Tag: minarchism

Categories
Economics

[2602] 2013 Malaysian federal governmet budget is smaller!

The tabling of the federal government budget is still ongoing but the Economic Report for 2013 by the Ministry of Finance is already out. Here is where the projected GDP figures and government finance are available for the first time.

I think the biggest point about this year’s budget is government spending. In most years, the fiscal deficit ratio (fiscal deficit to nominal GDP) dropped because the nominal GDP grew and not because actual deficit was down. This year, government spending is projected to come down.

Operationing expenditure is projected to fall by 0.3% and development expenditure is projected to fall by 4.2%. Overall expenditure is expected to decline by 1.1%.

The drop in operating expenditure is projected to come mostly from a drop in emolument (the civil service, really) and subsidies. For most people, this suggests that there will be a large subsidy cut in 2013. Pensions and gratuities are also projected to come down. This is a signal that something right is happening in the overly fat civil service. But then again, money to the civil service grew massively in 2012 that the cut in 2013 is pale.

Having a declining total government spending is rare. Between 1975 and 2012, there were only four times when total government spending decreased: 1983, 1985, 1987 and 2010.

Being a libertarian, I might be happy with this particular budget. But as I have been warned, I should wait until it happens.

This also means one thing. With the projected drop in government spending, politically, election must be held early in 2013 or even in 2012. It will be hard to achieve the reduction if election is held very late up to the constitutional limit. The later the election, the more electioneering will there be.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
errata — the peril of rushing. I made a number of mistakes in the earlier version of this entry, ranging from grammar to the numbers themselves. First, I had asserted that if the government stuck with the budget, it would have been the first time in ages that total government spending would decrese. While such year is rare, the last time that happened was in 2010. Second, I incorrectly calculated the overall expenditure growth rate.  I apologize for that and I have corrected those mistakes. 

Categories
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]

Categories
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.

Categories
Economics

[2562] A time for fiscal expansion at no cost, a challenge to minarchism

This economic crisis is a challenge to advocates of small government, especially for those who establish their argument based on finance. Even those who ground their position on something more profound like libertarians are being challenged simply out of the practicality of the situation.

The situation is that the cost of borrowing for several governments with debt considered as flight-to-safety grade like the US Treasuries and the German Bunds are very low now. For some, it is more or less zero.

Risk-averse investors really have nowhere to go and the supply for such fixed-income assets is limited. Demand for such assets will continue to outstrip supply in this situation of widespread economic crisis and yields will likely continue to suffer from downward pressure as individuals, firms, central banks and foreign governments bid the prices of these bonds up.

Cases of negative yields in real terms are aplenty. More profoundly, there have been cases of negative yields even in nominal terms. The Danish and the Swiss bonds are two examples where purchasers pay the government to borrow money from the purchasers. This does not happen too often. The market is saying, just take my money and keep it safe; we will pay you to do that.

In such cases, it is probably optimal for governments to borrow so much money and it does not matter if they actually do not need the money. Just borrow and store it somewhere. And if the relevant government has plan that has been delayed due to funding requirement, then this is the time to do it. With zero yields, financing is free. With negative yields, governments get paid to finance the project.

So, the relevant countries, this trend can be used to massively boost government spending and indeed, this can be a Keynesian case for fiscal expansion. There is no cost to it, at least, in the near future. This suspends the crowding out effect that is embedded in mainstream macroeconomic theories.

With the current situation, advocates of small government have to rely on long-run structural argument. The unfortunate thing with long-run argument is that it is describing a situation so far into the future, that it is hard to capture the imagination of enough persons. To most people, what is real is what they see.

And yields on various governments are zero. And judging from the look of it, increased government spending is unlikely to push yields up by a significant margin.

Categories
Politics & government

[2463] We don’t need a big government voting bloc

In our modern Malaysia, one can hope that government policy comes about through the general will of the people peacefully through democratic means. One can further hope that this mean not merely crass majoritarianism but that which is respectful of individual rights. After all, the government and the state derive its legitimacy from the people, the citizens — an idea that is clichéd but time-tested and the prevailing idea of government in our time. It took us humanity hundreds if not thousands of years to finally subscribe to it either willingly or grudgingly.

The ideal democratic government and state translate the general will into policy and ideally, they must always accede to the general will.

What is ideal is not necessarily true on the ground however. How many self-proclaimed democratic states have turned against its citizens?

History has witnessed many of those examples, which should be enough to convince the democrats among us of the need to establish some mechanism to limit the opportunity for government to shirk from their responsibility to the people and more importantly, to prevent it from developing means to promote its own separate interest at the expense of citizens.

Since we really live in a largely majoritarian reality, herein lies the importance of a small government.

To understand the need to control the size of government, it is crucial to note that government employees themselves are voters and all voters are self-interested. They will vote for those who will promote their welfare and interest more often than not. They are exemptions, of course, but the assumption of self-interest remains the most robust assumption of human behavior. It expects the least and thus less susceptible to disappointment, unlike other more benevolent but naïve assumptions that exist on the economic left that have failed more frequently than the financial markets have crashed.

A large government employing a large fraction of citizenry will invest this group of voters with excessive political power. The larger the government, the more votes will go toward enhancing the welfare of its employees.

This creates a conflict of interest where the employees of the government can promote their interest collectively instead that of the wider voting population. With a power voting bloc, the institution that is supposed to execute the general will of the people takes a life of its own. How many times have large rewards been to government servants just before the election in Malaysia?

Essentially, that large voting bloc enables government servants to raise their own wages and grant themselves other benefits, a conflict of interest so brilliantly portrayed in an episode of the BBC’sYes Minister.

That conflict of interest is even more worrying when the taxpayers are mostly those who are employed in the private sector. What pain do the benefactors of the voting bloc suffers when someone else is financing the punch party?

With a majoritarian reality and an influential voting bloc, officeholders and the aspirants will not dare promote a responsible public finance. So not only it exacerbates the status quo, it reduces the likelihood of putting the party to a stop before it is too late to switch the tracks.

At the very extreme, such bloc makes the liberal rationale for the state irrelevant. The state now becomes overly sensitive to government servants, and less so to the citizens at large.

The 19th century American author Edward Bellamy somewhat circumvented the problem by making everybody the employees of the state. He detailed his views in his work of fiction, Looking Backward.

Ingenious, except he dreamed of a very different society. He dreamed of a utopian communist society where all wants and desires are fulfilled, and men and women work not for monetary reward but merely for recognition that scout boys proudly wear. Men and women of Looking Backward believe the government does everything for the benefits of the masses, ever so efficiently.

Where Bellamy spotted a utopia, Orwell saw a dystopia.

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 Sun on November 25 2011.