Categories
Economics

[2598] Growth yes, but not by all means

The traditional understanding of economic growth has its fair share of criticism.  It has been criticized as being overly materialistic and overly focused on production with disregard for its side effects. Those with esoteric worldviews would accuse such progress as spiritually empty and unfulfilling.

While it is true that such understanding of growth does not take into account our human experience comprehensively—and possibly nothing can—it is very important nonetheless.

Try living in a period when the gross domestic product and its typical variants that measure the mainstream idea of economic growth register a contraction. All the fancy criticism will take a backseat as very real economic pain hits far too many persons.

It is in that sense that the traditional idea of economic growth matters. There is something profoundly substantive about it; when economy does not growth, you will feel it, whatever your reservations about the mainstream understanding of the economy.

Yet, this piece is not a defense of the status quo, even as I do sit in the status quo camp.

Rather I write this to criticize those who pursue growth for growth’s sake. The way a society grows matters even within the current status quo framework. As a result, there is such a thing as mindless growth and mindless growth is one that focuses fully on how fast the GDP grows and not how it grows.

The clearest example happened on the days after the official GDP figures for the second quarter of 2012 were announced in the middle of August.

The Malaysian economy grew by 5.4% from a year ago in real terms. The growth rate beat market projection and forced the gloomiest of private economists to upgrade their economic projection for the whole year.

While external factors continued to exert strong negative influence on growth, the domestic economy grew strongly still. The primary reason why the domestic economy grew was due to extraordinarily strong private consumption.

It is hard to explain fully why consumption in the private economy—primarily spending of households as well as private firms—grew as strongly as it did. Troubles abroad should affect domestic sentiment despite the excitement surrounding various projects related to the Economic Transformation Program embarked by the government. But it did not affect sentiment too badly.

One explanation for the strong private consumption growth was the cash transfer program (Bantuan Rakyat 1Malaysia or BR1M) which was introduced by the federal government. The cash transfer increased household wealth for some periods. The increased wealth effect in turn encouraged households to spend more. In a big way if I might add.

The commentariat has shared its piece of mind on the matter. Some has praised the cash transfer for boosting economic growth in Malaysia. The business section of the Straits Times in Singapore is one of which have sung praises to the cash transfer for the GDP growth that it had brought.

Unfortunately, this kind of growth is not the best of all growth possible. Such cash transfer is always merely temporary and growth arising from such temporary measures is not sustainable.

While cash transfer does have its merits within wider context—for instance, cash transfer is more efficient and less wasteful that subsidy in improving individual welfare from microeconomic point of view—growth arising from cash transfer should be received with a measured nod, and not by throwing in a party. One should acknowledge the growth the cash transfer program brought but one must also understand that without it, growth would have been less fantastic.

The counterfactual is important because it describes the more sustainable growth going forward.

Consumption growth arising from freebies from the government is not nearly as good as consumption arising from returns from productive investment or simply real growth in income won from effort. Growth from the latter is the sustainable growth and it is sustainable growth that will determine the long-run or future state of the economy, but a one-off freebie.

To put it differently, one wants growth from productive enterprise and not from an effort at redistribution.

Redistribution of wealth—whatever its merits income or wealth egalitarian perspective—cannot really be created by merely redistributing wealth. At risk of committing a tautology, one has to create wealth to create wealth in the big, long-run picture.

In contrast, to put it simply, cash transfer is only an act of borrowing from the future to consume today.

This is one aspect which growth for growth’s own sake is wrong. To repeat the message, how the economy grows matters.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in Selangor Times on September 21 2012.

Categories
Politics & government Society

[2597] The myth of adulthood

And a kid and a young teenager, I held the belief that adults had all the answers in the world. They would know what the best to do was, and it was the good of all of us. I thought they were wise, even if sometimes that came at the expense of the young me. Wisdom came automatically with age.

As a kid, I wanted to grow up to be wise, all knowing. Short of being a god of course but in this age, I suppose we are the gods themselves.

Along the way as I grew up, I learned that was not a rule. It was a myth. If there was a wise, well-behaved adult, there was a good chance that that was a mere exception.

In many cases, I have discovered that being an adult is overrated. In many cases, being an adult is worse than being a juvenile. Adults throw all the tantrums, being irrational and hypersensitive like a child, but with the power to do something that a spoiled brat cannot.

A spoiled brat at least does not have the rights of a full adult. The damage the brat can do is limited and there are easy consequences to any wrong the brat commit. Somebody will be there to provide a lesson in manners. For an adult who is also a spoiled brat, who will do that? The police?

Look around you. In the news, grown men and women acting childishly and even like a hormone-filled teenagers all hyped up on the smallest of things. They would shout nonsense, unlikely to think fully before they act. Some even have the audacity to appear on national television. Hell, national television will invite them and gladly provide them with airtime. Some of them are our elected representatives.

Closer to the ground, some adults would gossip and behave like he or she was still in high school. Such is our immature society.

Ah, adulthood. Such an overrated experience. I have enough of respecting adults. I will just respect maturity from now on thank you.

Categories
Economics

[2596] Today is Scott Sumner Day

Yes, it is.

I haven’t seen anyone else say it yet, so I will.  The Fed’s policy move today might not have happened — probably would not have happened — if not for the heroic blogging efforts of Scott Sumner.  Numerous other bloggers, including the market monetarists and some Keynesians and neo Keynesians have been important too, plus Michael Woodford and some others, but Scott is really the guy who got the ball rolling and persuaded us all that there is something here and wouldn’t let us forget about it. [It’s not just monetary policy, it’s Scott Sumner day. Tyler Cowen. Marginal Revolution. September 13 2012]

Categories
Economics Society Travels

[2595] Good things happen to good people

If one looks at various socioeconomic statistics, it is easy to conclude how far behind Malaysia Cambodia is.

Yet superficially, if one landed in Siem Reap in north Cambodia, one would find it hard to differentiate rural Cambodia from rural Malaysia, apart from Khmer writing on the billboards and posters as well as the spoken language. The homes appeared Malay and the people themselves looked Malay. There were a number of times when a Cambodian spoke to me in Khmer, only to giggle finding out that I did not speak their tongue.

The substantive difference became clearer only once I was in the town of Siem Reap. Most parts of the town were dusty to present a Wild, Wild West impression. There was clear under investment in infrastructure. The statement on infrastructure was true elsewhere as well. There were not too many cars. Whatever seen on the road would be driven by westerners, or belonged to the government or some aid organizations. The locals would either ride a bicycle or a motorcycle generally instead.

The tuk-tuk and the likes formed the backbone of public transport. A Cambodian tuk-tuk is essentially a small cabin attached to a motorcycle.

In Siem Reap, Battambang and Phnom Penh, every single available tuk-tuk driver would hail me and ask if I needed a ride. Sometimes, it appeared almost everybody on the road honked at me to ask plainly, ”tuk-tuk?”

A college friend of mine whom I was traveling with me told me that her brother visited Cambodia a few years earlier. She joked that he was traumatized by the tuk-tuks. She went on to buy a tuk-tuk-themed T-shirt for him as a cruel souvenir.

The persistence was noteworthy and it did not end with the tuk-tuks.

As both of us explored the Angkor temple ruins littered throughout the land, children would approach us and beg us to buy something from them. It could be a bottle of cold water, a flute, a book, a piece of cloth, anything. They would beg in the softest of voices that would melt the heart of an untrained traveler. There was a hint of desperation in their voices. And they were persistent.

After a while I became desensitized to the incessant pleas, as many other travelers eventually did. My friend made the desensitization easier. She said we could not possibly help them all by purchasing everything from everybody.

What struck me the most, and informed me the most about the state of Cambodian society beyond the cold statistics, was our guide.

We employed a Cambodian guide, who led us into various ruins. He explained to us in detail the history, the story behind amazing Angkor’s bas-reliefs and shared tidbits about temples for a moment worth of amusement. We thoroughly enjoyed his company.

By the end of the day, we wanted to go to where we wanted to go and he had to go to where he had to go. We parted ways. We paid and thanked him for a splendid day.

He thanked us for the payment, as it is customary to do so. What was unusual was that he exhibited further unnecessary gratitude. He explicitly thanked us for providing him with employment.

It was quite clear that he not only wanted a job. He also needed it.

What I am about to do is an attempt at generalization. There are always perils at doing so but after observing the Cambodian society as a foreigner, I do think Cambodia has a bright future.

It is true that it is poor now, with children working on the streets when they are supposed to be in school.

Yet, I do not believe those rough edges are enough to negate my optimism. I am optimistic because Cambodians in general appeared to have that hunger to move forward and leave the past behind.

Life in the capital Phnom Penh is the symbol of that hunger. The city is not as modern as Kuala Lumpur and it will be many years before the two are at parity.

Nevertheless, Phnom Penh is developing even as it maintains its old colonial charm. One can immediately feel the go-go spirit in the capital as one skyscraper or two slowly inches toward the sky, as the tuk-tuks laze across the city. The newly found Cambodian openness will further aid progress.

For years, Cambodia was held back by inward-looking world views. Judging by what I saw in Cambodia, from the rural north to the urban south, that self-damaging age has come to pass almost fully.

A new Cambodian era introduces its own issues.

Cambodians complain of corruption and suspicious political maneuvering. But as the society matures as it is inevitable with continuous economic progress that was impossible 30 or 40 years ago, chances are these issues will be arrested along the way to a more tolerable level.

I do hope Cambodia progresses to emerge out of its ancient Khmer predecessor’s shadow.

As I was haggling with a merchant at a market in Phnom Penh for an item, an American saw me and smiled. He approached me and said: ”They’ll take every penny from you. But they are good people.”

Good things are supposed to happen to good people.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in Selangor Times on September 7 2012.

Categories
Sports

[2594] It’s Saturday football!

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