Dividing Wealth

We Malaysians are absurdly concerned about dividing wealth. Not redistribution of wealth from the well-to-do to the needy, but plainly about dividing wealth amongst different races, treating wealth as though it is like manna from heaven.

And when it comes to dividing stuff, we inevitably need to impose our judgement on what is equitable – on what proportion is fair. And after much observations, I realised there is a consensus – what is fair is a proportion that relates to the proportion of that race to the total population. I mean, it is totally logical and rational right?

If say you have three adopted sons – Ali, Ah Chong and Muthu – and you want to divide 15 sweets amongst them, it is only fair that each gets 5 sweets. Right?

Okay, let’s inject some realism to this analogy.

1. Wealth is created, not inherited

Let’s add some details to the above story. Say that you are not the owner of the sweets and your adopted sons actually work themselves to earn those sweets. Ali is the most hardworking and diligent, earning 8 sweets. Muthu is next, earning 5 sweets and Ah Chong, being the lazy lad that he is, only managed to work enough to get 2 sweets.

What happens now? Does the notion of fairness as articulated above – dividing equally – still apply? If our notion of fairness is so simplistic, what will happen?

Ah Chong, with only 2 sweets, is the one who needs the most help. So as a parent, you subsidise him – give him more sweets. And since Ali is over 'endowed', you either ignore him or tax him so that you could transfer some of Ali’s sweets to Ah Chong. Muthu, well, you treat him indifferently.

What you are doing, in fact, is to encourage laziness and punish effort. Done often enough, you will breed resentment in Ali, complacency in Ah Chong and promote disunity overall. Since Ali is not rewarded anyway, he might just be less diligent and earn fewer sweets – or perhaps he might just run away from home. Ah Chong, on the other hand, knowing that he will be helped anyway, might as just as well be lazier and be fed the sweets regardless.

And this is the key reason why dividing wealth in such an arbitrary manner is misguided – wealth is created, not inherited. There is no omnipotent Master of Corporate Equity handing out ownerships to the various races in the country, like the parent in the above example. The Government of Malaysia is not the owner of the wealth of the nation, and neither should it be an absolute arbitrator of equity and sorts. A good government is one that facilitates a thriving private sector through good governance and upholding the rule of law, not stifles the sector with silly regulations.

2. Looking Beyond the Racist Perspective

Let’s consider another addition of realism to the example. Now, instead of just 3 sons, you adopted 6 – Ali, Ahmad, Ah Chong, Ah Wong, Muthu and Siva. And now you have 30 sweets (say you accumulated them through a form of savings of sweets from your kids previously). And instead of starting of with nothing, your sons actually have some initial sweets to begin with.

Say, the initial starting points are -

Ali – 20 sweets
Ahmad – 5 sweets
Ah Chong – 23 sweets
Ah Wong – 2 sweets
Muthu – 25 sweets
Siva – 0 sweet

If you are a racist, you will group them together and you get:

Malays – 25 sweets
Chinese – 25 sweets
Indians – 25 sweets

So with your silly notion of racist fairness, you give each race 10 sweets each, and further divide it to 5 per individual. So now you get:

Ali – 25 sweets
Ahmad – 10 sweets
Ah Chong – 28 sweets
Ah Wong – 7 sweets
Muthu – 30 sweets
Siva – 5 sweets

Clearly, this manner of redistribution of sweets results in great inequality if you choose to look beyond the racist perspectives and see them as individuals. Is this what we want? Ah Chong is already rather well off – should we give him more just because he is Chinese? Siva is poor – should we not give him more just because he is Indian?

Let’s blind ourselves and look at our sons as well-to-do and needy:

Well-to-do – 68 sweets
Needy – 7 sweets

Would you redistribute your sweets differently now?

This is the second point – Malaysia has one of the worst inequality of income in the world and the worst in Asia. And the most ironic bit about this is that it is even worse if you look solely at Malays as a group. If we are really driven to eliminate socio-economic inequality, why are we still having indiscriminate policies that help Bumiputera regardless of whether he is a multi-billionaire or not? And why are low income Indians neglected despite the Government knowing well their woes since the very first Malaysia Plan? Because they are Indians and not Malays, and hence do not deserve to be helped even if they desperately need aids? Imagine a 7% discount for a Bumiputera bungalow of RM 5 million – that is RM 350,000 worth of ‘aids’ we are giving to a single Malay multi-millionaire, money that could be used to assist dozens of needy Indian, Malay and Chinese families.

When are we going to truly look beyond ethnicity and address real poverty?

Going back to the beginning, the simplistic notion of fairness and our policies based on this dogmatic pre-occupation of ethno-economic equality – it is both destroying our economic competitiveness and promoting disunity without truly addressing the true issue of socio-economic inequality. When are we going to realise this folly?

Elanor