Faculty

Dr Mahathir: Lessons for Asia from the Financial Crisis

 

By Lu Yingzhe


On April 29th 2009, Tun Dr Mahathir Bin Mohamad, former Prime Minister of Malaysia, with his wife Ton Dr Siti Hasmah Mohamed Ali as well as other officials from Malaysia, visited Peking University and the National School of Development (NSD) and delivered a speech, entitled “The Global Financial Crisis of the 21st Century -- Lessons for Asia”, to the students and faculty members of the university at CCER.

His Excellency Tun Dr Mahathir Bin Mohamad, one of Asia's longest-serving leaders, had held 22 years term in office before his retirement in 2003. On behalf of Peking University, Executive Vice President Wu Zhipan extended his warmest welcome to Dr Mahathir for his visit to the university and greatly admired the achievements His Excellency had made in turning Malaysia into a prosperous regional hub during his administration. Professor Yao Yang, Deputy Dean of NSD, also gave a sincere welcome remark and hosted the event.

In his 40-minute speech Dr Mahathir shares his views to the students and faculty members in regard to the rationale underpinnings of several global and regional financial crises and the implications of the failure of western financial systems to Asian countries.

Dr Mahathir attributed the major cause of the financial failures, currently prevailed the western world, to a lack of government regulation in banking activities. Dr Mahathir referred to it as a "systemic failure", which could be traced back as early as in the 1700s when governments all over the world used fiat money to replace gold. Over-issuing of paper money resulted in too much currency in circulation beyond governments' control. Led by "greed and too much power" being given, as Mahathir put it, banks could easily evade government supervision and abuse the financial system.

Thus, in the US case, it led to the collapse of the sub-prime loans, which in turn pulled down not only the banks but also the insurance companies like AIG and the mortgage companies like Fannie Mae and Freddie Mac. Facing enormous loss and inability to balance their accounts, banks resorted to government bailouts which, sadly, had proven to be far from adequate to cover up the whole amounts.

 

Dr Mahathir went on to maintain that "Asia must not accept western ideas and systems without critical examination". He suggested that "Asians should actively promote their own systems" if they found what was proposed by western countries not suitable to their needs. He cited Malaysian government’s example as a proven success during the 1997-98 Asian financial crisis by dismissing the impractical advices given by IMF then and alternatively controlling the exchange rates, which later enabled Malaysia to recover much quickly than the other East Asian countries.

Dr Mahathir concluded in his speech that the European financial system is far from perfect and that "Asians have the same capacity to think and innovate" in devising their own economic policies. They should, after hearing and considering suggestions from others, be prepared to "put up and defend their proposals for the world financial and economic reforms" as well.

After the speech, Dr Mahathir also answered students’ questions. His eloquence in speech and charisma as an influential Asian leader has left great impression to everyone present. Malaysia and China has maintained an enduring friendly relationship and Dr Mahathir has long been a good friend of the Chinese people. There are 40 Malaysian students presently studying in Peking University, said President Wu Zhipan.