The Primacy of Political Economy in Asia

By Ooi Kee Beng, Editorial, Penang Monthly, July 2017

It’s a complicated subject, this thing we call Economics. I don’t always know what it means.

I remember once talking to Robert Kuok about it. His reply was (and I paraphrase from my vague memory of that conversation): “Economics is simply about living, isn’t it? As you live, you learn to live – that is economic knowledge”.

That is the gist of what I understood from what he said. I offer my apologies if I misunderstood his point. But what I understood then made sense to me. In fact, his description comes very close to the original meaning of the term. “Economics” has Greek origins, coming from the word okionomia, which means “household management”.

However, no household exists by itself, and so Economics can’t be about the management of a single household. It has to deal with the management of multiple households. The existence of multiple households means politics, of course. Therefore, when the subject of Economics emerged as a distinct modern field of study, it went under the title of “political economy”. Such was the case when Scottish economists Adam Smith (1723-1790) and David Hume (1711-1776) and the French thinker Francois Quesnay (1694-1774) made their greatest contributions by using systematic and secular terms to explain the creation and maintenance of wealth by studying the complex interactions between political, social, economic and technological factors.

Since then, Economics as an academic discipline has branched out in many directions, and there is really no definition of Economics today that anyone calling himself an economist agrees on. One can see why. If the focus is on the individual household, then we see how Smith’s notion of “the Invisible Hand” can argue how the collective effect of self-interest also serves the common good. For some, this approach ignores the state a little too much, and disregards what we today see as a central tenet in political and economic studies – National Interests.

The preference for the individual in understanding economics was further undermined by Karl Marx (1818-1883), who put forth powerful arguments that economic trends and dynamics are best understood as part and parcel of an unending class struggle within any societal form.

Today, when we talk about Political Economy, we silently assume that we are doing something unconventional and, following the interdisciplinary fad, are putting two distinct subjects together. And yet, in Asian societies and in newly formed nations, politics and economics are seldom unconnected matters. The fact that Asian governments almost always create government-linked corporations (GLCs) of various formats to compete against the multinational corporation (MNCs) of developed countries makes Political Economy the natural field of study of Asian life.

We seem to be struggling in the post-Cold War era on the one hand with a “cosmopolitan” system (as the economist Friedrich List described Smith’s obsession with the “invisible hand”) that now comes in the form of neoliberal economics, and on the other with the idea that the state – politics – is paramount.

When Dr Goh Keng Swee (1918-2010), Singapore’s economic tsar, proclaimed “the primacy of economics” in constructing the modern city-state in the 1960s, he was not denying the primacy of politics. He in fact assumed the state to be the prime actor in his economic innovations. What he dreaded was that the state in its nation-building eagerness – politics – would deny the importance of economics – the management of households.

One could say that Mao Zedong did make that fatal error, and it was Deng Xiaoping who succeeded in 1978 in establishing economics as the top priority of the state, communist or not. Economics today is of course about international trade and international supply chains.

In the case of Malaysia, Political Economy is indeed also the most valid social science. The problem is that the Malaysian state is more often than not taken to be the ruling party. And so, we observe the party economy more than the Malaysian economy being invested in. Worse yet, the state is very often considered to be the ruling party leadership, in which case what we observe is the management of a party-elite economy instead of a Malaysian economy or even a party economy.

The huge income gaps we now have in Malaysia and in Singapore come from the historical project of building a national economy – a state economy, where the management of households is done from the top down. Politics as the management of a collection of proactive households gets forgotten.