The Malaysian Insider | November 10, 2011

NOV 10 — Greed, ignorance, hubris, corruption and a departure from long-held principles and a lazy media all played roles in the financial meltdown that is Greece, Ireland, Iceland. In his latest book “Boomerang”, Michael Lewis goes on a meltdown tour to find out how countries and societies got into this mess.

Malaysia is not Greece or Iceland but some of his observations should resonate with Malaysians. Below are just a sampling of some of his observations and the commentaries under each point made by The Malaysian Insider.

What “Boomerang” says:

1) “The world is now pocked with cities that feel as if they are perched on top of bombs. The bombs have yet to explode but the fuses have been lit…

What The Malaysian Insider notes:

Our debt levels of over 50 per cent of the GDP is a far cry from the debt level which brought Greece and Iceland to their knees but here is the problem: all the cities and countries in financial trouble once had manageable debt levels but greed, corruption and the propensity to believe in the best-case scenarios even in the face of empirical evidence eventually led to historically high debt levels.

For Ireland, it was easy credit that brought its downfall. In Malaysia’s case, it may be our excess to cheap foreign labour which distorts our true productivity and competitiveness as well as poses a national security problem.

What “Boomerang” says:

2) In 2006, Danske Bank, Denmark’s biggest bank, put out a report highlighting that Iceland’s financial system was growing at a frantic pace and on collision course with disaster.

The reaction from Iceland: “You’re Danish, and you are angry with Iceland because Iceland is doing well.”

From the prime minister down, Iceland’s leaders attacked the messenger.

What The Malaysian Insider notes:

Denial is something we understand well, and every time someone puts forward a view contrary to that held by the government or establishment, it is rubbished and the holder of that view labelled unpatriotic, ignorant, etc.

So when the World Bank put out the most authoritative study yet on brain drain from Malaysia, the government’s reaction was: this is not a problem, this is not a problem, this is not a problem. In fact, there is a witch-hunt culture against journalists from neighbouring countries who write articles unflattering of Putrajaya.

What “Boomerang” says:

3) Where waste ends and theft begins almost doesn’t matter, the one masks and thus enables the other.

What The Malaysian Insider notes:

This could have been from the concluding chapter of the latest Auditor-General’s Report.

What “Boomerang” says:

4) Government ministers who have spent their lives in public service emerge from office able to afford multi-million dollar mansions.

What The Malaysian Insider notes:

This is where Malaysia has outdone its Greek counterparts because ministers do not need to retire from office to flaunt their wealth. While in office, they live in multi-million ringgit home in Damansara Heights, Bukit Tunku, Country Heights, have a fleet of expensive cars, send their children to expensive boarding schools in the UK and wear suits which cost more than their monthly salaries (one suit is the equivalent of a month’s salary). Then there are their wives decked out with diamonds and other precious stones. Sorry, I forgot the homes in Kensington.

What “Boomerang” says:

5) Morgan Kelly is an economics professor at the University College Dublin and he pointed out that Ireland’s real estate boom was not sustainable and the consequence for the banks and economy would be catastrophic. He sent his article to the Irish Independent newspaper and the editor hit back, saying he found the article offensive and would not publish it. The Sunday Business Post would not publish it. “The journalists were following the bankers’ lead and conflating a positive outlook on real estate prices.” Kelly’s prediction was spot on, sadly for Ireland.

What The Malaysian Insider notes:

This same cosy relationship exists in Malaysia between the government and the mainstream media. One of the biggest scandals in the country is the comic National Feedlot Centre project and the unsavoury nexus between politics and business, sometimes called crony capitalism. Millions of taxpayers’ money is being flushed down the drain but the editors at the mainstream press are pretending that this problem does not exist, in the same way that they black out all news which could have negative impact on Putrajaya.