Categories
Economics Politics & government

[2469] The United States of Europe, on the way

There are several stages of economic integration.

Free trade agreement is probably the lowest of all integrations. It seeks just free flow of capital and labor across borders.

The next step is either custom or monetary union together with a common market. Member states surrender monetary policy to a central authority while maintaining independent fiscal policy. Trade duties are harmonized across the union.

The next stage is fiscal union where individual governments cede their power over fiscal policy to a central authority.

The European Union is on the verge of becoming a fiscal union, making history less than just two decades after adopting a monetary union in all of its sense. Today at an important summit, a majority of European leaders voted for stricter fiscal deficit rules. They believed the best way to solve the debt crisis is to integrate further. Integration will eliminate the crisis of confidence Europe currently suffers from, much like how a troubled California will not trouble the United States by much.

This integrationist logic is persistent among Europeans. When Europe suffered from a serious currency crisis long ago, the then European leaders thought the best way to eliminate volatility between currencies that adversely affected trade in Europe was to have a monetary union.

This is really a big jump. Usually, debates on exchange rate mechanism gyrates between floating or fixed regime. Europe chose to not only have a fixed regime, they chose a fixed regime by marriage. You cannot get a more fixed regime than a monetary union.

Now, the thinking is that the best way to address the debt crisis to have a fiscal union.

Yes, it is an exaggeration to call the recent development in Europe as outright fiscal union. But the new agreement is a big push towards that direction, towards the United States of Europe.

Categories
Politics & government

[2468] They drive, they measure, they are tempted and they can

It does not inspire confidence when the same entity that is driving a program is the one that measures the success of the program as well. There is a conflict of interest there.

Imagine a soccer team up against another team and imagine the referee is a team member of the former team. It is safe to bet that the referee will rule in favor of his or her team. Similarly, if you are running a program to lower crime rate and you are also the one measuring the success of the program, there will be temptation to report your progress in an overly generous way, especially when your progress is not too good. More than temptation, you can actually give undeserved good marks to yourself if the temptation gets the best of you. In order words, you are the prosecutor, the judge and the jury all at the same time.

I see PEMANDU’s National Key Performance Indicators through the same lens. The NKPIs basically measure some areas where PEMANDU or the government wants to see improvement in. While I do appreciate that these tools do increase transparency and makes debates on some matters more objective than it was in the past, the measurements themselves are not entirely trustworthy. PEMANDU has the incentive to look good. What guarantees the indicators reported are not tempered with?

To compound the issue, PEMANDU is not exactly an independent or even an impartial party. It answers to a minister. I suppose it helps that Idris Jala is an unelected minister with probably an entirely professional background. That is an argument of him being isolated for the myopic politics. But then again, myopia is not a trait exclusive to politics. It is well documented in businesses, and everywhere else.

And the fact is that he ultimately answers to the Prime Minister, whose career is entirely dependent on politics. The success of PEMANDU will be one of the key factors in increasing the odds of reelection of  Barisan Nasional. So, it is in the Prime Minister and Barisan Nasional’s best interest to have PEMANDU succeed, or really, appear to be successful. PEMANDU wants to look good. The Prime Minister wants to look good. The government wants to look good. Well, everybody wins by looking good.

We have not even begin to consider the KPIs under the case of various ministries, which are even more suspicious. KPIs, at least the ones I have witnessed elsewhere, are always negotiated. The negotiation ensures that the KPI is not a kind of out of this world so that it is not impossible to achieve but at the same time, not too easy to make it meaningless. Now, consider a bunch of politicians that want to get reelected. It is in their collective interest to set easy KPI that can be achieved even without a mad dog chasing them behind.

So every time when somebody comes up to me and shows me some indicators to prove that PEMANDU has been successful in some area, I quietly note the conflict of interest at the back of my mind.

Categories
Liberty Politics & government

[2467] Why the rush?

I had listened to Prime Minister Najib Razak’s Malaysia Day address with skepticism. Part of the skepticism came after noticing all the qualifications made by the prime minister in the same speech. The so-called Political Transformation Program does not look so bold if one reads the fine print.

As we have learned in recent days, the actual reform does not meet the high expectations set by the prime minister himself. The manner at which the Peaceful Assembly Bill 2011 was rushed through did little to alleviate the skepticism.

In these days of skepticism, only actions command confidence. The nearly six years of the Abdullah administration justifies that attitude. The bravado of Parti Keadilan Rakyat only adds to the justification of skepticism. Indeed, political skepticism against all sides is a sign of maturity of ordinary voters.

While the scent of skepticism was strong, not all shared it. Not all ordinary voters are seasoned political observers after all. Many young Malaysians celebrated the announced reforms as if reform had already happened. And then there are other not-so-young Malaysians who willingly assume things in good faith. Because of this, the Najib administration gained some immediate political capital.

That was about three months ago.

However significant the political capital was, time is eroding it. The power of words can last only so long. The longer it goes unsupported by action, the less credible it becomes. Words are cheap. In order to arrest the skepticism and to ensure that the liberalization exercise will translate into votes for Barisan Nasional, the promised changes will have to be instituted before the next federal election. Action is required, hence the rushing of the Bill.

Within a week, the Bill was read twice. Members of Parliament were expected to read the Bill thoroughly, consult experts as well as their constituents and then debate it intelligently within the span of a few days. That was nothing less than an ambush on the liberal camp.

The ungodly rush suggests something else as well: the federal election is coming sooner rather than later. It suggests the tentative election date has been set and all Bills need to be passed before that deadline. If that is indeed the case, then the election presents a perverse incentive for the government to act based on a misunderstanding of criticism against the previous illiberal laws.

It must be highlighted that the criticism is against the spirit of the previous laws, and not against the laws per se. With the Peaceful Assembly Bill retaining the old illiberal spirit, it is no different from the old laws. To cite another example relating back to the Malaysia Day speech, the replacement of the Internal Security Act will still grant the government the power to detain a person without trial. Yet, the main criticism against the ISA was exactly the detention without trial feature. So, what exactly will the substantive change be?

One gets the impression that the government thinks all that is wrong is the names and the initials of a certain set of laws. Change the names and the initials to something more cheery and they expect the criticism will go away. That is a gross misunderstanding.

Based on that, the government would think that rushing the Peaceful Assembly Bill and other related ones will win it votes. No, it will not.

A substantive-minded government would take a more measured pace by making the Bill and others to come go through a thorough deliberative process. That possibly means pushing the next election as far as possible into the future and holding it only after a much improved Bill is ready for passing.

The reverse — setting the election date first and then targeting to pass the Bills before that date — will result in farcical Bills.

A rushed farcical Bill benefits no one. The voters will see through the farce and BN will not win any extra votes from it. BN in fact would lose votes because new voters and those who assumed good faith would think the ruling coalition has taken them for fools. Meanwhile, Malaysians will not see any improvement in their civil liberties.

In the end, what was the point of rushing it?

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 2 2011.

Categories
Economics

[2466] Too much chocolate can be a bad thing

The auction attracted enough bids to sell all of the bonds on offer, thus avoiding failure. Yet the avoidance of failure is different from success. Italy will pay an interest rate of almost 6.3% on the bonds, the highest since 1997, according to Bloomberg. What is more, the rate is almost a full percentage point higher than the one the country had to offer in an auction a month ago. With enough successful auctions such as this one, Italy will be on a path to bankruptcy. [Super Mario vs the Bond Vigilantes. Free Exchange. November 15 2011]

I laughed after reading the last sentence.

Categories
Sports

[2465] Watch out world, we’re Michigan!

There was an overwhelming Michigan confidence entering the Ohio State game at home. Coach Brady Hoke did not need even a season to turn a flagging Michigan team, in contrast to the disastrous era of Coach Rich Rodriguez. Under Rich Rod, every Michigan fan told themselves it was a turnaround season and so we should not expect too much, season after season until none could take it anymore. That what makes Coach Hoke so special. He did not need too much time to make Michigan, well, Michigan. Here was Coach Hoke, and here was Michigan, 10-2.

Maybe, Michigan fans all around were being harsh about Coach Rod. Coach Rod and his philosophy just will not work at Michigan. Michigan made a mistake of hiring him in the first place. In any case, separation was the only palatable option and we moved on. And it has been great since.

Ohio State meanwhile was in trouble. The traditional football powerhouse that only a few seasons ago jockeyed for national championship was in shamble while Michigan was ranked consistently in the top 25 week after week under Coach Hoke. With the humiliation Ohio State has handed Michigan for far longer anybody with maize and blue blood cared to remember, last Saturday was the best chance to return the school down south a favor.

After all, look at the season. Yes, we had trouble with Michigan State and disappointingly, against Iowa but we were entering The Game with 9-2. And we manhandled Nebraska, a team that a lot of people thought was going to dominate the Big Ten. And we were playing at home. I had expected Michigan to present Ohio State with a kind of loss they would not even want to remember. The people of Ohio would want to suffer from collective amnesia.

But it turned out there was too much confidence, and that I especially had underestimated Ohio State. Ohio State got the first touchdown. Throughout the game, things were too close for comfort. Throughout the game, at most only one touchdown separated the team. I watched the game live over the internet, being in the wrong time zone, was on the edge of my seat in the middle of the dead night.

A loss would have been devastated. A loss would make Coach Hoke’s achievement over the season unfairly negligible. It has been said that it does not matter whatever happened in the season as long as we beat the Buckeyes. Of course, that is not true but it does tell you how important the game against the Buckeyes is. After all, this rivalry originated from the Michigan-Ohio war of two centuries ago. It was more than football. It was about pride.

At the very end of the game with about two or the three minutes remaining and 40-34 in Michigan’s favor, Ohio State had the ball and they were driving. Audacious balls were thrown in a way that took your breath away. It was only when the ball was intercepted that we knew things were safe now. We could breath now. We had won. That was in the very last minute.

It was a relief to see the win over Ohio State. It was like knowing a curse had lapsed and in front of us is just something that Michigan truly deserves. There is still a long way to go but this season is a great platform to America a reminder that Michigan has returned to reclaim our spot among the best in football.