Income redistribution and the role of state in Peninsular Malaysia

Abstract

This paper seeks to advance our understanding of the factors affecting income distribution in post-colonial Peninsular Malaysia. Particular attention will be given to the role of the state, especially as it has sought to affect the pattern of income distribution. The paper is divided two main parts. We begin with a discussion of the changing nature of the post-colonial Malayan and then Malaysian state, with particular attention given to its income (and wealth) distribution goals. A brief overview of Malayan economic history under British colonialism serves to highlight some of the main sources and forms of inequality inherited from that period. The official view on distribution and equity issues are explained in relation to developments over the last quarter century. The second part of the paper offers an empirical survey of patterns and trends of income distribution in the post-colonial period. After presenting aggregate trends, ethnic and rural variations are examined. The impact of the fiscal system and public expenditure are then discussed. It is appropriate to comment here on the relation between market income and economic welfare. Finally, some 'indirect' consequences of specific government economic 'interventions' - with or without explicit distributional goals are looked at. The consequences of several different kinds of redistributive measures with respect to rice farmers, rubber smallholders, land settlers and industrialization are examined in some detail.