Bad economic times can often lead to rising ethnic tensions and bigger government. But a bold reform in Malaysia shows that neither development is inevitable. The Malaysian government has just radically reformed its long-established policy of ethnically-based economic quotas.

This policy shift shows that it is still possible to react to a deep recession by liberalising the economy rather than by increasing government controls. Elsewhere in Asia, India’s government is also promising to renew liberal reforms in the teeth of a global downturn.