PKR de facto leader and former finance minister Anwar Ibrahim espoused a line of thinking on economic development that showed a preference for a synthesis of the major schools rather than rigid adherence to one theory.

In a speech today on the lessons learned from the 1997 Asian financial crisis at the S Rajaratnam School of International Studies, Nanyang Technological University, Singapore, Anwar rejected economic monism in favour of an eclectic combination.

Anwar, who was also a former deputy prime minister, said the cardinal lesson learned from the 1997 crisis was that the International Monetary Fund's prescription for privatisation was a recipe for banditry if the pre-requisites of good governance, transparency and accountability were not already in place.

"I make no apologies for criticising the neo-liberal Washington Consensus and the IMF's standard formulae for borrowing countries," he said in a speech that nimbly sifted nuggets from theorists ranging from Adam Smith to Maynard Keynes in pursuit of a golden mean conveyed by the Islamic concept of awsatuha, akin to chung yung in Confucianism.

He said it was pointless to talk of market friendly policies and pro-growth initiatives to generate a bigger pie if the prerequisites of good governance, transparency and accountability were not already prevalent.

"Without those prerequisites this pie will be devoured by a select few at the expense of the more deserving majority," he said. "And when a crisis breaks out, it is this majority who will bear the brunt. They are the real victims."

The rich and powerful escape

He said the enduring lesson of the 1997 crisis was that the "rich and powerful get away unscathed or if they do get into trouble, they will be the first to be bailed out."

"The life boats will be reserved for them in times of trouble. In good times, they will get the icing on the economic cake and this applies across the board: water services, waste disposal, telecommunications, and ports speaking of which, you might already know that in Malaysia, a certain billion ringgit port scandal is about to explode and it goes back to the issues of good governance, transparency and accountability," he added.

He said another lesson gained from the crisis was a key cause: excessive leverage - heavy borrowing from banks by the politically connected.

He said this created the conditions for "moral hazard" which exists when governments create incentives for reckless behaviour.

He said the collapse of the entire banking and financial system was the price to be paid if heavy borrowers were allowed to go bust, the conditions existed for moral hazard the shielding of the improvident from the consequences of their own behaviour.

Anwar said it was better to err on the side of caution rather than to invite moral hazard. In short, prudence was paramount.

As for managing the economy, Anwar said he preferred "Hayekian free enterprise with a dose of Keynesian fiscal remedy every now and then."

"In Islam, we call it awsatuha just as we are familiar with the chung yung of Confucius. Translated into practical terms, it means that when the economy is underperforming below its potential, increased public expenditures would be needed. Obviously, fiscal discipline must be maintained to ensure that the consequent fiscal imbalances remain within manageable levels at all times," he said.

"We can subscribe to Hayek up to a point at which neo-liberalism must make way for the paternalism of Keynes. Some call this Dr Jekyll and Mr Hyde economics. I call it humane economics," he summed up.