Early on during the Pakatan Harapan government, a majority of market investors were concerned about Malaysia’s policy direction. The magnitude of political change Malaysia experienced in 2018 undoubtedly brought uncertainty. Such uncertainty needed to be addressed. To allay those concerns, the Ministry of Finance then frequently engaged with representatives from various funds invested in Malaysia.

A great deal of these funds were fixed income investors. So, they were concerned with the state of public finance. What will the government’s spending priority be? What will the projected deficit level be? How is tax collection with the GST abolished? How is the health of the banking system? How is the government facing the trade war between China and the US?

Such questions were easy to answer because the storyline was clear and plans were in place. Data was available and progress updates could be shared easily. Close engagement and high transparency level alleviated a great deal uncertainty in the market.

One concern was difficult to handle however. Mahathir had promised to handover power to Anwar Ibrahim. But the transition date was blurry. “When?” they asked.

“When” was an important question. Transition could mean, and likely would mean, policy change. And with it, investment rationale.

However the Ministry answered it, they could not be convinced and some of them were the biggest funds in the world.

Regardless whether they believed the transition plan, they were in the opinion that Malaysia could focus better on the economy if it had addressed its political uncertainty. Specifically, the trade war was once-in-a-lifetime opportunity for Malaysia to move up the value chain and gain from the reorienting global supply chain. Yet to the investors, political transition was distracting Malaysia from the task at hand.

Unfortunately, the level of political uncertainty in the country has worsened since then.

Muhyiddin’s supporters claimed formation of the Perikatan Nasional government would calm the politics down. We now know such claim is patently false. The faintest rumors would cause our collective heart to skip a beat.

It has become so bad that policymaking is grinding to a halt. Measures needed to mitigate the ongoing recession have been weak and late. Meanwhile, unemployment rate is shooting up and it will rise further. The result: we as Malaysians are experiencing more economic pain than necessary.

Not enough has been done. Continued inadequate and untimely government response will have long-term repercussions on the prosperity of the country. Remember, Malaysia has never fully recovered from the Asian Financial Crisis. Our growth since has been slower than before. This current crisis if not handled well would reduce the pace of our growth further.

Malaysia needs political stability to address the recession well. At the rate things are going, Perikatan Nasional is incapable for providing that stability.

Pakatan Harapan sees an opportunity to retake the power it won in 2018. If it succeed, could PH provide the much needed stability?

In order to answer the question confidently in the affirmative, I think PH will need to avoid having to face the transition question all over again. Either let their candidate be the PM until the next election (presumably in 2023), or ideally, do away with the transition plan altogether.

I do not think Malaysia has done enough in stabilizing our labor market. Policies introduced so far are inadequate in size, and have been implemented so late that its effectiveness is suspect. Each progress report by the Ministry of Finance feels irrelevant because even if all the measures recorded 100% implementation, it would still be insufficient. And the most relevant existing government countermeasures are progressing slowly.

We need to do much, much more to address the big problem we face in the labor market.

Our problem is massive unemployment

We are staring at a high likelihood of mass unemployment happening unlike anything we have seen in the recent past.

In 1998, the worst recession Malaysia has ever experienced yet, unemployment rate rose by about 70 basis points from 2.5% to 3.2%. For 2020, Bank Negara expected it to increase by about 60 basis point to 4.0%. But the projection was made well before anybody had an idea the lockdown would last more than 2 weeks. Hence, the central bank’s official view as recorded in its 2019 Annual Report is dated and any projection should be worse than what was published earlier.

Based on early indication from an unrepresentative survey by the Department of Statistics done later in late March, naïve extrapolation suggests unemployment rate could rise significantly higher. So much higher that mentioning the possible level of unemployment feels unreal. Yet, it is June now and the lockdown is still in effect though with looser restrictions.

The heightened risk of massive unemployment was the reason why we needed a much, much bigger wage subsidy program earlier. But we have failed to do so and the time for that has come and passed.

The bigger the hole, the more radical we need to be

The result: we now have a bigger hole to fill. We as a society are and will be experiencing more pain than necessary.

This comes to a minor point I want to make: the bigger the hole we need to fill, the more radical our policy response will need to be. And we have let the hole grew bigger unnecessarily due to political maneuvering and ministerial inexperience during a time of economic crisis. Make no mistake: the learning curve during crisis for a newbie will always be too steep that the optimal response will be almost impossible.

Passing the job hoarding stage

We have passed the job hoarding stage. Pass here refers to leaving the stage behind, and not in the “with-flying-colors” sense. We failed. We have failed to protect a huge number of jobs through a bigger and timelier wage subsidy program.

There is still some value to having wage subsidies. But the damage has been done and wage subsidy efficacy is weak at this point. You cannot subsidize jobs that have been lost.

We now have to move on and focus on other policies. Job creation programs are the obvious ones. There are other policies that could be implemented but I think the less obvious would be to move people out of the labor market temporarily. Call it the workforce reduction program if you like.

Brief explanation of jargons

To understand the need for workforce reduction program, one has to understand the way labor statistics works at the macro level. I promise, this will not be too technical as I myself am uninterested in explaining the technicalities.

Unemployment rate is the number of unemployed people over the labor force.

Meanwhile, the labor force is the sum of all those with a job or actively looking for a job. Those who are actively looking for a job and at the same time without a job are classified as unemployed.

The crucial part is that, the definition of the labor force does not include everybody. The too young and the too old are excluded. Those unemployed and not looking for jobs are excluded. Students are not part of the labor force. Technically, military personnel are not counted. You can argue whether these people should be included or not, but the point is, there are people outside of the labor force however you slice and dice the problem.

Here, I would like to focus on students in the tertiary level.

Minimizing unemployment given the crisis

We want to minimize the unemployment rate. To do so, we could increase the number of employed relative to the labor force to outpace the growth of the overall labor force. In common parlance, job creation. But creating more jobs is easier said than done.

Alternatively, we could reduce the labor force growth temporarily and then return the labor taken off from the equation back at a time when the labor market is healthier in a year or two years down the road. I think might be easier.

(I feel the need to say that both job creation and labor force reduction exercise are not mutually exclusive)

Massive expansion of tertiary education opportunities

This is my (radical?) policy proposal to help fill the hole.

I think one of the better ways to reduce labor force growth temporarily is for the government to embark on a massive publicly-funded program to get unemployed Malaysians and those suffering a high unemployment risk to go back to school. Specifically, enroll those interested in programs offered by public universities.

This program should include diploma, bachelor’s and graduate degrees. I think less for doctorate, and more for masters and below. PhDs generally serve a different purpose and the number of PhD placing in the country for a year is so low that it probably means nothing to the objective of reducing the labor force growth temporarily. This means we could give ourselves between roughly between 6 months and 2 years to repair the labor market.

I think for people wanting a second same-level degree could be given a chance to join the program.

Participants of the program could receive a reasonable stipend above minimum wage.

Other factors

While the objective of the program is to reduce the labor force temporarily, it has other factors at play:

  • Taking a portion of workers off the labor market helps balance bargaining power between workers and employers. At a time when there are a lot of workers looking for jobs and few job opening, workers are at a disadvantage.
  • The program would need massive funding into our universities, which itself could create more jobs, be it teaching assistants, lecturers or whatever positions there are associated with universities. In order words, pushing unemployed Malaysians or Malaysians at risk of unemployment could be job creating too. In any case, our universities are underfunded especially since the mid-2010s and this is a chance to address the problem.

I have an English translation of the Masnavi at home. It has been on my shelves for years but I have never read it full, much like my collection of Kafka’s, or writings of Robert Nozick and Bertrand Russell, or even the Koran.

The Masnavi feels like a reference material. You do not read it whole. You open the pages once in a while and read a verse or two or three now and then.

There is criticism that most established English translations have stripped the Islamic religion out of Rumi’s poems. That have made the Masnavi secular for a wider audience outside of the Muslim world; Rumi has been removed from his Islamic context. Meanings have been corrupted from its original intention.

My miseducation had misdirected my expectations when I was in Konya visiting Rumi’s tomb. He died here in the 13th century when this part of Turkey was ruled by the Seljuks. The tomb is officially called the Mevlana Museum. Rumi, or in full Jalal Ad-Din Muhammad Rumi, was a teacher, a master, a Maulana. But the tomb was no museum. It is a major shrine. And the population of Konya, I was told, is deeply religious but in a different way.

Growing up as a Muslim in Malaysia with religious education pummeled into me early on with questions discouraged, I had come to think of shrines as something absolutely unorthodox, bordering cultish. The religious authority in Malaysia strongly discourages worshipping at shrines fearing it could lead to effective apostasy at worst. In Keramat in Kuala Lumpur, a Muslim shrine was removed by the government to prevent the Malays from visiting it. By a long shot, Malaysia is not Saudi Arabia. But some aspects of it could be felt.

Rumi's tomb

And so it was a sight to see people coming in droves into the large shrine praying in front of Rumi’s large heavy sarcophagus.

The stone coffin, itself under a massive tall green dome, is lifted off the ground by a set of four legs. I, a person whose understanding of Rumi had been divorced from the Islamic context and understanding of Islam must have had approached puritanism from the perspective of these devotees in this shrine, was dumbstruck by the religiousness surrounding me. I did not expect to be in a pilgrimage, but I found myself stuck inside one.

It was all around me. Old women in black dressing covered from head to toes without a veil prayed toward Rumi’s remains while tearing up. There is no god but Allah, and Muhammad is his messenger… and Rumi the teacher. It was as if Rumi was a prophet himself. The Masnawi after all was nicknamed the Persian Koran. I was unprepared for this. Their devotion was true.

Many were determined to make their way to the front, pushing those in the way out harshly. A majority of them were Turks, but I spotted some Iranians too and other foreigners by listening to the language they spoke. They must have seen me as a nuisance, a foreigner standing in the way, not praying as they did.

As I observed, I came to disapprove what I saw. It was not so much due to my religious education, but rather due to the situation at hand. I can understand how holy the experience could be, but in the believers’ eagerness to reach for the scared, they pushed and shoved others in their way with a greediness and disrespect that should have no place in a holy place. The madness was understandable but disagreeable. It felt too worldly to deserve a place in this tomb beside the maulana.

I frowned each time I was pushed aside.

I felt angry but relented. If I needed to be patient, perhaps here inside the tomb was a place to practice patience. After all, I came with a secularized understanding of Rumi. I had no rights to judge them.

And The Earthly Strip makes a return.

There are discussions — or rather venom exchanges as it goes on social media these days — about prices and price control of certain items. I think I am here to highlight the obvious because oftentimes the obvious is overlooked due to familiarity: prices are only a method of allocation out for many out there.

There are other various methods in our toolbox if we care to learn.

Prices as an efficient allocator of resources

Now, prices are usually the best (efficient) allocator of goods and services in a society under normal circumstances. The thing with prices is that it is a reflection of the underlying demand, supply, and the context those demand and supply. Prices encapsulate all the necessary information needed to allocate resources. And under normal circumstances, that is good enough to allocate resources efficiently.

“Normal circumstances” is a catch-all cheat phrase. It almost always includes the assumption of (near) competitive/efficient market. Efficiency needs to be defined further: net increase in societal welfare. If it leads to a net decrease, the efficiency argument would melt away, and so too the merit of prices. Never mind prices, in theory, are not the only way to clear the market.

I make it sounds as if the price assumptions are a set of flimsy conditions. They are not. They are quite robust and hard to break, really. More than that after the section immediately below. The point is, it takes an extraordinary circumstance for it to happen.

When prices failed

During a war for instance with staple items suffering from massive supply disruption, prices will shoot up to an astronomical level. It is unclear prices will be the best means of allocating resources in this case if it would lead to a majority dying out of hunger due to unaffordability instead of absence of food, or protection gears. Even more so when a panic strikes, and hoarding takes place. After all, prices are only a means to a end. We care a whole lot more than prices. We care about our welfare.

This is mainsteam economics: most people do learn about market failures, that is when market mechanism decreases societal net welfare due to private cost failing to account for public cost.

Augmenting prices

When prices failed, it does not mean prices as a whole failed. There are various designs available to counter such failure before prices become completely irrelevant to welfare concerns. We can do price discrimination for instance, even all the way to first degree if we have the technology. We can impose quota within price mechanism. We have taxes and subsidies, an even that could be handled through tax and subsidy discrimination. We can impose coupon within price mechanism for instance. There are price ceiling and floor. We can be creative within market mechanism.

Do not forget these truths: we know when market mechanism is superior, and when it is not. And there are degrees of failure. Do not let your politics blinds you to it.

Knowledge and wisdom

Knowledge is about knowing the tools of allocation available and all of its possible combinations. Wisdom is knowing which tool and its combinations are useful during which period. In the case of prices, wisdom is knowing instances of market failures and which tools are available to address it. Prices are not superior all the times. Remember its assumptions.

Now, we have a crisis on our hands and it is affecting some items in the market. Some items are more important than others. We have the tools. Perhaps we need to relearn our lesson and develop some wisdom.

This is especially so when we are so partial to a method of allocation that we forget the assumptions why it works in the first place. We cannot imagine that those assumptions can breakdown.

This failure of imagination is perhaps a flaw in our classrooms. We take for granted these assumptions for pedagogic reason at the entry level in economics classes. It is worse when it done thru rote learning. And these weaknesses form the basis of popeconomics that is sorely inadequate to address our supply-side crisis.

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