Sometimes countries face a situation where one group is nearly totally impoverished and discriminated. Think of the Blacks in the US after slavery was abolished, the Blacks in South Africa after Apartheid and the Untouchables in India. A similar problem happens also in much of South East Asia where the Chinese minority dominates the economy. How can government achieve a more equal society?
South Africa and Malaysia have chosen for a system of positive discrimination where jobs are reserved for the poor majority. In neither of them it has helped and it is generally seen as a corrupt system as many of those who get their position under these systems get it not on merit but due to connections. It looks now that Malaysia is trying to reduce the system that favors Malays over Chinese and Indians. At least the government wants it but it is dubious whether it can overcome popular resistance among the Malays.
Interesting in this respect is an article in the NY Times that compares North and South India. In the south the caste system is slowly disappearing while in the north it has only become more important as caste based parties have arisen. According to the article this is also the reason why the south is doing economically so much better. But why? This is how the article explains it (Nadars are a low caste that form the focus of the article):
Unlike northern India, where caste-based political movements are a fairly recent phenomenon, lower castes in southern India began agitating against upper-caste domination at the beginning of the 20th century. Because these movements arose before independence and the possibility of elected political power, they focused on issues like dignity, education, and self-reliance, Mr. Varshney said.
Nadars created business associations to provide entrepreneurs with credit they could not get from banks. They started charities to pay for education for poor children. They built their own temples and marriage halls to avoid upper caste discrimination.
As a result, when independence came the southern lower castes, who had already broken the upper caste monopoly on economic power, enjoyed political power almost right from the start. Tamil Nadu set aside 69 percent of government jobs and seats in higher education for downtrodden castes, which helped rapidly move lower caste people into the mainstream. The north put in place affirmative action policies, but because education was widely embraced, southern people from lower castes were better able to take advantage of these opportunities than northerners.
It remains to be seen if the political agitation around caste in northern India will produce prosperity for lower caste people there, experts say. In India’s liberalizing economy these communities must prepare themselves to compete, not simply demand a bigger slice of the shrinking government cake...
My advice for South Africa and Malyasia would be: gradually abolish the positive discrimination. Put instead a system of progressive taxation that puts an extra burden on the rich and use that money to build education and infrastructure.