This article first appeared in Forum, The Edge Malaysia Weekly on March 31, 2025 - April 6, 2025

Here is a fun fact. Did you know that there is a bacterium that holds a place in the Guinness Book of World Records as the toughest known bacterium? I first learnt about the Deinococcus radiodurans from a book written by astronomy Prof Kelsey Johnson entitled, Into the Unknown. In the book, Johnson writes about how this particular bacterium can survive dehydration, extreme cold, acidic environments, radiation a thousand times more than humans can endure, and even the vacuum of space. This gangster of a bacterium is a form of extremophile — an organism that is able to live in extreme environments — and is wonderfully dubbed “Conan the Bacterium”.

Reading about Conan the Bacterium made me reflect on one of the most important things I have learnt in all my research and thinking about economic development — that economic growth is typically episodic, especially in developing countries. In the opening chapter to Deals and Development by economists Lant Pritchett, Kunal Sen and Eric Werker — a chapter that I think is a must-read for anyone interested in the messiness of development — the authors point out that over the medium to long run, most countries experience transitions between periods of high growth, periods of negative growth and periods of stagnation.

A separate paper by economists Ben Jones and Ben Olken corroborates these findings. They present evidence that extreme highs and extreme lows in growth are common across all countries but only among the very richest countries is there a drop in the magnitude of extremes. This is a really crucial point — maybe sustained growth is less about what the average growth rates are as opposed to what the standard deviation or volatility of those growth rates may be. Indeed, Jones and Olken argue that, “The basic challenge in poor countries thus appears to centre less on triggering growth and more on sustaining it”. As an illustration, the average growth of the UK and Ghana from 1950 to 2007 is almost exactly the same, but Ghana’s growth came with far more volatile episodes.

Recent political economy news from Indonesia has made me question if Indonesia is at the precipice of a transition in growth episodes. Long the darling of Southeast Asia’s economic prospects, recent news flow from Indonesia has seen a general reversal in confidence, both domestically and internationally. The Indonesian stock market has seen substantial foreign equity outflows while the rupiah has reached near five-year lows. Recent domestic data has indicated weakened purchasing power, consumer confidence, a shrinking middle class and declining formal employment. On top of that, there are serious concerns over a recent Indonesian parliamentary revision to the nation’s military law, allocating more civilian posts for military officers.

More broadly, the medium- to long-term outlook for the world is a potent mix of greater deglobalisation where countries around the world are becoming more nativist, of ever more existential consequences of climate change, of declining fertility in richer — and even middle-income countries — while dealing with socioeconomic instability from migration, and of deeper concerns over the ethics and spread of artificial intelligence. In such a world, it is altogether more likely for countries — rich or poor — to have a structural break and to transition towards a stagnant or, worse, negative economic growth episode. With the exception of artificial intelligence, the other three megatrends — deglobalisation, climate change and demographics — are inherently inflationary and should growth fail to materialise, countries may face an extended bout of stagflation. And that’s just not good for anybody.

As such, moving forward, in taking lessons from the literature of growth episodes where it may be more important to prevent stagnant or negative growth episodes than to generate accelerated growth episodes, as well as taking inspiration from Conan the Bacterium, perhaps a further economic strategy for Malaysia — on top of Prime Minister Datuk Seri Anwar Ibrahim’s Ekonomi Madani strategy — is in building a truly resilient political economy. One that can survive whatever the political economy equivalent of dehydration, extreme cold, acidic environments, intense radiation and the vacuum of space is. Can we create an extremophile political economy?

A really important place to start is the devolution of power. In the Game of Thrones series, when Arya Stark killed the Night King, it then triggered a domino effect of instantaneously killing off the rest of the White Walkers and their zombie army, precisely because they were tied to the power of the Night King. That kind of ecological cascade is catastrophic. As such, if Malaysia were to prepare to be an extremophile, we need to reduce concentration of power (and therefore of weakness, kind of like how the Death Star in Star Wars could be blown up just by targeting one spot) and ensure that multiple actors feel sufficiently empowered to continue to drive Malaysia’s economic development.

So, a really good start is the current discussion on term limits for the prime minister role. A total tenure of 10 years is plenty of time for any given prime minister to make their mark, and many countries around the world do employ two-term limits for their heads of state. The primary argument for these term limits is to avoid ever-ongoing concentration and entrenchment of power. This makes sense; as per The Dark Knight movie, “You either die a hero or you live long enough to see yourself become the villain”. I, for one, do hope this constitutional amendment goes through.

But there are other institutional reforms that can create a more resilient political economy. As a corollary to the entrenchment of power above, what we also need to devolve is the entrenchment of relationships with power, particularly those of businesses that have long held special rights or licences or rents due to their connections to political power. This form of “tycoon capital” is not unique to Malaysia. Much of business history in East Asia and Southeast Asia is a family affair. Even the Elon Musk-Donald Trump connection is a clear example of the intersection between business and politics.

Those relationships need to be broken up or, at the very least, weakened to allow for greater dynamism in business. The government can liberalise some of these rents and licences or, at the very least, demand some form of greater compensation for those rents and licences by way of capital expenditure for strategic investments into the country from tycoon capital, which, by the way, was the source of capital for economic growth in South Korea and Japan and, to a lesser extent, Taiwan. And even more than the government-linked investment companies (GLIC) and government-linked companies (GLCs), these tycoon businesses are the nation’s real long-term capital; we know what the surnames of the CEOs of these businesses will be in 10 years or so with far more certainty than the surnames of CEOs of our GLICs and GLCs. I genuinely believe that the first Asean country to break this business family-politics relationship will engender a new acceleration episode.

There are other possible sources of devolution of power — for instance, revisiting the political economy distribution of powers between the federal and the state or redelineating political constituencies to be more proportionate. But the point of the devolution of power is to ultimately build a more extremophile political economy that can then serve to ensure a more resilient Malaysia amid greater volatility globally. We have much to learn from Conan the Bacterium.

Nicholas Khaw is an economist and head of research at Khazanah Nasional Bhd

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.