Category: Politics & government

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Personal Politics & government Society

[2956] Why does sending Najib to prison feel so empty so soon?

As an 18-year-old a lifetime ago, I thought Sijil Pelajaran Malaysia was the end of it. The ending. Not quite death of course, but the emphasis placed on the national examination was so great that it felt like a be-all and end-all. A terminal. Yes, there was life afterward, but that exam determined everything. Do well, and you would get to go to a good school (if you are really lucky, then you would get to go to a really great school across oceans) with some kind of scholarship. Do badly, you would be destined to mediocrity.

I did well, but I quickly learned SPM was not the last station. I went to a good school with scholarship and all, but it was not smooth sailing. University life was hard, even as I was privileged to have experienced it. I learned I was wrong, and I learned something new: life is a series of challenges. A celebration might be appropriate for surmounting each challenge, but there will always be another barrier, sooner or later.

I learned it the physical way when I unwisely went on a major hiking trip to Yosemite during my junior year. Ill-prepared, I came down the Tuolumne Canyon, all the way down to the river at the bottom to soak my feet in cool flowing mountain water. It was a long canyon 20, 30, 40 miles in length, with rugged terrain, high cliff on both sides, and the Milky Way bright up in the sky. No artificial light, no vehicle, no phone reception. The destination was upriver. Each climb to a local peak only revealed a steeper trail beyond. It was a cascade of falls that seemed to never end. If ever I entertained of idea of suicide seriously, it was there. I wanted to give up and jump down. The fatigue was too much. It felt hopeless. But somehow, I made it, with assistance of two strangers near the very top. After a hearty meal, I zoomed to Los Angeles and returned to Ann Arbor to spend my summer more banally by waking up late and play computer games all the time, inter-spaced with anime-watching and soccer games, while waiting download of large files to complete.

The jailing of Najib Razak feels a little bit like SPM, or one of those falls in that Tuolumne cascade. It was a journey of roughly 10 years, which, a huge chunk of it spent in despair and hopelessness. My little part in the whole saga seemed meaningless. The 2018 election came, and there was euphoria, but hopes were dashed soon enough. It was a miracle Najib was found guilty four years later, and his appeal dismissed. And let us not kid ourselves, he could have escaped his deserved fate if he had pushed the political button harder. Government fell twice, partly because of Najib, and Zahid, who were desperate to outsmart the system.

But the day after, life feels empty. There is a slight hopefulness, but that is it. I take it as a reminder that life is a series of cascades. A series of challenges.

The system works this time, but only because we worked to make it work, and then be let to work. There are too many times when the system has been made to succumb to corruption. Never forget that. Institutions are not automatic machines. It has to be manned (and womanned?) by good people. And Najib still has his avenues to escape his punishment.

And it is not just him who is corrupt. His collaborators are still out there, corrupting our society still.

The long struggle is the reason why, the victory yesterday, feels hollow so soon. There is still a long way to go, mountains to scale.

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Books, essays and others Economics Politics & government

[2955] Reviewing The Republic of Beliefs

Do laws matter? How do they matter? When do laws work? Why should a law work just because it is written on a piece of paper?

Kaushik Basu explores these questions in his 2018 book The Republic of Beliefs: A New Approach to Law and Economics. He utilizes game theory to answer the questions. Basu is an economist with wide experience in public policy.

By Hafiz Noor Shams

From the very start, he is skeptical of the power of the law as understood through Hobbesian lens. He largely rejects the idea that laws function primarily through the threat of force. In place of coercion, he places beliefs firmly at the center of the answers, with possibility of coercion working only to modify beliefs. We are governed more by beliefs, and less by coercion.

To convince his readers, he lays out the basics of game theory. Luckily for most of us, he does not write down too many formulae. In doing so, he avoids turning a good chunk of the book into a dense game theory textbook. Charts are aplenty to deliver the same messages mathematical formulae would. All I am saying here is that the book is quite readable.

The point of the crash course (or review for those familiar game theory) is to ease readers into the idea of focal points, a concept imported from psychology (was it? I am unclear here). Within the context of game theory, focal points are a subset of equilibria as understood in economics. It’s a signpost to coordinate responses. Once all prerequisites in place, Basu delivers his central thesis: laws work to push society towards a preferred equilibrium, out of many equilibria.

Laws alone do not create equilibrium. A law that forces society towards a non-equilibrium outcome will suffer from serious ineffectiveness. That ineffectiveness translates into frequent violations as rules are ignored, or circumvented via corrupt ways.

This is an important point to be learned by policymakers. I write so because I see lawmakers more often than not prefer non-equilibrium outcomes and propose complicated policy to address problems arising from such non-equilibrium. So complicated, that their proposals end up creating bigger problems (wink wink: chicken prices and palm oil subsidies in Malaysia).

Perhaps, this idea can be better explain through the problem of smuggling. Political commentators and even ministers (BN, PH, PN or whatever) have blamed the smuggling of something (cigarette, rice, gasoline, anything) on imperfect enforcement. And so, their solution is to put more money into greater enforcement. But the primary problem is not enforcement—though weak enforcement itself creates beliefs regarding (in)credibility of laws (but I will skip that part and encourage you to read the book for deeper treatment). It is about the law itself, which attempts to move society to a non-equilibrium outcome. And that non-equilibrium leads to corruption.

The prime problem, typically, lies in demand itself. Here, I believe Basu would claim, to fight smuggling, preference or behavior itself has to change. And behavior depends on beliefs.

More specific to Malaysian context, I think this is where attempt at ‘generational end-game’ for smoking will likely do more at curbing future tobacco smuggling than any ‘greater enforcement’ initiative would. There will be no cigarette to smuggle if people do not like smoking in the first place.

I think that (focal points) is the greatest insight from the book. But there are other points of interest.

One is the history of law and economics. The author goes back to Hobbes and Hume, but I am more interested in his treatment of modern history when Basu writes about neoclassical understanding of laws as provided by Gary Becker. Basu criticizes the modern economics approach towards law by stating a typical neoclassical model ignores the interest of law enforcers and other agents of the state (that include functionaries like judges and prime ministers). He zeroes in on the inconsistency of neoclassical understanding of law: citizens are assumed to be rational agents, but agents of the state taken as robots obeying everything they are told to do. In that way, neoclassical economists working on the intersection of economics and laws regularly sidestep the problem of corruption. Basu suggests, agents of the state should be considered as rational too, and their obedience should not be taken for granted. In that way, economists can tackle corruption problem more directly.

Despite his criticism of the neoclassical approach, Basu does not call for a complete culling of the school. Rather, he wants to improve those models by expanding it in a meaningful way. Indeed, the way he writes the book, it feels like a pioneering work built up on neoclassical approach.

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Books, essays and others Economics Politics & government

[2954] The frustrating read that is Notes to the Prime Minister

The ringgit has been on a depreciating trend versus the US dollar since early April 2022. While it is natural for Malaysians to focus on the ringgit, the depreciation is best explained by the strengthening of the US dollar against a slew of other currencies. Global events are triggering capital to head to the US, leaving other economies having to deal with the repercussions of such capital flight. But this fact does not stop Malaysians from calling domestic authorities to do something about the depreciation. Former Prime Minister Mahathir Mohamed recommends Malaysia pegs the ringgit as the country once did.

This is where Wong Sulong’s Notes to the Prime Minister: The Untold Story of How Malaysia Beat the Currency Speculators might be useful in providing greater details how pegging and capital control of the 1990s came about.

Unfortunately, the book does not do the job very well by digressing too much.

The book is firstly a reproduction of notes Nor Mohamed Yakcop wrote for the Mahathir at the heights of the crisis. Nor Mohamed is the architect behind the pegging and possibly the brain behind the rebuilding of Malaysia post-Asia Financial Crisis.

Secondly, it is an unexpected festschrift-like tangent in honor of the man, written by men and women (themselves had, and have, big roles in corporate Malaysia post-1998) Nor Mohamed recruited to head various government bodies and companies.

While the notes are useful and enlightening, the book is deficient in a way the notes are ill-supported by context-making commentaries. Because of the structure, the book makes a disorienting read, which leaves me dissatisfied.

When I bought the book some time back, I had expected it would discuss how Malaysia came to the decisions it made, and how the debates among those in power went. Furthermore, given the book was published more than 10 years after the crisis, possibly a critical review of the pegging and capital control.

There is no critical review. When I write critical, I do not mean criticizing the actions. Rather, I expect an examination why the policy worked for Malaysia. What we have instead is assertion that it worked and everybody else in the world was wrong.

Debates had around the various policies advocated by Nor Mohamed through notes are totally absent. A reader would need prior and outside knowledge of the economic and political environment of the 1990s to truly comprehend the reasons and tensions behind the notes. For instance, Nor Mohamed in his letters to Mahathir here and there criticized decisions taken by the Finance Ministry and the central bank, both of which were responsible to the then Finance Minister, Anwar Ibrahim. But Wong Sulong left the tensions largely out. I did not expect a full political analysis of tensions between Mahathir and Anwar, but I think it would be reasonable to expect an exploration of policy difference between the two men in response to the Asian Financial Crisis.

This makes me feel reading the book a little like reading Malaysian newspapers in the 1990s and the 2000s. Journalists during those decades (sometimes, even now) liked to write about the government’s reply to an issue, but not the issue itself. Imagine the government saying “everybody is alright” in response to a major vehicular accident, but that accident is not mentioned at all. The public of that era would have to guess what the government was referring to. Reading Notes to the Prime Minister is a little bit like that: frustrating. Annoying even.

Nor Mohamed proposed multiple policies in his notes, but readers are left to guess whether the policies were adopted. This is yet another example how the Wong leaves the notes uncontextualized.

My frustration grows further when in the chapters following the ‘notes,’ the book goes off tangent to celebrate Nor Mohamad. The man deserves to be celebrated, but the book overly does it by having various then-contemporary corporate captains (several of them are still active) recounting how they met the man and describing the man’s best traits in a festschrift style.

Nevertheless, some of the stories told help readers understand some aspects of government policy in the 2000s. I also become more appreciative how many GLC men and women were Nor Mohamed Yakcop’s men and women. When Najib was at war with Mahathir, and reopened the forex scandal of the 1980s and inevitably found Nor Mohamed as the number one scapegoat, I wonder how these men and women felt. But again, these insights come only frustratingly indirectly.

Finally, the notes themselves are fascinating. I learned one or two things that I took for granted before. I think more importantly, I am just impressed how detail-oriented Nor Mohamed Yakcop was, how knowledgeable he was, and how he was able to explain complex financial transactions in simple terms to the Prime Minister. Very clear-minded.

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Politics & government Society

[2953] In Kampung Baru issue, PH supporters need to develop greater capacity for empathy

The expected eviction of some Kampung Baru residents by a private company during the administration of a Umno-led government has more than some Pakatan Harapan supporters feeling a little bit smug. Schadenfreude is aplenty. The residents are targets of that smugness.

This is the wrong.

Nevertheless, it is easy to understand the cause of those feelings RM1,000 per square foot offer was made on a willing buyer-willing selling basis, with a cash portion, as part of a plan to redevelop Kampung Baru comprehensively. It was not a perfect plan, but it was a plan. Many residents rejected the offer and many had legitimate reasons to do so.

But many too rejected it because they bought argument brought by Umno and Barisan Nasional’s politicians. Umno, Najib Razak especially, pushed for a ridiculous rate of RM3,000 per square foot deal. Ismail Sabri Yaakob, then leader of the opposition, also had commented on the issue to encourage residents to say no.

Roughly two years after the fall of PH government, Umno is back in power with Ismail sitting in the Prime Minister’s office. And here is where the incongruity happens.

Based on news reports from The Malaysian Insight and Malaysiakini, the private company is offering those whose properties have been taken over RM400 cash per square foot as compensation. This is approximately 3 times lower than the 2021-2022 market rate of RM1,500 per square foot. In addition, each household would be given the option to purchase a newly developed property there at discounted rates.

The numbers might change, but what will not is the sense of betrayal experienced by residents, and observed by third parties. There is no RM3,000 per square foot to be seen. Worse, eviction notice has been served regardless whether a resident agrees with the takeover term.

While it is tempting for PH supporters to hold that grin, and pontificate the residents on chances lost, and the betrayal the residents suffered, that is a self-defeating position to take.

PH needs those very residents’ support to win an election. But the way things are going, those residents will not be encouraged switch their political leanings. And if they are PH supporters in the first place, then the smugness will drive them away.

One has to remember, this is Titiwangsa, a seat PH won in 2018 but lost to political betrayal. That shared experienced of becoming victims of betrayal should enhance our capacity to be sympathetic to each other. But no. We prefer to say, “we told you so” instead.

PH supporters need to develop a larger capacity for empathy. Not just with respect to the Kampung Baru eviction, but also on other national issues. Build bridges instead of widening the chasms.

Again, this is Titiwangsa, a Malay majority seat in Kuala Lumpur. The way things are set up, if you cannot win urban Malays, you likely will not return to Putrajaya. Without empathy, you can wait for 10 years, and still not win federal power.

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Economics Politics & government

[2951] Politics of prices is counter-productive

There has been a global supply constraint of various kinds for at least a year now. The supply chain disruption was expected by many—I quickly noted the post-war Malayan supply-side crisis as a parallel. Nevertheless, few people expected the constraints would be this tight for so long. I certainly did not.

The tightness has slipped over into the Malaysian consumer market. Chicken, beef, vegetables are the usual suspects.

The waitlists for cars are long due to a persistent global chip shortage: I test drove a Peugeot several weeks back and that experience to me underscores how modern ground vehicles these days are more and more an electronic device than a mechanical one. I knew vehicles had an ever increasing electronics (and electrical) components to them. Several months earlier, I read a report showing how the share of electronic cost relative to total car manufacturing cost has gone up drastically in the past 20 years, from less than 1% to maybe 40%-60%. But there is a difference between reading it, and riding the thing. The dashboard is a computer screen popping more information any older car could show. When I say dashboard, I mean a dashboard full of dynamic data, with customizable menu. The air-conditioning controls are only accessible through a separate central LCD screen, which also controls other aspects of the car. Even the brakes can be controlled by the computer, along with so many other things.

It is not just chip and electronic components are in short supply. Somebody on Twitter jokingly said “oh, this is the chip shortages they were talking about” in reference to shortages of fries at McDonald’s in Malaysia and Japan.

Consumer prices are rising, and it would have risen higher if it was not for price control mechanism and subsidies in place in Malaysia. This is readily observed from the following chart, where consumer prices are not rising as fast as producer prices. The latter is a proxy to global prices.

PPI vs CPI

Nevertheless, despite enjoying the shield, consumers have been complaining about rising living costs. They demand actions. More than a few activists and politicians have demanded the same.

All governments are sensitive to such criticisms and this government, especially as weak, incompetent and clueless as it is, is doubly so. The opposition has been relentless in their criticism. Some Pakatan Harapan supporters have highlighted how their government played a better and proactive role in addressing prices, and go on to claim a Pakatan Harapan government would have been far more effective in managing cost of living problem. And when Pakatan Harapan was in power, Barisan Nasional and Pas, on top of their usual racist rhetoric, also attacked the government for rising living costs regardless of whether prices was actually rising (prices then were actually very stable due to the imposition of an overly generous blanket fuel subsidy).

I dislike politics of prices. While it has its uses in cases when there are monopoly abuses and regulatory hurdles (the drop in broadband prices are a great exception), in the current climate prices are largely out of the government hands. The truth is, if Pakatan Harapan was in power, they too would not be able to do much about it either.

But that does not matter. Such is the politics of prices.

The problem is with the supply itself and the players of politics of prices simply ignore the cause of the problem. Some even go has far as misdiagnosing it as unhelpfully as greed.

A supply-driven crisis like this requires investment to loosen up the supply chain: expansion of ports, new technology to hasten production and delivery, new plants, more workers, etc. Yet, the aversion for price hikes have led to large government subsidies (think fuel), which takes fund away from productive investment purposes that are needed to address the supply chain disruption.

Politics of prices not only ignore the source of price pressures Malaysian consumers are experiencing. They ignore wages. Prices and wages are part of the same coin: wages are prices of labor. Notwithstanding issues relating to income distribution between employees and employers, and technology-driven price cuts among others, the politics of prices suppresses price growth, and through it, risk of suppressing wage growth.

More than once, the politics of prices have led to calls for wage cuts. The targets have been high-paying professionals and ministers (and their unqualified advisors), but too often, it has gone a little bit too far. Mahathir as the 7th Prime Minister for instance, is a fan of pay cuts and that unfortunately set the tone for the whole economy when he was in power. Coupled with his obsession with government debt (government debt and transparency were a problem), and his history with the gold dinar movement, it felt like he wanted a deflationary environment.

All that set the tone for austerity. There was really no austerity in place—government spending went up and the economy expanded—but the narrative set by the PM made it difficult to convince many out there that that was no austerity. And the economy, even as it expanded, took heed of the deflationary sentiment.