We live in a time of widespread economic crisis.
Europe is in recession. For some European countries like Greece, it is effectively the Great Depression all over again. Economic recovery in the US is slow, with the labor market in May registering horrible statistics to suggest that the US recovery may be flagging.
On the other side of the Pacific Ocean, the Chinese economy is slowing down. Meanwhile, Asian production and trade are growing very slowly as well, if not contracting altogether like in Taiwan and South Korea.
The latest export statistics reveal that Malaysian April exports contracted for the second consecutive months as Europe and others demanded less goods and services. Europe will likely continue to demand less in the near future as its governments, firms and households rebalance their finance towards more saving and less spending on average. The rebalancing is needed and overdue. As always, there is cost to the exercise. The cost will be significant even to those halfway around the world.
These external developments are important to Malaysia because the country has one of the highest trade exposure in the world. The openness and generally liberal trade attitude has allowed Malaysia to enjoy significant secular economic progress so far. But the same factor also makes Malaysia sensitive to the global business cycle.
The awful trade data has not been translated fully into the domestic economy. The domestic labor market, for instance, is holding up pretty well and close to full employment. The resilience of the domestic economy is encouraging but if trade growth continues to be dismal, sooner or later things will change for the worse.
So, there is crisis abroad and Malaysia may very well feel the heat soon enough.
The country needs to be ready for the possible headwind. Politically, it is hard to see how Malaysia is ready given that the general election is just over the horizon, somewhere.
That means policymakers and politicians are politicking.
While this behavior is only to be expected, there is a fear that the government’s collective eyes are off the economic ball. Both sides of the divide — more importantly, the government of the day — are making populist promises and policies to outdo each other and win votes. That may hurt the country’s ability to address possible economic troubles when the time arrives.
While the election is a must to preserve and to enhance our democracy, there is a cost to it. That cost is populism. We have to bear the cost but we do not need to exacerbate it.
How does populism exacerbate cost?
The cost will be higher the longer the politicking opportunity persists. That is so because the longer the politicking period, the higher the likelihood of populist policy will emerge.
That in turn may cause us as a society to meet potential economic trouble with a rifle loaded insufficiently. The point is especially relevant because the federal Budget is expected to be tabled in September. A “people’s budget” will not be ideal if Malaysia wants to weather the gloomy days successfully.
So, this is a case to hold the general election as soon as possible. A resolution is needed as soon as possible. It is only by having an election as soon as possible that there can be less opportunity for politicking to lessen the probability of economic populism winning the day and ruining the future.