Our models show that Malaysia's strong political institutions can drive growth even if the ruling politicians change. Regulators exercise firm control over the economy. Social investment is relatively high and well-targeted. The poor receive adequate nutrition, sanitation, and education. Despite his rhetoric, Prime Minister Mahathir is no fool.
Semitic references play well among the Malay Muslim population.
Brilliant politician that he is, the prime minister has even managed to bolster his legitimacy without significantly scaring off foreign investors. The question of the day remains whether the prime minister believes his own criticisms of the speculators. The country seems to be in deep denial, avoiding the hard structural reforms that, in the end, will be needed to restore growth and contribute to new capital flows. This denial is especially dangerous because the country faces significant proximity risks from deteriorating situations in Indonesia and Japan. Korea has grown rapidly but failed to enforce impartial regulation.