Monday, October 13, 2014

Malaysian Budget 2015

1. The first question is whether the overall Budget 2015 is going to be expansionary or contractionary on the economy? Is the government sucking money out of the economy or is it putting money into the system? The answer is obvious since this is widely acclaimed in the local newspapers that Budget 2015 is good because the government is going to cut its overall deficit from RM37.3 billion in 2014 to RM35.7 billion in 2015, a reduction of RM1.6 billion. We can say that Budget 2015 will be contractionary on the overall economy by this amount of RM1.6 billion.

The government will be taking out from the general public RM10.1 billion in tax revenue while increasing its spending on operating expenditure by RM2.3 billion and development expenditure by RM6.2 billion.

2. Where is the critical assumption in the whole calculations in Budget 2015? The trick is in the GDP deflator. The government expects the headline inflation (the CPI) is expected to be 3.4% in 2014 and about 4% to 5% in 2015, because of the 6% GST and the cut in fuel subsidy. The GDP deflator is assumed at 4.2% in 2014 and 4% in 2015. With an economy that is expected to grow by 5% to 6% in real terms, it is not surprising that nominal GDP will grow by 10.2% in 2014 and 9.4% in 2015. All these inflationary effects are very good in lowering ratios of nominal debts in nominal GDP terms.

3. There is clearly a shift in direction from direct to indirect taxes. The attempt at avoiding the entrapment of average salary earners in obsolete income tax brackets is to be applauded, principally because salaries have been unable to keep up with rising costs of living and the escalation of property prices. Personal income taxes are reduced by 1% to 3% points to take into account contemporary income levels.

4. Corporate income tax is also reduced by 1% to 2% points. This may not have been necessary. Corporates are among the richest entities and foreign ones do not even have to pay tax.

5. Bumi Agenda. It is heartening to see the government's relentless pursuit of the bumi agenda. It is good to see help to the needy. But it is also strange for a government that is concerned with inclusiveness and private sector growth to neglect any section of society which may also be in want of assistance in entrepreneurs. The Budget even has encouragement for foreign start-ups in Malaysia with one year work pass. I hope I am wrong, but there seems to be a serious gap in economic thinking.

6. In general, I do not have much other complaints. There are lots of little smatterings of everything all over the place. In economics, these are considered marginal adjustments. The big item is the GST. Let's see whether that will bring the economy up to speed.

Tuesday, September 23, 2014

Independence: Scotland The Great

The Scottish referendum on independence was a show of the greatness of the Scottish people.

No where on earth have we seen a referendum that was so intense and yet so peaceful, except for a few scuffles on the Friday evening of the counting. In an imperfect world, it was as ideal a demonstration of the proper practice of democracy as we can even imagine that a group of people can perform.

We saw people from both sides debating the pros and cons of independence for Scotland, with great emotion and with great restraint.

The argument for independence for Scotland, as with the argument for independence for any notion of nationhood, is a highly emotionally charged one. Who does not want to be independent, to be the master of oneself, not to be controlled by someone else? It is this very notion of being the master of one's own destiny that is so at once romantic and so compelling. It is this very notion that now drives many other states to try to split from a federation or a union, in order to again a sense of freedom and liberation.

The argument against independence and for Scotland to stay within the union of the United Kingdom is an argument of great economic practicality. It is the economic argument that has created the European Union, for example, and that is pulling more states in peripheral of the EU towards the union. Most people want to be part of a bigger economic bloc so that ordinary people can also find good jobs outside their homeland. This is economic freedom. Which also means that there are people in the homeland who do not find jobs, and therefore blames the union of their inability to find something decent to do at home. If creating good jobs at home is easy, jobs can also be created while within the union.

Unless, of course, we are talking about some macroeconomic policy changes, the biggest of which is the currency which must be devalued in order to make the homeland more competitiveness, which then of course devalues the wealth of the rest of the population and since the unemployed is only a small fraction of the population, there is overwhelming argument against independence because of the currency issue.

The pro-independence camp arguing that the economic uncertainties highlighted by the other camp is pure fear mongering, which is incorrect. The economic uncertainties are real, and I think it is the reality of the economic argument that finally won the day over the romanticism of the political argument.

This is true of almost every country on earth where democracy is properly practiced, that the prime concern of all citizens is the day-to-day reality of survival and earning a living, and with it the importance of proper education, and law and order. In any union, therefore, the pulling force lies in the soundness of national policies, their fairness or "social justice" as the Scots said recently. It must be this sense of fairness in the treatment of all citizens that people feel they truly belong to the place which they were born and not be rejected considered as weeds in a monoculture plantation.

The greatness of the Scottish people, as shown by the recent referendum on independence, is that they give confidence that level-headed and rationality can prevail even in a highly contentious situation. Bear in mind that the Scottish mind is probably one of the most enlightened of the human mind, which gave birth to the idea of independence of the French Revolution which the French then exported it to America. For economists, of course, the greatness name is Adam Smith who fought for economic freedom for all people and nations. And David Hume who gave the idea of rent and rent-seeking, as well as the marginal returns to land. There are many more.

The greatness of the Scottish people is their elevation of mind from the primitive and irrational to the rational and disciplined. May the whole world learn and follow.

Monday, September 8, 2014

Joan Rivers: Brute Honesty

What is wrong being yourself?

If you find a reality that is an upfront to polite society and you find that you can make a living out of it, then it is not a bad thing. Nor is it a wrong thing.

Of course, polite society will say you are being caustic, acidic, sharp tongue, abrasive, etc.

But there is another section of society who is with you. And if you are popular with the general public - and as a result, you are successful - then that is really not a bad thing.

The truth is that it is really hard to be really nice and popular with everybody. There are people who are jealous and hate to see you do well. There is no need to obtain general acceptance.

I am probably spending too much time with people who want you to endear to them. There is so much hypocrisy when people pretend to be nice but in reality hate your guts. There is so much pretense that you do not know the reality.

Equally, I would probably not want to live in an environment where everybody shouts at you in your face all the time, and wish you ill or death.

The bottomline is the ultimate intention of the person. If you know that the person is ultimately kind, may not be nice, doesn't really mean the words used, but merely describing things the way she sees it without mincing words, and to be brutally honest, then I suppose one would not take offense, if the blunt words are not directed at you or are directed at someone else.

It is really a fine line. And only a master can walk that fine line and not fall.

Not everybody likes the jokes by Joan Rivers, but she was a master that brute honesty.

Tuesday, September 2, 2014

Independence & Nationalism

Between the 31st August and the 16th September, Malaysia have more than two weeks to contemplate what this so-called independence of ours means. Whose independence, who should have the upper hand - or are these entirely silly questions.

Independence is a claim on self-government by all the people in a certain geographical area. This is as opposed to the government of the local area by some foreign powers such as the UK or Japan, or Holland, France, US or China. Independence is the government of the local people by the local people, in the best way they see fit.

The 31st August is significant because some 57 years ago the UK government had graciously agreed to allow the local people of Malaya to determine their own destiny. The 16th September is significant because some 51 years ago, the UK government has graciously agreed to allow the local peoples of the now three entities of Malaya, Sabah and Sarawak to govern themselves and form a federation called Malaysia.

This idea of Malaysia was then as advanced as we have today of the idea of the European Union. The EU is a union at several levels. First, is the monetary union which uses the Euro among all EU members, except the UK. We have this in the ringgit. Second, there is the customs union where there are practically no barrier to trade among EU members. There is no barrier to trade among Malaya, Sabah and Sarawak. Third is the removal of barriers to intra-EU migration. This is now a big problem among EU member states where weakness in the control of non-EU immigration in a remote corner of the EU can cause havoc in other member states. There is now a growing call among EU member states to review this feature. What is meant as good solution to unemployment in some states and high wages in others - which it still is - is now a contentious issue in individual EU-member sovereign nations. The tendency to look at the good side while underestimating the problems is a major problem when sovereign states come together to create a larger economic bloc, often at the expense of politics.

The idea that Sabah and Sarawak can come together with Malaya is form a bigger bloc - ostensibly to fight a potential neighbourly military threat - is now being increasingly questioned by the educated group as to the implications on the economics as well as culture and religion.Independence does not appear, to them, to be a case for self-governance by the local peoples but the dominance of the majority on the large minorities in all spheres of life - politics, economics, religion, culture - the name of nationalism.

The real problem is, of course, the drive towards monoculture as the saving grace for nationalism masquerading as unity. This is a dubious proposition. Unity is always about cohesion, not uniformity. The constant struggle for survival and betterment is the driving force for the national strength - on as level a playing field as any humans can provide for their fellow human beings. It is not about complete domination of oneself over others, not the complete annihilation of others. It is the varying quality of the fertility of the ground that will define the structure of economic activities and social practices and general sense of well-being of different sections of society.

Taken to extreme, the inflictions of pain and death on others seem to be the way to new ways of life through bloody revolutions in some parts of the world, enabled no doubt by the arms industries of dysfunctional economies. Extreme ideology is an extremely potent and dangerous stuff.

The response to extremism is not extremism - no matter how righteous - but alertness by being always alert and to be ready to respond to counteract whenever there is a need to. In this, we need discipline and training and expertise. We do not have anymore the luxury to allow incompetence to take leadership position and leading all critical parts of the economy and society into disarray. We have got to wake up if this independence of ours is to have any value to us who live in this great nation.

Monday, August 18, 2014

Subsidies & Taxes

There are subsidies because there are taxes. Or, put it the other way round, because there are taxes, therefore there must also be subsidies. After all, there are the opposites of each other and both are needed to strike a balance.

Of course, the current debate in public in our part of the world is that there should be an increase in taxes and there should absolutely be no subsidies.

The major argument against subsidies is that subsidies lead to economic inefficiency. This is from the argument that the economy, left it itself, is efficient. Or, rather, will be efficient. This is not a statement of fact; it is a value judgement from laissez faire economics. The statement may be less incorrect if we were to say that subsidies, if improperly introduced and implemented, may leave to economic inefficiency or make the economy less efficient or more inefficient. We do not know that; we have to find out.

But the economy, as it is, is not without interference - not least, taxes from the government. Why is it not argued that because the government taxes people for working through the income tax, the income tax is making the economy less efficient by making people less inclined to work harder. There is also the tax on consumption and this discourages people from consuming because they have to give a portion of their little income to the government (and what is the government going to do with that extra revenue) which the people would have spent feeding their families.

There are also taxes on imports so that imports which we cannot produce ourselves will be more expensive - if the hope (?) that we can make those imports ourselves. The best example must be cars and we are paying good money to drive lousily-made local cars. Whereas, there are things that we have - for example, oil and gas, which we would put to good use ourselves are exported so that we, the producers of oil and gas, have to pay for oil and gas just like other people in the world who do not have oil and gas in their backyard.

If we study the direction of the various taxes, we can see that they are piled up haphazardly by the government as a form of getting more and more revenue because they have been advised by some mediocre economists that the best way for the government to stimulate (whatever this means) the economy is for the government to spend more and more. But taking more and more money from the general public for the government to spend does not encourage the people to want to invest in their future here. They want to get out of the way of the government before the government steamrolled them to death. The government seems to have a life of its own, and it will try to survive at the expense of the people.

There is a need for subsidies. Subsidies are needed in areas which protect the traditional livelihood of the society which defines our traditional culture. As the economy advances, it is inevitable that land and resource based activities will be unable to catch up technologically compared with the other sectors. But the traditional sectors are the food sectors, the agriculture, which are the soul of the society. We are not an island economy which is confined by its size to be super efficient in a small space. We are big enough to have sufficient space for every person who want to continue with our traditional activities. It is something else to argue whether things like cars are essential to the livelihood of society, or that they are mere toys which contribute to the ego of certain leaders of ours - and cars are now the bane of our society.

Tuesday, August 12, 2014

Robin Williams: Comedy - Life Is Not A Joke

Robin Williams, being the greatest comedian the world has seen, may have been the saddest man on earth.

He joked about cocaine was God's way of saying that you had too much money. But success has a way of isolating one from the rest of mankind. And out of that loneliness, one becomes an individual. When an individual connects with every individual at the same time, it is as if he could connect with the whole world, even when the whole world is not at one with itself.

No comedian ever intends to be funny. The comedian merely presents the world as it is not what everybody sees it to be, and as a result the situation seems funny to everybody - but not to the comedian. The comedian is dead serious in making a point about the reality of the world, and that reality is disbelieved and hence the comedian seems funny to the audience. Being laughed at, the comedian takes a bow and happily accepts the cash as the applause and duly blow that cash on cocaine. It completes the cycle of the madness of the world, and when the laughing stops, the comedian does not seem that funny anymore. Comedy is dead serious, and life is not a joke.

The world relishes comedy because the world is a sad place. That we can all laugh despite the meaninglessness of everything is that laughter is the only sane response to nervousness, to uncertainty, to ignore, to not knowing what is going to come next. Bit by bit, things happen all the time, sometimes to us but most of the time to everywhere else. Things are happening all the time and we don't know what they are. That's when we try to make sense of life. And when we can't make any sense of the life, that is when we think that life is a joke.

But to go on living, we cannot think that life is a joke. The next level down is that we think that life is funny. And we laugh life off and after the laughter, we get on with the drudgery of life again. And that is called living life.

It is therefore moment by moment that we prod along and when the next moment does not come, that is the end of the game for us.

The blip then goes on elsewhere, and life goes on regardless of us.

RIP, Robin Williams.

Monday, August 11, 2014

Extremism & Its Shades

The current fashion in social networking is to attack the extremism of the current Israeli government which is ultra-right in the sense that it is strongly in defense of the existence of the Israeli state and will do everything it can to eliminate its enemies, real or perceived.

The real culprit, in this case, is the current Israeli government. If they change government, then it may be an entirely different kettle of fish - we do not know yet.

The perceived culprits, in so far as the current fashion of the social network is concerned, is now everything that is Israeli or Jewish. This is a very dangerous generalisation - so dangerous that it is, in fact, the biggest plague in the current flash of human civilisation. So now, everything Jewish or Jewish-related is under attack - even companies doing business in Israel.

I do not agree with the editor of a local newspaper who said for once the local extreme racist group has got it right by shouting abuse, burning the Israeli flag and then went home - for they did not do stupid things like some neitizens who abused local workers of a targeted company by the extreme anti-Isreali gang. It is extreme groups with their mentality in holding to their own special need for survival at the expense of others not of their kind that is the root of social troubles which may simply boil over at the right time for violence against fellow human beings not of their kind to take place.

We cannot support extremism of any kind or in any shade.