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East Asian Economic Integration

Economics and Public Policy in East Asia.

Diversity - Let it strengthen us and not divide us

This past few weeks have been tumultuos for Malaysia and also globally. The subprime crisis now leading to a financial meltdown. Even India and China, the current juggernut in the Asian region have not been spared (read here and here).

Perhaps, at a time like this, it is important to come together to address this global crisis. China should especially step up to take a leading position in addressing this crisis.

Which leads me to the point I want to make. Can we celebrate diversity? Can we see that diversity is a pluss and not a negative. As Barack Obama (hopefully the next President of the United States of America) will say - that the sum of each of us are greater than the parts.
This is especially a challenge in my country Malaysia. Somehow the ruling party fails to understand the strengths of our diverse country. Appreciating diversity is key to surviving in this globalised world. This posting is especially for my Malaysian friends, especially those in the government.

In 2003, the Supreme Court of the United States upheld the right of universities to consider race in admissions procedures in order to achieve diverse student body. The landmark decision in support of affirmative action noted that while quotas are unconstitutional, diversity is congruent with the U.S. Constitution. Most importantly, the decision approved a model for universities on how to enrol a student body that is both academically excellent and racially integrated.

Diversity is a positive value. Nature thrives only through diversity. Diversity, as a philosophy, is liberating as persons are recognised for their uniqueness, heritage, talent and capabilities. It enhances the self-esteem of the individual, as the individual is selected not as an obligation but through set criteria. It leads to a more complete person that does not need to assert ones heritage, ethnicity, belief, ideology, social status, physical condition or geographical location unto others to gain self-esteem. Diversity promotes inclusion, understanding, and tolerance and rejects all forms of discrimination.

In heterogonous societies, governments and international businesses recognise the value of diversity to serve their citizens and consumers better. Several governments such as the United States, the European Union and Australia have implemented programmes to enhance diversity in the workplace through the provision of equal opportunity. The Global Diversity Forum, an international human resource expert network that promotes diversity at the workplace, boasts of membership from the Fortune 500 corporations. Businesses today use diversity as a strategy to better compete in a global market where consumers are heterogonous.

As a concrete measure to promote diversity in Malaysia, the following measures can be taken in the following sectors – the civil service, admission into private colleges and universities and non-centralised public universities, employment opportunities in the private and non-profit sector as well as faith-based organisations.

What will be required is a transparent system where the criteria of selection is stipulated along with the points accorded. An inclusive consultation process to develop the mechanism will help clarify the mechanism as well as assuage the fears of any particular group. Some suggestions for the criteria that promotes diversity would be points for applicants from poorer neighbourhoods or economically depressed regions, member of a minority ethnic groups as well as sub-ethnic groups, applicants who are differently able, women applicants, applicants who are multi-lingual, appreciating non-academic talents such as being artistic (musically inclined, able to paint, creative talents), love of outdoors, sports and community service.

By embracing diversity, Malaysia will progressively move towards building a cohesive nation and at the same time add to its competitive advantage in creating and seizing opportunities that come with a global village that appreciates diversity.

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4 Comments

Shruthi Jayaram

Hi Gregore, this is a really interesting post! I'm not understanding how you link the financial meltdown and diversity, though - is it via regional economic integration?

Gregore Lopez

Hi Shruthi,


It is actually two separate issues.

What is happening in Malaysia is that the predominantly race-based ruling coalition (United Front) is facing its strongest challenge politically from a new coaliton (Citizens Coalition).  Due to the current global meltdown, the political uncertainty has been amplified.

One way for Malaysia to find a solution is to accept diversity. As you know there are five major ethnic group in Malaysia along with many other important indegenous groups. If the ruling coaliton can accept diversity, it eliminates the issue of race and religion - two major problems in Malaysia. The country can then focus on addressing the global financial meltdown.

Diversity can also form a check and balance in the corporat sector. Read the following comment from ablog that my institute manages:
http://eastasiaforum.org/2008/10/09/the-mother-of-all-bailouts-perspective-from-india/#comment-3485

One of the checks we used to see in Australia within the financial system was that we had government-owned banks and insurance offices together with mutual building societies and credit unions. The diversity of institutions with different regulatory controls allowed for more genuine competition. But as the government financial instititutions are privatized and mutual institutions demutualized they move towards shareholder-owned commercial institutions where management is rewarded by stock options.

The long-term interests of customers or shareholders is not management’s prime objective. The objective functon and the time horizon is what the share price will be in 5 years when the CEO’s contract ends -hence risky behaviours and hollowing out balance sheets to pump up reported profits.

Fortunately, in Australia these incentives have not had full sway but one can understand why NINJA loans were created in the US.

And, behind all this was the figure of Alan Greenspan making sure that the money rate of interest was below the real rate of interest and credit expansion could flow through the world. The parallels with the 1920s years of easy credit and the “New Economy” before 1929 are unnerving.

Unfortunately, what we need is a limit to the creation of fiat money, not a helicopter showering of largesse on those who created the mess. When productivity is increasing, real interest rates might be 5%, nominal rates 3% and inflation minus 2% - but central banks print money to take the 2% as they keep the price level (even if they do that). The whole system has been built on clipping the coinage and is inherently unstable.

We also need a shift from taxing labour and capital to taxing land values to prevent the emergence of speculative real estate bubbles which are then validated to save the financial institutions which helped create them. The net result is that the next generation can rarely afford a home. The rentier is entrenched.

The moral of the story, as we see it unfolding, is borrow by all means, keep borrowing and investing but stay liquid and and never gear TOO much. Make sure you are an infra-marginal bank customer, meet your mortgages and ride out the storm. The banks will be bailed out, they won’t be able to foreclose on you. Meanwhile get ready to get more loans to buy hard assets at the bottom as inflation rears its head in response to the new flood of easy credit.

It’s like surfboard riding. You can do it with your career as well. I had wondered whether Greenspan had stayed on too long, but I must say he rode the wave he created to perfection and avoided the dumping. A first-class performance!

For those who enjoy history Murray Rothbard’s “The Great Depression” repays reading.

Gregore Lopez

Sorry: http://eastasiaforum.org/2008/10/09/the-mother-of-all-bailouts-perspective-from-india/#comment-3485

Gregore Lopez

Just go to http://eastasiaforum.org/ and look for
http://eastasiaforum.org/2008/10/09/the-mother-of-all-bailouts-perspective-from-india/

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