Is There an Underside to Economic Growth? A Mixed-Methods Analysis of Malaysia

Abstract This paper sheds light on a Malaysian paradox that may have lessons for the rest of the world. Despite high GDP growth with concurrent sharp reductions in income poverty and inequality, there has been widespread discontent in the country. The paper first documents various dimensions of the Malaysian “miracle” with a diverse set of survey data. It then draws on a large sample of open-ended focus-group discussions to go below the surface of the data to analyze how middle-class and poor Malaysian citizens perceive these changes, the challenges they face, and their sources of discontent. The findings reveal a broad consensus that while material living standards have improved, they have been accompanied by an underside such as a large “imbalance” between income and expenses, a need to rely on dual incomes and multiple jobs, growing indebtedness, increased stress, and polarization across ethnic groups. Furthermore, people in poorer regions of Malaysia demonstrate that they care more about social status—with a preference for relative over absolute income—in comparison to people in richer regions, indicating that growth may reduce social connectedness. The paper then draws on the work of Karl Polanyi and Fred Hirsch to argue that the Malaysian paradox may reveal something more general about the social embeddedness of economic life and its implications for why some people may experience undersides to economic growth.