Globalization and the End of Empire
As Tony Hopkins has observed, the end of empire in Malaya (known as Malaysia from 1963) coincided with a profound change in the character of globalization and an acceleration in the process of its development. Increasing flows of people and trade were accompanied by movements of new ideas celebrating the values of individualism, opportunity, and endeavor while emphasizing the need to eliminate discrimination and oppression. The spread of such ideas together with the removal of British imperial protection could easily have led to the displacement of old colonial enterprises and the harassment or expulsion of their European managers, as feared at the time by leaders of the British Agency Houses in Malaya and much earlier by the nineteenth-century writer Charles Henry Pearson (whose views are discussed by Peter Cain in chapter 23 of this volume). Such risks continue to be feared by Western multinationals making fresh investments in the emerging economies of Brazil, Russia, India, China, and other developing countries or transitional states. This chapter focuses on the experiences of foreign plantation firms facing the threat of expropriation under Malaysia’s New Economic Policy (NEP) between 1970 and 1990. On the face of it these firms were prime candidates for postcolonial punishment. Together with the British and American tin mining enterprises in colonial Malaya, they represented the unacceptable face of capitalist exploitation, focused on the extraction of value from natural resources rather than on the generation of value through investment in human skills or manufacturing technology. This view was argued strongly by radical writers at the time and has been argued more recently in a different way, in reference to the closely linked plantations sector in neighboring Indonesia, by the American institutional economists Daron Acemoglu, Simon Johnson, and James Robinson. Yet the argument is flawed in two main ways. First, it assumes that no investment was made by the planters either in the education or welfare of their workforce or in manufacturing activities, an assumption that will be contested in the main body of this chapter. Second, as Austin and Hopkins have each argued, Acemoglu et al.’s “Reversal of Fortune” hypothesis rests on a seriously oversimplified distinction between settler colonies, whose institutions supported the growth of productive investment, and extractive states, whose institutions facilitated the transfer of natural resources from colony to colonizer. Malaya’s colonial economy was dominated by mines and plantations, yet many Europeans settled there and helped to eliminate diseases like malaria from much of the western peninsula, where the mines and plantations were located. Furthermore, as W. K. Hancock observed in 1942, the Malayan plantation system was built on radically different political, economic, and social foundations from the violently exploitative forest concessions system of King Leopold’s Congo Free State, which provided Acemoglu et al.’s template for the extractive state. These points may help to explain why independent Malaysia was relatively late in adopting policies of economic nationalism and why, when the New Economic Policy was finally launched in 1970, Malaysian politicians maintained a strong aversion to forced expropriation. The NEP involved a significant transfer of share ownership from European to Malaysian hands, yet this was accomplished peacefully and with no interruption to the country’s economic growth, through a process that may well have influenced policy developments elsewhere, for example in South Africa. There was space for foreign owners to negotiate, to find local allies, and to cooperate with them in constructing new and sustainable systems of shared ownership and management. It will be shown below that the various major firms developed a range of strategies that, for some, involved investing in the industrialization of Malaysia’s fast-growing palm oil industry, supporting the nation’s emergence as the world’s leading exporter of palm oil products to Asian and African as well as Western markets at a time of rapid growth in global demand. The primary research underpinning this chapter was inspired by the author’s experience of studying with Tony Hopkins at the University of Birmingham during the late 1970s, in the middle of the period now under study. Tony had just published a pair of papers on imperial business in Africa, which called for the application of professional research techniques and analytical frameworks to the study of this relatively neglected theme. Although my own first choice of research topic was the history of smallholder palm oil production in Nigeria, I soon became aware that Hopkins’s comments about the limitations of existing imperial business histories were equally applicable to Southeast Asia. One of the great debates within the British West African imperial administration was over the desirability (or otherwise) of introducing the Congo concessions system and/or the Indonesian/Malayan plantation system to West Africa. It was impossible to evaluate critically the arguments put forward within this debate while so little was known about the social organization, cost structure, returns to labor and capital, and innovative capacity of the plantation system in practice. Having completed a monograph on the history of a community of smallholders involved in Nigeria’s palm oil export industry, I therefore undertook further training at London Business School, acquiring the ability to read and interpret firms’ annual accounts and to analyze a range of qualitative data on changes in their strategy and structure. This led to personal contacts opening up the opportunity to do in-depth research using a full set of internal records on the history of United Plantations Berhad, a “survivor” that is regarded within Malaysia as an icon of best business practices, in terms of both environmental impact and social responsibility. The research, financed in its initial stages (1987 to 1989) by the School of Oriental and African Studies and the Nuffield Foundation, drew on detailed operational reports, board of directors meeting minutes, and personal correspondence alongside a complete set of annual reports and chairman’s statements to shareholders, going back to 1906. Forty-four people were interviewed in depth for the study, including current and retired managers not only from United Plantations but also from its competitors Guthrie, Harrisons & Crosfield, Highlands & Lowlands, Socfin, and Unilever. Further information about the Malaysian palm oil plantations industry, within which all these firms operated, was gained from the publications held by the European office of the Palm Oil Research Institute of Malaysia, where the author was employed from 1995 to 2004. This primary research data was originally written up in narrative form, and its implications for development policy were explored using trade statistics and other industry-level data to contextualize the internal company information. The current chapter sets the United Plantations example within the wider context of an extremely rich body of recent business history literature revealing the full range of foreign plantation firms’ responses to the threat of state expropriation under Malaysia’s New Economic Policy since 1970. The argument emphasizes the foreign firms’ varying degrees of desire and ability to align corporate strategy with the social and economic developmental aspirations of the host country. It will be shown that a key variable was the foreign firms’ level of identification with such aspirations. What today would be called corporate social responsibility was closely linked to the sustainability of business success, in a way that required foreign firms to reexamine their own racial attitudes and concepts of ethical practice. This finding resonates with the argument currently emerging within the international business studies literature on corporate social responsibility (CSR), that an ethical paradigm shift is essential if foreign firms are to do more than pay lip service to the concept of CSR in their developing-country operations. This argument is typically bolstered by case study evidence of failure: failure to change business attitudes, linked to entrapment within a vicious circle of corruption and malpractice; and ultimately failure to survive the political and economic shocks endemic within emerging economies. The current paper confounds the pessimists and cynics by providing evidence that the ability to align corporate values with national developmental goals has underpinned sustained profitability and growth for at least some foreign firms following the end of empire.