THE INSTITUTIONAL AND POLITICAL FRAMEWORK OF GROWTH IN AN ETHNICALLY DIVERSE SOCIETY: THE CASE OF MALAYSIA

Abstract

ABSTRACT This paper classifies Malaysia as an enigmatic case, because it is regarded as one of the “miracle” economies of the world despite an ambitious affirmative action program that was vulnerable to the risk of deterring the growth process. Critics have rightly pointed out the predictable microeconomic distortions of Malaysia's “New Economic Policy,” but such distortions were not significant enough to impair economic performance. This paper argues that Malaysia fits the strong version of the notion of “shared growth,” in which both poverty and inequality declined and in which the alleviation of inter-ethnic imbalances had growth producing effects because of their contribution to social cohesion and political stability. In addition, the focus on export-oriented industrialization and investment in basic education and rural infrastructure contributed to the phenomenon of “shared growth.”