Category: Politics & government

[2640] Welcome back, LDP

I do not understand the intricacies of Japanese politics. I simply do not follow it closely. But I do know that Japan can play a significant role in Asia, if it finally decides to take up that role, which it has not under the uncertain leadership of the Democratic Party of Japan.

The DPJ wanted a closer relationship with Asia and less of the US. Contrary to what it hoped to achieve, a DPJ-led Japan has not successfully engage China and Japan now needs to forge a strong relationship with the United States in time when China is rising and growing more assertive against its neighbors. DPJ’s economic management itself has not been stellar but I think there it is unfair to blame to DPJ for that.

Unhappy with China, I welcome the reelection of the more conservative Liberal Democratic Party and a Japan with a backbone. That is so because it is almost certain that the LDP will strengthen its relationship with the US. With a stronger relationship with the US and a strong US presence in East Asia (and Southeast Asia), hopefully China will think twice in asserting its weight around the region. China has been an irresponsible giant so far, escalating crisis when a mature power would have handled it with care instead. For instance, is it really necessary to send a plane over the Senkaku islands?

A more hawkish (not too much I hope) Japan will tell China that it cannot bully its way through the region any longer. Rather than a hawk-dove strategy, now China faces a hawk-hawk scenario, which is more complicated and may force China to rethink its assertive, bullying regional policy into something more cooperative and amiable.

A hawkish Japan does have its own problem but at the moment, I do want a Japan that is willing to stand up in the region. China needs to learn that its bully tactics does have consequences and an LDP Japan can push back and say, no, play nice.

One big issue with LDP is its economic policy of Japan. First is the government interference in monetary policy. The Bank of Japan is losing its independence with the government trying to force the central bank to target for higher inflation rate. While I do think Japan needs a bit of more inflation, I am unsure how the interference will pan out. Lack of independence can be a recipe for too much inflation. There is some nuance in the interference in the sense that LDP government wants a stricter (but higher inflation) rule for the BOJ to follow but it does create a precedent of interference nonetheless.

On the same track, the LDP government will embark on a massive stimulus program to revive the economy. I prefer monetary to fiscal stimulus. The preference presents me with a problem: BOJ itself is too conservative to my liking and that probably makes the executive infringement into monetary policy somewhat palatable. Nevertheless, with expansive and coordinated fiscal and monetary policies, I suppose you will get inflation.

Finally, while I welcome the return of the LDP, I do not think the election of DPJ was a mistake. The Japanese system needs a shake-up and the DPJ did just that, even if it did not fulfill its promise. Being in power for too long can be dangerous to a political culture because it implants the party into the state apparatus. For a healthy democracy to prevail, the state has to be ultimately separate from the party. In the case of Japan, there is an additional dimension: the civil service is too influential. From my readings, the DPJ did have some successes in reigning the influence of the Japanese civil service, and that is good.

Tags China, fiscal policy, inflation, Japan, Liberal Democratic Party, monetary policy, stimulus

Economics Poetry Politics & government

[2628] 5.2% in the third quarter, 5.6% in the second and 5.1% in the first

Post author By Hafiz Noor Shams
Post date Friday, November 16 2012
No Comments on [2628] 5.2% in the third quarter, 5.6% in the second and 5.1% in the first

It’s above consensus,
so says the missus,
so shall we pop the champagne,
and start with the campaign?

Tags GDP, Malaysian elections

Economics Politics & government Society

[2625] AES, privacy and perverse incentive

Post author By Hafiz Noor Shams
Post date Friday, November 9 2012
No Comments on [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

First published in The Malaysian Insider on November 8 2012.

Tags AES, contract theory, crime, libertarianism, perverse incentive, privacy, The Malaysian Insider, traffic

Economics Politics & government

[2623] The death of politics of development

Post author By Hafiz Noor Shams
Post date Friday, November 2 2012
No Comments on [2623] The death of politics of development

I was Sarawak for two weeks in early 2011. It was election time and the campaigning period was well underway.

From my observation, I think I can conclude that the politics of development is very much alive in Sarawak. It is not hard to understand why.

While the standard of living in Kuching, the state capital, was respectable, a number of communities just outside of the city limits still did not have access to the local electricity grid. They wanted electricity. On the road to Bau, the residents complained how dark it was at night along the road. They wanted streetlights. The journey to Sri Aman meanwhile felt like a mild rollercoaster ride. Users wanted a smoother and wider road.

The politics of development there is very much about physical infrastructure. It is about promises and execution of development. Incumbents make lavish promises for more and better infrastructures. Challengers harp on unfulfilled promises.

While there were other concerns lingering in the mind of Sarawakian voters I am sure (indeed, it would be a remiss if I did not mention that the Chief Minister of Sarawak, a popular brand of lightning rod among urban voters), the way the campaigns were sometimes framed was as if the primary concern was development. It was a matter of whether the electorates should reward the incumbents for a job well done, or punish them for not bringing in sufficient development.

To be sure, the politics of development is relevant not only to Sarawak, but also to other places throughout the country. Else, the authority would not have paved the roads just before a critical election.

In other places where road connections are respectable, with clean water supply and electricity taken for granted, the same brand of politics is less appealing to the electorates.

Voters in these places—likely urbanites—have expectations too sophisticated than anything the politics of development can cater to. Educated urbanites are no longer mostly concerned about physical infrastructure. They will shrug it off and they will probably return to say that mere development is no longer enough. There are other concerns.

That comes close to what economist Amartya Sen has articulated in one of his books, Freedom as Development. He argued that development should be understood in its widest sense. Economic development is not merely about paved road, tall buildings and everything that is concrete but it is also about the soft aspect of individual freedom. It is about individual empowerment. Institutions should be created and improved so that individual freedom is guaranteed.

With such freedom, individuals can take upon themselves to promote their own welfare. After all, the end of development is enhancement of individual welfare.

So, freedom is one of the necessary means of development and the focus on physical development alone is not enough.

And if one subscribes to something similar to Maslow’s hierarchy of needs where individuals prioritize economic well-being and other basic needs over political rights, then perhaps, for many Malaysians, the basic needs for brick and mortar development have been fulfilled. Any more of that kind of development returns less satisfaction than it did before. Now, the same Malaysians may want to fulfill other needs down the list that they have ignored previously.

So, faced with the widened definition of development, the old way of doing things becomes inadequate.

There are at least two major cases illustrating how the traditional development argument alone is insufficient and sometimes rejected altogether because it clashes so nakedly against other concerns. One will bring us to Pahang, where Lynas is building a rare earth processing plant. The other will bring us to Johor, where Petronas is investing in a massive petrochemical complex.

The proponents of the projects have highlighted the projects’ merits: foreign investment, jobs creation, technology transfer, tax revenue, etc. In a society that hungers for more old development, the projects would have gained popular support.

Yet the projects face popular opposition for a variety of reasons, the most notable perhaps being environmental and health concerns. In the past, not too many would oppose such development. Many needed it. Today, the acceptance of development comes with conditions. The conditionality is a sign of the end of the old politics of development.

The politics of development itself suffers from fatalism. Its appeals will end because development, whether the narrow definition or the more holistic one, is not an end by itself. It is a mean to an end. What is the appeal of the promises of more development, when we are nearing the very end that any development aimed for? What is the appeal, when we are at the end? We already have it.

The politics of development only lasts as long as development has not reached its stated end. The death of development politics is the natural ending for any successful development.

Only failure prolongs the life of old-style development politics.

First published in Selangor Times on October 26 2012.

nb — I am disatifised with this particular essay. I initially had wanted to make the connection about how politicians who have engaged or engaging on the politics of development can no longer expect gratitute from voters because of the death of the politics of development. I also wanted to highlight that there are pockets where politics of development still work but I was running out of time and space to expand on the idea. I also suffered from writer’s block. Those are the reasons why the final part of the essay seems rushed. Verbosity is the death of me.