In good times and in bad … we need social democracy

The introduction of social safety nets and policies to safeguard the people’s livelihoods should not wait until a moment of crisis, Johan Saravanamuttu writes. 

As I watched Prime Minister Muhyiddin Yassin presenting his massive “RM250bn” “caring” economic stimulus package on TV on 27 March 2020, the first thought that came to my mind was whether the time of social democracy in Malaysia had arrived. 

Several highly respected commentators were impressed with the rapid and decisive government intervention to contain the coronavirus epidemic and the measures proposed to ease its damaging impact on ordinary citizens. One such response came from Socialist Party of Malaysia (PSM) chairperson Dr Jeyakumar Devaraj, a two-term parliamentarian, who felt the government was on the right track.

It certainly appeared to be so. The wide-ranging measures in the stimulus package included purportedly RM128bn for the people’s welfare, RM100bn to support businesses, including small and medium-sized enterprises (SMEs), and another RM2bn to strengthen the economy.

This was on top of the RM20bn earlier allocated by the Mahathir government. And on 6 April RM10bn more was injected into the package, showing the government’s earnestness in tackling the crisis.

However, many have noted that the actual fiscal (or cash) injection was RM25bn, a tenth of the package. Other criticisms included the inadequacy of measures for the SMEs, that cash handouts were going to the wrong groups and that hardly any consultation with the most affected groups had been conducted.

Crucially, there was no presentation or deliberation of the package before lawmakers in Parliament.

My purpose in this essay is to demystify the government package and to further unpack how such policies should look if they were indeed “caring” and qualify as social democratic measures. My view will be a wholly personal one, although I draw from the critiques of other writers.

A brief word about social democracy and what it entails.

First, social democracy accepts that capitalism is necessary to our economic moment in history.

Second, two important terms have to be understood: market failure and state failure.

Advocates of social democracy point to why the market fails to address the basic needs of individuals.

In contrast, deniers argue that state failure is why governments are the wrong entities to undertake any sort of enterprise.

The debate is ongoing. US Democrat presidential candidate Bernie Sanders (who has just dropped out of the race) placed social democratic policies at the centre of his campaign, drawing significant support from the young especially.

Readers can draw their own conclusions on the debate, but let me make one further point. Social democracies do vary in the degree of state interventions and, regarding progressive taxation, on how high fiscal levies should be on the rich. French economist Thomas Piketty famously suggested that taxes on the super-rich should be as high as 90%.

As for Malaysia, it is clearly a state articulating within the global order of neoliberal capitalism, ie it adheres to market-driven rules globally and at home. A minor deviation from this neoliberal norm is that bumiputera-oriented policies have been in place since 1971.

Holding this factor constant, the proper introduction of social democratic policies in Malaysia must assure all segments of society, in good times and in bad, a livelihood, basic healthcare and other social safety nets, regardless of ethnicity, social station, cultural and sexual orientation.

As noted by Terence Gomez, should not the highly profitable government-linked companies contribute a fair share to the package? Finance Minister Tengku Zafrul Tengku Abdul Aziz referred to this “government ecosystem” of government-linked companies and how they could contribute to easing the crisis. However, beyond words, we have not heard of any significant measures that these firms can actually implement.  

The giants among these government-linked companies include utilities-based Tenaga Nasional and Telekom and financial institutions such as Maybank, CIMB, RHB Bank and Bank Islam. The provision of free internet in the stimulus package is but a pittance that Telekom can easily contribute.

This ecosystem includes pension and savings funds, such as the Employees Provident Fund and Permodalan Nasional Berhad, and statutory bodies like Mara and the Federal Land Development Authority (Felda).

Contrary to social democratic principles, employees have been allowed to withdraw RM500 of their own retirement savings from EPF for the next six months. If they do, they would automatically lose the dividends they could have earned while spending their precious retirement savings now.

Significantly, as noted by the Women’s Aid Organisation (WAO), Malaysian workers comprise 4.9 million active male EPF contributors and 3.3 million active female EPF contributors. Together, they account for only 54% of the labour force, leaving out a sizeable minority.

The WAO stressed that the stimulus package ignored a substantial segment of vulnerable individuals, including the self-employed, informal workers and unpaid family workers, who are disproportionately women, making up a quarter of this group. 

Another obvious flaw of the stimulus package is the RM500 handout to over one million civil servants, Grade 56 and below, including pensioners, who already have a fixed salary.

Lim Mah Hui has suggested that the package raises a plethora of issues. He said the package should have been one based on “the principle of sharing pain” and that the well-to-do should sacrifice more than low-income earners.

What Lim and others have called for are, in fact, safety nets and social security for workers – a cardinal principle of social democracy.

These safety nets must not just apply to Malaysians but also to the 3.3 million regular and million-plus irregular foreign migrant workers, who have become the underbelly of Malaysia’s thriving economy. Nothing in the stimulus package addresses this.

Finally, let me refer to Jeyakumar’s comment that we are in a time of market failure.

In times of market failure, the state invariably bails out the well-heeled, not the weak segments of society. Known as the problem of “moral hazard” during the financial crises of 1997/98 and 2008, the first call of duty for many governments the world over was to rescue failing enterprises and not the poor segments of society.

In the current coronavirus pandemic, the same thing seems to be happening again.

Policies such as attending to the people’s livelihoods should not wait until a moment of crisis. This is the very problem that has to be tackled if we are to advance social democracy in Malaysia. Safety nets should be implemented as a regular measure to ensure that the most vulnerable groups of society and the millions of workers, local and migrant, who sustain enterprises from regular market failure, are looked after.

We must also ensure that citizens don’t always have to carry the burdens of the rich in bad times when their enterprises already profit disproportionately from the work of ordinary employees in good times.

This lesson from the coronavirus pandemic could be the silver lining that ushers in a thorough-going introduction of social democratic policies in Malaysia.

Johan Saravanamuttu
Co-editor, Aliran newsletter
9 April 2020

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

AGENDA RAKYAT - Lima perkara utama

1. Tegakkan maruah serta kualiti kehidupan rakyat
2. Galakkan pembangunan saksama, lestari serta tangani krisis alam sekitar
3. Raikan kerencaman dan keterangkuman
4. Selamatkan demokrasi dan angkatkan keluhuran undang-undang
5. Lawan rasuah dan kronisme

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