the __earthinc

I am holding the view that the RM67 billion government spending-based fiscal stimulus as announced will not be helpful. The market will show a swing independently of spending.

The swing is already happening in spite the fact that government spending has been insignificant so far. Furthermore, the magnitude of government spending is pale in comparison to the drop of external demand. If there is to be any recovery, it will be driven by external demand, just as the recession has been caused by external demand. All this makes the government spending-based stimulus irrelevant.

Due to temporal issue between the effectiveness of the spending and market cycle, when proper recovery takes places, private firms will suffer from crowding out effect since the stimulus is financed through local sources. Interest will have to go up higher when compared to a situation where there the size of government spending is absent.

Well, I might be wrong. My position is too kind. There is a piece yesterday that may indicate that the stimulus is hurting recovery:

GEORGE TOWN: Penang’s electronics industry is facing a shortage of production workers after orders started to pick up early last month, according to a job outsourcing company.

The problem is compounded by local workers who prefer to enrol instead in the government’s retraining scheme where they are paid more, said Inter Resources Consulting Global Search (M) Sdn Bhd managing director Michael Heah.

He said locals were not keen to work long hours in factories for RM500 to RM600 a month, preferring the retraining scheme for unemployed graduates and retrenched workers where they were taught new skills and received a monthly allowance of between RM500 and RM800. [Penang electronics firms unable to cope with demand. The Star. July 2 2009]

Firms are actually competing — gasp! — with the stimulus package for labor, making them incapable of meeting demand in the short run.

How is that for a stimulus?

Worse:

Heah said the electronics industry started to recover last month with the semiconductor and consumer electronics sector stepping up their recruitment drive to get more locals to fill vacancies.

“To make matters worse, the intake of foreign workers has been frozen. We appeal to the Government to lift the freeze in the sector,” he said. [Penang electronics firms unable to cope with demand. The Star. July 2 2009]

Unless productive firms can find individuals that are not enrolled in the retraining program, they will need to raise wages.

I am a fan of raising wages only to accommodate inflation, to compensate improvement in productive for the labor factor of production or competition from firms for labor.

I see none of those here. That potential raise of wages may be caused by distortion created by the government, more than anything else.

Barbican Apple rocks.

As we toy with the possibility of having President Barack Obama in Malaysia, it is good to remember President Lyndon Johnson.

I am delighted to be here in Malaysia. I feel that I know you because Malaysia, like the United States, is a federation of States which were once colonies of Great Britain–and because Malaysia is, like the United States, a nation of many diverse peoples, different religions, and different cultures. Here, as in America, you are working to reduce racial tensions so that all men may live in peace with one another.

Malaysia, like the United States, has been making great social and economic progress, based on the concept of personal initiative. That concept–that a man should be free to make the best of his life as he sees fit–is one that the people of America cherish. [Remarks upon Arriving at Subang Airport, Kuala Lumpur, Malaysia. Lyndon B. Johnson. October 30 1966. Archived by The American Presidency Project. Accessed on June 29 2009]

He is the first and remains the only US President to ever visited Malaysia.

If you had switched on the television, listened to the radio or read the newspapers for the past number of weeks, you may have noticed how so many individuals and entities are claiming to represent the people. The people wish for this and the people wish for that but oddly enough, your wish never coincides with that of the people.

So, who exactly are these people?

There are incessant talks of the people’s opinion. It is in the air but it is just not there. It is as elusive as god, or Shangri-La, or El Dorado, or the princess on top of Ledang, or simply a dodo bird.

More confusingly, somebody claiming to speak for the people would say one thing and then another somebody would insist the people seek another different agenda altogether. It is almost hilarious how the people would hold diametrically opposing thoughts at a particular point in time without a pause for reflection. It seems that contradiction is of no concern to the people. Unless if these representatives are telling convoluted truth.

We could gauge the people’s opinion and ignore the representatives. In this country however, the absence of free press and liberty in general generates a reason to be skeptical of any sampling done to measure public opinion. Instead of reflecting the public opinion, such sampling is used to shape the opinion of the masses.

Furthermore, the culture of gauging public opinion through the use of good sampling method is not widespread in Malaysia. Or at least, the organizers of the poll do not have the reputation of neutrality and the desire to produce reliable and trustworthy surveys. Thus, public surveys forever skillfully evade the opinion of those that actually make up the people.

But who needs surveys anyway. There are three types of lies: lies, damned lies and statistics, so said Benjamin Disraeli.

And so, our only recourse is the self-proclaimed representatives of the people that, if I may, are popping like mushrooms after the rain lately. The problem is, I do not remember electing these representatives to speak for me. In fact, I do not recall of them winning elections to public offices. Yet, they claim to speak for the people. They certainly do not represent me but maybe, I am just not part of the people.

Here’s a question: do they speak for you? Are you part of this elusive “people”? Let me put it this way — take a breath — the representatives speak for the people and you are part of the people but the representatives do not speak for you. Huh?

Something is terribly wrong here, do you not think so?

The truth is numbers as well as perception matter and there are those that seek to create the illusion of numbers. It is far easier to make claim that millions of people support an individual rather than having that individual going down to the ground to convince the people to join his cause. This has encouraged many to abuse the phrase “the people”, even when the people — you and I and some dudes out there collectively — have nothing to do with those self-elected and unsanctioned representatives.

On top of that, there are those that — sincerely confused or otherwise — think that society is a monolithic entity. To refer to the people as a monolithic entity sadly falsely assumes that there is uniformity of opinion within the society. It ignores the diversity of opinion of the people. To me personally, it gravely disrespects individuality; it is an insult to intelligence.

The people are not of one mind; they are of millions.

First published in Bolehland on December 17 2007.

The Coincident Index (CI), that measures the current economic activity, rose by 0.9% in April 2009 registered at 113.7 points. The increase of the index were contributed by real gross imports (0.7%), real sales in manufacturing sector (0.4%), Index of Industrial Production (0.2%) and real contributions in EPF (0.2%). The six-month smoothed growth rate of CI in April 2009 showed an improvement to -7.1% from -9.7% in March 2009.

The Leading Index (LI) which monitor the economic performance in advance also increased in April 2009. The index grew by 2.0% to 162.5 points from 159.4 points recorded in the previous month. Main components that have contributed to the increase of index were real total trade of eight major trading partners (0.6%), real money supply, M1 (0.5%) and Bursa Malaysia industrial index (0.3%). The six-month smoothed growth rate of LI improved 4.3% in April 2009 compared to 0.6% in the previous month. [Malaysia Economic Indicators - Leading, Coincident And Lagging Indices April 2009. Department of Statistics. Accessed June 26 2009]

Wages in Malaysia are generally depressed.

Protectionists blame foreign labor as the main cause of that depression. According to them, if we are less dependent on foreign labor — low-skilled mostly — wages will go up. So, they want to kick out as many foreign labor as possible. Even all, for the extremists.

They make that assertion without considering foreign labor are active in sectors mostly different from the ones locals are participating in; there simply not enough locals wanting to participate in the sectors filled with foreign labor.

Removal of these foreigners will no doubt increase wages up as the law of supply and demand demands it, but that is largely true only in those sectors. The problem of wage depression in the larger economy will not be addressed or significantly affected with the absence of foreign labor.

In front of our eyes is a natural experiment to prove that. Indonesia has decided to stop the flow of maid into Malaysia:

JAKARTA, June 25 (Bernama) - Beginning today, Indonesia will halt temporarily sending maids to Malaysia until there are discussions on the review of the memorandum of understanding (MoU) on the matter. [Indonesian Maids To Malaysia Halted Temporarily. Bernama. June 25 2009]

I am confident that while wages for maids will rise, wages in other sectors will remain largely unaffected.

In fact, Malaysian productivity might fall because Malaysians who face high opportunity cost between housework and professional job might not be able to do what Adam Smith wrote in The Wealth of Nations: specialization.

And in economics, besides supply and demand, productivity is a major component in the determination of wages.

The proposal to form a so-called unity government between PAS and UMNO finally finds its rightful place — in a dustbin. Nothing guarantees any PAS member from rummaging through the trash to rejuvenate the idea however. If the dream still lingers, I am here to offer a dire possibility. If PAS-UMNO unity comes true, PAS may break up as internal and external forces pull the political party in different directions.

Why is it a possibility?

PAS-UMNO unity will significantly affect the status quo balance of power. It will grant BN a proper majority in Perak. Selangor will suffer from a hung assembly. Other notable changes include the weakening of the opposition in many states and the absence of one in Perlis.

In sum, PAS-UMNO unity will be a major setback for Pakatan Rakyat.

That scenario has one caveat: it assumes all PAS members will remain united if the party defects from Pakatan Rakyat to work with UMNO. Given the kind of rift caused by the PAS-UMNO unity talks, that is a big assumption.

It is not every day one can expect Nik Aziz Nik Mat as the leader of PAS to tell off one of his prominent party members — Nasharuddin Mat Isa — to quit the party and join UMNO after Nasharuddin spoke warmly of the possibility of PAS-UMNO unity.

Later, 10 PAS members of Parliament went out to support Nik Aziz and to oppose any pro-UMNO activity within PAS.

The action of the 10 MPs is particularly revealing. For the more liberal members of PAS, or the Erdogans as they have come to be known, they have every incentive to not associate themselves with a pro-UMNO PAS. Many of the Erdogans contested in areas where voters come from diverse backgrounds. These Erdogans understand that they won on March 8, 2009 because they appealed to inclusive politics. They campaigned by convincing voters that PAS is for all and not just for the Muslims or the Malays, i.e. exclusive politics.

To have PAS working in concert with UMNO — as Onn Yeoh writes in The Edge^[0] — amounts to betrayal of these voters. The very notion of unity between PAS and UMNO is based on the idea of exclusive politics, running contrary to the kind of campaign the Erdogans ran in the last general election. By the next election if the Erdogans are still part of a pro-UMNO PAS, these voters will not vote for the Erdogans. Hence, the future holds very little prospect for the Erdogans.

These Erdogans can of course undergo a rebranding exercise to adjust to exclusive-based politics that a PAS-UMNO coalition is expected to play. Notwithstanding the very appropriate accusation of hypocrisy that may come, these Erdogans will face stiff competition from the real conservatives within PAS as all compete for smaller pool of seats any exclusivist politician can expect to win. Furthermore, it is unrealistic to expect UMNO to surrender their seats to PAS in order to accommodate the Erdogans-turned-conservatives.

If PAS-UMNO unity happens, the only way for the Erdogans to secure their future is for them to demonstrate their commitment to inclusive politics and, inevitably, Pakatan Rakyat. This may translate into having the Erdogans or more generally the pro-Pakatan Rakyat members of PAS to either eject pro-UMNO members out of PAS, leave PAS in favor of PKR or even form a new party that DAP and PKR can work together under the banner of Pakatan Rakyat. In any case, the result will leave PAS utterly broken.

Only through this can they hope to secure their political future. The existing seat distribution formula within Pakatan Rakyat can continue to be used to accommodate these Erdogans, as long as they remain loyal to the coalition even as PAS finds itself in cahoots with UMNO.

For DAP and PKR, the stake is simply too high that both parties cannot allow PAS to defect so easily. It will in the best interest of PKR and DAP to embolden the Erdogans to mount a revolt against any movement towards PAS-UMNO unity, possibly leading to a breakup as described earlier.

The breaking up of PAS will limit any gain made by UMNO. It may prevent Selangor — the jewel of the crown — from experiencing a hung assembly. If Pakatan Rakyat is lucky, the maneuver can even prevent BN from gaining the coveted two-third majority in Parliament.

For PKR especially, there is an extra motivation to break PAS apart in case PAS-UMNO unity becomes a reality. PKR may enjoy an influx of high-quality members from PAS, especially if the pro-Pakatan Rakyat members of PAS decide to leave the party and not form a new party. PKR may need high-caliber individuals to strengthen its ranks and the Erdogan MPs do just that, if ever the Erdogans have a reason to part from PAS.

But, at the end of the day, the most preferable solution for DAP and PKR is to have PAS as a committed member of Pakatan Rakyat. Both DAP and PKR will want work to keep PAS within the young three-party coalition to build on the existing momentum. As we have seen, this is exactly the path taken by DAP and PKR.

As long as the most preferred option works, there is no need to resort to the second most preferred option. This is something everybody who wishes to see a strong PAS must understand.

First published in The Malaysian Insider on June 24 2009.

^[0] — The much-hyped, but now abandoned, unity-government concept, first touted by PAS President Datuk Seri Hadi Awang in March, and welcomed by all and sundry within Umno is a betrayal.

From Pakatan Rakyat’s perspective, it is a betrayal of voters’ trust. Malays who voted for PAS did so because they preferred it over Umno. Non-Malays who voted for PAS didn’t do so because they wanted PAS but because they rejected Umno. In either case, PAS teaming up with Umno is the last thing these Malay and non-Malay voters want. [Unity govt a betrayal all around. Oon Yeoh. The Edge. June 22 2009]

I do not pretend that the most unlimited use of the freedom of enunciating all possible opinions would put an end to the evils of religous or philosophical sectarianism. Every truth which men of narrow capacity are in earnest about, is sure to be asserted, inculcated, and in many ways even acted on, as if no other truth existed in the world, or at all events none that could limit or qualify the first. I acknowledge that the tendency of all opinions to become sectarian is not cured by the freest discussion, but is often heightened and exacerbated thereby; the truth which ought to have been, but was not, seen, being rejected all the more violently because proclaimed by persons regarded as opponents. But it is not on the impassioned partisan, it is on the calmer and more disinterested bystander, that this collision of opinions works its salutary effect. Not the violent conflict between parts of the truth, but the quiet suppression of half of it, is the formidable evil: there is always hope when people are forced to listen to both sides; it is when they attend only to one that errors harden into prejudices, and truth itself ceases to have the effect of truth, by being exaggerated into falsehood. And since there are few mental attributes more rare than that judicial faculty which can sit in intelligent judgment between two sides of a question, of which only one is represented by an advocate before it, truth has no chance but in proportion as every side of it, every opinion which embodies any fraction of the truth, not only finds advocates, but is so advocated as to be listened to. [On Liberty. Chapter 2. John Stuart Mill. 1859]

It is hard to describe how I feel about the situation in Iran as protesters clash with the basij — a paramilitary group loyal to the incumbent government — and the Revolutionary Guard.^[0][1][2] It is not a matter of ambivalence about the brutality of those security force though I am still quiet unsure whether fraud did occur. The issue has gone well beyond the question of fraud to the question of freedom. And when individuals actually die for freedom, my opinion solidified against the government led by Mahmoud Ahmadinejad.

What I find it hard to describe is the kind of anger I am in, especially after watching a video of a young woman died after being shot.^[3] Something simply has to be done.

Amid the chaos, it is important to take note that the ones suppressing the protesters are the basij and the Revolutionary Guard. In contrast, there are limited reports on the roles of police and the army in suppressing protesters. Some reports further suggest that the police and the army are reluctant in moving against the protesters. As Blake Hounsell writes at Foreign Policy Passport, if “we start seeing cracks in those forces, or the regular army, then the regime will really be in trouble. But it will take sustained pressure — more demonstrations, strikes, and smart politics — to get there.”^[4] This of course not to suggest that the army is of one mind just as the Revolutionary Guard is not.^[5]

Is intervention by the army — presumably based out of conscience as probably evident through the kind of reluctance reported — the only way out of the quagmire Iran is in at the moment?

It is unclear if the protestors could bring down the incumbent government but with the army in, it will surely makes the possibility of a new government brighter. The problem is, of course, if having a military government desirable?

At the moment, it is hard to say no, especially if the army acts on conscience. What guarantees that that military government will not turn on the very same Iranians who are exercising their rights to assembly and freedom of expression now is another question. The burning question is, will a military government be better than the current one, no matter how far short it is from the ideal of a liberal democratic state?

^[0] — Thirty years ago, during the demonstrations that led to the Shah’s downfall, one of the dominant images was scenes of uniformed soldiers firing live ammunition at protesters. This week, Iran’s clerics seem determined, at least, not to repeat that historic mistake. They remember that the daily news coverage of the Shah’s soldiers shooting and killing unarmed protesters precipitated the collapse of the regime.

Instead, bearded plainclothes militiamen have been attacking and harassing the demonstrators in Tehran this past week. These are Basijis, members of a civilian paramilitary organization founded by Ayatollah Ruhollah Khomeini in 1979. It was conceived of as a civilian auxiliary force subordinate to the Revolutionary Guards, and so it has functioned over the past three decades. During the eight-year Iran-Iraq war, fervent Basijis volunteered to serve on the front lines. For a time, very young Basijis were encouraged to offer themselves for martyrdom by clearing minefields with their bodies in what became known as “human waves”—literally walking to their deaths en masse so that more experienced soldiers could advance against the enemy. An Iranian friend of mine who is a war veteran described the Basiji boy martyrs as having played a tragic but significant role in the war, by providing Iran with a “flesh wall” against Saddam Hussein’s vastly superior Western-supplied military technology. [Understanding the Basij. John Lee Anderson. The New Yorker. June 19 2009]

^[1] — REVOLUTIONARY GUARDS: An elite military corps of more than 200,000 members that is independent of the regular armed forces and controlled directly by the supreme leader. The Guards oversee vital interests such as oil and natural gas installations and the nation’s missile arsenal.

BASIJ: A powerful volunteer militia directed by the Revolutionary Guards. Basiji played a high-profile role as “morality” police after the Islamic Revolution and now are often used in crackdowns of dissidents. Some estimates place the membership at 10 million, or about 15 percent of the population. [Key players in Iran's disputed election. Associated Press via Google News. June 18 2009]

^[2] — CAIRO (AP) — They’re the most feared men on the streets of Iran.
The pro-government Basij militia has held back its full fury during this week’s street demonstrations. But witnesses say the force has unleashed its violence in shadowy nighttime raids, attacking suspected opposition sympathizers with axes, daggers, sticks and other crude weapons.

At least once, the militiamen opened fire on a crowd of strone-throwing protesters. State media said seven were killed. [Feared Basij militia could transform Iran showdown. Associated Press via Google News. June 20 2009]

^[3] — See Iranian woman killed in protests [Two Videos] at Youtube. Accessed June 21 2009.

^[4] — It’s hard to tell who has the upper hand, but it seems like there are still plenty of people willing to beat, maim, even kill their fellow Iranians. That’s bad news for the good guys. Roger Cohen, the New York Times columnist who’s in Tehran, tells of a police commander who pleaded with demonstrators to go home because, “I have children, I have a wife, I don’t want to beat people.” From what I can glean from Twitter and various reporting, the regular police aren’t quite as eager to beat heads, in contrast with the hard-line Revolutionary Guard and basij militiamen. If we start seeing cracks in those forces, or the regular army, then the regime will really be in trouble. But it will take sustained pressure — more demonstrations, strikes, and smart politics — to get there. [War on the streets of Tehran. Foreign Policy Passport. June 20 2009]

^[5] — According to Cyrus News Agency (CNA) in Iran, at least 16 members of the Iranian Revolutionary Guard were arrested on Tuesday for allegedly attempting to join the “people’s movement.” Protests, riots and violence broke out in several cities in Iran on Saturday night following an election which many in Iran and the world say was fraudulent. [Report: Members of Iranian Revolutionary Guard arrested for joining 'people's movement'. Wikinews. June 20 2009]