THE INSTITUTIONAL AND POLITICAL FRAMEWORK OF GROWTH IN AN ETHNICALLY DIVERSE SOCIETY - THE CASE OF MALAYSIA

This paper classifies Malaysia as an enigmatic case, because it is reg arded as one of the ''miracle'' economies of the world despite an ambi tious affirmative action program that was vulnerable to the risk of de terring the growth process. Critics have rightly pointed out the predi ctable microeconomic distortions of Malaysia's ''New Economic Policy,' ' but such distortions were not significant enough to impair economic performance. This paper argues that Malaysia fits the strong version o f the notion of ''shared growth,'' in which both poverty and inequalit y declined and in which the alleviation of inter-ethnic imbalances had growth-producing effects because of their contribution to social cohe sion and political stability. In addition, the focus on export-oriente d industrialization and investment in basic education and rural infras tructure contributed to the phenomenon of ''shared growth.''