Category: Society

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Economics Society

[2632] The worthlessness and the vestige of gold

In the olden days when four-legged beasts were the best mode of land transportation, gold was money. Everyday transactions involved gold and other precious metals as the medium of exchange then, just as paper money now dominates transactions in the modern economy. Gold had a very special position in human culture then due to its fundamental functions. It is still special today, but only because of vestigial reasons.

During the European Age of Exploration, Portuguese and Spanish explorers crossed the seas under the guises of God, Gold and Glory. The truth is that it was never really about god and religion. It was about the gold more than anything else. When Hernán Cortés and Francisco Pizarro first set for the heart of Aztec and Inca separately, they were dreaming of the glittering yellow metal for themselves.

As other European powers rose to take their place in history, the search for gold became less explicit. The new explorers, traders and later colonialists did not go out in search of El Dorado but it was still about amassing wealth through commerce. It was less explicitly about gold but yet, wealth was very much denominated in gold still.

Sometime during the industrial era, gold and other precious metals lost their function as the medium of exchange. They were no longer circulated as widely as they were during pre-industrial period. It was all papers and coins by the time motorcars, trains and steamboats were crisscrossing the world. By the 20th century, the dominance of papers was almost absolute.

Nevertheless, all money was still backed by gold and other precious metals.  Papers and coins struck out of cheaper materials were merely claims to those precious metals. All issuers promised to convert those papers and coins to gold upon demand. So, gold may have lost its role as a medium of exchange during industrial times but it was still the ultimate arbiter of the value of money.

That last real function of gold ended in the 1970s. The United States government ended the direct convertibility of the US dollar to gold as a reaction to an economic crisis. Soon after, the world followed in ditching the convertibility and thus, gold stopped being special.

Many continued to believe that money, even in Malaysia, is backed by gold but the truth is that all economies in the world today run on fiat currency. That is, money today has value only because its issuers say so and the market believes the words of the issuers.

To put it in clearer terms, gold has no importance to modern central banking.

Of value instead to the modern central banking system — and the wider economic system — as far as money is concerned is trust. Indeed, at the heart of capitalism, is trust but not gold. Capitalism can survive without gold—it is running affirmatively better without gold—but it cannot survive without trust.

So, gold has no fundamental economic function to play anymore in our modern world. Gold is neither a medium of exchange nor does it back any money. Because of this, gold really does not deserve the reputation it enjoys now.

The reputation of gold lives on only because of humanity’s vestigial attitude towards gold.

The phenomenon is much like in the case of Pavlov’s dog. The dog learned that a ringing bell meant food. The dog then began salivating at the sound of the ringing bell instead of at the food per se. It did so even when food was not present. At the end of the day, the dog had been conditioned to salivate to something else entirely. In some ways, the dog had been tricked.

In the same way the dog had been conditioned, humanity has been conditioned to think favorably of gold. Gold has seeped into our consciousness regardless of the fact that gold now has no fundamental economic function anymore. So persistent in fact the favorable predisposition towards gold that too many laypersons still believe that money today is backed by gold, despite the abolition of such a system more than four decades ago.

The momentum of history is huge and it takes time for humanity as a whole to adapt to the new reality of fiat currency.

The failure to adapt can exert cost especially on the gullible. The case of Genneva is one example where individuals were cheated out of their vestigial sentiment for gold.

Believing that gold had a special place in the modern world, they too eagerly bought the metal from Genneva while not realizing that they were being manipulated. It is only too bad that reality had to set in and the scam had to end. Actions by the authority in both Malaysia and Singapore only hastened the inevitable collapse of Genneva, just as any large-scale scam eventually will under of its own weight.

Of course, financial scams come in so many other ways and gold is not an exclusive tool for scams. Old-styled Ponzi scheme relies on just money, plain old greed and some doses of gullibility. Still, the obsession with gold is unhealthy. The sooner we all realize that there is nothing special about gold anymore, better we all will be.

After the learning is complete then perhaps we may start to put our money into something more productive than the vestige of gold.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in Selangor Times on November 23 2012.

Categories
Economics Politics & government Society

[2625] AES, privacy and perverse incentive

The implementation of the Automatic Enforcement System (AES) is proving to be so controversial that even federal backbenchers are joining the federal opposition in criticizing the system.

For the uninitiated, the AES is a privately-financed and operated system of speed traps under the purview of the Road Transport Department (JPJ). It has two functions: catch those who drive above the speed limit and those who beat the red light. The overarching aim is to reduce road accidents.

There are strong opinions on the matter, and at times, it appears that there is no middle ground. As for me, I am of two minds about the matter.

I can be supportive of the AES because, frankly, there are assholes on the roads. They drive as if the roads are racetracks. Many of them disrespect the traffic lights. They, as some would say in Malay, think that their fathers owned the road.

These drivers endanger others’ life and there have been times when they caused me unnecessary distress. Though it is unbecoming of me, there were times when I wished they would meet with an accident. Pain is a great disincentive and these drivers need some serious disincentive. Maybe, like losing a limb. Or two.

But such pain can be barbaric and so, the next best thing is to hit them in their pockets. For those driving Ferraris, a Hummer financed by a tycoon and the likes, the AES is unlikely to be of any deterrent. If you think a maximum of RM300 fine can deter the elites from becoming a road menace, then I do have something to sell to you.

Philosophically, the libertarian in me is always skeptical of cameras in public space, either for crime fighting or as speed traps. It is a concern for privacy and in an environment when I distrust the government with my private data, especially with an illiberal government in power, having these cameras all over the public space allows the government, or even private entities, to track me. Whatever the guarantee of privacy, words are words and it is open to abuse. How do I know, for instance, that the AES cameras will be used purely for traffic purposes?

I just do not.

There is, of course, an argument that in this age of social media, the concern about privacy with respect to cameras in public spaces is really overblown. A large chunk of our lives is already available online. Nevertheless, there are things on social media, and there are things that are not. Cameras in public space have the capability of revealing things that are not on social media, among other things. There is such a thing called privacy, especially to a libertarian like me.

The other part that raises my opposition is economics. Specifically, the incentive structure of AES is flawed. There is a clear case of perverse incentive. It creates a conflict of interest among the companies.

The private companies operate the AES and they generate revenue from paid traffic tickets. There is a clear profit motive here. The profit motive itself is not the problem.

The problem comes when one considers the fact that the process of taking the pictures is managed by the companies.

With that, the AES operators face the incentive to tweak the violation benchmarks regardless of the speed limits sanctioned by the authorities. The operators can increase their revenue by dishonestly lowering the benchmark for fines. In other words, there is an incentive for the companies to cheat commuters. There is a risk that these companies will cheat us.

This basically negates a pro-AES argument out there that sounds like this: if you do not commit an offence, the companies get no money. As I have explained, there is a risk that the companies do make money even when there is no offence committed.

This can be addressed by having an independent, incorruptible body to oversee the system. This can be the government because the government (a clean one at that) can be a counterweight to the profit-motive. The independent overseer needs to ensure there is no cheating done by the operators of the AES.

This is already in place in a way. All cameras will be calibrated every eight months by SIRIM, which one assumes to be an independent party. Still, something can happen between two calibration sessions. After all, the two private companies do operate and maintain the cameras on behalf of JPJ. They have access to the cameras all the times.

The alternative which can make the AES more palatable incentive-wise is to change the incentive structure. In my humble opinion, the companies should not be paid according to the number of fines paid. The payoff should not be pegged to the number of motorists caught. Instead, these companies should be paid a fixed regular fee from the relevant authority. This will make the incentive to cheat go away.

The problem with this is that the government may have to go back on its word and break the contracts signed. But hey, what else is new?

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 Malaysian Insider on November 8 2012.

Categories
Politics & government Society

[2611] That contrast between public and private space

Walking out of the door of a nice little restaurant in Kuala Lumpur is very much like traversing between two worlds. It is a journey from a world of no worry to a world that almost qualifies as a dystopian science fiction.

There are plenty of nice restaurants which are not necessarily posh but are appropriately organized to fit certain appealing themes. It targets the relatively well-off middle class, especially the relatively well-paid young adults. That makes the crowd well-educated and armed with proper etiquette. Not too many speak too loudly over the cell phone, or leave their kids to run around unleashed. Everything accommodates for low-decibel conversations.

Being inside one of these restaurants makes me expect to come out to a grand boulevard of some great cities of the world. Yet the truth is that these restaurants are an oasis in the middle of an ugly suburb sprawl. The walls of the restaurant isolate patrons from the harsh reality of many parts of Kuala Lumpur. Inside, it is just nice. Outside, it is hot, humid, chaotic and dirty.

Sometimes the road barriers put up by the communities in these neighborhoods can remind you that it can be unsafe as well. Then news reports of snatch theft suddenly flash through in your mind. The effect of the blue pill you had as an entrée earlier is now gone after the goodbyes, hugs and kisses. You just had the red pill as dessert and now you instinctively walk faster, hands clutching your bag, all alone and scared for something that might or might not happen.

That reminds me of Robocop’s Detroit. That picture of Detroit is not one of hot and humid but it is still chaotic, dirty and unsafe. It is an almost believable dystopia—minus the cyborg of course—and it almost describes the commercial centers of Damansara, Bangsar, Hartamas, Subang Jaya, Petaling Jaya and who knows where else. It is one that many live in and others frequent.

Drawing parallel between the dystopian Detroit with these commercial centers is an exaggeration. Admittedly, it is a rhetorical device.

Nevertheless, even without the concerns for crime, there is a contrast between public and private spaces.

If money can really buy the good things in life, then surely these neighborhoods can afford and should have a better environment for themselves beyond the restrictive four walls of their homes or some restaurants. The contrast between the world inside and the world outside—between private and public spaces—should not be too great. But it is.

Perhaps this is a reflection of an overly individualistic community in the city. Most of us are so concerned with our small private space that most of us ignore the commons that we share. We jealously maintain our private space against nature but left the public space just beyond our private boundary at the mercy of nature. We use the commons almost daily, so we do care for the commons but none of us have enough incentive to take upon ourselves to make the commons as orderly, clean and safe as our private space.

Although I hold that the individual is the most basic unit of any society, I do find the individualism that I see proliferating in our society as too much for my liking. Besides, seeing a fat rat or two tip-toeing across the pavement in the evening in Bangsar and Damansara does not paint a great picture of a community that enjoys a kind of welfare that is well above the median. I think it is a damning symptom of the excessive individualistic attitude that we have. I think the excessive individualism is adversely affecting the viability of public space.

Individualism can be a force of good. A healthy dose of individualistic culture provides a bulwark to tyranny. It is also a fertile ground for creative thinking among others. A society cannot really progress far with a hive mind that will never challenge the status quo.

That, however, does not negate the fact that there are costs to excessive individualism. One of the costs can be the unviability of the commons.

Thankfully, the setup of our society and institutions are designed partly to address problems arising from individualism. We have our local authority funded by public resources to take care of the commons. The establishment of the local authority is in line with the liberal rationale for the establishment of the state: we establish the state to provide crucial services to us all which we cannot individually provide for ourselves. And the local authority is part of the state.

Yet, there is significant a contrast between private and public space. The private space is well taken care of by private individuals and firms while the commons—the commercial centers of Kuala Lumpur’s suburbs—are a dump.

I take this as a sign that the local authority is not doing its job well. If the viability of the commons is a benchmark to a working local authority, then the local authority is broken.

It is possible that the local authority is failing its job as the janitor of our commons because it is not responsive to the community it is supposed to serve. By that I mean to refer to the fact that most of us already know. Our local authority is unelected and so it is unaccountable to the beneficiaries of the commons, which is us.

The unelected and unaccountable local authority can afford to fail at its jobs without any real repercussions. That the commons are chaotic, dirty and arguably unsafe is linked directly to the unelected and the unaccountable nature of our local authority. The beneficiaries of the commons can complain but the local authority really has no incentive to take it seriously.

If we do care about the stark contrast between private and public space, if we do care for our commons, then we need to make local authority responsive. We need our local election back.

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 Malaysian Insider on October 11 2012.

Categories
Politics & government Society

[2597] The myth of adulthood

And a kid and a young teenager, I held the belief that adults had all the answers in the world. They would know what the best to do was, and it was the good of all of us. I thought they were wise, even if sometimes that came at the expense of the young me. Wisdom came automatically with age.

As a kid, I wanted to grow up to be wise, all knowing. Short of being a god of course but in this age, I suppose we are the gods themselves.

Along the way as I grew up, I learned that was not a rule. It was a myth. If there was a wise, well-behaved adult, there was a good chance that that was a mere exception.

In many cases, I have discovered that being an adult is overrated. In many cases, being an adult is worse than being a juvenile. Adults throw all the tantrums, being irrational and hypersensitive like a child, but with the power to do something that a spoiled brat cannot.

A spoiled brat at least does not have the rights of a full adult. The damage the brat can do is limited and there are easy consequences to any wrong the brat commit. Somebody will be there to provide a lesson in manners. For an adult who is also a spoiled brat, who will do that? The police?

Look around you. In the news, grown men and women acting childishly and even like a hormone-filled teenagers all hyped up on the smallest of things. They would shout nonsense, unlikely to think fully before they act. Some even have the audacity to appear on national television. Hell, national television will invite them and gladly provide them with airtime. Some of them are our elected representatives.

Closer to the ground, some adults would gossip and behave like he or she was still in high school. Such is our immature society.

Ah, adulthood. Such an overrated experience. I have enough of respecting adults. I will just respect maturity from now on thank you.

Categories
Economics Society Travels

[2595] Good things happen to good people

If one looks at various socioeconomic statistics, it is easy to conclude how far behind Malaysia Cambodia is.

Yet superficially, if one landed in Siem Reap in north Cambodia, one would find it hard to differentiate rural Cambodia from rural Malaysia, apart from Khmer writing on the billboards and posters as well as the spoken language. The homes appeared Malay and the people themselves looked Malay. There were a number of times when a Cambodian spoke to me in Khmer, only to giggle finding out that I did not speak their tongue.

The substantive difference became clearer only once I was in the town of Siem Reap. Most parts of the town were dusty to present a Wild, Wild West impression. There was clear under investment in infrastructure. The statement on infrastructure was true elsewhere as well. There were not too many cars. Whatever seen on the road would be driven by westerners, or belonged to the government or some aid organizations. The locals would either ride a bicycle or a motorcycle generally instead.

The tuk-tuk and the likes formed the backbone of public transport. A Cambodian tuk-tuk is essentially a small cabin attached to a motorcycle.

In Siem Reap, Battambang and Phnom Penh, every single available tuk-tuk driver would hail me and ask if I needed a ride. Sometimes, it appeared almost everybody on the road honked at me to ask plainly, ”tuk-tuk?”

A college friend of mine whom I was traveling with me told me that her brother visited Cambodia a few years earlier. She joked that he was traumatized by the tuk-tuks. She went on to buy a tuk-tuk-themed T-shirt for him as a cruel souvenir.

The persistence was noteworthy and it did not end with the tuk-tuks.

As both of us explored the Angkor temple ruins littered throughout the land, children would approach us and beg us to buy something from them. It could be a bottle of cold water, a flute, a book, a piece of cloth, anything. They would beg in the softest of voices that would melt the heart of an untrained traveler. There was a hint of desperation in their voices. And they were persistent.

After a while I became desensitized to the incessant pleas, as many other travelers eventually did. My friend made the desensitization easier. She said we could not possibly help them all by purchasing everything from everybody.

What struck me the most, and informed me the most about the state of Cambodian society beyond the cold statistics, was our guide.

We employed a Cambodian guide, who led us into various ruins. He explained to us in detail the history, the story behind amazing Angkor’s bas-reliefs and shared tidbits about temples for a moment worth of amusement. We thoroughly enjoyed his company.

By the end of the day, we wanted to go to where we wanted to go and he had to go to where he had to go. We parted ways. We paid and thanked him for a splendid day.

He thanked us for the payment, as it is customary to do so. What was unusual was that he exhibited further unnecessary gratitude. He explicitly thanked us for providing him with employment.

It was quite clear that he not only wanted a job. He also needed it.

What I am about to do is an attempt at generalization. There are always perils at doing so but after observing the Cambodian society as a foreigner, I do think Cambodia has a bright future.

It is true that it is poor now, with children working on the streets when they are supposed to be in school.

Yet, I do not believe those rough edges are enough to negate my optimism. I am optimistic because Cambodians in general appeared to have that hunger to move forward and leave the past behind.

Life in the capital Phnom Penh is the symbol of that hunger. The city is not as modern as Kuala Lumpur and it will be many years before the two are at parity.

Nevertheless, Phnom Penh is developing even as it maintains its old colonial charm. One can immediately feel the go-go spirit in the capital as one skyscraper or two slowly inches toward the sky, as the tuk-tuks laze across the city. The newly found Cambodian openness will further aid progress.

For years, Cambodia was held back by inward-looking world views. Judging by what I saw in Cambodia, from the rural north to the urban south, that self-damaging age has come to pass almost fully.

A new Cambodian era introduces its own issues.

Cambodians complain of corruption and suspicious political maneuvering. But as the society matures as it is inevitable with continuous economic progress that was impossible 30 or 40 years ago, chances are these issues will be arrested along the way to a more tolerable level.

I do hope Cambodia progresses to emerge out of its ancient Khmer predecessor’s shadow.

As I was haggling with a merchant at a market in Phnom Penh for an item, an American saw me and smiled. He approached me and said: ”They’ll take every penny from you. But they are good people.”

Good things are supposed to happen to good people.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in Selangor Times on September 7 2012.