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Economics Education Society

[2931] If affirmative action is to end in Malaysia, spending on public service has to increase

Discussions on affirmative action in Malaysia have never gone away but interest in it has increased in recent weeks. The first exciting interest in the topic was Hwok-Aun Lee’s book Affirmative Action in Malaysia and South Africa: Preference for Parity. I have not got my hands on the book (I hope to buy it soon), but I listened in to one of Lee’s webinar on the book and the subject earlier this year. Most recently, is Nazir Razak stating the New Economic Policy—Malaysia’s affirmative action—no longer works.

My thinking of affirmative action has softened over the year. Softened in the sense that while in the past I think I could be labeled as anti-NEP, I have adopted a show-me-the-result position. In fact, I have concluded there has to be a balance between economic and social imperatives. As a relevant side note, I am writing a book (a never-ending project) and in a segment of it, I outlined why I thought NEP might have a role in created a shared identity in Malaysia (perhaps Bangsa Malaysia as a shorthand for this) for a short while in the 1990s. It was a decade or two-long process coupled with rapid industrialization and globalization, that was unraveled during the late-1990s Asian Financial Crisis and later, China’s entrance into the global marketplace. My current thinking is that, though NEP-styled affirmative action worked in the 1970s and the 1980s (dare I say the 1990s despite its official expiry?) situation in the 2020s have changed dramatically that the way Malaysia does it affirmative action need to be rethought. It requires a rethinking because NEP did not work in isolation during the years and the factors (high growth and absence of China) that made NEP work are no longer present today.

Last week, I somehow got pulled into a Clubhouse discussion about NEP where Nazir Razak stood on a soapbox. Near the end, riding on an acquittance’s train of thought, if I remember correctly, Malaysia needs to invest in its public services more. I would like to clarify and expand that idea further.

If affirmative action is to end, then I think it is imperative that public service be expanded further. This is not to say the public service expansion and affirmative action are mutually exclusive. But it is probably good to understand that most beneficiaries of affirmative action probably rely on public service more than others. Removing affirmative action would likely require expansion in other parts of government in order to maintain the beneficiaries’ general welfare.

Here, the maintenance of general welfare is importance for social stability, which in turn is crucial to creating the environment for long-term economic growth, which itself is important to the maintenance of welfare. It is a loop.

By public service, I refer specifically to public education and public health system. By expansion, I mean by making it more accessible cheaply at a higher quality and while this may sound fluffy, I think the best proxy to this is government spending in these areas.

And Malaysia lags in terms of public spending in these two areas when compared to other countries. I have written a short advocacy paper on this matter under REFSA earlier and you can access it here.

A brief look at the World Bank database containing data from most countries will show that Malaysia is a middling when it comes to government spending in education relative to its GDP, while under-spends in public health services.

Malaysia’s government spending on education and health relative to nominal GDP

Malaysia’s 2018 government spending on health was 1.9% of GDP and this compares badly with upper-middle income countries’ average of 3.2%.[1] Malaysia does better in public education, spending 4.7% of GDP in 2017, versus upper-middle income average of 4.1% in the same year (year 2017 and 2018 are chosen because those are the latest year available for year-to-year comparison between Malaysia and upper-middle income average).[2]

So, if ever affirmative action, or NEP in whatever form it persists now, is to be dismantled, I feel is it crucial to boost public spending in government services. Boost spending alone, of course, is not enough. How you spend it matters too.

Hafiz Noor Shams. Some rights reserved

[1] — Domestic general government health expenditure (% of GDP). Open Data. World Bank. Accessed April 7 2021.
[2] — Government expenditure on education, total (% of GDP). Open Data. World Bank. Accessed April 7 2021.

Categories
Economics Society

[2930] The biggest losers in this recession: the young

All recessions have its losers and to claim so is to state the obvious. It is more interesting to know who the losers are. Data from the Department of Statistics shows that the biggest losers in this recession are the young.

From the chart below, it is quite clear the job market for 35 years old and younger is doing badly relative to the market for older cohorts:

The chart is drawn by comparing total employment by age for each quarter relative to a pre-pandemic benchmark. In this case the benchmark is the final quarter of 2019, the last quarter before the pandemic. To illustrate:

  • there were 31,800 fewer employed persons among 15-24 years olds in the first quarter of 2020, relative to the last quarter of 2019
  • there were 202,600 fewer employed persons among 15-24 years olds in the second quarter of 2020, relative to the last quarter of 2019

So, if the number goes down, then it is bad because it shows fewer people are employed relative to the benchmark. If the number goes up, then it is good because it shows more people employed.

The data is from the Quarterly Report of Labour Force Survey. The 2020 fourth quarter report, which is the latest report, was released on February 8 2020.

Increased underemployment among younger cohorts

The change in total employment does not indicate change in employment quality. Here, I am referring to underemployment. Once again, the young are the most badly affected:Unlike in the first chart, an increase here suggests more people working less than 30 hours per week, which could be considered as a definition of underemployment (there are other underemployment definitions). They work less than 30 hours because they are likely unable to work fulltime. Therefore, an increase in this chart points to a worsening situation.

This is relevant because a person is considered employed in official statistics if he or she works for at least an hour per week. As you can see, it is a loose definition. During normal times, it is alright to use it because it works. But the situation we are in are quite abnormal and it challenges our traditional definitions.

Categories
Politics & government Society

[2929] Malaysian democracy dies and we forgot to mourn it

In 2017, political scientist Thomas Pepinsky claimed that life in authoritarian states was mostly boring and tolerable (that is tolerated by the people). He cited Malaysia where life was quite normal, despite it being an undemocratic country and mildly authoritarian. But his audience were not Malaysians, but Americans, many of whom found themselves in opposition to Trump and his illiberalism.

Pepinsky argued authoritarian states did not necessarily mean “jackbooted thugs, all-powerful elites acting with impunity, poverty and desperate hardship for everyone else, strict controls on political expression and mobilization, and a dictator who spends his time ordering the murder or disappearance of his opponents using an effective and wholly compliant security apparatus.” Life on the ground in such a state could be indifferentiable from a democracy of comparable economic development.

He was not defending authoritarianism. Instead he was warning that authoritarianism arrived more subtly that most people realized. It does not come with a bang. He wrote:

It is possible to read what I’ve written here as a defense of authoritarianism, or as a dismissal of democracy. But my message is the exact opposite. The fantasy of authoritarianism distracts Americans from the mundane ways in which the mechanisms of political competition and checks and balances can erode. Democracy has not survived because the alternatives are acutely horrible, and if it ends, it will not end in a bang. [Thomas Pepinsky. Life in authoritarian states is mostly boring and tolerable. Vox. January 9 2017]

Forward 4 years later, Malaysia has lost its democracy and we are now ruled by a dictator.

When Prime Minister Muhyiddin Yassin and his allies in 2020 wrested power from the victors of the 2018 Malaysian General Election without going through any election, his action arguably was still done within the gray ambit of democratic practices. Gray because of the 2009 mistake that began in Perak legitimizes an obscure process of selecting a government over the usual transparent process of letting the contenders prove their support in the Dewan Rakyat. The same untransparent process contributes to or exacerbates the political instability that we suffer today.

Muhyiddin’s government was never stable from the get-go. Now when it became clear he did not have the majority needed to remain in government, he carried out a self-coup through the declaration of emergency. The excuse was the COVID-19 pandemic but we know he was just pulling the wool over our eyes. As if giving more power to a government that mismanaged the pandemic was a good idea. More will die sadly. In a better situation, we would be replacing this incompetent Cabinet with one of better caliber.

That self-coup has firmly placed this government into the realm of authoritarianism. The Prime Minister is the Dictator of Malaysia. There is no democratic mandate to speak of anymore. There is only the will of the Dictator Muhyiddin Yassin.

And that happens without loud protestation.

The pandemic is to blame no doubt. Perhaps the economic devastation worsened by this government’s complete incompetency is sapping energy away from the population. Perhaps they are tired of the failure of the Pakatan Harapan and their allies in opposition to do what was right back in November during the tabling of the 2021 Budget. The failure and disillusion breed ambivalence. Everybody is tired of the national political chaos.

All that leads to us tolerating authoritarianism. This is more so when the Dictator defends his self-coup by stating life will go on as normal, however disingenuous that sounds. The Dictator is telling us authoritarianism is tolerable.

Such a disappointment.

Categories
Politics & government

[2928] Rationalizing the camps in Umno

I had a conversation yesterday, where we tried to make sense of the political situation in Malaysia. It is a confusion situation all-around and the intricacies could only be understood by understanding the disputes in Umno, the one of the major sources of instability in Malaysia.

A systematic way to understand the troubles within the party is to ask two questions:

  • One, do they want Zahid to remain as the party president?
  • Two, do they want to remain part of Muhyiddin’s government?

The combination of the answers provides a clean division of the camps in Umno. See the graphics below:

Theoretically, there should be 4 camps.

But realistically, there are 3 camps only. This is because if a person prefers Zahid to remain as the party president, chances they would parrot his position. That means if they said yes to Zahid, it is likely they would also want out of Muhyiddin government. To signify that, I have struck one of the boxes out.

The 3 camps are:

  • Najib-Zahid camp (Yes to Zahid but no to Muhyiddin). This is the camp suffering from multiple corruption charges.
  • Hishammuddin camp (No-Yes). Hishammudin was one of the Sheraton Move architects.
  • Tengku Razaleigh camp (No-No). Possibly the weakest camp among the three.

The names listed might be inaccurate because it is based on my readings and possibly their sentiment as reported in the press.

Additionally, there are names I put in the unknown brackets, but if the questions are right, then they would eventually be pigeonholed into a camp once the time comes.

And clearly from the chart, it is not exhaustive. It is difficult to know beyond the top names who sits where. This is especially when some of these people like Noraini Ahmad and Zahida Zarik Khan seem awfully quiet, and in some ways irrelevant despite being part of the party leadership.

Finally, some people in DAP have told me it is all about power (who has what and those without are making noises). However when I look at the problem closely, it is a bit hard to systematically rationalize the division through “power.” “Power” does not reveal the camps as clearly as it should. Nevertheless, it is difficult to dismiss “power” as a factor. It might very well be an underlying dimension beneath the two questions I am proposing for benchmarking purposes.

Categories
Economics Society

[2927] M40 classification mischaracterizes the middle class, weakens the middle class and in doing so, weakens democracy in Malaysia

Who are members of the middle class in Malaysia?

Theoretically, they consist of those in the middle income distribution. The middle class is a relative position between the poor and the elites, however both are defined.

But it is not that simple. On Wikipedia alone, there are plenty of dimensions to be considered beyond income. Among the factors are education, nature of employment, social status and even as fluffy a factor as lifestyle. Wealth is another marker, which is related to income but perhaps better except its data is not as easy to get.

In Malaysia, perhaps for over 10 years now, we have chosen a specific way to define it. We do it through income distribution. We have the bottom 40 percentile households in terms of income distribution defined as the poor (the B40), the next 40 percentile households are understood as the middle class (the M40), and the top 20% household income earners are taken as the rich (T20).

The classification is needed to operationalize certain policies like conditional cash transfer that Malaysia has. Household income, whatever its weakness, is an easy proxy of status. It is needed for targeting purposes. You lose something, but it does the job. Arbitrary, but convenient and it works.

Our problem is that the same convenient arbitrary classification that works is beginning to have an unintended negative effect on social discourse. Familiar to the definitions used by the government for implementation convenience, the public is beginning to associate the M40 as the middle class, and the middle class as M40, when in fact, there are middle class people falling outside of the M40 group. Additionally, there are people inside the M40 who are not really members of the middle class. The shorthand of B40-M40-T20 is dividing the middle class crudely and consider some members of the middle class as members of the elites.

It creates a class war against the middle class just through misattribution arising from arbitary statistical definition.

The middle class is special because they are largely the flagbearers of progressive values. With such values, they function as a check-and-balance mechanism in any society. Members of the middle class are not poor and that allows them to spend more time on matters other than livelihood issues. Things like corruption, environment or something that is well above something that is similar to the bottom of Maslow’s hierarchy of needs. At the same time, they individually are not rich enough to have outsized influence on society like few elites. Yet collectively, they check the power of the elites thanks to their education level. They are the bulwark preventing the elites from abusing power. They are the ones crucial in keeping a democracy from becoming crass majoritarianism.

When members of the middle class are considered as elites, middle class values would be condemned as elitist. Once identified as so, the same values would be rejected by the majority because they feel the values are meant for the few.

This is the danger of the M40 classification. The misattribution makes the middle class alien to the poor as the elites are, but without having the same influence the elites have. This weakens the roles of the middle class in protecting democracy from abuse by the elites, and from majoritarian excesses.

That is one of the costs of the B40-M40-T20 classification. It breaks the middle class, and then artificially and implicitly labels middle class values as elitist. With that, the roles of the middle class as the moderating force in our society gets weakened.

In short, the M40 classification mischaracterizes the middle class, and weakens the middle class’s role in moderating Malaysian democracy.