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.

Categories
Economics

[2462] With a fail-safe, no reason for supercommittee compromise

The failure of the supercommittee to agree on the distribution of US budget cut is not much of a news. It has been expected. Leaks of how difficult it was to reach a common ground made it way to news reports .

More importantly, the impact of the failure is not too big because the fail-safe automatic cut is going to happen anyway. Both the unsurprising result and the minimal impact of the failure are signified through the low level of attention given by the media on the issue. Focus on the failure is not nearly as intense as focus on the earlier downgrade of US debt by S&P’s.

In retrospect, the fail-safe mechanism is a brilliant political maneuver. It was a result of uneven bargaining where deficit hawks, perhaps irresponsibly, held the US government at random and squeezed as much juice as possible out of the situation. Default or cut it. It was a Hobson’s choice: default was out of the question. And now here we are with the fail-safe mechanism.

While the fail-safe mechanism now ensures the implementation of the USD1.2 trillion budget cut over the next 10 years, it may have also contributed to the failure of compromise. If the members of the supercommittee — whom belongs to competing political parties and we know they serve their political bias — know the cut is going to happen anyway with its distribution already apportioned, why compromise when a compromise angers your voters base?

In a way, the supercommittee is really a lame duck committee. No incentive to action with every incentive to do nothing.

Categories
Economics

[2461] The unexpected 5.8% growth

The GDP growth number for Malaysia shown on the Bloomberg machine surprised me. I had expected somewhere between 4.0% and 5.0%.

Trade numbers had been very good for the fast few months but I did not expect it to push the GDP growth figure close to 6%. In fact, I watched in awe the growth of the trade numbers given the current confusing state of the world’s economy.

For the GDP figures themselves, the year-on-year growth for the third quarter was 5.8%. The average growth expected by economists listed on Bloomberg was 4.8%. This number had progressively grown over the past months from a number close to 4.0% to what it is now.

Looking at the numbers sweepingly and superficially, government spending grew the largest percentage wise. It grew close to 22%. In terms of absolute value, consumption grew the largest and indeed, it was the main contributor to most of the GDP growth.

I am tempted to say the consumption growth was related to government spending (since the separation between government and the private sector is not so clear cut) but without the energy to mine for that, I will refrain from making more courageous statement.

But what exactly is the driver behind the consumption? In my head, I can only think of government. If I want to know more, I clearly need to dig deeper into the numbers.

Was the growth due to base effect? I do not believe so. Base effect is not a convincing case in post-recovery period. Year 2010 had been a year of normalization and year 2011 grew from a somewhat normalized base. So, I am discounting base effect from explaining the unexpected high growth rate.

Categories
Economics Humor

[2460] Prof Dan on the Daily Show!

That is my former econometrics professor at Michigan, the famed Daniel Hamermesh! And he was on the Daily Show!

Categories
Economics

[2459] Did you spot something?

If you were the editor, what would you do?

PETALING JAYA: Total vehicle sales in October 2011 rose slightly by 3% to 53,654 units from 52,297 units a year earlier, boosted by the fact that it was a longer working month (versus September) and the return in consumers’ buying interest. [Eugene Mahalingam. Vehicle sales up. The Star. November 17 2011]

Here is a clue: year-on-year.