Nor Mohamed: Drop the laissez-faire attitude

KUALA LUMPUR: Malaysia cannot afford to adopt a laissez-faire attitude towards innovation-led growth if it hopes to become an inclusive society, said Khazanah Nasional Bhd deputy chairman Tan Sri Nor Mohamed Yakcop, even as the government continues to negotiate the Trans-Pacific Partnership, which propagates freer markets.
“Innovation is important for growth, but its impact is not always positive or even neutral. As we have seen previously, certain types of innovation seem to have a tendency to favour the already-privileged, sometimes at the expense of the underprivileged. Thus, we must be conscious not just of the effects of the disruption, but also whom the disruption will be affecting,” he said in his opening address at the Khazanah Megatrends Forum 2015 yesterday, promoting the concept of inclusive innovation.
According to the World Bank, inclusive innovation is “any innovation that leads to affordable access to quality goods and services for the poor on a sustainable basis and with extensive outreach”.
Nor Mohamed said the government needs to intervene to ensure fair distribution of wealth created in the economy and remove social injustice, including social injustice arising from any disruption.
“This can be done by the government by providing good education for all its citizens, good infrastructure in urban as well as rural areas, and technical and vocational training to enable the young to take up skilled jobs and thereby earn a reasonable income. The government must also provide financial and technical assistance to individuals from disadvantaged backgrounds to become entrepreneurs, particularly innovative entrepreneurs,” he added.
He said the government must provide an environment where, through a combination of education or skills training, hard work and good behaviour, any citizen can move up from humble beginnings to at least reasonable success.
“Unfortunately, today, in many parts of the world, there are millions of people who are behaving well and working hard but barely getting by.”
Nor Mohamed said the government must encourage creativity and ensure that regulations allow for the “creative” in creative disruption. He said this is important in ensuring that innovation is not stifled.
He said although the concept of creative disruption promises important and exciting results, there is less excitement over discussions on the impact of creative disruption on social inclusivity.
“The relationship between innovation and income starts from the standpoint that innovation is often a key driver of economic growth. By providing and commercialising new products, processes or services to meet market needs, innovation creates new businesses and new employment, which subsequently fuels economic growth. Theory suggests that this economic growth would then translate into income growth.
“However, in reality, we must be aware of whose income innovation really grows, as innovation does not necessarily lead to income and wealth creation for all classes in the economy,” he added.
Nor Mohamed said the situation in the US – the most innovative nation in the world but reportedly had 15% of its population living in poverty last year – shows that the economic philosophy of laissez-faire and its assumption of trickle-down dynamics, namely that the beneficiaries of wealth creation would pass on the largesse to all segments of the society, is not valid.