'Morons' and 'menaces', the lively world of Mahathir's economics

Malaysiakini.com – 26 Oct. 2003
Outgoing Malaysian Prime Minister Dr Mahathir Mohamad can claim many feathers for his economic cap, but one that must give him great pleasure comes from his humbling of critics in the International Monetary Fund (IMF). At the time of the Asian financial crisis in 1997-98 Mahathir refused to buckle to the IMF's demands and did the opposite of what they recommended by imposing capital controls and pegging the local currency to the US dollar. Last month, IMF chief Horst Koehler conceded during a visit to Kuala Lumpur that Mahathir had been right.
"With hindsight, we have to recognise the good performance of the economy. Mahathir was right," he said. The July 1997 devaluation of the Thai baht sparked the crisis as other currencies also came under speculative attack, and Mahathir's actions were seen as so dangerous that billionaire financier and currency trader George Soros (photo) described him as "a menace to his own country". In turn, Mahathir famously called Soros a "moron", accusing him of igniting the crisis by taking up massive positions against regional currencies in the foreign exchange market - a charge Soros denied.
Mahathir also derided his Western critics as "cockerels crowing arrogantly but with the tail-feathers mired in faeces."
17th position

The savage verbal exchanges were classic Mahathir, but he can point to his success in hoisting this small country of 23 million people from being an exporter of rubber and tin into 17th position among the world's trading nations. Unemployment is negligible and the country is on track for 4.5 percent GDP growth this year. But Mahathir's critics say he has allowed political cronies to become rich and stifled some development through an affirmative action programme giving the Malay majority privileges over the economically-dominant Chinese. Government policies, they say, are too accommodating, resulting in a lack of healthy competition to spur productivity growth which had averaged below one percent in the last decade. A government tendency to step in and rescue troubled firms also clouded his rule.
His pump-priming policy to lift the economy out of the doldrums has led to seven straight years of budget deficits. Malaysia is also struggling to lure foreign funds with investors wary of putting their money into a country where they could again have problems getting it out. Moody's Investors Service in April said Malaysia must strive to make its corporate sector more competitive and draw in more foreign investment to sustain long-term growth. - AFP
Source: malaysiakini.com