Actually, free market capitalism is good!

Free market capitalism is facing a hard time. Many are blaming the free market for the economic crisis facing the world. In a country like Malaysia, where there is serious misunderstanding about what free market capitalism really is, it is much easier, and perhaps more politically popular, to join the free market-bashing fiesta than to speak the truth.

When I was in primary school in rural Perlis, I knew nothing about free market capitalism. But I was introduced to the concept during my later years in Sekolah Alam Shah. In fact, as president of Badan Ugama Sekolah Alam Shah (Busas), I delivered several tazkirah about the ills facing society. At that time, capitalism was in my list of social ills.

My scepticism towards capitalism continued when I boarded at Tonbridge School, England, and throughout my university years in the United Kingdom. As an active member in Hizbi UK, a group with close links to PAS, I never hesitated to criticise free market capitalism whenever I was given a platform.

The opportunities increased when I became president of the organisation. Not only did I continue bashing capitalism, I even helped shape how the bashing should be done. What a fun time it was!

So why did I change from someone who would grab the first opportunity to bash capitalism to someone who actively promoted and defended the free market, which is a lot less fun?

The answer is simple. Knowledge.

Knowledge the key

I must admit that when I was happily bashing capitalism, I didn't really know what the word meant. I was told by teachers and friends that capitalism is bad. Capitalism victimises the poor. Capitalism is greed. Capitalism is evil. Never once did I ask: "What exactly is capitalism?"

In short, I was merely blindly following the crowd. There is an Arabic word for that. That word is taqlid .

I see so much blind following these days, especially when it comes to bashing free market capitalism. And still, many people continue to be confused about the true meaning of free market capitalism. The global economic crisis makes capitalism-bashing not just more politically popular, but also easier. After all, was it not capitalism that caused the crisis?

Well, not quite.

A policy document published in November 2008 by a group of think tanks from around the world, including the Malaysia Think Tank, argued that there were other factors that contributed to creating the crisis.

These included flawed monetary policies and government regulations, the roles played by government- linked companies such as Freddie Mac and Fannie Mae, the existence of government guarantees that did not allow certain companies to fail, and the granting of privileged roles by governments to certain credit rating agencies.

In short, governments played an extensive role in causing the economic crisis, and they were helped by cronies operating in the market. It was not free market capitalism that was to be blamed. It was government intervention. And that is much closer to socialism than anything else.

In Malaysia we had our own experience of pseudo-capitalism. The 1980s saw a mass 'privatisation' of various government-owned companies. Under the guise of Malaysia Inc., companies that were previously state-owned were denationalised.

Privatisation done properly benefits all. Demolishing government monopolies and introducing competition brings incentives for efficiency and innovation into the provision of services to the public.

But the privatisation of the 1980s lacked the crucial element of competition. They were often no more than a transfer of monopoly from the government to the government's cronies. It was cronyism, not capitalism.

‘Pseudo-capitalism’

Rather than bringing benefits to the people, which is what the free market would do, it only made those who were well-connected to the political elites, richer. Similarly, that is the real reason behind the huge opposition to the recent proposal to 'privatise' the National Heart Institute.

Indeed, despite the many sacrifices we made to defeat the forces of communism, Malaysia's experience of faux privatisation in the 1980s helped swing the pendulum the other way to the extent that there is now widespread scepticism of, and confusion about, free market capitalism.

Looking at the issue globally, of course critics would never highlight how much benefit the free market has brought to developing economies around the world. That would not help their cause.

Have we ever asked what reform is taking place in China that made its economy grow so quickly? What policies did India introduce that have brought the country closer to becoming an economic giant?

Until recent months, before the economic crisis engulfed the world, we heard time and time again that both India and China were fast becoming economic giants. How did they get there?

The answer is more free trade. Both countries, like many other developing countries around the world, are benefitting tremendously from increased liberalisation and globalisation. Free market capitalism is not hurting the poor, it is helping to bring the poor out of poverty. That is a fact.

Doubtless, it is imperative that we base our opinions on facts. And that is also why we at the Malaysia Think Tank have worked hard to bring scholars from both India and China to Akademi Merdeka from Jan16 to18 to discuss how their countries have benefitted from the free market and capitalism, and why socialism would be disastrous.

We will also have experts from Pakistan and the United Kingdom, in addition to Malaysia, to debate globalisation.

The whole purpose of Akademi Merdeka is to impart knowledge. After all, it was knowledge that made me realise that, actually, free market capitalism is good.

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WAN SAIFUL WAN JAN is director-general of the Malaysia Think Tank. Details of Akademi Merdeka, which will take place on Jan 16-18, can be found on www.WauBebas.org