CME: DIGITAL TRANSFORMATION CAN SUCCEED ONLY IF ENTREPRENEUR-DRIVEN AND NOT GOVERNMENT-LED
Saturday, 20 February 2021: Following the launching of MyDigital — the Malaysia Digital Economy Blueprint – by Prime Minister Tan Sri Muhyiddin Yassin during a virtual ceremony, the Malaysian government expects the digital economy to contribute 22.6 percent to the country’s gross domestic product (GDP) by the year 2025. Muhyiddin said the plan also aimed to create and provide 500,000 job opportunities in the digital economy.
The Center for Market Education (CME) invites the Malaysian government to be prudent in setting too ambitious targets that cannot simply be met via policy design and implementation.
Dr Carmelo Ferlito, CEO of the Center for Market Education, explained that “the digital transformation that the government is hoping for, with its positive consequences, belongs to the realm of those processes of creative destruction described by the Austrian economist Joseph A. Schumpeter over a century ago”. By looking at the history of break-through innovative processes, the main common feature they present is that they were all entrepreneur-driven and not government-led.
“Innovations happen because entrepreneurs ‘smell’ the presence of unexploited profit opportunities wrapped into new ideas, new production processes or new markets. When one of them grasp that opportunities and enjoy a competitive advantage, the transformation process is set in motion and it has to struggles against the old way to do things”, Dr Ferlito added.
Mr Sergio Calzolari, a Fellow at the Center for Market Education, added that “this is a process that arises from within the capitalist dynamics and not imposed from outside”.
The positive element in the new blueprint is the presence of institutional actions aiming to make easier for innovations to be implemented within the Malaysian market. However, CME invites the government to be careful in the implementation of the program in order to avoid unintended consequences: innovations, in order to be sustainable in the long run, needs to pass the market test, they have to be accepted into the mode of production because they are economically sustainable, which means accepted by producers and consumers at prevalent market prices.
On the contrary, if innovations happen simply because they are policy-induced but they are not consistent with market preferences, we will obtain a technological bubble which will burst once the policy support is withdrawn. The consequence will be that the positive effects created by the new technologies will be temporary and the post-bubble economic conditions could be worse than the previous once.
In order to lead toward a sustainable innovative path, the role of government needs to be as less as pervasive as possible, and very much limited to the definition of a favourable institutional framework, letting entrepreneurial spirits in the market to be the real process drivers.
Among the reforms that the Center for Market Education advocates to awake domestic creative entrepreneurial spirits is a reform of the education system which restores the role of humanities as those set of disciplines able to shape critical thinking, as critical thinking is the only solid base for really disruptive transformation processes.
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About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.