Professor Kishore Mahbubani about Indonesia

Kamis, 31 Juli 2008

Lecture By Professor Kishore Mahbubani

Presidential Lecture, in State Palace

LECTURE BY PROFESSOR KISHORE MAHBUBANI,
DEAN OF THE LEE KUAN YEW SCHOOL OF PUBLIC POLICY
AT THE NATIONAL UNIVERSITY OF SINGAPORE

AT THE PRESIDENTIAL PALACE,
JAKARTA. 31st JULY 2OO8

Mr President
Distinguished Ministers
Excellencies
Ladies & Gentlemen

I am truly humbled by this request to address such a distinguished
audience. lt is an especially great honor because I come from one of the
smallest states in the world, Singapore. I didn’t realize how small
Singapore was unti lmy wife and I went on holiday on the island Samosir
in Indonesia. It is located in side a lake on the top of a volcanic
mountain, called Lake Toba. But this small island is about the size of
Singapore.

However, growing up in Singapore as a member of a minority group, I came
to realize that I had a special advantage in connecting with all corners
of Asia. My family were Hindu Sindhis. As a young child, I learn to
write Sindhi whichh as the same script as the Arabic script. I also soon
discovered that my name `Mahbubani`came from the Arabic word, Mehboob,
which means beloved. Hence, when I travelt o West Asia, I feel at home.
Similarly, when I traveli n Southh Asia, both in India and Pakistan, I f
eel at home as I can understand Hindi and Urdu. Indeed, I do all my
writing only by listening to the famous Hindi movie singer, Mohamad
Rafi. Equally significantly, through my Chinese friends in Singapore, I
have also developed a sensitivity to East Asia. My Indian origins also
enable me to connect with the Buddhist strains of the Chinese, Japanese
and Korean societies. As an ethnic Indian, I also remember what Presiden
Sukarno said: “ln the veins of every one of my people flows the blood of
Indian ancestors and the culture that we possess is steeped through with
Indian influences.” And of course, I grew up in South East Asia and
learnt Bahasa Melayu as a child.

It is this background whichh as emboldened me to write about the biggest
story we are going to see unfolding in the world: the relurn of Asia.
From the year 1 to the year 1820, the two largest economies were China
and India. Many other parts of Asia, including the legendary Sri Vijaya
and Majapahit empires, thrived together with China
and India. The last 200 years of Western domination of world history
have been a historical aberration, an aberation which is coming to an
end. Hence, Goldman Sachs predicts that by 2050, the four largest
economies will be China, India, USA and Japan. Indonesia will also rank
among the world’s largest economies then. The recent World Bank Growth
Commission Repot reported that 13 economies had grown by an average of
7% over 25 years. This list of super-performers also included Indonesia.

I have no doubts that Indonesia will be part of this great
transformation of Asia. Indeed, Indonesia has already played a heroic
role in the transformation of Asia. lt has successfully made one of the
most difficult transitions any society has to make: the transition to
full democracy. This is a remarkable story which has not been fully
understood by the world.

To describe how remarkable this transformation is, let me tell you what
I actually said when I spoke at a forum organized by Asia Society in San
Francisco on 2l February 2008. One of my fellow panelists was Larry
Diamond, the world-famous expert on democracy. This is what I told them.
The world’s beacon of freedom and democracy
is the United States of America. But in the last seven years, America
has been walking backwards in this area. If someone had told me ten
years a go that the first modern developed society to reintroduce
torture would be America. I would have said “Impossible” . But the
impossible has happen. Ms Irene Khan, the Head of Amnesty International,
has described Guantanamos as “a Gulag of our times”. She is right. In
addition, in a story that has not been fully told, America, the bastion
of civil liberties, has also been quietly retreating in this area. Many
of my American friends are also shocked but they say to me “Kishore, you
must understand, We were massively attacked on 9/11″. It is true that
America was attacked. But the fact that the beacon of freedom and
democracy could retreat in many areas of human rights after one attack
showed how fragile America’s commitment is to some key human rights
principles.

By contrast, the second country to be attacked after 9/1 1was Indonesia.
lt took place one year later on 12 October 2002 in Bali. Despite this,
Indonesia did not retreat. Indeed, even though Indonesia had gone
through a wrenching financial crisis in 1998 and 1999 which caused the
economy to shrink significaitly, and even though it had experienced a
lot of social and political turmoil as a result of this financial
crisis, Indonesia went steadily a head in its advance toward democracy.
Remarkably, less than 10 years after this huge financial crisis, Freedom
House declared in a global survey entitled ‘Freedom In the World” in
2005 that Indonesia’s status has moved from “partly free” to “free”
during President SBY`s term of office. President SBY deserves alot of
credit for this remarkable success. This is why two eminents cholars,
Andrew MacItyre and Douglas Ramage, have said that President SBY “is the
most capable, focused and internalionalist of the post-Soeharto
presidents” and that “his record of leadership is unlikely to be beaten
over the next decade or so”. America may also move forward again
together with Indonesia when it elects a president whose father was also
an lndonesian.

By the way, when I finished describing how A merica had gone backwards
and Indonesia had gone forward in freedom and democracy, I expected
Larry Diamond to disagree with me. Instead, he agreed with me.

To fully understand how remarkable Indonesia’s transformation has been,
imagine the members of the Chinese politburo having a discussion on how
China should make the eventual transition to democracy. I have no doubt
that they are aware that they will have to make this transition. They
also know how difficult this will be and that
even though China’s percapita GDP is higher than Indonesia’s. China is
not yet ready to make this leap into democracy. The Chinese leaders must
be amazed that lndonesia made this successful leap in a period of great
economic snd political uncertainty.

The big tragedy here is that Indonesia`s remarkable story has not fully
spread to the world. This is because the international media`s dominated
by the Western media, which cannot imagine that Asia can do better than
the West in many areas. This is why I chose to write my book on “The New
Asian Hemispherea” at this point in time: to provide a non-Western
perspective on the great transformation of Asia. Something remarkable is
happening in Asia, but the world does not really understand what is
happening. Indeed, many Asians are also not aware of how remarkable the
great Asian story is.

The best way to understand how remarkable Asia’s story is, is to compare
it with the story of Latin America. We all know that the first continent
to modernize was Europe. The second continent to modernize was North
America. The third continent that was supposed to modernize was Latin
America.

Why Latin America? At the beginning of the 20’century, Latin America was
seen as the land of promise for many reasons. Firstly, most of the Latin
American elites had come from Europe. They spoke European languages.
Hence, they were fully expected to replicate Europe’s success in Latin
America. Indeed, an American writer, David Gallagher (reviewing a book
by Michae Reid), described Latin America in that period as follows:

/Between 1850 and 1930, many Latin America countries had a very
successful run. Their economies were relatively open, exports thrived,
and in some countries, democracies looked like consolidating
successfully. By 1910, a century after independence, Argentina was, on
a per-capita income basis, one of the half dozen richest countries in the
world. Immigrants flocked there from all over Europe. Chile was also
thriving. German immigrant had colonized large tracts of the south and
Valparaiso was one of the world’s most prosperous ports”./

We know that the Germans, Spanish and ltalians have created very
successful economies in Europe. So why did these immigrants fail in
Latin America?

The failure of Latin America to develope despite these massive advantage
as hundred years ago is one big story. But there is another even more
amazing story of Latin A merica’s economic failure in the last 25 years.
The reason why this story is amazing is that many Latin American
economies adopted the right and not the wrong economic policies in this
period. Despite this, they failed. Please let me quote a few
distinguished authors who make this point.

Mark Weisbrot and David Rosnick, two American economists, wrote: ” Among
policy-makers and economists in the United States it has been widely
assume that the economic policy changes which began to be implemented in
Latin Americain the early 1980s would eventually bear fruit, and lead to
strong economic growth. A quarter century later, this has not yet
happened. lndeed, these two authors wrote that from the period 1980 to
1999, when Latin America implemented the right economic policies, the
result was that “this is the worst 20-year growth performancfe or more
than a century, even including the years of the Great Depression”.

Let me add that Latin America’s record of economic failure despite
Implementing the correct economic policies is also documented by Danny
Leipziger, a senior World Bank official, and Ricardo Hausmann, a Harvard
Professor. Their papers are cited in footnotes in my text
.
Now, let me come to the remarkable part of the Asian story. One major
Asian country also began to implement the correct economic policies
around the same time as Latin America. And it did so under very
unpromising circumstances. It had experienced 30 years of failed
centrally-planned communist economics. l.t also had a disastrous
experience with both the Great Leap Forward (1958-1960) and the Cultural
Revolution (1966-1976). Any observer watching both Latin America and
China implementing the right economic policies in the 1980s would have
confidently predicted that Latin America would succeed and that China
would fail.

Instead the exact opposite happened. China took off in an explosive way.
Ricardo Hausmann said “whichever way you measure it the events in China
are really remarkable. Chinese out put per worker grew annually at 7.8%
and is 2.8% faster than the second country”. In the same period, the per
capita growth in Latin America grew by 0.5% annually from 1980 to 1999
and actuallyf ell to 0.2% in the five years from1 999 to 2004.

What is the big lesson we should learn from this dramatic contrast
between the experiences of Latin America and China despite the fact that
both implemented the right economic policies? The big lesson is that
economic development is not a result of economic policies a lone. This
is indeed the biggest mistake made b y the Washington consensus: in
leading people to believe that only economic policies lead to economic
growth. Social and political policies play an equally important role.
However, when economic development fails, economists are reluctant to
speculate or assess which social and political policies may have
contributed to economic failures.

The big difference between China and Latin America is the nature of the
Social contract between the governing elites and the population they
governed. When Deng Xiaoping took over the leadership of China, his only
goal was to strengthen China. He knew that the only way to do that was
to unleash the energies of the Chinese. hina’s big advantage was that it
had removed the feudal classes and the feudal mentality with the
communist revolution. Hence, Deng Xiaoping carried out his policies with
the goal of helping all the people of china, and not just a small elite
or feudal group.

By contrast, the main disadvantage of many Latin American societies is
that they continue to have either feudal elites or a feudal mentality.
The ruling classes are more interested in preserving their special
privileges, not in helping the masses of the population. By focusing on
the interests of the ruling elites, not the interests of the population
as whole, the Latin American societies have not been able t o succeed.

In my book, I speak of the seven pillars of Western wisdom that several
Asian societies have begun to implement. These seven pillars explain the
success of Asian societies. One of them is ‘meritocracy’ . The simplest
way of understanding the virtues of meritocracy is to ask this question:
why is Brazil a soccer superpower and an economic middle power? The
answer is that when it looks for soccer talent, it searches for it in
all sectors of the population, from the upper classes to the slums. A
boy from the slums is not discriminated against if he has soccer talent.
But in the economic field, Brazil looks for talent in a far smaller base
of the population, primarily the upper and middle classes.

Asia always had the world’s largest pool of brain power. But it also had
the world’s largest pool of unused brain power. The s imple reason why
Asia is taking off now is that the unused brain power is finally being
used. In my book, I look at the case of India, whichh as had the caste
system for thousands of years. For thousands of years, birth was
destiny. lf you were born untouchable (people below the lowest caste),
you lived untouchable and you died untouchable. To day, as a result of
several reform movements, India is changing. I describe the case of a
young man who was born untouchable, went to school as an untouchable and
sat separately in class and at mealtimes. However he did well in school,
got scholarships, went to Columbia University in New York to get a PhD
in economics. Today, he is the Chief Economist of the Reserve Bank of
lndia. His namei s Narendra J dhav.

China and India a resucceeding and taking off because they are finally
finding the right means of igniting the hundreds of millions of brains
that they always had. After China and India, the third largest pool of
brain poweirs in the ASEAN region, where w e have over 5 00 million
people. The success of ASEAN will be determined by whether we follow
China and India’s pattern and unleash the brain power of the masses or
whether we follow the Latin American path of nurturing the interests of
the elite classes.

Which way will the ASEAN countries go? The honest answer is that the
answeris not clear. One of the most telling comparisons I often take is
between South Korea and the Philippines. In the 1950s, the Philippines
was perceived to be one of the most promising economies in the world. It
had everything going for it: an educated elite, the strong support of
America. By contrast, South Korea was seen to be a basket case,
especially after it had suffered the ravages of the Korean War from
1950-1953. One important fact that I only recentlyl earned is how much
of South Korea was ravaged. Indeed, it almost lost the war. The South
Korean capital, Seoul, had fallen within days and within weeks, the
defending UN forces had been driven to the Southern tip of the Korean
peninsula.

Hence, in 1960, the GDP of the Philippine was US $6.9 billion while that
of South Korea was US$1.5 b illion. The GDP of Philippine was almost
five times larger.

By 2007, the respective figures were 144 billion US dollar and
969.billion US dollar. The South Korean GDP had become almost seven
times larger. What happened? Why did the Philippines fail to keep pace
with the growth of South Korea? The politically in correct answer is
that Philippines society has retained most of the feudal mentality that
continue to bedevil Latin American societies. By contrast, South Korea
managed to remove most trac es of its feudal mentality.

To understand the South Korean story, I would like to strongly
recommened to you a book by the distinguished Harvard Professor,
Professo Erzra Vogel, entitled /The Four Little Dragons: The Spread of
Industrializatiton East Asia. / He did a study to find oout why the
success oh Japan (which he also wrote about in his famous book “Japan is
Number One”), the next few Asian societies succeed were the four Asian
tigers: South Korea, Taiwan, Hongkong, and Singapore. Since these four
societies were very different, the wanted to find out whether there were
any common elements that explained their success.

One common element he found was the following: “concern for the overall
social order led officials to be sensitive to problems of inequality
early in the process of industrialization and to make efforts to spread
income opportunities to all parts of society”. What is remarkable here
is that, even though none of these four societies were Socialist and
even thought he governments of South Korea under Park Chung Hee, Taiwan
under Jiang Jing Guo, Hong Kong under British coionil rule were seen as
right-wing and not left-wing, all these governments focused on making
sure that the fruits and opportunities of development were shared
between all classes, from the top to the bottom, unlike the Latin
American societies, where the bottom never experienced the fruits of
economic growth. In 2007, the Gini coefficient for Brazil was close to
0.6 while that of South Korea and Taiwan w as barely over 0.3.

It is vital to emphasize here that Japan, China, India and the four
tigers did not invent the principle of meritocracy (which I describe as
the principle of looking for talent in all sectors of society).
Essentially, these Asian societies copied the best practices of the
Western developed societies, especially America, which remains the most
meritocratic society in the world. Two of the beste xamples of the
fruits of American meritocracy are the two speakers who preceded me in
this Presidential Lecture series: Shaukat Aziz and Bill Gates. Shaukat
Aziz arrived in America with no educationin any Western university. He
was educated entirely in Pakistani educational institutions. But through
sheer merit he rose to the highest levels of Citibank, part of the group
of seven that ran the bank. Bill Gates went to Harvard but dropped out.
Despite that he ended up as the richest man in the world by creating a
completely new industry.

In my lecture to day, I have only emphasized the virtues of meritocracy,
which is only one of the seven pillars of Western wisdom that I discuss
in my book. Let me briefly mention the other six but as I do so you will
find that they are all linked to the virtue of meritocracy.

The first pillar is free market economics. Free market economics does
not just enhance economic productivity through incentives for good
performance. Free market economic as l so leads to the continuous
creation of new elites and removal of old elites. Indeed one little
known fact is that the best description of the virtues of capitalism is
provided by Karl Marx. His essays explain well how capitalism destroys
feudal elites. The f eudal Latin American elites failed in their
economic reforms because they refuse to give up the “rent” income that
they could extract from their privileged positions. “Rent” income
distorts free markets. One quick way to promote economic growth is to
destroy “rent” income.

The second pillar is science and technology. An enormous shift is taking
place in Asia. The late Nobel Laureate in Chemistry, Richard Smalley has
predicted that by 2OlO, 9% of all PhD holding scientists and engineers
will be living in Asia. The third pillar is meritocracy, which I have
spoken about. The fourth pillar is pragmatism. The best definition of
pragmatism is given by Deng Xiaoping when he said it did not matter
whether a cat is black or white; if it catches mice, it is a good cat.
He used this simple saying to explain to the Chinese people why China
had to switch from centrally planned economics to free market economics.

But Deng Xiaoping was not the first pragmatist in Asia. T he first
pragmatist were the Meiji reformers. After watching the total
colonization of India by the British in1 850s and the humiliation of
China in the Opium War of 1839-1842, the Japanese knew that they too
would be colonized or humiliated if they did not change. So the Japanese
Meiji reformers went out and copied the best practices of the West.

The big untold story of Asia is how so many Asians have successfully
copied this Japanese practice of adapting from the best. Earlier I had
praised the South Korean success in development. One little known secret
about the South Korean success is that South Koreans initiated their
success by copying the Japanese. The reason why this secret is so little
known is because the South Koreans get very angry if you suggest that
they had copied from the Japanese. I discovered this when I wrote an
essay in lime magazine mentioning this fact. The response was a flood of
angry emails from South Koreans denouncing me. Given this strong
Korean-Japanese rivalry, I thought it was a brilliant decision by Dr.
Mahathir to award the contract to build one tower each of the Petronas
Towers to rival Korean and Japanese teams. The result was spectacularly
successful.

The fifth pillar is the culture of peace. The remarkable thing about
East A sia is that even though the biggest wars since World War ll were
fought in East Asia (the Korean War, the Vietnam War and the
Sino-Vietnames War), the guns have been largely silent in our region
since 1980. The sixth pillar is the rule of law. No modern economyc an
function without an impartial and fair rule of law. Foreign investors
need this. So does international trade. This is why China is now
producing more new well traine djudges than any other country. But
China’s case also illustrates the enofmous difficulty of fully
implementing rule of law. Traditionally, most Asian societies have had
rule by law, but not rule of law. Hence, the emperor issues edicts but
is not bound by his edicts. China has a modern society but while in
theory the CCP members are subject to the same rule of law as ordinary
members, in practice they are often not. This is unlike America where
even the President and Senators can be indicted or impeached.

Fortunately, many Chinese CCP members are honest. lf they are not,
China’s economy could not have grown so fast. However, in the long run,
neither China nor any other Asian society can just rely on honesty. We
need to adopt the Western system of rule of law, not rule by law, if we
are to succeed. Andrew Mclntyre and Douglas Ramage have also said that
President SBY “has taken more of a leadership role than his predecessors
in the counter-corruption drive. His official approval and encouragement
have created something of a virtuous circle of reinforcement and
political probity.” This is one of the reasons why the rule of law is
needed: to prevent and eradicate corruption.

The seventh and final pillar is education but it is in some ways the
most important one. Without education -and I mean primary, secondary and
tertiary education- no society can succeed. One reason why China and
India are among the most successful Asian societies is that they have
the largest number of students studying in American universities. In
2006-2007, China had 68,000 students studying in the US and lndia had
83,000 students.

In conclusion, please let me summarize the implications of what I have
said for the future of ASEAN societies, including Indonesia and
Singapore. I would like to conclude with three specific prescriptions to
promote national development:

(l) The first prescription is to develop a win-win /social contract/
between the governing elites and the masses. This is why Japan, China,
India and the four tigers succeeded. Th e absence of such a social
contract is also why the Latin American societies are not succeeding. In
many Latin American societies, the elites want to cling on to their
“rent’ income to ensure that their privileged positions are not
challenged. Hence, no Shaukat Aziz or Bill Gates can emerge or succeed
in such a feudal setting.

The main point to emphasize here is that it is in the interest of the
ruling elites to also introduce meritocracy in the new social contract.
When hundreds of millions of new brains enter the market place, the
economy becomes bigger and the society more socially and politically
stable. When people at the bottom believe that their societies offer
opportunities for them to progress, you also get less crime. When I was
in Latin America, I was explicitly warned that I should stay far away
from the slums. But when I was in Mumbai, India earlier this month, my
youngest son and l wen on a guided tour through the biggest slum in the
city, the Dahravi slum. lt felt safe. People were busy working. The
children were studying in schools. And if the social contract works, the
people will be out of the slums in one lifetime.

(ll) The second prescription is to develop the belief that we can
succeed. As a child, I grew up in Singapore when it was under British
colonial rule. One of the most pernicious effects of colonial rule was
that our minds were colonized.

Hence we were led to believe that the Europeans were naturally superior
to the Asians. This mental belief in the supremacy of the Europeans
carried on long after political independence.

Today, we have a remarkable reversal. The most optimistic young people
in the world are young Indians. While many of them are still poor, they
are confident that their tomorrow will be better than their today. By
contrast, when I travel to Europe, many of the young people are not
confident that their tomorrow will be better than their today.

About a year ago, the International Herald Tribune correspondent in
Mumbai, Mr Anand Giridharadas, called me. He asked me whether there was
too much hype in India. I said that it was always better to have hype
than no hype. Just imagine how differently we would view the future of
Latin America and Africa, if we could generate the same hype in Latin
America and Africa as we have in India today. Hype is a sign of hope.

We should develop the same kind of hype in ASEAN. To do this, we have to
believe that we can succeed.

(III) The third prescription is to focus on the youth. Let me explain
why. There is an Arab proverb which says that he who speaks about the
future lies, even when he tells the truth. The proverb is right. We
cannot predict the future. But there is at least one respect in which we
can make confident predictions about the future: if we can measure the
amount of snow that has fallen in the Himalayas in any winter, we can
predict the future flood levels in the river Ganges because the snow
that has fallen will determine the future flood levels in six months.

In Asia, we see the demographic snow on the ground in the form of our
youth in our countries. If we can educate our youth and prepare them for
a very different world of tomorrow, we have good prospects of creating a
good future. But if we fail to educate our youth, we are guaranteeing
that there will be no improvement in our standard of living. Hence, if
we want a great future, we have to invest in our youth: education,
education, education. Here, Indonesia already has some success stories
worth mentioning. While only 76% of children complete primary school in
India, 91% complete it in Indonesia, even though India spends 7.2% of
its GNP on primary education, while Indonesia spends only 3.2%. In
short, Indonesia has laid some good foundations in this area.

Therefore, in conclusion, the three prescriptions are Social Contract,
Belief and Youth. Please remember these three prescriptions through the
acronym, SBY.

Thank you.

———— ——— ——— ——— ——-
/* Professor Kishore Mahbubani is Dean of the Lee Kuan Yew School of
Public Policy at the National University of Singapore. He has recently
published/ The New Asian Hemisphere: the Irresistible Shift of Power to
the East.

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One Response

  1. Great Blog!……There’s always something here to make me laugh…Keep doing what ya do 🙂

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