It is true that the world is more integrated than ever. Major developments on the other side of the world may affect the local environment. Being one of the top trading nations in the world with an export-driven economy, it is undeniable that a reduced consumption in the economies of our major trading partners — specifically the United States — will adversely affect our export sector and ultimately the Malaysian economy.
As the economic crisis unravels and insidiously spreads globally, it is crucial to keep in mind that the local economic environment is different from that of the US. A problem faced by the US economy may not be the same as that faced by the Malaysian economy.
The integration of the world economy is within the grasp of many Malaysians. It is amazing how many Malaysians are attuned to the economic turmoil in the US. This is a cause for celebration because this demonstrates the existence of the free flow of information. That in many ways is crucial in creating a liberal society with empowered individuals.
The idea of connectedness is enhanced by the fact that many households have access to CNN, CNBC and Bloomberg, among others, which keep them informed with the latest nightmares-turned-real on Wall Street and its counterparts across the world.
But something is horribly wrong with the picture. The centric-ness of perception bugs me.
It has been joked that the world according to a typical American begins with Hawaii and California in the west and ends with the West Coast with a whole lot of red states in the middle. To the north are people who end their sentences with “eh” for some unclear reason while to the south, always there are huddled masses yearning to breathe free trying to break into the US. Anything else beyond the US borders is irrelevant, except for some obscure countries like Iraq, Afghanistan, and that one country where French fries supposedly come from and Europe. The perception is that the average American worldview is US-centric.
This is an unkind gross generalization of Americans but to a large extent, it describes the coverage of CNN, CNBC and Bloomberg. These news channels report — especially CNBC and Bloomberg given the fact that these are financial channels — news from the US perspective. It is more likely to give greater coverage over the US economy instead of the local economy. And it does not help when the coverage is biased towards that of the stock markets rather than the real economy.
While many Malaysians are exposed to events outside of our borders, one has to be cautious in taking the US economy as a complete parallel of the Malaysia economy. Yet, here in Kuala Lumpur under the incessant rain, I find Malaysians unreasonably subscribing to US-centrism.
I therefore wonder whether it is possible that some are merely absorbing US-centric commentaries word for word without critically considering their relevance to the local economy? Being informed is great but what use is it when one merely memorizes the lines without comprehending the implication or non-implication in this age of information overload?
This is not another “decoupling theory” which suggests that a particular economy could be isolated from global events. Whenever the US sneezes, the world catches a cold and that world includes Malaysia since the country is not an autarky by any stretch of the imagination. Instead, this only stresses the different issues which Malaysia and the US are facing. Malaysia needs to run a set of policies different from that seen in the US and other countries in crisis.
Despite the importance of the US to the Malaysian economy, the two economies are different. For example, first of all, the main cause haunting the US economy is the deflating of the housing bubble. For Malaysia, there is no housing bubble; even if there was one, it has not deflated it. Secondly, sub-prime lending along with the associated securities are practically non-existent in Malaysia. Even if there was one, that would be dependent on the housing bubble. The closest shave Malaysia saw was probably the one involving AIG. After considering the level of debt, foreign reserve, laws and regulation as well as other important indicators, the difference between the two economies is as clear as daylight.
There may be more close shaves later and if one does hit us, it is likely that the crisis would be exogenous in nature — meaning originating from outside of our borders — instead of endogenous or caused from within. In all likelihood, if a crisis does hit us — knock on wood — it is likely that Malaysia will defend the local economy from exogenous waves rather than protecting the local economy from itself.
The impacts will be different from that seen in the US and the solutions will be different from those employed in the US. Therefore, any effort to stimulate the Malaysian economy will require policies tailor-made to local circumstances rather than cut-and-paste ones.
That requires the relevant authority to keep close tabs on various indicators of the local real economy. These indicators at the moment suggest that issues plaguing the US economy are different from what Malaysia is facing, though the issues are connected in one way or another.
A version of this article was first published in The Malaysian Insider.