun Daim Zainuddin, has promised that this time the government wants to get it right in delivering its bumiputra empowerment policy.

We all wait with bated breath, for this country cannot endure, economically, politically and socially, yet more decades of affirmative action on the basis of race rather than need, and all the consequent distortions and abuses that had benefited the economic and political elites.

Fourth, I wish to live in a country where the political leaders and the citizens embrace our diversity as a source of strength, and not a threat. And to walk the talk. It is imperative that the new government sets the tone that it will not tolerate further manufacturing of a siege and crisis mentality among the Malays and supremacist speeches in the name of race and religion to incite hatred and fear of “others”.

This country was on the verge of implosion, and it was the wisdom of the rakyat that saved us, when with courage we voted into power a reformist party.

I was in Bangkok last week to give a talk on identity politics in South-East Asia together with speakers from Indonesia and Myanmar. They were depressed about the political developments in their countries, and my optimism on Malaysia was tempered by the reality that they too had earlier voted in reformist leaders who have now succumbed to the politics of race and religion in order to remain in power.

But I would like to believe that Malaysia is different as we have strong antecedent resources that will put us in good stead in moving forward on a reform agenda. Most importantly is the entrenched belief that this country cannot survive nor prosper without the three major races accepting each other and learning to give and take in sharing equitably the wealth of the nation. It can never be a winner take all game in Malaysia.

Second, we have a significant minority population. This means there is a limit to how far the majority group can use race and religion to serve the interest of the ruling elite, before paying a high political cost for its relentless transgressions, or complicity in its inaction and silence.

Third, while things are far from perfect, our long record of economic growth, poverty reduction, and strong state apparatus put us in good stead that a more open and robust democracy will not be destabilising, and can lead to a more inclusive Malaysia.

Moreover, a large educated Malaysian middle-class and a strong business community eschew any hint of violence or chaos or extremism, and there is a growing critical mass of voters, not least from among the young, who expect their freedoms and rights to be upheld.

And more than anything, the rakyat feel very precious about what we have achieved. As much as we are willing to give Pakatan Harapan the support it needs and the time, too, to deliver on its reform agenda, we have learnt from the mistakes made in the past. We are no longer willing to acquiesce in silence in the wrongdoings and abuses in powerful places, in return for stability and prosperity.

This is the new Malaysia where it will be tough love for all.

New York Times : Malaysia pushes back against China’s Vision


August 24, 2018

New York Times :Malaysia pushes back against China’s Vision on account of Najib Razak’s stupidity

Continue reading

Demonizing State-Owned Enterprises


August 14, 2018

Demonizing State-Owned Enterprises

 

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Historically, the private sector has been unable or unwilling to affordably provide needed services. Hence, meeting such needs could not be left to the market or private interests. Thus, state-owned enterprises (SOEs) emerged, often under colonial rule, due to such ‘market failure’ as the private sector could not meet the needs of colonial capitalist expansion.

Thus, the establishment of government departments, statutory bodies or even government-owned private companies were deemed essential for maintaining the status quo and to advance state and private, particularly powerful and influential commercial interests.

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SOEs have also been established to advance national public policy priorities. Again, these emerged owing to ‘market failures’ to those who believe that markets would serve the national interest or purpose.However, neoliberal or libertarian economists do not recognize the existence of national or public interests, characterizing all associated policies as mere subterfuges for advancing particular interests under such guises.

Nevertheless, regardless of their original rationale or intent, many SOEs have undoubtedly become problematic and often inefficient. Yet, privatization is not, and has never been a universal panacea for the myriad problems faced by SOEs.

Causes of inefficiency

Undoubtedly, the track records of SOEs are very mixed and often vary by sector, activity and performance, with different governance and accountability arrangements. While many SOEs may have been quite inefficient, it is crucial to recognize the causes of and address such inefficiencies, rather than simply expect improvements from privatization.

First, SOEs often suffer from unclear, or sometimes even contradictory objectives. Some SOEs may be expected to deliver services to the entire population or to reduce geographical imbalances. Other SOEs may be expected to enhance growth, promote technological progress or generate jobs. Over-regulation may worsen such problems by imposing contradictory rules.

Privatization has never been a universal panacea. One has to understand the specific nature of a problem; sustainable solutions can only come from careful understanding of the specific problems to be addressed. To be sure, unclear and contradictory objectives – e.g., to simultaneously maximize sales revenue, address disparities and generate employment — often mean ambiguous performance criteria, open to abuse.

Typically, SOE failure by one criterion (such as cost efficiency) could be excused by citing fulfillment of other objectives (such as employment generation). Importantly, such ambiguity of objectives is not due to public or state ownership per se.

Second, performance criteria for evaluating SOEs — and privatization — are often ambiguous. SOE inefficiencies have often been justified by public policy objectives, such as employment generation, industrial or agricultural development, accelerating technological progress, regional development, affirmative action, or other considerations.

Ineffective monitoring, poor transparency and ambiguous accountability typically compromise SOE performance. Inadequate accountability requirements were a major problem as some public sectors grew rapidly, with policy objectives very loosely and broadly interpreted.

Third, coordination problems have often been exacerbated by inter-ministerial, inter-agency or inter-departmental rivalries. Some consequences included ineffective monitoring, inadequate accountability, or alternatively, over-regulation.

Hazard

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Moral hazard has also been a problem as many SOE managements expected sustained financial support from the government due to weak fiscal discipline or ‘soft budget constraints’. In many former state-socialist countries, such as the Soviet Union and Yugoslavia, SOEs continued to be financed regardless of performance.

Excessive regulation has not helped as it generally proves counter-productive and ultimately ineffective. The powers of SOEs are widely acknowledged to have been abused, but privatization would simply transfer such powers to private hands.

Very often, inadequate managerial and technical skills and experience have weakened SOE performance, especially in developing countries, where the problem has sometimes been exacerbated by efforts to ‘nationalize’ managerial personnel.

Often, SOE managements have lacked adequate or relevant skills, but have also been constrained from addressing them expeditiously. Privatization, however, does not automatically overcome poor managerial capacities and capabilities.

Similarly, the privatization of SOEs which are natural monopolies (such as public utilities) will not overcome inefficiencies due to the monopolistic or monopsonistic nature of the industry or market. The key remaining question is whether privatization is an adequate or appropriate response to address SOE problems.

Throwing baby out with bathwater

SOEs often enjoy monopolistic powers, which can be abused, and hence require appropriate checks and balances. In this regard, there are instances where privatization may well be best. Two examples from Britain and Hungary may be helpful.

The most successful case of privatization in the United Kingdom during the Thatcher period involved National Freight, through a successful Employee Stock Ownership Plan (ESOP). Thus, truck drivers and other staff co-owned National Freight and developed personal stakes in ensuring its success.

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In Hungary, the state became involved in running small stores. Many were poorly run due to over-centralized control. After privatization, most were more successfully run by the new owners who were previously store managers. Hence, there are circumstances when privatization can result in desirable outcomes, but a few such examples do not mean that privatization is the answer to all SOE problems.

Privatization has never been a universal panacea. One has to understand the specific nature of a problem; sustainable solutions can only come from careful understanding of the specific problems to be addressed.

 

Dr. Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

 

 

NY Times Book Review: Looking Back@Crash of 2008


August 11, 2018

CRASHED

By Dr. Fareed Zakaria

How a Decade of Financial Crises Changed the World
By Adam Tooze
706 pp. Viking. $35.

Steve Bannon can date the start of the Trump “revolution.” When I interviewed him for CNN in May, in Rome, he explained that the origins of Trump’s victory could be found 10 years ago, in the financial crisis of 2008.

“The implosion of those world capital markets has never really been sorted out,” he told me. “The fuse that was lit then that eventually brought the Trump revolution is the same thing that’s happened here in Italy.” (Italy had just held elections in which populist forces had won 50 percent of the vote.)

Adam Tooze would likely agree. An economic historian at Columbia University, he has written a detailed account of the financial shocks and their aftereffects, which, his subtitle asserts, “changed the world.”

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If journalism is the first rough draft of history, Tooze’s book is the second draft. A distinguished scholar with a deep grasp of financial markets, Tooze knows that it is a challenge to gain perspective on events when they have not yet played out. He points out that a 10-year-old history of the crash of 1929 would have been written in 1939, when most of its consequences were ongoing and unresolved. But still he has persisted and produced an intelligent explanation of the mechanisms that produced the crisis and the response to it. We continue to live with the consequences of both today.

CreditTyler Comrie; Photograph courtesy of GSO/Getty Images

As is often the case with financial crashes, markets and experts alike turned out to have been focused on the wrong things, blind to the true problem that was metastasizing. By 2007, many were warning about a dangerous fragility in the system. But they worried about America’s gargantuan government deficits and debt — which had exploded as a result of the Bush administration’s tax cuts and increased spending after 9/11. It was an understandable focus. The previous decade had been littered with collapses when a country borrowed too much and its creditors finally lost faith in it — from Mexico in 1994 to Thailand, Malaysia and South Korea in 1997 to Russia in 1998. In particular, many fretted about the identity of America’s chief foreign creditor — the government of China.

Yet it was not a Chinese sell-off of American debt that triggered the crash, but rather, as Tooze writes, a problem “fully native to Western capitalism — a meltdown on Wall Street driven by toxic securitized subprime mortgages.”Tooze calls it a problem in “Western capitalism” intentionally. It was not just an American problem. When it began, many saw it as such and dumped the blame on Washington.

In September 2008, as Wall Street burned, the German Finance Minister Peer Steinbruck explained that the collapse was centered in the United States because of America’s “simplistic” and “dangerous” laissez-faire approach. Italy’s finance minister assured the world that its banking system was stable because “it did not speak English.”

 

In fact this was nonsense. One of the great strengths of Tooze’s book is to demonstrate the deeply intertwined nature of the European and American financial systems. In 2006, European banks generated a third of America’s riskiest privately issued mortgage-backed securities. By 2007, two-thirds of commercial paper issued was sponsored by a European financial entity.

The enormous expansion of the global financial system had largely been a trans-Atlantic project, with European banks jumping in as eagerly and greedily to find new sources of profit as American banks. European regulators were as blind to the mounting problems as their American counterparts, which led to problems on a similar scale. “Between 2001 and 2006,” Tooze writes, “Greece, Finland, Sweden, Belgium, Denmark, the U.K., France, Ireland and Spain all experienced real estate booms more severe than those that energized the United States.”

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Credit Sonny Figueroa/The New York Times

 

But while the crisis may have been caused in both America and Europe, it was solved largely by Washington. Partly, this reflected the post-Cold War financial system, in which the dollar had become the hyper-dominant global currency and, as a result, the Federal Reserve had truly become the world’s central bank. But Tooze also convincingly shows that the European Central Bank mismanaged things from the start.

The Fed acted aggressively and also in highly ingenious ways, becoming a guarantor of last resort to the battered balance sheets of American but also European banks. About half the liquidity support the Fed provided during the crisis went to European banks, Tooze observes.

Before the rescue and even in its early stages, the global economy was falling into a bottomless abyss. In the first months after the panic on Wall Street, world trade and industrial production fell at least as fast as they did during the first months of the Great Depression. Global capital flows declined by a staggering 90 percent. The Federal Reserve, with some assistance from other central banks, arrested this decline. The Obama fiscal stimulus also helped to break the fall.

 

Tooze points out that almost all serious analyses of the stimulus conclude that it played a significant positive role. In fact, most experts believe it ended much too soon. He also points out that large parts of the so-called Obama stimulus were the result of automatic government spending, like unemployment insurance, that would have happened no matter who was president. And finally, he notes that China, with its own gigantic stimulus, created an oasis of growth in an otherwise stagnant global economy.

The rescue worked better than almost anyone imagined. It is worth recalling that none of the dangers confidently prophesied by legions of critics took place. There was no run on the dollar or American treasuries, no hyperinflation, no double-dip recession, no China crash.

American banks stabilized and in fact prospered, households began saving again, growth returned slowly but surely. The governing elite did not anticipate the crisis — as few elites have over hundreds of years of capitalism. But once it happened, many of them — particularly in America — acted quickly and intelligently, and as a result another Great Depression was averted. The system worked, as Daniel Drezner notes in his own book of that title.

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A trader on the floor of the New York Stock Exchange in February 2009. CreditJames Estrin/The New York Times

 

But therein lies the unique feature of the crash of 2008. Unlike that of 1929, it was not followed by a Great Depression. It was not so much the crisis as the rescue and its economic, political and social consequences that mattered most. On the left, the entire episode discredited the market-friendly policies of Tony Blair, Bill Clinton and Gerhard Schroeder, disheartening the center-left and emboldening those who want more government intervention in the economy in all kinds of ways. On the right, it became a rallying cry against bailouts and the Fed, buoying an imaginary free-market alternative to government intervention.

Unlike in the 1930s, when the libertarian strategy was tried and only deepened the Depression, in the last 10 years it has been possible for the right to argue against the bailouts, secure in the knowledge that their proposed policies will never actually be implemented.

Bannon is right. The crash brought together many forces that were around anyway — stagnant wages, widening inequality, anger about immigration and, above all, a deep distrust of elites and government — and supercharged them. The result has been a wave of nationalism, protectionism and populism in the West today. A confirmation of this can be found in the one major Western country that did not have a financial crisis and has little populism in its wake — Canada.

The facts remain: No government handled the crisis better than that of the United States, which acted in a surprisingly bipartisan fashion in late 2008 and almost seamlessly coordinated policy between the outgoing Bush and incoming Obama administrations. And yet, the backlash to the bailouts has produced the most consequential result in the United States.

Tooze notes in his concluding chapter that experts are considering the new vulnerabilities of a global economy with many new participants, especially the behemoth in Beijing. But instead of a challenge from an emerging China that began its rise outside the economic and political system, we are confronting a quite different problem — an erratic, unpredictable United States led by a president who seems inclined to redo or even scrap the basic architecture of the system that America has painstakingly built since 1945.

How will the world handle this unexpected development? What will be its outcome? This is the current crisis that we will live through and that historians will soon analyze.

Dr. Fareed Zakaria is a CNN anchor, a Washington Post columnist and the author of “The Post American World.”

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A version of this article appears in print on , on Page 1 of the Sunday Book Review with the headline: The Aftershocks.