Tuesday, April 19, 2011

Chinese Politics, Economics & Philosophy

What do you do when your government does not take care of you - nay, even have policies carved in such as a way as to disadvantage you so that you do not have a chance?

You fight for an opportunity for yourself and your children.

You are not talking about fairness. You are talking about an opportunity - an opportunity to earn a living, an opportunity to work very hard, very very hard, even to the extent of having to do two or three people's work in order that you may have a chance to earn a living for yourself, taking only one of the lower or lowest of the two or three parts that you have earned.

It is only by sheer hard work, plus lots and lots of ingenuity can it be possible for a non-Bumiputra to irk out a decent living in Malaysia. By then, of course, the disparity has widened much much farther.

When the single simple opportunity in life that one is looking for just to survive does not even exist, because it is perceived that all the opportunities have been monopolised and that the wealth that has been amassed has been transformed into power of control and domination, you want regime change.

How does the minority cause a regime change of the majority in a democratic way?

By giving all its support to the opposite, the best that can be managed is 77:23.

This is the best that can be done at the moment.

But the message is clear. That the people who are unhappy can say register their dissatisfaction.

So far, the non-Bumiputra has made their stance. Now, among the Bumiputra, unfairness of unjust policies has also been taking place. If the discontent is intense, you can get a swing that can go to 40:60 (assuming half turned).

How do you prevent unfairness? Malaysia, and Sarawak, has gone way past the point of racial disparity. We are now entering the era of class inequality: the poor fighting against the rich, for survival. If the rich has gotten rich through plunder, then there is a limit to that plunder. We are reaching that limit. The whole country is down going into economic descent.

The only way forward is a conducive environment for investment, private investment. This is not the perfect solution, but this is the way that the modern world has learned to bear with. This world of private investment, will create with it the problems of worker welfare. This is the economic disparity. But at least, there is a way out by negotiating for better pay and conditions for workers.

At the moment, the problem is unemployment and rising cost of living. Dishing out cash handouts in "poverty-eradication" programmes is a short-term measure, important to prevent riots and buy time for better programmes to come in. It must be the encouragement of local private investments.

The whole nation should not be held back by one lone racist voice. We should fight racism and get the whole nation back to where it was in 1970, and start all over again. We have lost enough time. It is time to put excellence back into the nation, and take our rightful place in bright Asia.

Tuesday, April 12, 2011

Sarawak Politics, Economics & Philosophy

Politics is about power.

The current political fight in Sarawak today is about the struggle for power. Whether it is the Barisan Nasional or Pakatan Rakyat, both are now trying to convince the voters why they should vote for them and not the other group. So, what is the difference between the politics in Sarawak, and the politics elsewhere?

Between the politics in Sarawak and those in the Peninsular, the current arrangements on both sides of the water are similar - racial political parties conveniently come together to form groups each with a multi-racial front. In Sarawak, on the BN national front, there is PBB which is supposed to represent the Bumiputra which is odd because you also get in it other Dayak groups such as PRS and SPDP which are Bumiputra as well, in addition to SUPP which is generally taken to be predominantly Chinese. On the other Pakatan front, Keadilan is supposed to be a front runner but in reality DAP is the stronger and both are Peninsular-based parties. Appended is SNAP which is taken to have a Dayak dominance.

What you are now witnessing in Sarawak today, as well as in Peninsular, is racial politics at its best. You have grievances even among the Bumiputra where, in the Peninsular, the gripe is UNMO-putra, whereas in Sarawak the culprit is the one and only and his cohorts. Both probably come straight out of a leaf of the NEP. The Chinese and everybody else then see themselves as orphans in an unloved disorganised family with a greedy and roving-eyed father. In Sarawak, the opposition talks of the dilemma of ungrateful urban Chinese juxtaposed against the poverty-stricken rural natives or indigenous people, when the reality may simply be the everyday fight for survival, against poverty or fear of not having enough. There is poverty in the urban areas as well as in the rural. Remember that when the rural people come to town, they become the urban poor. In towns, when the parents did well, the NEP makes sure that they do not have new opportunities.

It is a terrible thing when an affirmative policy such as the NEP has become a racist policy that is used to deprive the majority for the benefit of a few. It is equally unacceptable for the alternative to champion the interests of the now-deprived Bumiputra or non-Bumiputra to the exclusion of Bumiputra. It is this racism in Malaysian politics as well as in Sarawak that is objectionable to rational-minded citizens of this country. For this reason, thereby, my contention is that the current battlelines are drawn at the wrong points by the opposition; it could be the result of the early stages of development in Malaysia as well as Sarawak.

In all countries everywhere and for all people in all countries, the greatest fear is economic survival with eyes being opened wide as a result of the internet where the whole world is collapsed into a picture frame made of plasma or pixels. We know of everything we want to know, and while we marvel at technology, we fear for ourselves and our children. In such a world of great nervousness, there is a great demand for reassurances and governments around the world guarantee it by printing money and getting into massive budget deficits. With massive budget deficits come inflation, now on a global scale, which means that it hits also the poor little indigenous people or the non-indigenous people on the wrong or better side of Borneo. Their home-grown output, be it the processing of local foods or the processing of local materials into tourist items called handicraft, however much they produce and sell is inadequate for them to enjoy a piece of the advances of modern technology as the terms of trade is wrack-smacked against them, thanks no doubt to the multi-award multi-year winning central bank that we have in keeping this country economically competitive while the people deprived.

Under trying localised circumstances, there is nothing but humanity for all citizens of Malaysia, and some say Sarawak, to argue for a level playing field economically at the very least for everybody, be that somebody a Muslim or non-Muslim, Bumiputra or non-Bumiputra. It is time we do away with racism of any guise.

In Sarawak, the two oldest multi-racial parties are the SUPP and SNAP, and their full names say so: the Sarawak United Peoples' Party and the Sarawak National Party. Fill these two parties with well-educated, well-intentioned young and energetic people of all races - if they can work well in other countries and survived, they can do likewise in Sarawak. Let them fight on the economic ground: between big businesses and the welfare of the people. There is much can has to be done to re-position Sarawak which for now, in economic policy terms, is nothing but an adjunct to Peninsular-centric economic (and political) policies. There is a need to refocus on Sarawak as an wholesome and self-sustaining unit rather than merely a supplier of energy to the Peninsular either in the form of oil and gas or hydroelectric power. There must be a way to retain these natural resources for use locally.

I find the current political fight in Sarawak boring on fundamental issues, though not for want of theatrics by masters in their defined fields. But the outcome on 16 April can be devastation of one kind or another.

Monday, April 11, 2011

Capital: Control or Free Flow

It was not so long ago when economic theorists argue that it was OK for people and capital to flow freely around the world, in the belief that it would be favourable for economic growth as well as economic welfare. Economic growth because these people and capital have to work hard to find the extra gain from existing resources - meaning more output and more output. Economic welfare because these people and capital owners have income or extra income and that by things getting cheaper the welfare of the average consumer is improved.

With globalisation and the ICT whereby the flow of people and capital can be made almost instantaneously, the free flow of people and capital can be likened to the unfortunate but relevant image of the tsunami where an extraneous force comes strongly into the domestic system, and leaves just as quickly but in that quick second, the end result is devastation. No matter how strong or how stable, no man-made system can withstand such violent forces.

The unleashing of the manpower of the Chinese people from the grips of authoritarian control to one of a freedom to negotiate and trade has caused an explosion in the manufacturing world where there is little room for the less than competitive. Either you are competitive or not competitive. The export of competitively priced goods by China has made the Chinese people the sloggers for the whole world, with very little for themselves except for the opportunity to work. The capital owners were happy to make that extra cash and they continue to pour capital in enterprises in China. In the meantime, the costs of raw materials rise around the world because of the unprecedented prolonged of China and this is causing the cost of living to rise around the world including China. While the standard of living of Chinese workers can be adjusted by raising their nominal wages, workers in other parts of the world whose livelihoods have been devastated because of their lack of competitiveness have no choice but to look for new political leadership blaming their day-to-day difficulties on corruption of the ruling elite.

US, which has the unique privilege of unlimited printing of its paper money, solves its problem of lack of competitiveness by printing still more money. As China and other parts of Asia as well as some parts of Europe and Africa benefit from the slog of the Chinese workers, those who have managed to obtain the cash that the US is printing choose to invest for short-term gains in those investments without them sinking one cent into a real piece of machinery. These are the short-term capital investors, the investors of portfolios on the stock market. These are the ones that cause havoc on the foreign markets when they come in and out, on the stock market when they come in and out, on the property market when they come in and out.

Economists have long thought hard and long on what to do with these short-term capital flows. Most economists, if not all, have decided against them. How to prevent these short-term capital flows from having a bad impact on the local economy. Sterilisation - how to remove these short-term flows from the banking system. Rise in the reserve ratio of banks - so that banks can create less credit out of these short-term funds. Capital controls - these are the most drastic, how not to allow them to enter the economy at all.

In some countries in the past, Peru, I think - they even try to prevent the entry of long-term borrowings by private companies because eventually they will have to repay and they will chew up their foreign reserves and hence cause a decided deterioration in their exchange rate.

In Malaysia, there was an attempt to sterilise the short-term flows in the 1990s but failed because the central bank wanted to be nice and pay depositors their market deposit rates, and its attempt to recoup from the forex market failed. The second mistake was to use those short-term funds in the stock market for long-term investments. When the funds pulled out, the capital market collapsed. The third mistake was to capital controls to stop funds from getting out of the economy. This mistake was big. It removed all confidence investors has on the government to conduct policies properly. There is nothing wrong with capital controls. If you do not want funds to come in, don't let them in in the first place. If you let funds in in the first place, you cannot trap them and prevent them from leaving. There were other mistakes as well, such as taking the currency out of international trading and not understanding the sophisticated on the forex market. The short-selling that was pushing down the ringgit had to be covered later, and when that happened, the ringgit would have recovered to near its equilibrium which was fairly high because of the fundamental surplus on the trade balance. In any case, Malaysia screwed up and we have not properly recovered since.

The many discussions on the capital flows or controls are interesting but they are by no means simple. It is a sign of the times, that things have been cheapened by their apparent plentifulness - everywhere, things are piling all around us. The only thing we do not seem to have sufficient is green environment for healthy food for us to eat.