Anwar pays homage to humane economics

The free market economy cannot be saved if it is detached from its moral moorings.

Opposition Leader Anwar Ibrahim’s speech on the global economic crisis, delivered at Chulalongkorn University in Bangkok earlier this week, once again addressed the moral underpinnings of economic ideas.

For the second time in a year at an international forum, he drove a stake through the free market fundamentalism which fueled the Thatcherite revolution in Britain and the excessive deregulation that led to the credit market squeeze in the United States which triggered today’s global recession.

As in a earlier speech in Hong Kong last year, Anwar held that market fundamentalism was dead for good, and espoused a humane economics that pays proper heed to man’s capacity for productive labour while taking care to balance economic growth with distributive justice.

“We still believe that market economics which stand solely on the feet of ‘homo economicus’ are doomed to fail because the dictates of a humane economy impel us to consider right and wrong, social justice and the dignity of man,” reiterated Anwar in a keynote address at Chulalongkorn.

Anwar’s Bangkok speech meant that the PKR leader could not be present on nomination day of the critical by-elections at home, having already agreed to the overseas engagements prior to the Election Commission’s announcement.

Moral hazard has gone berserk

In the effort to surmount the global crisis brought on by excessively fecund credit markets, Anwar was unswerving in holding to the principle that policies that promote moral hazard are a decided no-no.

He said the lessons of moral hazard that were drummed into Asian nations when they faced the currency and stockmarket crises of 1997 were being stood on their head now by their former exponents.

Moral hazard occurs when policies offer incentives for perverse behaviour.

He described the massive bailouts in America as “nothing if not classic instances of moral hazard going berserk, made all the more ironic considering that we are looking at the bastion of free market capitalism.”

If easy credit brought the doom of investment banks in the US, overconsumption at inflated prices exacerbated the problem.

“Perhaps it’s time we took another look at the factor-price equalisation (PFE) theorem. We know that it was through exuberantly inflated prices of goods and services that made it possible for Americans to carry on indulging in overconsumption while the rest of the world, particularly in Asia, had to settle for much less.

“As those trained in economics and international trade will tell you, this mirage will be shattered eventually as the FPE theorem sets in to bring into equilibrium the relative prices of these goods and services across the world.

“This may have been a tad too theoretical in the distant past but with the pace of globalisation and international finance and free trade flowing the way it has now, the impact can be real.”

Transparency in award of contracts

Anwar emphasised his belief in the traditional pathways to prosperity, namely, through growth and productivity spurred by entrepreneurship and private sector stimulation.

Needless to say, all this must be attended by good governance and transparency in the award of contracts.

“More importantly, the spending packages that have been announced should focus on projects that are good for business and good for people. A social agenda during recessionary times would ensure that crucial institutions such as public health and education are not neglected,” he said.

“Infrastructure development should seek growth areas in industry, public housing and strengthening transportation and communication between urban and rural areas.

“Fiscal intervention could then find areas to increase demand through tax cuts and incentives to hire workers and enhance their human capital through training and development.”

On Asean, Anwar cautioned against unilateralism and called for political resolve to formulate a pact with a mechanism to institutionalise agreements on trade, finance and human rights.

“This has proven no easy task but it is still attainable,” said Anwar, who had a meeting with Thailand Prime Minister Abhisit Vejjajiva (right).

Above all, Anwwar cautioned Asean nations against a revival of the mantra of Asian values which he saw a smokescreen for the repression of human rights on the pretext that economic growth mandated it.

He said a “prosperous Asia is merely an illusion if material wealth is subsumed in a sea of repression and denial of basic human rights”.