Monday, February 25, 2013

Economics & Politics

In light of the impending general elections in Malaysia, it will be interesting to explore the intricate link between economics and politics.

Economists, by training, cannot help themselves but to see the world from the point of view of economics - the rise and fall of industries and sectors in the changing tides of supply and demand between all participants in the economic game. Behind the aggregate numbers that we analyse are private individuals jostling for their place in the sun, those successful trying even harder to be the biggest and those in the shade shouting in desperate voices to be heard, to whoever who want to here, and, hopefully, to be counted. There is also a harsh reality. The poor in the countryside can always resort to eating worms and rodents, but those homeless in towns and cities will have to plunder the garbage bins and sleep in the streets. The town mouse and the country mouse certainly do have different lifestyles but everyone share the same fate in having to labour for their daily sustenance except for the fat cats do live on the returns on capital.

There are in general a handful of distinctive economic systems. We could live in a world of utopia where everybody has everything they want and not having to work is, in literature, commonly called heaven where we do not have a stomach and are fuel efficient and we are nothing but a state of mind. Unfortunately, economists deal only with the material implications of being human and have left this study to a different school of thought. In reality, the nearest we get is where everybody has everything they need (but not want) and they all have to share the burden of labour (and no one is supposed not to work). The concept of this was first described by Karl Marx. But in reality, all material assets belong to everyone but no one in particular, except for an artificial constrict called the party where everybody has a party. The party controls the state which represents everyone and hence the party controls everyone and holds in trust the assets of the people. This now roughly comes under the label of communism. Ideally, of course, the assets should be owned by the people themselves. Ideally, the assets should be shared equally. As we can see in the problem of the distribution of inherited assets in a family, this is seldom a straight forward case and the impact on successive generations is a very interesting phenomenon to observe in society. The problem with assets is that you cannot have your cake and eat it. You cannot consume and save at the same time. You can consume only if you have income. The most socially acceptable manner of earning an income is to work very hard. The socially unacceptable way of earning an income is to ride on the back of others who have to work very hard. Everybody loves to be the monkey on somebody else's back. This is why throughout history is a battle against usury or, in modern parlance, loan sharking. Even charging an interest rate, where the lender takes a first right to an income, is frowned under by some communities. These communities instead champion the concept of venture capital where everybody shares the risks as well as the profits. It is this right of capital that takes the shape of the interest rate that is the driving force of the modern world of so-called capitalism. Capital, an inanimate object, is taken to be object of holder of value precisely because it cannot die, or thought to be undying. In early times, this capital is gold and silver, then gold-backed currency, and when fiat money is introduced, all attention turned to real estate especially in another artificial construct called towns and cities where real estate hold value only because people from the countryside sees towns and cities as mirages rising out from nowhere and then suddenly they glitter with gold, literally. It is where the market economy comes in and people bargain and cut deals and trade. In any economic system, there will be a town mouse and a country mouse, and the two seldom can be the same person because of the difference in the workings of the towns and the countryside. It is a major error in judgement to encourage the country mouse to be envious of the town mouse unless one is really filled with envy and jealousy. The only way to go is to choose one's own path in life and to make the best of it within one's means and ability.

It is quite interesting that, in trying to describe economic systems, we in fact ends up describing political systems, politics being the power play among different groups in the economy as they fight for dominance and control. It is sad when the battle lines are drawn along racial grounds for history has shown us that, when this is race, one unfortunate race or another will have to suffer as a result of deliberate policy. The same goes for religion. The only real issue, from the economic perspective, is between the rich and poor, the capitalists and the workers. When politicians are sided with the rich and the capitalists, this is where real politics comes into play.

I surmise that whichever way we vote, our decision is likely to be less than perfect and we will have to face the consequences of human weakness. There is a fine balancing act between preserving continuity and stimulating freshness. In the end, the voting is likely to be influenced by the underlying economic conditions on the ground. We will see whether the economy is that impeccable when the results are out. Happy voting.


walla said...

It's one of those mind traps to always associate capitalism with democracy.

In one country today that has been practicing capitalism without unfettered democracy, the relative median income accelerated by forty percent over twenty years. Aggregates aside, the standard of living has improved dramatically on the ground.

Maybe what's important is neither the individual nor the state alone but what happens at their common interface.

The villager moves to the city to look for work. Scruffy and clueless, he has had no education and thus can only offer his sinews and hands as a temporary contract worker for a basic wage that is a pittance by any standard.

Without a place to rest, he sleeps at the work site, his tattered bag for a pillow.

Then one day, the owner notices him and plucks a decisive moment out of the interface between individual and state, fate and destiny.

The owner offers him a full-time job as handyman in his office, doubling the basic wage and giving him some money to go get a haircut and change of clothes.

Delighted beyond words, the villager turned handyman makes the first of a thousand steps towards becoming a productive member of a society that awaits his presence amidst the unspoken hope of millions like him.

In the deep darkness of forlorn despair, a small light is lit from which warmth and life begin out of a silent and cold void.

The owner next sponsors his handyman to take a night course as electrical repairman. To the sinews and deft hand work, now add a brain recharged with new knowledge to be used as an earning tool for societal as well as personal improvement.

Meanwhile the state expands and upgrades itself, in turn strengthens and imbues a new dynamism to the interface that astride with individuals.

The boat of life that the villager has fashioned for himself is now lifted higher by the waves of progress brought by the state which in turn achieves its destiny to lift up its peoples.

At the interface, synergies come alive. Because the components of both state and society are congruent in their assessments and objectives.

Today that young man without hope owns his own shop with an admirable throughput.

Because of the compassion of the owner, nothing has become a statement of something.

Man is made for something better than suffering needlessly, endlessly...

walla said...

Over here? In less than eight years from now, we expect to double our debt to one trillion ringgit. That's net of anything we can throw at it to cancel out the liabilities. It's not a good badge to wear. Financing will cost more. It's also dangerous because a man who owes a million ringgit is likely to be more flippant about his debt than one who owes one ringgit.

Especially when his productivity, currency and education standards have all declined in relative values.

And it is particularly toxic when a society is more inclined towards form over substance. Even Keynes would say that's cooking its own goose.

This thing about form over substance has gotten out of hand. It rears its tail because minds choose to crimp themselves and that because they don't want to face up to facts and reality and that because they don't want to appear they are less competent than what they have been and that because they are saddled by fear of some loss and that because they lower their own standards about what will be satisfactory levels of comfort.

It's messy. To erect protectionism outwards and yet achieve only self-imprisonment inwards.

If not recognized and acted upon as an impetus for change, that fear then becomes only an irrational and useless emotion reducing both new options and the means to new options, ending in loss of hope which destroys motivation and blinds out new opportunities for honest and fresh effort to overcome old hurdles.

And when form over substance is subscribed even in religions, the final diagnosis may be written and salted away for future generations to study how fear leads to stupidity.

The a's call their God 'A'. Let's accept it is unique to their faith. The b's also call their God 'A'. Let's say the first and second A's don't have subscripts that will distinguish them. We also note that the generic term God can be denoted by a term called 'B'.

The solution is simple. Let's see if blogspot's character limits will allow for it to be enunciated clearly

The solution is as follows: No b's can utter A in the presence of a's. By the same token, no a's can utter the term B in the presence of b's.

Since neither a's nor b's will realistically meet, the protocol formula offered above will work. Since the rules imply either can do whatever they want in the absence of the other, it is a status quo that moves but remains stationary.

Note that no a would be seen opening a holy book of b, and so what is written in it should not be subject to debate. If it is raised, then b can contend a has no recourse to require b to use B exclusively. And vice versa.

That should convince one and all bimodal resolution can be achieved. If one uses that thing called brain.

walla said...

So the limit was indeed not breached. By an Unseen Hand, it is now apparent.

This post, for that villager made good. Also for his State. Most of all, for the owner who had helped him up.

walla said...

The bromide at GE13 should be this:

"whether the components of both state and society are congruent in their assessments and objectives".

If state and society see differently their assessments and objectives, sayonara, auf wiedersehen!

walla said...

We too have our own villager made good.

He said he came from a humble background. He started selling insurance, walking the streets of the city day and night. The only asset he had was he knew how to speak english.

One day the break for him came. A fast food chain asked their local consular official here who he knew could be a business partner to introduce their products. The consulate office happened to be in the same building as the villager turned insurance salesman who had become friends in the course of daily seeing each other.

Needless to say, the officer being a lazy fella just introduced the salesman to the fast-food chain who proceeded to award him the franchise if he could put up the capital.

It happened the salesman also knew the son of the AG at that time. That contact in turn knew the son of another man. A quiet man called Diam.

So the capital was advanced and the franchise started. When the pond is small and the fishes big, they will inevitably rub scales. Thus one thing led to another. Diam introduced the salesman now restauranteur to another man. One who was said could walk on water.

This man was extraordinary. He had become politically omnipotent by the simplest of tricks - playing on a single mass herd emotion. Fear. He was so good at it even the highly educated, learned and holy reading this now still believe in the exactitude of his sincerity. Whatever that still means.

In any case, the man awarded one of the most valuable permits to our villager. A gaming license.

After that, the doors of wealth opened all the way. From insurance to restaurant to gaming and next to retail construction. A gigantic building was erected on prime land in the city, playing on the mind of the man for something iconic to erase the apparent anglo-saxon slights embedded in his own psyche.

In the midst of putting up the place, the crisis came and a huge credit crunch fell on the gamer's empire. He sought help from his benefactor who then went to Parliament and literally engineered a bailout using public funds. The empire was saved, and grew even higher on the wings of patronage.

The wahhabism of faith elsewhere has been transmuted into the sahibbism of economic folly here. And that's 'economics & politics 101'.

Lately, the villager turned billionaire engineered his own transformation. He gave twenty million to voluntary organizations after pledging millions to education. It is also said that another two hundred million has been pledged to his benefactor's cause for the election campaign due to start.

If that be so, he has valuated ten times more the econo-political cause of his political master than the socio-voluntary causes of the organizations thankful for his charity and working for the plight of other men, women and children of likewise humble backgrounds.

walla said...

Now, the question (5 marks). Did he on the whole do the right thing?

A good state would make such a question easy to answer consistently. What is right in one stage will also be carried forward to be right at another consequent stage.

In this particular example, nyet.

He made good on patronage. In effect that is just taking things from others like him to help only him in exchange for future favours now explicated in plain currency terms.

The bailout money was taken from those many thousands who could have been saved. Instead it was used just to save one man's ambition.

His empire also takes money from the desperate and they are desperate because their workplace cannot grow their income to cover the rise in costs.

Their need also fuels something bad; the house always wins, and thousands go into more debt in their vain hope to overcome it using what little they have left.

And the third thing, right or wrong, is to invest more in the same regime that intends to perpetuate the same status quo that will continue to humble millions so that a few can enjoy a better life, for that matter afford to be 'charitable' in exchange for some 'reputation'.

If the status quo is changed which means the two hundred million is given instead to those who really need and not those who intend to use it to buy votes after cutting some out for themselves, wouldn't the gordian knot be finally cut once and for all, thereby ending the charade and hypocrisy that have to be propped up for the so-called expediency of realpolitik?

After all, that sum also came from the same poor desperate hoi-polloi as the sum that was issued out of Parliament.

Right, or wrong? Somehow the other villager appears more sincere and honest.