Mahathir Mohamad: 'Limits' to democracy key to Malaysia's economic success

By Felipe Salvosa II

Former Malaysian Prime Minister Mahathir Mohamad touted his multi-racial country’s economic success in a university lecture yesterday, saying Malaysia’s phenomenal growth was hinged on pro-business policies accompanied by “limits” to democracy.

Mahathir also blasted the excesses of Western financial markets and said European society, which is reeling from Greece’s sovereign debt crisis, has been living beyond its means by maintaining generous compensation schemes, huge bonuses, and short working hours.

“We applaud democracy but democracy works only when people understand the limitations of democracy,” Mahathir said during a special convocation of the Pontifical University of Santo Tomas.

Photo by Sherwin Vardeleon

“We are seeing the collapse of moral values and of beliefs. All the things that we used to value are being questioned, scrutinized and in many cases rejected, to be replaced by what is called freedom, freedom which is enjoyed by some at the expense of others, often at the expense of the community as a whole,” he said.

Mahathir repeated his call for a new Bretton Woods summit to look into the currency and banking systems, pointing out that markets had created financial products that did not exist and then gambled on them to the detriment of the global economy. During the 1997 Asian financial crisis, Malaysia did not require such huge bailouts given to US banks during the subprime mortgage meltdown, he pointed out.

“We did not print money,” said Mahathir, who defied the International Monetary Fund by imposing capital controls and putting a peg on the ringgit during the Asian crisis. Mahathir, a physician by training, noted that he is not an economist and therefore “not bound by economic theories.”

“Markets are not efficient. [US President Ronald] Reagan’s decision not to regulate markets was the worst decision ever made,” he said.

Mahathir, 86, flew in by private jet to Manila to accept an honorary professorship from UST Rector Fr. Herminio Dagohoy, O.P., who lauded the Malaysian leader for questioning “unfounded” distinctions between the first and third worlds.

Mahathir’s 22-year rule up to 2003 saw economic growth of up to 9%, but was marked by curbs on civil liberties and allegations of abuse of power, as well as his falling out with deputy premier Anwar Ibrahim, who was jailed over sodomy charges.

Malaysia had no choice but to let in foreign investors and even its old colonial masters to achieve industrialization, dangling perks such as tax holidays, Mahathir explained. The government, meanwhile, spent a quarter of the national budget on education and training. Eventually, economic activity flourished and the government used increased tax revenues to build infrastructure, which in turn attracted even more investors, he said.

Adopting the “classic Asian strategy,” Malaysia started out by “adding value” to imported raw materials and exporting the output, he recalled. Now, Malaysian exports are valued at $100 billion annually, double that of the Philippines.

Mahathir however said he still preferred democracy over autocracy, because in the former, governments could be overthrown by casting a ballot. “We see democracy principally as providing an easy way to change governments. No revolution, no civil wars, no Arab spring,” said Mahathir, whose old political coalition -- in power since Malaysia’s independence -- is said to be on the brink of losing next year’s general elections.

But Malaysia is not a liberal democracy, he said. “Too much democracy,” he warned, could lead to anarchy. “We cannot assume that majority of the people are intelligent … If we don’t manage democracy well, it won’t pay dividends,” he said.

Without naming names, he spoke of a country in which leaders have been elected and driven out of office by popular demonstrations. “[D]emocracy … has not resulted in the people enjoying a better life than when they were under autocratic rule,” he noted. In a democracy, he said, “Leadership must play a crucial role. Leaders must be incorruptible.”

Mahathir himself had to deal with claims of corruption and cronyism during his rule, but often points out that he had been investigated and cleared.

He reminded yesterday’s audience that corrupt dictators held on to power due to fear of retribution from the people and being killed. In the first place, “So very often leaders are mediocre, present company accepted.”

“All we need [are] leaders and people who love their country more than they love themselves,” he said.

Mahathir called on the Association of Southeast Asian Nations to maximize its market of 500 million people but downplayed talk of a rebirth of the so-called Asian Century. “Asia cannot exist by itself. It needs Europe and other parts of the world.”

BusinessWorld, June 12, 2012