Tag: minarchism

Categories
Economics

[2204] Of beware the tragedy of economic populism

The story in Greece is a result of intertwining plots. One major plot concerns economic populism. It is a reminder that populist measures tend to ignore scarcity. It highlights that the policy of spend, spend and spend and then hoping someone else will take care of it, is risky.

With a brick wall up ahead, the Greek government is frantically trying to change its course. It plans to raise taxes, combat tax evasion and cut the salary as well as bonuses of its bloated civil services. Massive cuts are in order. It has to do this urgently because not only Greece is on a collision course, but also because the International Monetary Fund and European governments have told the Greek government that if the country expects others to save Greece, Greece has to be serious about saving itself.

The policy as demanded by the IMF and EU is harsh, but Greece would not have reached this juncture if it had not spent to please Greek voters with impunity. At so many points, there were so many opportunities for the Greek government to stop indulging in immediate gratification. There were so many chances to cease appealing to crass populism.

But no. They wanted to keep the voters happy. Political expediency was more important than responsible fiscal policy. To finance its spending, Greece even misreported its statistics. Oh, what was that about government as the guarantor of transparency in the markets?

It is all too late now. Only hard choices are on the table. The party is no more.

Greece is in so great a wreck that the possibility of bankruptcy is very real. Funny that even in times of great distress, certain fractions within the Greek society are protesting against plans to address structural fiscal deficit suffered by the Greek government. Shockingly, they want the clearly unsustainable status quo to remain.

The Greek Communist Party for instance staged a protest against the austere fiscal policy, which the IMF and the EU demand in exchange for bailing Greece out. Perhaps, it is unfair to single out the Communist Party in such a manner. The outrage in Greece appears to be one shared by many outside of the Communist Party. It is popular outrage after all.

That popular outrage is a little amusing. Where was the outrage when outrageous demands were made and met? It was this populism that brought Greece to where it is today. Due to that, there is some sadistic value to the whole episode.

The Greek government has shown political will to see through reform that the country needs so far. It has no choice. A capitulation to populism at this point will prove to be more costly than the cost austere fiscal measures. The fact that a left-leaning government — typically a leading proponent of government spending — has now become the leading proponent of the austere measures is telling. They finally realize that their freewheeling spending programs invite disasters. It invited disasters.

Greece is so far away from Malaysia but the story of populism is relevant. Perhaps, a comparison between Greece and Malaysia is an overkill, especially as the memory of the Asian Financial Crisis — which is more or less thirteen years old — fades. Yet, the pressure of populism is present in Malaysia. It is not hard to name these populist pressures.

Expansion of the civil service, demand for special treatments, pork-barreling during election times, opposition to subsidy removal, opposition to introduction of goods and services tax to replace existing sales and services tax, call to nationalize highways and effort to provide water free of charge are among many examples that will surely increase government expenditure without raising the necessary revenue to fund it.

In fact, at least three of the pressures that exist in Malaysia contributed to the Greek fiscal mess.

We are not done with 2010 yet but at the rate Malaysia is going, 2011 is likely to be the 14th consecutive year that the government is running a fiscal deficit. Clearly, Malaysia is suffering from a structural deficit. Needless to say, cyclical spending, which is largely unavoidable, exacerbates the situation.

The size of government in Malaysia is wildly big. Its scope is maddeningly wide. Its cost is incredibly huge. Malaysia needs to address this. This is why the story of Greece is a compulsory reading for all public office holders. Beware: populist measures will not address this concern, even up to the very end.

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 May 11 2010.

n/b — there are multiple grammatical problems at the TMI article. That is entirely my bad. I was rushing the article through. I know, I look stupid now.

Categories
Economics

[2184] Of initial reaction to the New Economic Model

With over 200 pages, it will take some time to digest the so-called New Economic Model fully. I began by reading the speech delivered by the Prime Minister earlier today and I am only beginning to read the document proper just now. Given time constraint, I doubt I will able to able to go through the points presented comprehensively. At first past though, the NEM seems to suggest something favorable to me.

It appears to suggest the retreat of the state from the marketplace. The stress on frictions in the market due to subsidies and trade restrictions, the need of liberalization and reduction of government holding in some government linked enterprises are proofs for this. The term market is prominently used throughout the document.

There is more nuance than a simple retreat however. The speech itself suggests that entities like Khazanah and EPF will be allowed to invest abroad as part of effort to not crowd out the private sector.

That is good but it does not erase the fact that these entities still exist.

Affirmative action itself is still in force although the PM suggests that it will be reformed from race-based to need-based. Somewhere in the speech, the term market-friendly affirmative action appeared. I am not quite bought by that term. I rather hear the abolition of affirmative action but I am willing to give ground that need-based is far better than race based affirmative action.

The existence of national key performance indicators itself suggests a huge bureaucracy. It has been taunted as part of government transformation but I am not at all impressed with the idea of enlarged bureaucracy. Nevertheless, I am willing to give the administration a benefit of a doubt on this front.

Never mind the administration seeks to strengthen the public sector. How that strengthening will affect the size of the bureaucracy is something I hope to find out while reading the report.

Categories
Economics

[2170] Mengenai apabila kerajaan mencipta masalah, salahkan pasaran bebas

Bekas Presiden Bursa Saham Kuala Lumpur Salleh Majid menulis tentang dialog yang beliau hadiri di dalam Utusan Malaysia hari ini.[1] Beliau menyenaraikan pelbagai masalah yang dihadapi Malaysia, masalah yang diakui kewujudannya oleh kerajaan Barisan Nasional hanya selepas Pilihanraya Umum 2008. Masalah-masalah ini kemudiannya dijadikan sebagai alasan untuk mengaminkan campur tangan kerajaan di dalam ekonomi negara serta polisi Barisan Nasional. Walaupun masalah-masalah ini wujud, ia tidak boleh dijadikan alasan untuk campur tangan yang lebih hebat kerana kerajaanlah yang menjadi sumber kepada kebanyakan masalah-masalah ini.

Sistem pendidikan yang lemah disebut sebagai satu punca kepada struktur ekonomi negara yang tidak menyakinkan. Siapakah yang mempermainkan sistem pendidikan kita? Siapakah yang mengikat kaki dan tangan pelajar serta tenaga pengajar? Siapakah yang memperbodohkan beberapa generasi rakyat Malaysia demi kepentingan politik? Kerajaan.

Karenah birokrasi kerajaan adalah satu lagi faktor yang diketengahkan. Adakah birokrasi tersebut disebabkan oleh pasaran bebas?

Kemudian disebutnya masalah korupsi dan rasuah. Ini adalah perkara yang kelakar. Siapakah penyebab utama perkara tersebut berleluasa? Pasaran bebas? Bukankah bahagian eksekutif kerajaan yang dikuasai oleh Barisan sekian lama yang telah meluaskan kuasa mereka sehingga sistem timbal balik hilang reputasinya? Bukankah kerajaan persekutuan dan negeri Barisan Nasional yang sewenang-wenangnya menggunakan duit rakyat untuk kepentingan parti? Bukankah punca korupsi itu adalah kerajaan?

Kewujudan kartel dan monopoli adalah masalah yang besar. Tetapi, siapakah yang menggalakkan pembentukan monopoli ini? Siapakah yang menggalakkan industrialisasi secara penggantian import di Malaysia? Siapakah yang menyekat pemberian lesen? Kerajaan! Kerajaan! Kerajaan!

Beliau akhir sekali menyebut beberapa negara yang mengalami masalah ekonomi yang kononnya disebabkan oleh sikap free for all. Beliau menyebut tentang Sepanyol, Portugal, Itali dan Greece. Tetapi, bukankah masalah negara-negara ini adalah saiz defisit fiskal yang besar yang disebabkan oleh perbelanjaan kerajaan yang tidak terkawal? Adakah kemampuan kerajaan-kerajaan ini untuk mengawal keadaan fiskal mereka disebabkan pasaran bebas? Mereka yang memperjuangkan pasaran bebas kebanyakan mahu saiz kerajaan dikurangkan. Penyokong pasaran bebas mahukan perbelanjaan kerajaan dikurangkan lalu mengatasi masalah defisit.

Jadi, mengapa salahkan pasaran bebas apabila kerajaan yang menyebabkan semua ini?

Ini penipuan yang tidak boleh dibiarkan.

Yang lebih mengarut lagi, masalah-masalah ini ditulisnya akan menjadi lebih teruk jika pasaran bebas dilaksanakan. Kerajaanlah penyebabnya, tetapi beliau tidak mengakui akan kebenaran ini. Malah, menurut beliau, kerajaan perlu campur tangan untuk mengatasi masalah ini.

Ini adalah satu pegangan yang mungkin lucu, jika ia tidak pernah memusnahkan negara ini.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — BEBERAPA kumpulan pertubuhan bukan kerajaan (NG0), usahawan Bumiputera Semenanjung, Sabah dan Sarawak telah berpeluang memberikan pandangan mereka tentang Model Ekonomi Baru(MEB) kepada Pengerusi Majlis Tindakan Ekonomi Negara, Tan Sri Amirsham Aziz pada hari Khamis 25 Februari yang lalu. [Dialog dengan Majlis Tindakan Ekonomi Negara. Salleh Majid. Utusan Malaysia. Mac 1 2010]

Categories
Liberty Society

[2144] Of libertarian position on the Allah controversy

I have nothing clever to say with respect to the controversy involving the usage of the term Allah by Christians in Malaysia (specifically, Catholic Christians I suppose) and objection raised by considerable number of Muslims there.[1] What I have to say is just some plain old consequences arising from my libertarian position. I think I have somewhat clarified my position while trying to explain, what I think is why some more conservative Muslims in Malaysia object to the use of the term Allah by Christians in Malaysia.

In any case, I am going to explain my position.

From the principle of freedom, specifically religious freedom and more broadly, freedom of expression, there is no reason for me to be alarmed by the recent court decision to allow Christians to use the term Allah to refer to their god in Malaysia. For any group to claim exclusive right over an idea that cannot be, in a sense, privatized or perhaps — however ridiculous this may sound — trademarked, is problematic. I cannot quite find the right words to describe it but clearly, no individual liberty has been transgressed by this action taken by Christians. Meanwhile, to prevent Christians from doing so will violate their liberty, and therefore should be untenable for libertarians.

Furthermore, based on the concept of secularism, which I consider as an essential aspect of the libertarian concept of the state, the state should have no role in this at all. So, to me, the court decision is only right. If the court had ruled otherwise, it would call for government intervention in form of religious control in the society.

Not only that, that government intervention will expand the frontier of the state into private life of a person. Just imagine the kind of mechanism required to enforce a ruling that insists the term Allah belongs exclusively to Muslims and no one else in Malaysia. Well, actually, you do not have to imagine it. It is already in place.

Lastly, this conflict paints both Christianity and Islam in Malaysia in a bad light: those Christians who insist in using the term Allah when there are other alternatives and conservative Muslims for their schizophrenic attitude. It is true that the Christian insistence does not violate liberty but hey, a lot of things a lot of people say and do do not violate liberty either. Whether all those things are the smart things to do or say is another matter altogether, even within libertarian constraint.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — Dec. 31 (Bloomberg) — Malaysia’s High Court ruled that a government ban on non-Muslim publications using the word ”Allah” is unconstitutional, settling a dispute that stoked questions about religious freedom in the country.

The Herald, a weekly publication of the Catholic Church of Malaysia, filed for a judicial review after it was temporarily ordered to stop publishing for two weeks in December 2007 after using the word, which means ”God,” in its Malay-language section. [Malaysia Court Rules Catholic Paper Can Print ”˜Allah’. Manirajan Ramasamy. Ranjeetha Pakiam. Bloomberg. December 31 2009]

Categories
Economics

[2135] Of GLCs are not quite part of the private sector

Second Finance Minister Ahmad Husni Hanadzlah recently made a speech that received a lot of attention. Early in it, he shared that the government is looking to increase the private sector’s contribution to the domestic economy. This particular point would have been exciting if it was not for three reasons. One, he is not the first person to say this. Two, the last time somebody important in the government expounded the idea, the size of government expanded considerably instead. Three, as the minister said, the government means to see this through via government-linked companies. The third point is noteworthy because government-linked companies hardly qualify as part of the private sector.

It is instructive how the definition of a word or a phrase changes over time. Invasion is termed as liberation. Loss of innocent human lives resulting from military action sanctioned by the state is called collateral damage. George Orwell probably drives home the point best with the statement ”war is peace, freedom is slavery and ignorance is strength.”

The term private sector is supposed to describe the sector within the economy that is not owned by the state, where private individuals make private choices with private resources for private gains or losses. Any enterprise owned by the government, and therefore largely utilizes public resources, is part of the public sector. While the break may not be clean because the link between the two sectors in some cases is inevitable, their difference in Malaysia now is far too blurry for it to be meaningful within the context of the speech. The cause of that is years of government intervention in the market.

These interventions come in many ways. Bailouts of failed enterprises by the government are one way where excessive presence of the state in the market can be introduced. Another is through the government’s expressed intention of participating in business that is mostly due to political and not business considerations.

During the Abdullah administration, multiple fully-owned government-linked companies were established as part of the government’s focus on the agricultural sector, as well as its love affair with centrally planned economic corridors. During the Mahathir administration, the focus on manufacturing brought upon the birth of — for example — the state-owned Proton. How the protection of Proton has prevented Malaysia from becoming a regional automotive hub driven by foreign but essentially private sector is well known and needs no further elaboration.

Even when import substitution policy was all the rage in the early history of Malaysia, the government helped create what eventually became favored oligopolies in multiple sectors. These oligopolies continue to exist until today. The creation of a monopoly is not exactly a healthy way to enhance the private sector’s contribution to the economy because most monopolies have the incentive to maintain the status quo. They do this by discouraging adoption of new technology that is crucial to improving productivity and ultimately challenging their dominance to the benefit of society at large. Without improved productivity, it is hard to see how the private sector could increase its contribution to the economy.

Due to those interventions, the understanding of the term private sector has gradually but surely shifted to assume its opposing definition. Observe how strongly linked the domestic economy, specifically the supposedly private sector, is to Khazanah Nasional Berhad, Perbadanan Nasional Berhad and even the Employees Provident Fund, among others. Entities linked to them are countless: UEM, CIMB, Maybank and Sime Darby. Many of supposedly privatized companies are not quite part of the private sector as well.

To label entities strongly linked to these organizations as part of the private sector is tenuous because, like it or not, the government has a strong say in the management of those entities. With that, the government essentially controls the direction of these companies. Given the vast resources available to the government despite its massive fiscal deficit, the government unfairly competes with the true private sector. This unfair competition itself discourages the creation of new entrepreneurs for the inculcation of competitive market, to limit space for the true private sector.

Considering all that, how exactly does the government plan to increase the true private sector’s contribution to the domestic economy through government-linked companies will be interesting.

Does the government intend to instruct its government-linked companies to increase activities in the market and then label such contributions to the economy as privately-driven?

Or does the government plan to increase activities of government-linked companies to increase opportunities for entities from the true private sector? This creates only a culture of dependency. In times when the government seems intent to reduce dependency on the state, this contradicts the effort.

The best way to increase the true private sector’s contribution is to embrace the original meaning of the term. To do that, the government or really, the state, needs to reduce its participation in the market. Bad regulations protecting monopolies and state-owned entities meanwhile require dismantling in order to give true private sector space to expand in a largely distortion-free environment.

The first step to take is for the government of the day to stop overestimating its capability in managing the economy. Humbleness is the key in getting the private sector to improve its contribution to the local economy, especially in a sustainable manner. Rather than trying to expand the role of government-linked companies, the government should focus on building credible institutions capable of accommodating expansion of private sector.

In other words, the government must refocus on its original purpose. That original purpose of a government, without being ideological about it, is governing, not doing business.

Let the true private sector do its work properly without excessive government interference either directly from the government itself, or via government-linked companies.

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 December 17 2009.