The colour of inequality: Ethnicity, class, income and wealth in Malaysia

Abstract

Petaling Jaya: MPH Publishing, 2014, pp. 249, ISBN 978-9-6741-5214-7. Since the financial crisis of 2008 and the 'Arab Spring' protests across the Middle East, growing levels of inequality have been one of the most hotly debated subjects globally. [...]the default subject of most studies has been income inequality.

The colour of inequality: Ethnicity, class, income and wealth in Malaysia. By Muhammed Abdul Khalid. Petaling Jaya: MPH Publishing, 2014, pp. 249, ISBN 978-9-6741-5214-7.

Since the financial crisis of 2008 and the 'Arab Spring' protests across the Middle East, growing levels of inequality have been one of the most hotly debated subjects globally. Muhammed Abdul Khalid's book The Colour of Inequality: Ethnicity, Class, Income and Wealth in Malaysia is an attempt to deconstruct the historical developments, determinants and distributions of inequality in Malaysia, paying particular attention to differences between the Bumiputra and non-Bumiputra races.

One of the key strengths of this book lies in the sheer amount of data presented. In a similar vein to Thomas Piketty's (2013) seminal work on global inequality, Capital in the Twenty-First Century, Muhammed looks at historical data stretching back to the pre-colonial period in order to paint a detailed picture of how economic inequality was embedded into the very social fabric of pre-independence Malaya and how various post-independence policies have attempted to address the issue. In this regard, the second chapter of the book is particularly impressive; it presents a remarkable amount of data of the historical developments of inequality in Malaysia, from the pre-colonial era till the present day, focusing on a wide range of indicators, including income, labour force participation, education status and asset accumulation.

Another key strength of this book is that the author uses a broader definition of inequality than simply looking at income, which constitutes only one facet of inequality. The other aspect of inequality lies in asset and wealth inequality. Most works discussing the subject will inevitably focus wholly or predominantly on income. This is because data for total assets held, or overall wealth, is much more difficult to get than that of income distributions. Therefore, the default subject of most studies has been income inequality. By using proxy data for asset allocation in Malaysia, Muhammed has been able to, to a certain extent, circumvent the limited access to data. While the data used does not allow for a very exact analysis, the result is still that this book can present a much broader picture of inequality than if income alone had been used.

The benefit of this focus on asset inequality is that the policy recommendations made can be much more far reaching than when only looking solely on income. The author uses this to his advantage by arguing for an overhaul to the current tax code in order to tax assets and capital gains - which will have a higher impact on the rich - and reduce the tax rate for lower-level income and goods and services - which will have an impact on the poorer segments of society.

The main issue of this book, however, lies in its poor editing. There are numerous cases of poor editing that, whilst not undermining the relevance of the book, severely impairs its readability. Such niggles include not specifying a parity value when referring to monetary values in US dollars. Further issues pertain to tables presenting data but where the variables are not fully explained. And, the book seems to be using both internal citations and footnotes simultaneously. Additionally, in chapter 5, there is a random paragraph on the lack of racial intermarriages at the end of a section discussing differences in educational attainment between the races. The paragraph appears out of the blue, and though it would be an interesting topic to pursue it remains just a small paragraph without any relevance to other arguments. This list of issues is not exhaustive by any means, but as they do not affect the arguments made in the book, I will not dwell further on them.

What is much more serious, on the other hand, are those issues where the argument is severely affected due to contradictory points being made throughout the book. The main example of this pertains to the question of whether or not the within or between race inequality is the greater problem (i.e. is inequality in Malaysia predominantly due to inequality within each racial group, or because some races are richer than others). Though the author at times seems to suggest that data analysis - as well as supportive studies - indicate that the problem with inequality in Malaysia today is in fact most profound within ethnic groups and not between them, at other times he falls back on the assumption that it is between race that inequality is more pronounced.

One way in which the above inconsistencies can be accounted for is through discussion about the difference between income and assets/ wealth inequality. The Gini coefficient for asset or wealth inequality in Malaysia, as in virtually every country, is estimated to be higher than that of income inequality. This means that, when looking at not just the disposable income, but also what assets a person owns, and can pass down to the next generation, the gap between rich and poor in Malaysia becomes even greater. The author discusses this distinction at some length, and includes a long section on how the Chinese have over the centuries been able to accumulate wealth, due to their status as a favoured people during British colonial times. The Chinese, then, have more assets to transfer to the next generations, who in turn will have a greater advantage in terms of both education attainment (i.e. can afford expensive private or overseas education), as well as have greater access to future credits. This means that the Bumiputra and Indian races were behind in asset accumulation from the very beginning.

Though the author does stress why assets and wealth make better indicators for inequality in general, the point linking asset inequality to the between versus within race effect is not made sufficiently clear to the reader at the outset of the book. The argument for the between race effect of inequality being specifically connected to asset accumulation is not stated fully until the concluding chapter of the book. Had the author clearly stressed this connection already in the introductory chapter, the argument of the book could have been much more succinctly presented, and the reader would not have been left in doubt as to whether the prescribed policies changes really would improve the situation.

This is far from a trivial point, as several of the policy recommendations derived from the analysis relates back to the point that we have to be more concerned about the between race inequality than we have to be about the within race inequality. This is especially pertinent with regards to the discussion, in chapter 5, about the need to preserve a race based quota system for entrance to public universities in Malaysia, which is one of the core policy arguments set forth in the book. The author argues that in order to assist the educational attainment - and therefore asset accumulation - of the Bumiputra races, there is need for a quota system protecting their access to public universities based on their proportion of the total population. If the author is correct that the problem is between race inequalities, due to unequal asset accumulation, then he would also be justified in arguing for racial quotas. On the other hand, if the within race effect is dominant, then racial quotas would have very small impact on the overall inequality in the country, as poorer Bumiputra students would be losing out in the competition to better-off students from the same group.

All in all, this is an important contribution to the debate about inequality in Malaysia. The book's heavy reliance on data, both current and historical, paints a clear picture of how inequality developed from colonial times until today, giving the reader a good overview of the origins and trends of inequality. Nevertheless, the overall clarity of the arguments presented in this book is greatly diminished due to the inadequate editing. The internal contradictions between sections make the reader unsure about the relevance ofthe policy suggestions presented, as well as detract from the readability of the book. Nonetheless, given the important subject matter and the unique reliance of data, I look forward to a revised second edition of this book.