Microsoft Word 6-057 a gentler Capitalism Final version June 2006. doc
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10 was not only the right thing to do from an ethical basis 23 , but also from an economic one. They argued that the country’s prospects were directly linked to the prospects of those at the bottom of the pyramid—a rather radical thought for businesspeople. Government, unions, established business, and black business, argued the Commission, each had a role to play in transforming the economy and possessed collective responsibility for human capacity building and supporting entrepreneurship. 24 The conference chair, Cyril Ramaphosa 25 , asserted: The challenge facing black business is to become a dynamic force, to become an agent for change, to establish a new patriotism in business. Black business must champion transformation within their businesses. Black business has a personal responsibility to ensure those people within business are empowered to engage their white counterparts on equal terms. 26
The BEECom understood that it was embarking on a long and arduous journey. It was no accident that one of the early speakers at the conference described the Malaysian experience. From its inception as an independent country, Malaysia was a country riddled with ethnic tension between the Malays, Indians and Chinese. These tensions were largely attributed to the economic inequality across these groups. In 1963, the bumiputras, a group composed of Malays and other indigenous peoples, comprised 52% of the population, yet they owned just one percent of the country’s publicly available corporate equity. 27 Most lived in rural areas, and were engaged in subsistence farming and fishing. The Chinese were the most financially secure ethnic group and owned 27% of the corporate equity, with the balance in the hands of foreign investors. 28 When
modern Malaysia formed as a parliamentary democracy between 1957 and 1963, the Malay majority insisted that the constitution establish a protected status for them as economically disadvantaged natives of the country. 29 Still, violent ethnic riots broke out 23 They also recognized that to maintain legitimacy, the government and the black business community had to attend to improving the lot of those still at the bottom of the pyramid for they too had fought and made sacrifices in the anti- apartheid struggle. It is interesting to note the following observation on pages 10-11 of R. Abdelal and D. Spar, “Remaking the Rainbow Nation: South Africa 2002.” No. 703-017, “Indeed, for many South Africans, democracy was understood less as a political process than an economic one, a way of ensuring substantive improvement in their daily lives. According to survey data, for example, nearly a third of the South African electorate believed that democracy was equivalent to material improvement, whole only 45 percent viewed democracy as a set of procedures.” 24 Both Amartya Sen and Tarun Khanna note the importance of human capacity building in emerging economies. See A. Sen, Development as Freedom. New York: Oxford University Press, 1999 and T. Khanna and K. Palepu, "The Future of Business Groups in Emerging Markets: Long-Run Evidence from Chile." Academy of Management Journal 43 (3), June 2000. 25 Following nine years as the Secretary-General of the National Union of Mineworkers (NUM), Ramaphosa had been elected Secretary General off the ANC in 1991. In the next years, he played a crucial role in drafting South Africa’s new constitution. After leaving government, Ramaphosa had joined the business sector and quickly became one of the most prominent black businesspeople in the country. 26 Black Economic Empowerment Commission Conference, October 2000. 27 L. Comber, 13 May 1969: A historical Survey of Sino-Malay Relations. Kuala Lumpur: Heinemann Asia, 1983. p. 57. 28 J. Drabble, An Economic History of Malaysia 1880-1990: The Transition to Modern Economic Growth. UK: McMillan Press, 2000. 29 See the Malaysian Constitution as well as L. Comber, 13 May 1969: A historical Survey of Sino-Malay Relations. Kuala Lumpur: Heinemann Asia, 1983. p. 49. 11 in 1969 as the bumiputras became impatient with the government’s efforts to improve their economic lot. 30 In 1971, the government adopted the National Economic Plan (NEP). The ambition of the NEP was to “re-structure society so as to erase the identification of race with economic function and geographic location.” 31 The plan reserved four out of every five positions in government for bumiputras, set aside bumiputra positions at the University in areas where they were not well-represented, required that, by 1990, 30% of all public, domestically-owned companies belong to bumiputras, and that an “equal share” of positions be held for them in corporations. 32 The
NEP also called for strong economic growth. The NEP was followed by the Industrial Coordination Act in 1975 which instituted a licensing system for businesses and allowed the government to “insist that firms meet NEP requirements in terms of share ownership and employment structure.” 33 The government also made funds available to help bumiputras start entrepreneurial ventures. While all of the goals of the NEP have not been achieved, and the implementation of some of the policies has been quite controversial, redistribution has begun to happen. By 1990, about 23% of domestic, publicly owned companies were in the hands of the bumiputras. 34 In addition, the growth of the Malaysian economy is considered one of the region’s great success stories. In 1982, 35% of Malaysians were living below the poverty line; in 2003 only 5% were. 35
and the “upper secondary” school enrollment rate was 20%. In 2003, the rates were 84% and 73% respectively. 36 But inequality, as measured by the Gini coefficient, has not changed substantially. In the 1960s, Malaysia had a Gini coefficient of 0.42; 37 in 1997, it was 0.492. 38
With such historical lessons in mind, a BEECom document that was created at the conference suggested that black business should: •
Encourage investments in areas of national priority and job creation by mobilizing support for this objective within the boards of pensions and provident funds. •
Invest in skills development and growing companies.
30 L. Comber, 13 May 1969: A historical Survey of Sino-Malay Relations. Kuala Lumpur: Heinemann Asia, 1983. p. 56. 31 C.T. Goh, Integration in a Plural Society: The Chinese in Malaysia. The Straits Echo Press, 1978. p. 28. 32 C.T. Goh, Integration in a Plural Society: The Chinese in Malaysia. The Straits Echo Press, 1978. p. 28. 33 A. Kaur, “Economy and Society: The Formation of a National Economy,” The Shaping of Malaysia, A. Kaur and I. Metcalfe, Eds. New York: St. Martin’s Press, Inc., 1999, pp. 160. 34 “The Slaughter of Sacred Cows,” The Economist, April 3, 2003. 35 “The Exotic Doctor Calls it a Day,” The Economist, October 31, 2003, p. 1. 36 L. Lopez, “Hidden Weakness,” Far Eastern Economic Review, Vol. 166 (46), November 20, 2003, p. 51. 37 Alesina, A. & D. Rodrik, “Distributive Politics and Economic Growth,” The Quarterly Journal of Economics, Vol. 109, 1994, pp. 465-489. 38 The World Factbook: Malaysia, CIA Publications, www.cia.gov/cia/publications/factbook/print/my.html , updated on August 1, 2003, accessed on June 1, 2006.
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