KUALA LUMPUR: Capitalism must be very carefully handled although it is a good system, said former Prime Minister Tun Dr Mahathir Mohamad.
Dr Mahathir said events that led to the present global financial crisis, which affected the West very much showed that uncontrolled capital could actually destroy even the big economies.
Capitalism has many different interpretations, some declare it as complete free movement of capital into a country to invest and exploit while others feel that there should be some control over the movement of capital.
"Because capital is a very powerful instrument...it actually can destroy an economy as much as it can build an economy. Many countries now especially in Asia are wary of complete free flow of capital," he said from Sarajevo, Bosnia-Herzegovina, in a question and answer session about the future of capitalism, in a video conference interview.
The session was conducted by Dr Frank-Jurgen Richter, the President and founder of Horasis: The Global Visions Community, an independent international organisation committed to enacting visions for a sustainable future, in conjunction with the Plus International Expressway Conference and Exhibition 2101, which ended here today.
Talking further about the cause of the present financial crisis, Dr Mahathir who is in the capital city of the Balkan state for a visit, said that governments in many countries abdicated their role because they decided that the market will control the economy and the market would play the role of regulating itself.
"But the market is about making money. So, when they saw a chance to abuse the system to get money for themselves...they did not hesitate," he said.
As such, Dr Mahathir said that governments need to regulate the functions of banks and make sure banks did not lend far too much money.
"The crisis started because too much capital (was) lend out without any proper consideration as to the prudence of lending money to the people, who actually turned out unable to pay their debts," he said.
Answering a question on the rise of protectionism in the United States and Europe, Dr Mahathir
pointed out that most countries in the world including East Asia had the tendency to protect certain industries regarded as of national character or very crucial to the economic growth of their country.
"So we had to accept that there cannot be really total openness...some countries will try to protect not by tariffs or physical blockage but by having certain conditions such as qualities...specification, etc...which means in effect you have become protectionist," he said.
On China, Dr Mahathir urged those who had the idea that China posed a threat to the world, to re-think about it.
"Because China is there and will be there, no matter what you do, and is going to be a great world power...but I think to curb China's growth and all that is not the right approach.
"You have to accept that China is going to be very strong economically and strong economies obviously must have strong military capability to protect themselves. This is not a threat to the world," said Dr Mahathir.- Bernama