Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : TOKYO, JAPAN
Tarikh/Date : 09/06/2000
Tajuk/Title : THE 6TH NIKKEI SHIMBUN
INTERNATIONAL CONFERENCE ON
`THE FUTURE OF ASIA'
I would like to thank Nikkei Shimbun for inviting me
to speak once again at its International Conference, this
time on "The Future of Asia". Looking into the future has
become almost a science and many experts profess to know
what will happen in the immediate, near and distant
future. I am afraid I am not one of these experts but I
like to look at history, so I may avoid the mistakes of
the past and thus ensure a reasonably good future for my
country with less of the mistakes of the past. But
unfortunately in the history of Mankind learning from past
mistakes is not common. And so we keep on making the same
mistakes and paying the price.
2. Human history is full of so-called solutions to the
problems of human society. Each time a solution was
found, the efficacy and infallibility of the solution was
accepted as being beyond doubt. Those who espouse the
solution will permit no criticism or opposition. They
become so fanatical that they would figuratively and
sometimes literally burn the heretics at the stakes.
3. The Feudal system, Republicanism, Capitalism,
Socialism and Communism are among the ideas invented by
men to deal with the inequities and injustices in his
society. When first introduced each was regarded as
perfect by those who espouse them. They were all
practised as articles of faith and anything done in their
name were accepted unquestioningly. They were
embellished, interpreted and reinterpreted until their
originators could not recognise them anymore. But as long
as the name remains, questioning or condemning them would
make one a heretic.
4. But over the years their imperfections would show and
result in negating the very objectives they were supposed
to achieve. Unfortunately at this stage it is not the
original objectives which count. The important thing is
faith in the solution. Even if it destroys the society
whose ills it was supposed to cure, it does not matter.
It does not matter because the solution is correct.
5. And so we see how Feudalism was allowed to flourish
long after kings became tyrants and oppressed their
people, destroying their kingdoms. The same thing
happened with Republicanism, with Socialism, Communism and
in time with Democracy.
6. The same thing will happen to all human ideas,
concepts and ideals. Over time they will all become quasi-
religious, fanatically believed in until they bring about
new problems which are often worse than the problems they
were supposed to solve.
7. We know the history of all these ideas, ideologies
and systems and we ourselves have experienced the problems
they create. But we have learnt nothing. We are as
convinced as ever that the ideas and solution and
ideologies that we contrive today are perfect and will
make our society and the whole world better and superior
than the societies of the past. And so we become
fanatical about them and we will apply them even when the
results are worse than the state of affairs ante. We
accept the damage because they were caused by the right
solutions.
8. Today we are into the floating rate, into the free
unregulated market, into globalisation and of course into
democracy and freedom. We believe in them absolutely. No
one may question them, certainly not condemn and reject
them.
9. When Malaysia decided to fix the exchange rate
between our Ringgit and the U.S. Dollar we were roundly
condemned as stupid people who do not understand finance.
We were told we will soon fall flat on our faces and have
it rubbed in the mud as well. Our economy would collapse.
We would be begging for help from the IMF and the whole
financially civilised world.
10. As you know none of these things happened. We are
doing very well indeed. I will not trot out the usual
figures to prove. But believe me we have turned around
and we are much better off than those who religiously
believe in the floating rate as the only way to ensure
sound finances for a country.
11. Why did we go against the current financial
orthodoxy? Well, when the great minds gathered at Bretton
Woods, they concluded that the best thing for a world
which had had its economy shot to pieces by World War II
was to have a fixed exchange rate. The U.S. Dollar was to
be worth 0.35 oz of gold and the rest of the world's
currencies would be pegged to this 0.35 oz U.S. Dollar.
12. We all know that for two decades the world
experienced the longest sustained high economic growth on
a fixed exchange rate. And the vanquished, Japan and
Germany, grew the fastest of all.
13. Japan would not have recovered at all despite its
hard working, dedicated and highly skilled people and its
strategy of high volume, and low margins in order to gain
market share, if the Yen had fluctuated and had been
artificially revalued as it is now. We in Malaysia and in
other developing countries would not have enjoyed cheap
high quality goods and higher living standards if Japan,
because of Yen uncertainties, had not succeeded with its
market share strategy. In fact we would not have been
enriched by Japanese and other foreign direct investments
had the Japanese failed due to the fluctuating and
strengthening of the Yen.
14. Left to themselves the West, i.e. Europe and America
would have gone for high profit margins which their people
could afford, sending a few left overs to the developing
countries which could ill afford the high prices. But
forced to compete with the Japanese they moved some of the
production to low-wage developing countries. This was the
real reason for FDI. And we became industrialised and
relatively better off. Later of course we acquired skills
and capacity and we grew into the Newly Industrialising
Countries, a term coined by the West in order to single us
out for special unfavourable treatment.
15. But all these were made possible by the fixed
exchange rate of the Bretton Woods regime. The World's
trade grew by leaps and bounds and recovery from the
disaster of World War II was more than complete. Indeed
the Bretton Woods fixed exchange rate system created a
world more prosperous than ever before. Only those who
stayed out of the system, namely the Eastern Bloc failed
to prosper.
16. The floating exchange rate is not a creature of
Bretton Woods. It certainly was not the result of serious
study, debate and international agreement as was the fixed
rate of Bretton Woods. The floating rate is the result of
countries, powerful countries, reneging on their
undertakings in the Bretton Woods agreement.
17. The U.S. was involved in an intractable and costly
war and abandoned the balanced budget. It was importing
too much and the dollar was flooding Europe. It could no
longer guarantee redeeming the dollar with 1/35 oz of
gold. Speculators moved in and sold U.S. Dollar at below
the guaranteed value. A market in Eurodollar was created.
18. In the end the U.S. accepted the de facto devaluation
and went off the gold standard. It seems that the right
place to fix the value of a currency is the market. The
market would know just how much any currency is worth.
What people seem to forget is that the market has never
been perfect. Demands and supplies can be manipulated.
And certainly with futures trading and short-selling true
values are less important to the market than fluctuating
values. Static exchange rates may be good for business
but are not profitable to currency speculators.
19. Whatever may be the arrangement and reasons for the
floating rates it was not good for the world's economy.
The cost of business went up because of the need to hedge.
Even then considerable losses could be sustained.
Revaluation and devaluation affect the economic
performance of countries. If the oil price goes up, then
devalue the dollar. The oil producers then increase their
price again and poor countries with poor people suffered
because they could not revalue their currencies against
the U.S. Dollar.
20. If there is a trade imbalance then devalue your
currency or better still gang up and revalue the currency
of the country with the surplus in trade. In the case of
Japan the revaluation did not really reduce the Japanese
trade surplus with the West but it hurts the poor people
in the poor countries who could no longer afford the cheap
high quality Japanese goods.
21. Malaysia borrowed a lot of Yen. It was worth just
one Malaysian sen when we borrowed. The Plaza Accord
pushed up the Yen to 2.5 Malaysian sen. Suddenly to pay
our Yen loans we had to find 250 per cent more Malaysian
Ringgit. Through no fault of ours we became a bigger
debter than we had planned to be.
22. But who cares about us, about poor countries and poor
people. They are not fit to sit at the same table with
the rich -- the G-7. If solving the trade problems of the
G-7 results in the poor becoming poorer it is just too
bad. Marie Antoinette would have said let them eat cake
if they have no bread. If they also have no cake that is
really their fault; they are corrupt, incompetent etc.etc.
23. You must forgive Malaysians if we don't think much of
the floating exchange rate, if we believe that fixed
exchange rates are better. History has demonstrated how
the fixed exchange rates of the Bretton Woods regime had
enabled the world to recover from the trauma of World War
II. On the other hand the floating exchange rate had
stopped the two decades of post-war growth. Malaysia too
benefited from the fixed exchange rate and as you know we
suffered grievously from the manipulation of the rogue
currency traders of the floating rate regime.
24. We were never consulted about the floating, we
entered into no international agreement to always stick to
floating. Others renege on their undertakings. Why can't
we?
25. Malaysia is interested in results not systems. No
matter how good a system is, if it delivers a bad result
we are not going to stick to it. Call us heretics if you
like. We are willing to be called stupid ignorami who
cannot understand herd instincts. But for us if the
result is bad then we must assume the system is bad and we
will throw it out.
26. And so our exchange rate control and the regulation
of short-term capital flows were instituted. And as I
said Malaysia is doing nicely, thank you.
27. But the point I would like to make is that we must
learn from the lessons of history and we must avoid the
mistakes of the past. What is the lesson of the past? To
the point of being boring may I repeat that all the
systems devised by Man in order to create a better society
are imperfect. And they become more imperfect because
clever people keep on tempering with them, embellishing
them and making them sacred so that you may not question
them even when they fail to deliver.
28. We must learn not to be too fanatical about economic
theories as much as we should not be fanatical about
interpretations of religion. We should be prepared to
examine them and their performance. And certainly if the
results are not what were promised we should be ready to
jettison them. We cannot wait too long. Look what
happened to the Communist countries. They saw the bad
results early but since the theory was good, uphold the
theory and forget the results. By the time they came to
their senses the damage was practically irreparable.
29. We must learn not to be fanatical especially now, now
that the Information Age has descended on us. We talk now
of globalisation, the borderless world. We talk of
deregulation, liberalisation and transparency. We talk of
human rights and of democracy. These are the great ideas
whose time have come. We must all accept them. The great
democrats who believe in freedom and human rights tell us
that if we don't accept them then we will face sanction.
Our people will be starved to death. So don't play with
these democrats. Accept democracy and human rights or you
will know how we democrats will take away your rights and
your freedom of self determination by force. Somehow I
think there is something not quite logical with this way
of propagating democracy and human rights. But that is
not what I want to talk about, what I think will shape the
future of Asia and the world.
30. I am concerned that we should not make the mistake of
being fanatics about any of the ideas and theories that I
have mentioned. We have a need to examine them, to think
through, to keep focused on the purpose and objectives and
not on the means.
31. Globalisation, a world without borders, a seamless
world -- these are great ideas. But already we have seen
how much damage they can do to our currencies. The free
flow of capital and goods may make things cheaper.
Competition in a free market would increase efficiency.
But let us see what is happening and what may follow.
32. The mega corporations and mega banks which are
getting ever bigger through repeated mergers will move
into every country as soon as the WTO force open the
markets. The small and the inefficient in these countries
will be wiped out. The need for manpower, particularly
unskilled manpower will disappear.
33. Maybe it will be good for everyone. Remember the
fear of the weaving machines? They created more jobs and
greater wealth rather than the other way round. That is
one of the lessons of history. But the Banana Republics
are also part of the lessons of history.
34. As we all know the great plantation owners in the
Banana Republics practically own the countries they invest
in. They determine the politics of the country. In other
words when a foreign company is richer than the Government
of the country they invest in, the country becomes a fief
of the company, existing only to enrich the company.
35. When the mega corporations, already more wealthy and
more influential than the developing countries move in to
take over the economy of these countries, will they not
control also the political Governance of these countries?
Can we consider these countries as being independent
anymore? What if the powerful countries where these
corporations are based make use of the power of these
corporations to hegemonise, to colonialise by another
name. The people and the resources will then belong to
the foreigners. The last time the foreigners wield this
kind of power they exploited the people and the countries.
Will they not do it once again?
36. Probably they will give us a better life. But what
will happen to our independence, to our pride and honour.
Can we be sure that they will not translate borderlessness
into a licence to move labour around the world the way
they brought Chinese and Indians into Malaysia, and Fiji
and the African countries and the West Indies. It would
serve economic exploitation to have these migrants but
what would happen to the natives. Malaysia has been able
to handle this multiracial problems but many have not.
37. Are these things important to Asia's future? Of
course they are. The demographics of Asia will be
affected. There will be instability. Economic growth
will be affected. The relation between Asian nations will
be affected. We will be divided and effectively we will
be ruled by others. We will be surrogates and testing
grounds for all kinds of things. New theories will be
tested in Asia, and God-forbid, new weapons too. The West
is still inventing and developing new and more efficient
ways of killing people. That has to be financed. Create
the fear of war. Can China and Japan avoid a future war
between them? To have peace prepare for war. The
military industrial complexes in the West can provide you
with the weapons you need. And also the ever newer
weapons which can counter the weapons your enemies have or
are likely to have.
38. The situation in Asia will be tense as countries,
armed to the teeth glared at each other. That can be the
Asia of the future if Asian countries in all good faith
agree to open up and allow the mega-mega corporations to
take over everything.
39. But this will not be the picture if Asians at least
are able to learn from history and to look at all the new
ideas with a degree of suspicion, to accept them only
after careful study and debate, to test them and to modify
or reject them if the results are not as promised. In
Western countries if the goods are not as promised you can
sue for millions of dollars. But we cannot sue anyone if
the theories, policies and ideologies which are sold to us
by the Western ideologues turn sour and destroy our lives.
40. So look at the gift horse in the teeth. Reject them
if they are even slightly defective. Don't be afraid to
send them back and ask for compensation if you find them
not up to standard or defective.
41. We Asians should begin with the International
Financial Regime. If they don't accept our suggestions or
reform then throw the whole thing back to them. Since
they have ganged up on us, we should at least form our own
forum, the East Asian Economic Caucus (EAEC), so we may at
least discuss with each other and find out what kind of a
deal we are getting and how to protect ourselves.
42. Asia's future depends on Asians. We can make it
great. We can even make the 21st Century the Asian
Century - although I will not recommend it. We should
make this century the century of the world, the century of
world-wide prosperity. Asia can even contribute and be
the engine of growth, pulling along with it Africa, Latin
America and the former Eastern Bloc countries.
43. But Asia must assert itself. It must not just
follow. It must work together with Europe and America.
It must give voice to its views. It must demand respect
even as it respects others. Asia is old in experience and
it has shown that it can master everything that is modern.
44. Provided that Asia is prepared to do this, the future
of Asia will be bright. There will be great countries in
Asia again. Asian inventiveness, Asian industries, Asian
management skills and Asian governance will provide the
models for the world. We will not dominate it but we
certainly will not be bullied. Indeed Asia can be an
equal partner with the other groupings in the world, the
European Union and NAFTA. This is a possible future
scenario for Asia but it is not going to be if we just
passively wait for it to happen.
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