Yeeaap. The football season is just around the corner.
Borrowers obviously will celebrate if they see a reduction in their repayment obligation. When the National Higher Education Fund Corporation (PTPTN) reduces its service charge or really, interest rate, from 3% to 1%, already I read borrowers singing high praises to the body. The reduction of rate also turns the financing facility into a subsidy, small as it may be.
Even with the traditional inflation rate between 3% and 4% that Malaysia had enjoyed earlier, 1% interest rate has the PTPTN suffering negative returns. The borrowers meanwhile get to pay less in real terms. Accommodating inter-temporal consideration which is typical in calculation present values, clearly the borrowers are being subsidized.
Now, while I am vehemently anti-subsidy as I have consistently demonstrated in past postings, my opposition towards subsidy is based desire to eliminate certain kind of negative externality as well as a desire for freer market. When it comes to positive externality however, I can be quite supportive. The public benefit derived from well-educated citizens are far higher than any private benefit enjoyed by individual borrowers, assuming all else is constant.
Indeed, subsidization of education creates positive externality. As a result, I am willing to have a subsidy supporting students. This willingness of course has it own qualifications but I shall leave that topic for another day.
One potential issue with the lowering of the interest rate is the disincentive to pay the installments on time. Compared to previously, the penalty of not paying any installment is smaller now. This may encourage borrowers to delay their payments, preferring to incur minor penalty to manage their own cash flow. As a result, PTPTN may have trouble managing its cash flow.
Finally, the across the board cut seems too blunt. I prefer to turn the PTPTN into a convertible loan, rewarding the best students with subsidy, or if you like, scholarship. For those whom are less successful, let them take the full brunt. Under this scenario, I think we would introduce a strong incentive for students to succeed.
Categories
[1746] Of Hadi for PM?
Joke of the day:
Dewan Ulama head Datuk Mohamed Daud wants party president Datuk Seri Abdul Hadi Awang to become the Prime Minister if Pakatan succeeds in forming the new Federal Government on Sept 16. [Ban gaming and drinking joints: PAS Dewan Ulama. Sylvia Looi, Clara Chooi. The Star. August 14 2008]
Assuming that The Star reported this accurately, I think PAS are going over their heads. Maybe, they have been drinking a tad too much?
PAS are definitely still grappling with the fact that they are now the most junior member of the Pakatan Rakyat.
But if PAS are serious, to signal my disapproval of the proposal, I would rather have Abdullah as PM. Heck, I would rather be in Avril Lavigne’s concert!
Ethnic integration does not top my list as an issue we as a society face. I used to be bothered a lot by it but I have long learned to accept the wisdom that birds of the same feather tend to flock together.
More importantly, I have accepted that organic integration is a painfully slow process. This effectively means the idea of Bangsa Malaysia for me remains a dream in the near future. Nevertheless, if indeed ethnic integration is a goal, then I think the special rights enjoyed by the Malays as well as the vernacular schools would have to go.
The idea of Bangsa Malaysia has never been satisfactorily and properly defined. What exists are competing definitions. For me personally, I take Bangsa Malaysia — or the Malaysian nation and not the Malaysian race — as simply the concept of rights egalitarianism embedded in the idea of Malaysian citizenship. That means the state does not discriminate its own citizens on anything except, mostly, merits.
I do not have to demonstrate about how large a role race and religion play in our society and I think a lot of us realize how central race and religion are to our society, for better or for worse. While I have resigned to the fact that it takes years to restructure our society organically, I still despise how race and religion are exceptionally central to our society and how both factors have been manipulated to the effect that they erode liberty.
As a result, a tiny insignificant part of me wants to throw liberty out of the equation and use coercion to encourage integration, to do away with factors which encourage ethnic division in this country. Part of me wants to hasten the integration process, preferring an inorganic method over organic.
But I am a libertarian and I am proud of it. I plan to neither resort nor consent to forced integration or assimilation. For others without libertarian tendencies and who are fiercely working for a more integrated society, coercion through the elimination of public funded vernacular schools and streamlining the education system with just one national school stream may indeed be a tool of great use.
Embracing the concept of rights egalitarian would be the first step in encouraging ethnic integration. Any policy which discriminates people based on creed and skin color only fuels anger of the discriminated against the favored. As long as the hatred is there, ethnic integration will be a pie in the sky.
Equality has the greatest potential in dousing the fire of communal hatred. Within the Malaysian context, this calls for the dismantling of various policies which discriminate our own citizens. It goes as far as requiring the Constitution to be amended to conform to the spirit of rights egalitarianism, where all are truly equal before the law which is ever conscious of individual liberty.
The dismantling of discriminatory policies, however, will not be popular with the majority power, which is Malay. In as much as the Malay community is not monolithic in its political outlook, considerable members of the Malay community do hold dearly to policies which grant them special privileges. The continuous support which UMNO receives from a majority of Malays proves that.
Due to that, removal of policies derived from the New Economic Policy will be highly unpopular. As a direct result, the political support for a rights egalitarian society may not be there. If equality of rights is a goal to be achieved, it is the Malays that the advocates of egalitarianism need to convince, especially in the illiberal democracy that we live in.
The first step in convincing the majority is an exposition of the weaknesses of the current race-based affirmative action policies and juxtaposing it with a better merit-based alternative. The majority has to be persuaded that if the majority of Malays are really poorer than the average Malaysian, a merit-based affirmative action would aid them anyway. Therefore, there is no reason for those who truly require aid to worry about the switch from a race-conscious to race-blind and merit-based policy.
I have come to believe that this is the strongest point that exists against the status quo. It is so because it appeals to the concepts of justice and fairness apart from being an economically superior policy compared to race-conscious affirmative action.
Theoretically, it is impeccable and I have seen it work in practice, especially during the election. This very line has been used from time to time. With patience and good orators at hand, many Malays who are genuinely concerned with the welfare of impoverished Malays are convinced by this point.
That notwithstanding, I personally do not subscribe to any kind of state-based affirmative action. A merit-based policy nevertheless is a potent tool to bring down the current policy; my support for a merit-based over race-based policy only exists due to the virtue of thinking on the margin.
But why should only the Malays sacrifice their position?
I am convinced that rights egalitarianism is one of few ideas that is capable of bringing this country forward. It is one of those abstract developments that this country needs more than physical developments. Our current societal structure is not conducive to attracting talents and egalitarianism — as well as liberty — is one of our best bets to catalyze our economy forward, which at this point, is stagnating.
So, I tend to think that this is not a zero-sum game. Rights egalitarianism has the prospect of increasing the economic pie but while the point is taken but a lot of Malays seem unconvinced about why they should give up their privileges.
It is possible that this is a matter of time horizon. While it is beneficial in the long run to have an egalitarian society for everybody, in the short run, the Malays really do not have the incentive to give up their privileges. This is even more so when there is a heavy discount on future gains.
This sounds like a bias called loss aversion. To explain the phenomenon slightly deeper, loss aversion describes a situation when a person considers a loss as unacceptable even when there is an eventual net gain.
This bias later transforms the original question into “Why should the Malays sacrifice their position while the rest have everything to gain?”
Failure to answer this question may cause the Malays to question the sincerity of others in building a less ethnic-conscious society. I think I can safely say that the conservative Malays see vernacular schools as the special privileges of others as how others see affirmative action enjoyed by the Malays as special privileges.
I have been thinking and I do not pretend I have given it very deep thought but my initial feeling is that the abolition of vernacular schools funded by public money could be the answer to that question.
This absolutely makes sense if we return to the original intention of ethnic integration. This is also important to demonstrate to the conservative Malays that there is sincerity in building unity among various communities. There are Malays whom distrust calls for equality because of the question. A sacrifice by the other sides do a lot in proving the sincerity in building an egalitarian society and thus renders the question irrelevant.
One cannot expect to have an integrated society when children are not given the opportunity to mingle with their peers of different backgrounds. Vernacular schools, be they Chinese, Indian or even schools like the Malay College, work like silos, isolating children in the same community from one another. It is the silo nature of vernacular schools that is detrimental to the idea of ethnic integration.
Surely separation from the very beginning does little in bridging the gap that already exists between cultures. If bridging the gap is truly the goal, then the silos have to be removed and replaced with the grand mixer that is the national school. Concerns about languages and religions, which are the typical criticism directed at the idea of national schools, could be addressed by making language classes available and making the national school neutral of religious influence.
All in all, in the abolition of both Malay privileges and vernacular schools, there would be a quid pro quo arrangement, solving the question of “why should the Malays sacrifice their position while the rest have everything to gain?” It gives the appearance that both are sacrificing something in the name of unity.
On a final note, I want to reiterate that I do not consider ethnic integration a burning question. With regards to school systems, I prefer the concept of charter schools to typical public-funded ones, which schools are given the liberty to do whatever they like as long as they deliver results. With a charter school system in place, it would be likely that the abolition of vernacular schools would lead to merely a change in label, which would render abolition meaningless.
Abolition furthermore seems to be an act to force individuals into a system with the system trying to mold an individual with a template. That disturbs me.
Thus, my agnosticism to abolition. And since I am agnostic to the idea of ethnic integration anyway, preferring to take the time to organically integrate our society instead, I really could not care less for abolition.
For those dreaming of a rights egalitarian society, however, the proposed quid pro quo arrangement is something for all egalitarians to consider. If the arrangement is rejected, the egalitarians would still have to answer the question why should the Malays sacrifice their position while the rest have everything to gain.
Unless that question is satisfactorily answered, I do not think we can see the rise of a rights egalitarian society anytime soon.
A version of this article was first published in The Malaysian Insider.
I felt the original version does not have a smooth logical transition. This is most likely due to me rushing the article through. Regardless, I have added a sentence or two in this version. In the TMI version, there are no sentences on sincerity.
Before we get the party going in celebration of falling crude oil prices, beware. This decrease could well be just a pause before prices march to yet another record.
I am suspecting so not because I subscribe to Malthusian logic. Malthusians all over fail to notice that humanity has an amazing capability to adapt. As prices of typical energy rise to a sufficient level, the search and utilization of substitute sources will take place. As a result, the demand for expensive source of energy will fall, bringing along its prices down.
The prices will stay down, given all else being equal, if technological, or rather increase in efficiency in consumption of the energy occurred. Improved efficiency produces a situation where fewer fuel is required for the same amount of production.
I suspect that it is possible that we may be seeing merely a dip in prices of crude oil because I am unconvinced at how the recent fall in prices is caused by structural changes.
On the surface, three factors seem to be causing crude oil prices to fall. They are contracting demand curve probably due to high crude oil prices, appreciating greenback and the slowing down of several world’s major economies. All factors are possibly cyclical and none is structural. When I refer to cyclical changes, I refer to changes in volume and when I refer to structural changes, I refer to changes in efficiency.
The relationship between crude oil price and the health of the global economy is easy to pinpoint. A slowdown causes demand for crude oil to decrease. While the relationship may well be the reverse, the point is that it is a matter of typical business cycle and has nothing to do with improvement of technology.
The strengthening of the US dollar also has little to do with improvement in technology. To understand how stronger dollar leads to cheaper crude oil, it is important to understand the mechanics that works between trade and exchange rate. Weaker dollar causes cheap export and cheap export causes foreigners purchasing more US product. With weak dollar, the strength of the USD has to return as improvement in net export accumulates capital. If theory does not convince you, then let the number must do the job: the US trade deficit already dropped for the month of June.[1] With stronger dollar and with crude oil priced in riyal or some other currencies, fewer dollars is required to buy the same volume of oil.
Now, the third factor — contracting demand curve — may come closest to encouraging structural changes. The problem is however, I am not convinced that there is a actual improvement in technology. What I see is people using smaller instead of larger vehicles, public transportation, etc. But that is merely temporary lower consumption because once prices become sufficiently low, consumers would abandon small cars and public transportation and anything that only reduce volume of crude oil consumed rather than substituting it.
While there is indeed greater usage of electricity, natural gas and biofuel to replace crude oil, I am unsure how widespread it has been. Besides, the fall in crude oil prices have been too drastic in such a short time that I have trouble accepting the fall is caused by technology.
Why after all the adoption, the decreases in crude oil prices come only now and in such a dramatic pattern? Effects from structural changes should come gradually due to various lags that exist in the real world, not abruptly.
This has led me to speculate that the trend we are seeing is caused by merely and mostly reduction of consumption with little substitution energy consumed as replacement. It is likely that what we are seeing is merely reduction in volume rather than increase in efficiency. If my take is correct, then once prices reached a level somewhere down below, consumption would return to assume its record breaking rise performance which we saw weeks earlier as volume would go up while efficiency level would stay constant. This might be so due to little structural change in the global economy.
[1] WASHINGTON (AP) — The U.S. trade deficit unexpectedly fell in June as exports advanced to an all-time high, offsetting another big surge in oil imports.
The Commerce Department reported Tuesday the trade imbalance dropped to $56.8 billion in June, down by 4.1 percent from a revised May deficit of $59.2 billion. It was the smallest deficit in three months and much better than the $61.5 billion deficit Wall Street had been expecting.[June trade deficit shrinks as exports climb. Martin Crutsinger. Associated Press. August 12 2008]