Yet a personal God can become a grave liability. He can be a mere idol carved in our own image, a projection of our limited needs, fears and desires. We can assume that he loves what we love and hates what we hate, endorsing our prejudices instead of compelling us to transcend them. When he seems to fail to prevent a catastrophe or seems even desire a tragedy, he can seem callous and cruel. A facile belief that a disaster is the will of God can make us accept things that are fundamentally unacceptable. The very fact that, as a person, God has a gender is also limiting: it means that the sexuality of half the human race is sacralized at the expense of the female and can lead to a neurotic and inadequate imbalance in the human sexual mores. A personal God can be dangerous, therefore. Instead of pulling us beyond our limitations, “he” can encourage us to remain complacently within them; “he” can make us as cruel, callous, self-satisfied and partial as “he” seems to be. Instead of inspiring the compassion that should characterize all advanced religion, “he” can encourage us to judge, condemn and marginalize. It seems, therefore, that the idea of a personal God can only be a stage in our religious development. The world religions all seem to have recognized this danger and have sought to transcend the personal conception of supreme reality. [Page 209-210. A History of God: The 4,000-Year Quest of Judaism, Christianity and Islam. Karen Armstrong. 1993]

Bank Negara Malaysia does not publish the minutes to its Monetary Policy Committee meetings, unlike the Federal Reserve in the United States. This keeps the rationale behind rate-setting decisions murky to outsiders sometimes.

A few economists in the past several years have bugged the governor on the matter. Acquaintance Jason Fong from RAM Ratings yesterday asked Zeti whether BNM would release its MPC minutes. She provided the same answer she gave last year — I think, also asked by Jason — that maybe in the future, the central bank would allow certain PhD students to go through the minutes for their thesis. The short answer is, disappointingly, no.

The demand for transparency goes by back to professional economists’ attempt at understanding various decisions taken by the MPC. Detailed minutes would reveal who thought what, and explain the MPC statements clearly. A more transparent process would ultimately helps in projecting the Overnight Policy Rate or other aspects of monetary policy.

But yesterday, I suppose since it was her last big briefing with all the economists in town, she felt a bit generous and volunteered a longer answer. It is a good response I think, highlighting the trade-off between transparency and frank discussion.

She reasoned having published minutes could keep participants from discussing various issues freely during the meeting. Some may even be encouraged to state something just to be on record without sharing what he or she really thinks. The end result could be one where not all views will be shared and not all views are actually honest, leaving the final decisions incapable of aggregating views of the committee members accurately.  Zeti said MPC decisions are currently reached through consensus, which means, I guess, no voting.

I understand her point. I would also add having secretive element into the process protects meeting participants from political backlash, much in the spirit of Chatham House Rule, where privacy is the key to robust and frank discussions.

While I do not disagree with the governor, I can think an instance where her point could be weak.

The MPC can get away with that reasoning because there is a lot of trust in the competency and the motive of the committee members. If the next governor is one who does not inspire confidence, I think the importance of transparency will outweigh the importance of having frank and robust discussions.

These days, after all, the trust deficit is not merely a mere gap anymore. It is a gaping hole.

While Zeti is respected in the industry and everywhere else, the next governor — as well as the Finance Minister (the office which effectively appoints the governor) who is also the Prime Minister of multiple conflicts of interest —presents us all with a big question mark.

There are times when books of different focus and field would run parallel with each other and reveal new insight on a specific idea, making that particular idea richer.

I recently finished Jürgen Kocka’s Capitalism where he touched on, among others, the shift of power from feudal lords to the merchant class. I am currently reading Karen Armstrong’s A History of God and this is what she has to say on the (somewhat) same subject:

The story of Elijah contains the last mythical account of the past in the Jewish scriptures. Change was in the air throughout the Oikumene. The period 800-200 BCE has been termed the Axial Age. In all the main regions of the civilized world, people created new ideologies that have continued to be crucial and formative. The new religious systems reflected the changed economic and social conditions. For reasons that we do not entirely understand, all the chief civilizations developed along parallel lines, even when there was no commercial contact (as between China and the European area). There was a new prosperity that led to the rise of a merchant class. Power was shifting from king and priest, temple and palace, to the marketplace. The new wealth led to intellectual and cultural florescence and also to the development of the individual conscience. Inequality and exploitation became more apparent as the pace of change accelerated in the cities and people began to realize that their own behavior could affect the fate of future generations. Each region developed a distinctive ideology to address these problems and concerns: Taoism and Confucianism in China, Hinduism and Buddhism in India and philosophical rationalism in Europe. The Middle East did not produce a uniform solution, but in Iran and Israel, Zoroaster and the Hebrew prophets respectively evolved different versions of monotheism. Strange as it may seem, the idea of “God,” like the other great religious insights of the period, developed in the market economy in a spirit of aggressive capitalism. [Page 27. A History of God: The 4,000-Year Quest of Judaism, Christianity and Islam. Karen Armstrong. 1993]


Who will replace Najib Razak if he goes away?

Those skeptical of attempts to legally push him out of office raise the question out of fear nothing will change. They are afraid it would achieve nothing and switch for yet another Prime Minister from Najib’s camp.

As a result, the alternative they seem to be fighting for is to do nothing and wait for a miracle. Somehow, a righteous Superman would descend down from the stars and make everything right. Perhaps, a just god would finally take a concrete form and change our fate for the better.

It seems to me, those who ask who will replace him, are embracing the Dr Pangloss character wholly. To them, we are living in the best of all possible worlds and any change would lead to a worse outcome.

Well, I am no Panglossian.

I believe keeping Najib in power risks damaging our institutions further. Pushing him out would slow the erosion, even if the next Prime Minister is less than a desirable character.

One institution now at risk because of Najib remaining in power is the central bank. The Governor is set to retire end of April and there are concerns Najib will nominate someone new who will toe the line and stop digging down the 1MDB hole. This is damaging the independence of the central bank, which will hurt the bank’s credibility to run monetary policy. In other words, if indeed the next Governor is a Najib’s man, then it would spread the trust deficit from Putrajaya to Jalan Dato Onn. The situation has gotten so bad that, believe it or not, there is something bigger at stake here than 1MDB.

Changing the Prime Minister would minimize that risk. Keeping him does nothing at addressing the risk.

As for the question, who will replace him, and if indeed it would be yet another corruptible person, so be it and the attempt to build a better Malaysia continues on. But there is a small chance the change will be for the better. Why not take it?

Have courage.

There is also another dimension people forget: expectations. Booting Najib out creates the expectations wrongdoing will be punished and so discourages, however little, the future Prime Minister from being blatantly corrupt doing as he pleases like an absolute ruler with no democratic checks and balances. In contrast, keeping Najib creates the expectations anybody can get away with murder.

Before anybody forgets, expectations are also part of institution-building. Forging the right expectations help builds trust in our institutions.

Yet, many want to do nothing about Najib and say, we need to reform our institutions for the better first. How do we reform when our expectation is Panglossian, that we live in the best of all possible worlds?

Capital accumulation as an idea sits close to the center of modern economic growth theory. Any introduction into the field will begin with physical capital accumulation, before population growth, technological progress, human capital and even institutions are progressively thrown into the mix to explain the real world.

As far as modern macroeconomics is concerned, I think I can trace the idea of accumulation as the key to growth right up to Harrod-Domar as formulated in the 1940s. The model has a naïve mechanics. William Easterly lays out the world of Harrod-Domar within the context of international aid and points out the model’s weaknesses in his 2001 book The Elusive Quest for Growth. Those same criticisms led to the articulation of the famed Solow-Swan growth model in the 1950s, which in turn was improved in the 1960s through the Ramsey-Cass-Koopmans model. About twenty years later, the so-called new growth theory with its endogenous models dominated mainstream macroeconomics.

Harrod-Domar is the earliest modern growth theory with capital accumulation at its heart that I can think of. If I try really hard, I think I could cite Karl Marx in the 1850s-1860s and even Adam Smith in 1770s although both of them did not produce a model while I do not think Marx’s idea of accumulation is directly related to growth as we understand it today. I struggle to trace the evolution of the idea beyond Marx and Smith, although a quick search on the internet points towards St. Aquinas and Ibn Khaldun, and possibly right up to Greek philosophers.

But the tracing of these models and works only describes the evolution of the idea. It is not the history of accumulation per se.

Jürgen Kocka recounts the history of physical capital accumulation in Capitalism, a nifty book on the history of capitalism. First published in German in 2014, the English translation came out this year. It is only available in hardcover currently with a price tag of MYR142. I bought a copy from Kinokuniya in Kuala Lumpur. Kocka is a German historian focusing on German and eastern European labor history.

Kocka writes consumption pattern gradually switched from a period of instant gratification when personal accumulation was hard if not impossible for the majority to a time when where they began to care for the next generation and were able to gather private wealth and transfer it to their children as inheritance. Although Kocka does not use the term, this is the intergenerational capital accumulation.

The intergenerational accumulation happened in a limited fashion in the middle age be it in Europe, Arabia or Asia. Even among the merchant class, the accumulation and transfers were limited among a few families before the Industrial Revolution. Wealth produced by a person was generally consumed within his or her lifetime, with limited opportunity for intergenerational transfer. This happened as feudalism worked in the background, the great institution that prevented the majority who were serfs from accumulating capital. The personal wealth of the serfs generally belonged to or easily extracted by to feudal lords. What is the incentive for work when the fruits could be appropriated freely by the local lords?[1]

Private wealth accumulation in Europe began only during the Industrial Revolution in the 1800s. Rapid economic pace in the cities suddenly made accumulation faster than ever in history for most. That attracted serfs from the rural areas to the town and cities which led to the crumbling of feudalism as there were fewer and fewer pairs of serf hands to work for the feudal lord. Now freed from serfdom, common workers were able to accumulate private wealth and participate in intergenerational accumulation. It was a slow process and never a straightforward one judging from the various labor unrests and even revolutions during the industrial age but it did start the process of capital accumulation among the masses nonetheless.

But even before the Industrial Revolution, early companies in the 1100s in Venice played a role in intergenerational capital accumulation. A company, a product of various traders and merchants coming together to pool resources and diversify risk extended the accumulation horizon beyond the lifetime of a person. The application of the new social technology – along with the creation of double-entry accounting to keep track of the company’s resources – means the endowment got bigger and bigger, which encouraged bigger accumulation that was possible if wealth was restricted within one’s lifetime.

Some of these traders and merchants went on to form their own banks (as company) to finance their and others’ various business requirements. Jürgen in his book points to the 1300s as the turning point, when rich trading families first established banks in northern Italy. This made the financial market more efficient, which in turn aided them and other banking consumers to manage and amass their wealth better.

The evolution of companies continued in London and Amsterdam, capitals of the trading nations England and the Netherlands. The joint-stock companies were developed and more and more individuals and entities got together to pool their resources to finance, among others, the British East India Company and the Dutch East India Company, the first true multinationals in the world.

But the greatest enabler of capital accumulation was, of course, technological progress, as stressed in the Solow-Swan model. Indeed, wealth per capita soared during the 1800s Industrial Revolution after thousands of years of largely stagnation that began in northwestern Europe.

Gregory Clark in his 2008 book A Farewell to Alms claims it happened in England and the Netherlands because they had the institutions that enabled the Industrial Revolution to take place in exactly those countries first. He goes on to suggest, controversially, that these institutions which were absent in other places led to a deep cultural change that made the industrial age possible.

Kocka does not challenge that in his book. While explaining the connection between industrialization and capitalism, he writes:

One the one hand, when industrialization began, capitalism already had a long history to look on. Not even in its proto-industrially expanded form did merchant capitalism, which was widespread throughout the world, lead inescapably to full-fledged industrialization. There are many cases illustrating this point. Conversely, the case of the Soviet Union substantiates how it is also possible for industrialization to exist in a noncapitalist form. The concepts of capitalism and industrialization are defined by different features, and it is advisable to make a sharp distinction between the two of them.

On the other hand, preindustrial-commercial traditions of capitalism, whenever they persisted, significantly promoted the breakthrough to industrialization, whenever that happened in the nineteenth and twentieth century. In the nineteenth century, industrialization took place within capitalist structures everywhere. Alternative models of a centrally administered economy were tried out under Communist auspices between 1917 and 1991. They proved to be inferior. China’s rapid industrialization also began to take off only when the country’s party leadership decided to loosen political controls step by step and make room for capitalist principles. There obviously was (and is) a pronounced affinity between capitalism and industrialization: for both, investments are of decisive importance. An inherent part of industrialization is the permanent search for new projects, as is constant engagement in new configurations; to this end, pointers and feedback from markets were and are irreplaceable. A decentralized structure that disperses decision-making among many different enterprises has proven indispensable. So far, any effort at industrialization expecting to be successful over the long run has presupposed capitalism. [Page 99-100. Capitalism: A Short History. Jürgen Kocka. 2016]

But accumulation did not always happen peacefully through hard work, production or technological progress. In the middle age, pillages, plunders and wars were a common way to accumulate wealth. There were a lot of cases in Europe and elsewhere as well. This continued into the 1800s during the colonial age where European mercantilism helped European powers accumulate more wealth.

Such mercantilism meant accumulation for European was the dis-accumulation for the rest of the world.

Kocka does not go into the dis-accumulation as he is focusing on European capitalism mostly. But he does mention the slave trades between Europe, Africa and America, where African slaves were used to man the plantations and fulfil European demand. It does appear to me the slave trade and European colonial policy decimated Africa.

In Asia, especially Malaya, colonialism seems to have the opposite effect. Although European powers, the British in Malaya especially, were still accumulating wealth, the colonialism did have an accelerating effect on domestic growth in the 1800s and the early 1900s. Perhaps the reason for that was that the colonial administrators in Malaya was importing European advancement along with various institutions from the Industrial Revolution, hence boosting technological growth in this part of the world.

So, was colonialism good or bad for Malaya in terms of capital accumulation? I guess the only way to answer it is to address the counterfactual: how would capital accumulation have progressed if Malacca was not defeated by the Portuguese war fleet? How would the area now called Malaysia have fared if it had never been colonized by the British and the Dutch?

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

[1] — Let me digress slightly. Anthony Milner in The Malays believes the feudalist structure explains the lack of the Malay merchant class during the 1700s-1800s. The sultan as the feudal lord owned everything and the idea of private wealth among the masses did not exist. Everything within the realm ruled by the sultan belonged to him. Milner, if I recall correctly, cited Munshi Abdullah who lamented in his writing about the lack of security to self and property of the masses due to tyranny of the sultans in the 19th century Pahang, Terengganu and Kelantan.

While this sounds like a rival explanation to Syed Hussein Alatas’ as outlined in The Myth of the Lazy Native where he postulated that European colonialists killed the Malay merchant class by regulating trade in a way that granted monopoly to European traders, I feel both arguments can be true. Milner is describing the effect of the sultans’ influence on the masses while Syed Hussein focusing specifically on the merchant class. Indeed, Milner’s point is more general and hence, the effect of European monopoly could well happen within Milner’s explanation. So, it was a double-whammy for Malay traders.

The 4Q15 GDP figures came out better than my expectation. I had projected about 4.3% YoY but the official figure came slightly higher at 4.5% YoY. However, it is still an overall slowdown as warned earlier.

GDP 2015Q4

But there is a good news here.

The blue line in the chart above representing consumption growth picked up. That is a green shoot, a hint that the economy might be turning around. Consumption weakness has been the number one reason behind the gradual slowdown we are seeing in the economy. This is why the slight uptick is an important point to note.

I do not have much details behind the stronger (but still weak!) consumption growth yet, but on the production side, there is a reason to be optimistic that this is not some no-good dead cat bouncing around. Based on the performance of the retail sector, consumers did buy more stuff:

GDP 2015Q4 production

There is also good news for people working in finance. The fourth quarter was less bad than 3Q15. The only real bad news is for people in mining. I am unsure if the drop it is all about base effect, but the situation in the oil and gas sector is not pretty regardless. I suppose QoQ readings would tell me more but I am in a hurry right now.

GDP 2015Q4 mining production

We are not out of the woods yet. Despite signs of a turnaround, the 4.5% YoY overall growth is still a slowdown. Consumption has to cover a lot of ground before we can claim to be out of the $700 million MYR2.6 billion hole. And I am worried about the employment rate given so many layoffs taking place late last year. The effects of those retrenchments might come too late to be accounted for in the 4Q15 GDP data.

Finally, for the lovers of headline figures, the curse of 1Q15 frontloading will bite back this quarter. Nevertheless, that will only be a mathematical quirk.

The Department of Statistics will release the GDP figures for the last quarter of 2015 tomorrow.

I fear we will see the ugliest numbers within the past three years, if we are lucky. It will not be a contraction but for a country like Malaysia — a young population which suggests strong potential growth — anything close to 4% YoY is pretty bad. In 1Q13, the GDP grew 4.3% YoY. To find something worse, you will have to go all the way back to 2009 during the last recession.

I think private consumption growth decelerated in the last quarter. In 3Q15, it expanded only 4.1% YoY after increasing 6.4% YoY. If I have to guess, the GST is having a prolonged negative impact on the economy, on top of other things happening. The various layoffs we saw last year added further stress to consumption growth. These people who lost their jobs should begin to cut their spending. I have also heard discouraging stories over the Chinese New Year, suggesting it is not over yet, which made me re-read a joke I wrote three years ago that is no longer funny. I have also noticed many oil and gas professionals are turning to Uber to meet their financial obligations.

At work as well, we maintain various index measuring all kinds of things from sentiment to spending pattern. I cannot share them with you but I can tell you, it ain’t pretty.

But perhaps, the surest indication of a slower economy beyond anecdotes is from the manufacturing side. The GDP does follow industrial growth rather closely. So closely in fact, you could make a decent econometric forecast based on the index. The following chart comparing GDP with industrial growth gives you an idea of what had happened in the quarter.

Source: Department of Statistics Malaysia

Another piece of bad news is the government is in love with its deficit target out of fear of credit rating downgrade. I generally supportive of cutting the deficit but this is the wrong time to do it. But, I am just a keyboard warrior.

Exports however might cushion the domestic slowdown. In the fourth quarter, I think, it finally exhibited a J-curve, which essentially describes the idea that exports would slow rise up after a currency depreciation. Indeed, exports to the US have been phenomenal for a number of months now. Overall exports of goods have grown faster in 4Q15 on yearly terms compared to the previous quarter. But it will not be enough to fight off the domestic growth slowdown.

At the end of the day, this keyboard warrior’s model suggests the 4Q15 GDP growth will be around 4.2%-4.4% YoY.

But I could be wrong. Could you do better?

This not-nearly-as-scientific poll will close at noon tomorrow when the official GDP figures are out.

How fast did the Malaysian economy grow in 4Q15 from a year ago?

  • 2% or slower (0%, 0 Votes)
  • 2.1%-3.0% (0%, 0 Votes)
  • 3.1%-3.5% (0%, 0 Votes)
  • 3.6%-4.0% (36%, 4 Votes)
  • 4.1%-4.5% (36%, 4 Votes)
  • 4.6%-5.0% (27%, 3 Votes)
  • Faster than 5.0% (0%, 0 Votes)

Total Voters: 11

Loading ... Loading ...

Oh, this post is dedicated to this man.

About six years ago, I found myself working for a senator in Kuala Lumpur. I would go through parliamentary Bills and highlight my concerns about any proposed laws to him.

He had an unhealthy preoccupation with traffic violation issues. Speeding, running the red lights, illegal parking, stopping in the yellow box, Mat Rempits, you name it…

It is not the sexiest thing to debate in the highest rubber-stamping body in the land but he was truly into it. Unlike him, traffic matters bored me. I felt they had little national importance in light of other fields of policymaking.

I ventured once, “Perhaps, we should focus on other issues.” But he was the senior senator and I was the young punk.

Life is full of irony sometimes. Part of me is turning into him after all those years.

I feel the traffic situation has worsened significantly since my time with the senator and I grumble as I drive. The toxicity of life on the road is slowly seeping into my being. I curse loudly alone in my car. I struggle to keep my middle finger down. I try to refrain from honking like a mad man.

In hopes of becoming a better person, I aim to drive and so, curse less by relying more on trains and Uber. Yet driving still makes absolute sense in many circumstances. And so each day is yet another day of boiling blood pressure.

Many park on both sides of the road, more than ever and always. In the residential areas of Datuk Keramat and near the entrance to Bukit Gasing forest reserve, vehicle owners turn a two-lane road into a single lane without a single thought for other road users.

Things are just as horrible on Jalan Kerinchi where one man would coolly park in the middle of the road and force hundreds to go through a chokepoint. Many more have the audacity to park by the side of major trunk roads, like by Jalan Tun Razak in front of the menacing dark monolith that is Umno’s headquarters or Jalan Sultan Ismail in the busy business district. In Bangsar and Damansara Utama, double-parking and loud prolonged angry horns are a daily occurrence.

Red lights are increasingly being run over in the suburbs and in the city. Even when they stop for the lights, drivers would halt their vehicles well past the white line and on the pedestrian path. Zebra crossings are meaningless. There is also no respect for the yellow box anymore while queue jumpers are a fact of Malaysian life.

Do the offenders care about their violations? Do they feel guilty? Videos of traffic violators verbally abusing police officers for stopping them are aplenty online.

These are the days when committing a wrong is a right and righting a wrong is just wrong, from the bottom to the top of our society.

Whatever the causes — overly pro-car policy, subpar town planning, inadequate public transport, etc. — the result is us putting ourselves at the center of the universe. Being inconsiderate is the default value. We personally ignore the adverse effect of our anti-social behavior to others at large. Rules are nothing unless they conveniently side with us personally.

I wonder about the significance. Is this a petty concern of no national importance as the young me believed once?

I have travelled widely to know disrespect for traffic rules is a not a problem that belongs exclusively to Malaysia. I would not dare use the zebra crossing in Jakarta or Bangkok. In some other big South-east Asian cities, stopping at the red light can be downright awkward when everyone else runs through it and honks at you for stopping.

But in developed countries like the US, Europe and Australia, and closer to home, Singapore, traffic rules are better complied with generally.

The contrast hits me on the head. I would casually suggest there is a connection between how advanced a society is and its members’ observance of traffic rules.

The link does not sound tenuous to me. Traffic rules, after all, are a set of conventions that ultimately form an institution governing interactions on the road. Other institutions like the judiciary sound grander than the traffic one but that does not detract the fact the latter is still an institution.

If you can accept advanced societies have better institutions, then it will not be a huge logical leap to believe advanced countries will have better and more respected traffic institutions, which they do.

Here at home, as I have written above, I feel things on the roads have gotten worse.

I wonder if that is a tiny manifestation of our Malaysian regression.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on February 1 2015.

Powder kegs that are too close to the fire. That is the situation in Kuantan right now.

Local residents frustrated by the rampant bauxite pollution are beginning to take matters into their own hands. Threats have been made and carried out. Trucks carrying the mineral burned by the angry mob. Vigilantism is on the rise.

Vigilante justice is always worrying but it is hard to blame the local residents for resorting to it. When non-violent ways failed to address their grievances, they are left with less than desirable devices. Like it or not, vigilantism is a solution available when the typical mechanisms ― market and government ― are not working.

The free market usually provides robust solutions to a myriad of problems big and small. But such a market does not exist magically out of nothing. It is a human institution running on implicit human rules arising from our daily interactions with other fellow beings. As with any human creation, it can be imperfect. At times it can fail disastrously.

The market will disappoint the strongest supporters of the laissez-faire approach when too much of profits are privatized while too much of costs are passed on to the public with impunity. In economic jargon, that cost is called negative externality.

The tragedy of the commons is the oft-cited theoretical example of market failure involving extreme externality. Without any intervention to correct the misaligned private and public incentives, the benefits will be exhausted and the commons will collapse.

The negative effects of climate change are examples of market failure of global proportions.

Closer to home, I would submit the massive bauxite pollution in Kuantan, Pahang as a disturbing local case. The miners and the landowners reap their windfall profits but the rest bears the cost of the pollution.

Heavy red dust now contaminates the local air and water supply and that creates severe health threats to residents. One can only imagine the fate of whatever wildlife left in the plantations where the topsoil has been removed to feed China’s ferocious appetite for more bauxite.

When the market fails, then it is the responsibility of the government to step in and realign the diverging private and public incentives to produce a better outcome for both sides.

The typical solution involves taxing mining activities heavily, imposing strict production quotas or regulating the industry tightly in some ways to force the beneficiaries to take into account the disregarded general welfare.

But from the very beginning when the mining began, the government at the Pahang state level is not doing its job as the industry regulator and as the guardian of public welfare. Not enough has been done to correct the market failure. By definition, that is government failure.

Factors contributing to market failure mostly are innocent despite the grave consequences as it usually involves people minding their own legitimate business. It is always the government’s job to understand those businesses so that if there is any negative externality or conflict, then the authorities can come in and arbitrate any dispute. Any libertarian mindful of market failure will take this as one of the major roles of government.

In contrast ― if it is not incompetence or inadequate powers ― government failure is almost always about conflict of interest. In the case of Kuantan, it does seem like yet another case of conflict of interest.

For one, reports suggest the Pahang state government received more than RM37 million in revenue last year from bauxite mining. That figure will increase significantly once the state government doubles its current tariff rate on production to RM8 per ton.

The sum is significant for a government with a budgeted spending close to RM900 million in 2015. In a country where the concept of separation of powers is weak, the state’s fiscal interest can be hard to overcome.

But more troublingly, there are pictures circulating on the Internet, creating the allegations that some of the landowners enjoying the modern day gold rush are quite influential and close to the state government.

Information from the Internet may be wrong. While the local media has done a good job at reporting the impact of the pollution, not too many are investigating the identity of the landowners and the miners. Perhaps that is the cost of the culture of fear we have in Malaysia. Public welfare is suffering from gross disrespect for free press.

The federal government has come in to suspend the mining activities temporarily to order to study whether any environmental law has been breached. It is unclear if the suspension will mean anything or even be effective but one thing is certain: the issue falls firmly within the ambit of the state while the federal government is even more reluctant to do anything conclusive especially since Pahang is the political base of the prime minister. With so many troubles in other states, would he risk the ire of local politicians to do the right thing?

These are disheartening facts. Unless the conflict of interest is addressed strongly, the state and the federal government will likely continue to do too little, thus guaranteeing the continuing government and market failures.

I fear, at the rate we are going, the whole episode will lead to a period of persistent vigilantism. Down that slope ― however far down the slope is ― is a general breakdown in law and order. Miners are already employing thugs to protect the trucks from vigilantism. That sounds awfully close to anarchy.

But then again, does law and order mean anything these days? When the top leadership has no moral authority, will the so-called Little Napoleons down the line be impressed by any necessary directive from the top?

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on January 5 2015.

[2811] Uncertainty

When the bus stopped outside the inn, and the rain could be heard loudly and—probably there was a window open—so could the voices of the guests, Raban wondered which would be better, to get out at once or to wait until the innkeeper came to the coach. What the custom was in this township he did not know, but it was pretty certain that Betty would have spoken of here fiancé, and according to whether his arrival here was magnificent or feeble, so the esteem in which she was held here would increase or diminish, and with that, again, his own, too. But of course he knew neither what people felt about her nor what she had told them about him, and so everything was all the more disagreeable and difficult. Oh, beautiful city and beautiful the way home! If it rains there, one goes home by tram over wet cobbles; here one goes in a cart through mud to an inn.—”The city is far from here, and if I were now in danger of dying of homesickness, nobody could get me back there today.—Well, anyway, I shouldn’t die—but there I get the meal expected for that evening, set on the table, on the right behind my plate the newspaper, on the left the lamp, here I shall be given some dreadfully fat dish—they don’t know that I have a weak stomach, and even if they did know—an unfamiliar newspaper—many people, whom I can already hear, will be there, and one lamp will be lit for all. What sort of light can it provide? Enough to play cards by—but for reading a newspaper?

“The innkeeper isn’t coming, he’s not interested in guests, he is probably an unfriendly man. Or does he know that I am Betty’s fiancé, and does that give him a reason for not coming to fetch me in? It would be in accord with that that the driver kept me waiting so long at the station. Betty has often told me, after all, how much she has been bothered by lecherous men and how she has had to rebuff their insistence; perhaps it is that here too…!” [Franz Kafka. Wedding Preparations in the Country. 1908]

282 pages