Category: Politics & government

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Economics Politics & government

[2587] You shall not crucify mankind upon a cross of gold

I do not take hard currency idea seriously. Hard currency is a wacky idea. I generally think supporters of hard currency, gold standard advocates being the worst, as non-serious discussants of monetary policy. Hard currency is inflexible and it will exert unnecessary pain in time of crisis. If we had a hard currency all over the world during the last financial crisis, we would have easily experienced the worst depression in modern times. Worse than the 1930s Great Depression.

It would be worse because the world’s economy was so much bigger in the 2000s than it was in the 1930s and given real prices of commodities associated with hard currency, gold and silver specifically, the supply of hard currency could not accommodate the demand for money. The world’s economy would be much smaller than it was at every single point of modern history even without any crisis.

I am a libertarian but unlike too many libertarians, I prefer fiat money to gold standard. I have rationalized my position before.

On top of that, I am a monetarist because I understand the basic operations of modern monetary policy and its implications. I accept the lesson taught by Milton Friedman and Anna Schwartz: in times of crisis, expand the money supply. Under hard currency, the expansion is almost impossible while deflation, which as damaging to general welfare as hyperinflation is, is always a real threat.

Although I am generally reluctant to admit it, I do ultimately support previous quantitative easing exercises in the United States and other similar money supply expansion in other parts of the world. The fear of expansion is always about high rate of inflation but it is quite clear for the past few years that there is a considerable unmet demand for money that money supply expansion does not create any kind of noticeable damaging inflation. Until inflation becomes a credible threat, I will not oppose money supply expansion by too much.

In other words, I think Federal Reserve chairman Ben Bernanke has done a great job. Bernanke given his scholarship is the right man for the job.

So, I take it as a demerit when Mitt Romney said he would not reappoint Bernanke to the job if he is elected as the next President of the United States. And I take it as a huge downer for the Republicans to bow to unreasonable crowd that is the Tea Party and then push for gold standard.

This may force me to reassess my bias with respect to US politics.

I have a Republican bias just because of Republicans’ economic policy has typically been closer to my preference (notwithstanding the Clinton’s years that blurred the line; I do consider Clinton as the best President in recent times). At least, the rhetoric is. And I do think the selection of Ryan Paul as exciting. This election has catapulted libertarian understanding to the national front farther than Ron Paul has ever done.

But the contemporary Republican view on monetary policy might be too much for me.

There are many great economists within the Republican camp at the moment. It is the responsibility of these economists to advise the Republicans of the folly of gold standard.

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Conflict & disaster History & heritage Politics & government Society Travels

[2584] Better commercialization than communism

Cambodia has a dark modern history and I always knew that. That knowledge did not bother me much previously because I did not really relate to it. Cambodia despite being so close to Malaysia appeared farther away from me than, for example, the United States where I spent my undergraduate years.

Cambodia was some land far away from my consciousness. Farish Noor once lamented that Malaysians knew more of New York, London and Paris than Jakarta, Bangkok and Manila. I am guilty of that.

My travels to Cambodia, specifically to its capital Phnom Penh, were my effort to turn his statement untrue. I started out in Siem Reap up north trying to relearn my Southeast Asian history. It was an adventure, going through and climbing all of the famous Angkor temples and more, and then getting lost in the obscure ones, which were no less impressive than Angkor Wat or Bayon. Only the fear of landmines prevented us from being too adventurous, on top of constraints involving time and money.

Warnings of landmines are a stark reminder of Cambodia’s dark past. Too many landmines were planted across the country by participants of the Cambodian civil war. While the war has long ended, efforts at clearing up the mines are still under way and there are new landmine victims every day. The past will not just go away quietly.

Even in the capital Phnom Penh, time passed slowly. I felt as if I was still living in colonial times during my stay there. French influences are remarkably strong still. There are many French tourists and expatriates even. It was as if they refused to leave in the first place.

That is understandable. The capital, located at the meeting of Tonle Sap and the fabled Mekong rivers, is beautiful. Rows of old buildings stand along the banks, providing a lively waterfront. If it wasn’t for the devastating civil war, Phnom Penh would have been one of the great cities of Southeast Asia.

The city was emptied during the communist Khmer Rouge regime. It is hard to imagine the beautiful Phnom Penh devoid of life but it was a ghost town in the 1970s, as were other towns in Cambodia in the same period.

The communist Khmer Rouge came to power in Cambodia in 1975. They had a terrible idea of equality and wanted to create a classless society. But more than that, they did it in a hurry. Their solution was to turn everybody into a peasant overnight.

To do so, they forcefully relocated urbanites to the countryside. There were no doctors, engineers and other professionals under the Khmer Rouge. All were peasants. Peasantry, in reality, was a euphemism for forced labor. Many realized that. Those who questioned the Khmer Rouge were tortured and killed. The intelligentsia were murdered to protect the communist revolution, before Pol Pot turned on the Khmer Rouge itself in the name of power and ideological purity later in the late 1970s.

The failure of China’s disastrous Great Leap Forward, which aimed at creating a communist society quickly, was unheeded. The Khmer Rouge thought they were a better implementer of communism than their Chinese counterparts.

Well, judging by the result, maybe they were. According to the World Bank, there were more than seven million individuals in Cambodia then. By the end of the Khmer Rouge regime, between two million and three million were dead according to the United Nations. That was a significant proportion of total Cambodian population.

Yet, statistics are just cold numbers. It is always hard to humanize numbers that run to the millions. Being in Cambodia gave me the chance to understand exactly those numbers.

I visited the Tuol Sleng museum while I was in Phnom Penh. The museum was formerly a school, which the Khmer Rouge turned into a prison and a torture house. The turning of a school into a prison more than symbolized what the Khmer Rouge and, really, what communism in practice is all about.

Despite the purpose of the museum to remind us all of the past, entering that museum felt like an act of trivializing history. It cost two US dollars to enter the museum. There was something sacred about the museum that I could not explain. Yet, here, like many places in Cambodia, history had been commercialized. Past pain has been repackaged as a product of tourism. It was about making money. It felt wrong.

As I was about to condemn the commercialization as a scam, what I saw inside prevented me from protesting after all.

The first building was where the last tortured prisoners were placed in, and died. There was an empty rusty metal bed frame in each cell, with photographs of the last victims hung on the wall by the curators. The photographs were not pretty. The photographs were shot by the invading Vietnamese army as the Khmer Rouge regime fell. The Vietnamese came too late to save anybody. They found only rotting bodies bound to metal beds in the torture house.

The next two buildings had even punishingly smaller cells. It was much smaller than my bed at home. Judging by the condition of the cells, one could imagine the impossibility of life during the time of the Khmer Rouge. It was a kind of environment that if I were put inside, I would die almost immediately out of sheer despair. Out of the thousands who passed through the gates of Tuol Sleng, only a few survived it. Most were destined for the infamous Killing Field located a number of miles outside of the city, if they were not killed here.

What made the visit to the museum unbearable for me were pictures of hundreds or thousands of victims pasted on countless boards. Many prisoners were clearly scared of things that were to come. One particular face was on the verge of crying. That particular image haunted me throughout the day.

I decided I could not stand it anymore after seeing all of the photographs. I could not explore the rest of the museum to make good of the two dollars. It was then that I made an emotional connection to Cambodia.

As I sat on a bench outside in the open space, disturbed at the capability of the Khmer Rouge to do what they did, I became angry. Just before I exited the building, I spotted some writing on the wall. A visitor had penned that no God would have let this happened. I understood that person.

I came to think of the two-dollar entry cost. During the communist rule, this would have been illegal. Commerce in general would have been illegal. There was only one profession in the name of equality. The peasantry produced for the benefit of the communist state. That policy of unreasonable equality produced famine and exacerbated the genocide perpetrated by the Khmer Rouge.

Only now are Cambodians coming out of the shadow. They are eager to do commerce and improve their lot, something that was not possible under the communist Khmer Rouge.

The two-dollar entry cost is only part of the effort to come out of the hole that communism created. If the commercialization of the dark past brings about a brighter future for Cambodians, then let it be. Nobody, foreigners the very least, has the right to condemn the commercialization.

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 August 20 2012.

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Politics & government Society

[2580] Opposing the proposed SABM-HAKAM Social Inclusion Act

Saya Anak Bangsa Malaysia (SABM) and the National Human Rights Society (HAKAM) have proposed to introduce something called the Social Inclusion Act.[1] The general idea behind the proposal is noble but if this act somehow finds itself in a queue for debate in the Parliament (which I think is unlikely given how private member bills are typically ignored in favor of government-sponsored bills), the act does give too much power to a commission that it seeks to establish.

I am against the act, at least in its current form.

The proposed commission has too much power because its functions have been defined so broadly and the act grants the commission the ability to implement its own recommendation.

Furthermore, the commission can also compel the government, federal or state, to implement its welfare program if the commission believes such program is warranted. In other words, it can dictate government policy, which I think is unreasonable. It transfers debate on such social policy which can be controversial from the public sphere to within the commission’s four walls. The commission can also exclude members of the public from participating in any discussion held by the commission. So, not only it transfer the venue of debate from the public sphere to the private space funded with public money and public authority (yes, it can compel anybody to appear before the commission, which I find odd and coercive, but this is a small issue), there is transparency worry.

In clearer terms, I find the non-transparency as unreasonable as the commission can compel the government to implement its suggestions whatever the commission sees fit, notwithstanding what other laws state that may curb the commission’s powers. There is too much authoritarianism in that. I do hope, if the proposed Social Inclusion Act is taken up in the Parliament and eventually passed, there are such laws that limit the powers of the commission.

Now, what are the functions that I find too wide?

The commission has the power to develop social inclusion policies and also, the power to implement it. The exact boundary of such policies is unclear but it can be so extensive that it may require a whole ministry or two to do it. Social inclusion, based on what are listed as the functions of the commission, includes but not limited to reduction of real poverty, reduction of income inequality, provision of social safety net and prescription of intervention model. I wrote the functions of the commission are not limited as to those stated in the act because social inclusion can mean a lot of thing and it is ill-defined.

It is ill-defined because it is based on the definition of marginalization, which in turn is defined as the exclusion of a person or a community’s economic, social and political rights that prevents the person or the group from realizing their full potential and from participating fully in society.

Those rights are controversial, if you understand the existence of negative and positive rights. Given the individuals behind Anak Bangsa Malaysia, I think I will quickly disagree with a number of ideas that they may consider as rights. I subscribe to negative individual rights and more often than not, I am oppose to positive rights, which compel others to intervene another person’s life to help achieve the latter’s potential. In doing so, it is a violation of the former’s individual rights, which demand the former to not be coerced into doing something.

Define these rights as positive rights, then the size and role of government will quickly expand at the expense of individual liberty.

I think the act can be improved by making it more transparent and more inclusive in its decision making (which is ironic because this is a so-called Social Inclusion Act but its discussion and decision can be exclusive) by allowing the commission to recommend first, and then have the Parliament debates and then on approve or reject the recommendation. If the Parliament approves it, only then the commission should be allowed to implement directly or compel the necessary existing ministry to implement the recommendations. Or better, let the commission be the implementer of whatever relevant laws the Parliament proposes and passes. Take away the recommendation power of the commission.

I think having the lever at the parliamentary level is important at guaranteeing a more inclusive act. It also puts a bump on effort to expand the role of government. The membership of the proposed council can be biased and unrepresentative of the wider society. Having the Parliament has the decision maker partly solves the problem of bias and representation.

Here are some example of excessiveness of power the proposed commission has. Consider this: the power to introduce a social safety net is entirely in the hands of the commission. Such introduce is a major policy, require major expenditure and in the US, the expansion of public insurance, or the Obamacare, was a major public debate. It will be outrageous to give the commission such power. That decision should be decided by both the Cabinet and the Parliament and the wider Malaysian public, not the Commission exclusively.

Consider this also, the stated function of the commission is to reduce income inequality. This potentially include tweaking with the taxation system. To provide the commission with such power is too much.

So, I reject the act. I see the current proposal as a way to ram through certain way of thinking about social issues without check and balance. It is a request for free pass to expand the role of government, without accountability.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — An Act to provide for the development and implementation of an integrated plan of action to address serious marginalization within Malaysian society [Social Inclusion Act 2012. SABM, HAKAM. Extracted August 17 2012]

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Politics & government Society

[2574] Declining crime rate may not be enough

The statistics show that total crime in general has been declining since 2009, according to PEMANDU. Yet many members of the public distrust the statistics and insist that they do not feel what the statistics suggest. Others in the wild, wild world of cyberspace, where discussions can be very unrefined, openly call those in authority outright liars, which is not the first time that has happened. Suffice to say those in the government are frustrated at incredulity exhibited by many members of the public towards the official narrative of declining crime.

Idris Jala, the head of PEMANDU, cited an article entitled ”Cockeyed optimists” in The Economist some time ago. The message of the article, among others, is that perception lags behind actual crime statistics. The article referred to the United Kingdom to support its claim. In short, Idris Jala was defending the statistics amid widespread disbelief. He tried to rationalize the seemingly contradictory signals inferred from the reported crime statistics and public perception of the level of crime within the society, and he hoped others believed it. If he had not hoped, he would not have shared his rationalization in the first place.

Eugene Tan, a PEMANDU director, was clearer in delivering the same message. ”Changes in perception do not immediately follow changes on the ground. And even when people fear crime less and perception changes, the change is slower than the actual reduction of cases,” he reportedly said.

Crime may be falling. Or at least the reported official crime statistics are declining. And it may be true that perception lags behind crime rate.

Or it may be that falling crime rate itself is not the real concern. Maybe, the actual issue is that the public tolerates only so much crime.

It can be that is a maximum level of crime that the public can endure while maintaining their composure. If total crime is above the level in general, then the public will complain loudly about the performance of the authority in tackling crime. If total crime is below that level, then maybe it will ease the public.

If it is indeed true that there is a ceiling that the public tolerates, then the question is not whether the total crime has been falling. The whole new hypothesis makes the point on declining crime statistics somewhat redundant. The trend itself becomes of little comfort to the public and is of little value in improving public sentiment with respect to crime and overall safety of self, their loved ones and property.

Instead of focusing on whether the crime rate has fallen — conditional on the truth value of the assumption of comfort ceiling — the relevant concern now takes a slightly different form. The question now is whether total crime has fallen low enough?

Taking the continuing public dissatisfaction within this new context, then the answer seems to be no. It appears that there is still some way to go before the public is satisfied with the level of crime within our society.

So, the alternative way to convince that public with issues regarding general crime is to identify the ceiling, compare the total crime to the ceiling and work towards pushing total crime below that.

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 August 3 2012.

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Economics Personal Politics & government

[2572] The bitterness of a financial conservative

I handle my finances conservatively. I spend very little for someone my age and my profile. In fact, I impose a sort of limit on my spending. I am conscious of it and get mildly nervous if my total spending grows too fast even when I can more than afford it.

I probably do buy too much insurance and I do save or invest a large part of my earnings. My credit card service provider probably hates me for having to finance me without getting the chance to charge me interest too often too much.

I can afford to save a lot partly because I do not have too many financial responsibilities.

The other factor behind my saving habit has a lot to do with my upbringing and education.

As a very young school kid, I never really needed to spend too much. Canteen food was clearly subsidized. I rarely asked my parents for expensive items.

The more important thing was that my parents did not give me a generous allowance when I was in primary school. My pocket money was very little. Not that I needed too much anyway but at that age, the limited pocket money effectively curbed any spending impulse I might have then. I was always mindful of my limits. It trained me to be financially prudent.

The same was true as I attended a boarding school in Kuala Kangsar; I rarely had expensive lunches or dinners. Meals were again subsidized and there was rarely a need to spend lavishly in a small rural royal town in Perak. While my allowance did increase, it was definitely less than that of my more well-off peers. I lived spartanly then. This continued during my undergraduate years in America. Formal lessons in economics further solidified my attitude towards personal finance.

During my time living abroad, I did learn to enjoy the finer things in life, but I rarely, if ever, overspent. I rarely overspend still.

So, I can say with certainty that I live by the morality of a financial conservative very strictly.

I think I can say without too much pretension that I am an economist. I understand the various reasons for fiscal deficits. Some of the causes for deficit are justifiable, and some are not. I do understand how the government is not a household in a way that the government can do certain things beyond typical household economics, the point which many defenders of the roles of government in society rush to in deflecting criticism against many facets of government spending. After six years of education in economics, I do not think I need too much schooling in that matter excessively.

Rather, put the economics aside and understand the psychology instead. Understand the worldview of a financially conservative taxpayer.

The state of federal government finance does not impress a person like me. Deep inside, I do feel something along the lines of ”if I can do it, why can’t Putrajaya?” It is a dismissive attitude towards the federal government. It is a damning judgment against a failure to adhere to certain brands of secular morality.

It is a kind of sentiment that is almost always in the background. It is the ever-present demand for financial discipline. Putrajaya violates this conservative morality so blatantly. Each violation accumulates further moral condemnation.

What further justifies the dismissive attitude is the inevitability that the indiscipline — add in the irresponsible economic populism that has happened throughout the year and earlier — will one day, one way or another, result in higher tax on the conservative, and everybody else, sooner or later. Whether I like it or not, I, will have to finance the fiscal indiscipline of Putrajaya.

That fuels my bitterness towards Putrajaya.

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 July 26 2012.