About Nick: i am an economist based in malaysia. I write about development economics, while sneaking in a pop culture reference or two.

The Institutionalization of the Malaysian Mindset

Published in The Edge Malaysia, 8 - 14 June 2015.

I recently re-watched one of my all-time favorite movies – a 1994 classic called The Shawshank Redemption which tells the story of life in prison for Andy Dufresne, played masterfully by Tim Robbins, a banker who is sentenced to two life terms in Shawshank State Prison for the murder of his wife and her lover despite his claims of innocence. The movie is deep, with many thoughtprovoking themes running through it. Perhaps the most thought-provoking, at least to me, is how the space or condition in which a person exists can ‘institutionalize’ a person. This is best described by one of the lead characters, Ellis Boyd “Red” Redding, who says, “Believe what you want. These walls are funny. First you hate them, then you get used to them. After long enough, [you] depend on them. That's ‘institutionalized.’”

Institutionalization, in this context, simply means the eventual adaptation of a person to their surroundings, no matter what those surroundings are. In the Shawshank Redemption case, convicts adapt to their prison lives so much that when they are released on parole, they find that they cannot survive in the outside world – despite being free persons – and so, they conceive of ways to return to prison and thus, to their institutionalized lives. In general, the human species is one of the most capable species of adaptation; geneticists at Stanford University found that adaptation – the process by which organisms change to better fit their environment – is indeed a large part of human genomic evolution. In the social sciences, researchers at the Centre for Economic Performance at the London School of Economics found evidence that while there are massive changes in self-reported life satisfaction at the time of important life events such as marriage, divorce, widowhood and child birth, life satisfaction eventually returns to baseline – hence, indicating adaptation – after a given amount of time. However, it is worth noting that these results do not hold for unemployment, particularly among men.

Therefore, there is strong evidence that the capacity for humans to adapt to their surroundings is well-founded, both in the natural sciences and the social sciences. Now, taking the theme from The Shawshank Redemption, we can then ask ourselves if there are situations or scenarios in our own personal lives that are ‘institutionalizing’ us. Do we do certain things because we are a product of our environment, regardless of whether that thing we do leads us to optimal or suboptimal outcomes? Extrapolating this, and if we believe that Malaysia, with all its quirks, institutions, economic issues, politics, people and idiosyncrasies, is a social environment – which, of course, it is – then we may also ask ourselves, what are the aspects of living in Malaysia that may lead to the institutionalization of a Malaysian mindset?

To be clear, I am not saying that living in Malaysia is akin to living in prison. Far from it, in fact. All I am saying is that, no matter where you live, you are bound to be ‘institutionalized’ by that place and thus, think certain things or act certain ways that are a result of that cultural and national institutionalization. Consider, for example, the recently released Eleventh Malaysia Plan. Given that it is the thirteenth of its series (including the Malaya Plans), the 5 year plans have become part and parcel of Malaysian development planning for over half a decade. The Malaysia Plans set out the federal government’s plans – channeled through development expenditure – in terms of strategic thrusts for a period of 5 years.

This article is not meant to review the contents of the Eleventh Malaysia Plan as well as its respective merits and demerits. Rather, given the context of ‘institutionalization,’ it is perhaps worth asking if the Eleventh Malaysia Plan was prepared because the Malaysia Plans are an institution in Malaysian development planning, rather than because the previous Malaysia Plans have been rigorously proven to be critical in Malaysia’s growth and development. Do we know if previous Malaysia Plans were actually successful? Would Malaysia’s GDP growth, for example, have been significantly below what the historical growth numbers have been if the Malaysia Plans did not exist? Recall that a policy works not when it produces positive outcomes, but when it produces positive outcomes over what we would have observed had that policy not been in place. Therefore, do we know if 5-year Plans work for Malaysia and if we do not know this, then why are we continuing to create more 5- year Plans? To be clear, I am not saying that we should not have a development strategy at all when it comes to national development; I am asking why this strategy has to come in the form of a 5-year Plan when we do not know for certain if the 5- year Plans actually work.

Another example of the institutionalization of Malaysian culture is the GST. I have argued, in another column in this newspaper, about the merits of the GST. What I am curious about is whether the attacks on GST, such as the recent anti-GST rallies, are because of a mindset that any tax increase or that any government-introduced policy is necessarily bad. It is absolutely true that those who may not have paid income taxes before are now paying consumption taxes (by choice, since you can choose which products you want to consume) and therefore, their cost of living has increased. Correct me if I am wrong, but if we want to push for good governance by the government, is this not a good thing? Are you more likely to complain about a bad product if you paid RM50 for it or if it was given to you for free? People pay taxes in exchange for goods and services from the government such as subsidized healthcare, public education, a wellfunctioning bureaucracy, and so on. Now that more people are actually paying for these services, would it not be the case that the pressure be increased on the government to reduce all its ridiculous wastages, leakages and corruption? Channeled correctly, the increase in costs of living, particularly among hitherto non tax-paying Malaysians, can be used to improve the government services machinery. However, if we are ‘institutionalized’ to think that all increases in costs of living are necessarily bad, we may miss out on capitalizing on such a channel.

So, why is recognizing the institutionalization of a mindset important? Well, institutionalization tends to favor the status quo and the status quo means that the sentence, “This is the way we have always done it” is regularly used as a defense. When these nine words are used as a defense for continuing a policy or a mindset – the Malaysian Plans or ‘new taxes that increase costs of living are always bad’ – that is a bigger red flag than the Kelantan state flag. Change is good. We must always be on the lookout for the next good thing and the next great idea. Critical to that type of mindset is the recognition that institutionalization of a mindset is pervasive in any society and every effort must be taken to recognize what aspects of society are institutionalized and thus, what that society can do to break free of such institutionalization.

The Incoherence of Blanket Policies in Malaysia

55, Not Out – Behavioral Finance and the EPF