Monday, April 8, 2013

When Both Promise the Same

If, for example, both opposing parties make essentially the same promises, then, the interesting question is what is the difference?

The difference will be (1) whether all the promises can be fulfilled at the same time, and (2) the style by which the promises will be fulfilled.

In making similar pledges, whether achievable or not, the conclusion is that there is really no disagreement over the nature of policy anymore. Specifically, both have zeroed in on the voters are individuals - rather than as businessmen or investors or professionals or workers - and the promise is to make life easier for everybody, especially during such trying times.

As economists, we know that in trying to soften the blows on individuals, the brunt of the adjustment will be undertaken by government spending which means that, other things being equal, the government deficit will enlarge. An enlarging government deficit is a contentious issue now and this has got to do with how the central bank is trying to keep its monetary policy in balance - a topic that is very carefully left out by all policy discussions around the world which is being inundated with the quantitative easing (QE) ideology.

Note that it is interesting to observe in reality how, after the endless printing of money, the end of the printing of money - when its creditors refuse to lend any more for a small-country central bank - will result in the collapse of the banks and the evaporation of their customers' deposits in varying degrees.

Unless, of course, the government tries to raise its revenue by raising taxes, other things being equal. If income growth and job creation is an issue, then it is inevitable that income tax will be left alone or cut, and the burden of the government budgetary balance then befalls the consumers. For those who are badly brought up in economic theory, they will suggest an increase in the consumption tax.

If this really is the case, then we are going round one big circle or trying to help the consumers by pushing the  consumers. This circle points to the problem of income growth which I think both parties have not been very good at elaborating. Or, if I may think in nastily, that they think that growth can be induced by more government spending which is the last order of business in stimulating growth.

The crux of the matter when the general public raises issues concerning corruption, crime, education and language is really about building the human and social capital of the nation - after having piled up the financial capital with cheap easy credit and empty buildings on government spending. Solving traffic problems is not about commuters only but about the efficiency of logistics. There is a whole discussion on economic efficiency which has been overlooked especially we are talking about elevating ourselves from a middle income nation to a high income nation.

So, are we being stuck in the middle income trap? Are we suffering from mid-life crisis? If the nation is like an individual person, I would say that Malaysia, after 56 years of independence (after some foreign elite), is now suffering from a middle-age spread. Poverty is a thing of the past for most (those who reminisce their poor old days), whilst new forms of poverty are emerging, and those of us with a house or some of us with houses would now wonder what to do with the time on our hand (apart from thinking how clever we all are about solving the problems of our world except those of our own minds). We may even discourage our children from working "too" hard, for "it is not worth it." Our skills extend sideways - how to multiple the same old things we had done, but repeating them in new environments (like overseas). We simply refuse to invest, in putting our resources back into our own system so that we can do the same things better (with less drudgery) or to do new things. We have all become capitalists, putting our money and time into ventures that require other people (modern slaves) to put in the effort and pull in the cash. This is where the services industries are the worst, especially if we venture into casinos, tourism and all forms of services (except quality time with our own family members or friends). In these days of inflation (some would argue "Inflation, what inflation?"), the future of the younger generation is being forfeited so that the old and self-satisfied can rest on their laurels. Instead of building more buildings and more roads, it may be better if projects are being created to put the skills of the young and talented to work. If we create an environment of transitory wealth creation through trading of unproductive products such as bad houses in bad locations, it is no wonder that, after a prolonged period, the young gives up putting an effort and mentally switched off and merely staring at that blinking screen on their palms.

So, which style will prevail after the election results are out?


walla said...

Some may contend that technically we have been released from the middle income trap. They may even helpfully suggest the present slew of economic transformation projects as playing a hand to provide the release lever.

However the memory remains fresh how temperatures suddenly ignited when ron-95 was sold sans subsidy not too long ago.

The same memory also reflected on the numerous real-life examples posted in cyberspace where irate citizens asked to change their lifestyles broke down their monthly household expenses just to show how their entire monthly earnings had simply dissolved before the end of each month just to pay for basic city life subsistence.

So one cannot be faulted for asking much has changed since those projects were announced? One suspects, little if any for the majority. Except for those in specific vote deposit positions, people of the private sector are still tied down to basically static incomes but rising costs in an environment where entire lives are tied to mundane careers and mortgages. For the majority steep in household debt and living only at the pleasure of mr credit card, the middle income trap is as real as those who think otherwise but only because they are holding politically safe and comfortably paying posts.

And if one removes subsidies especially on fuel items, the spike in energy costs with their negative multiplier effects will just topple over many businesses. So much for the competitiveness of our enterprises, something easy to overlook except when we note how many employers had risen against the minimum wage ruling.

This non-competitiveness all around will soon find another example in the removal of excise quota on palm oil. While there's some hope it will bring about closer parity with the export price over at one neighbor, the more valuable lesson is actually about the need to be in tune with change fast enough to stem unnecessary loss of not just revenues of the day but also the market sources of revenues of the future.

walla said...

Which comes to the matter of change.

The present caretaker government is asking voters not to change the government. In the same breath, it is asking voters to return it so that it can fight the scourge of corruption, the biggest common internal threat to all emerging markets especially new democracies.

The voters however are finished with governmental lip services. What exactly has the incumbent been doing about big ticket corruption all these past five years since the last elections, they asked while already knowing the answer that thieves cannot be policemen at the same time.

And that provides the answer to the question posted on the difference between essentially the same promises by opposing parties. The incumbent has had too many chances and failed all of them. The corrupt in their midst are getting away with public property. The challenger is yet untested. It should have one chance to bring about real change and make the difference a reality. No?

The lateral retort to that is a counter-question, namely how can the challenger comprising three different mandates federally govern in a united way.

The response to that counter-question can also be lateral. Namely, how can an alliance basically shown to be monoracial in vested interest of one party alone portray itself to represent the plural and multiracial citizenry, especially when the members of that party can look askance at the double standards applied in too many instances, such as a ten minute only allowance for opponent air time and maintaining a deafening silence on assorted charges from travesty of justice to proxy racialism. Yes?

walla said...

So we may now conclude that in addition to middle income trap of the citizen consumer, this country is also suffering from double standards trap of the present government in which case if the businesses of the citizens are to be toppled by weak competitiveness, why should the present government not be toppled on the grounds of bad governance?


walla said...

No government which punishes its own citizens who vote for the opposition should be allowed one day more to rule, let alone another five years.

Such a government can offer four tyres to taxi drivers when it suddenly realized how this group can shape political opinion, and yet it can withhold a few hundred buses from an opposition state government trying to solve traffic woes in the state. Arrogance personified. Yes?

walla said...

It remains to make a small remark regarding the pantheon of pro-incumbent remarks from bank analysts and certain academia. Perhaps it is because one is holding too many shares whose prices have fallen and the other is trying to gain limelight with view to promotions to get out their middle income traps.

Since they are in different vocations, the only common explanation is a certain tardiness with principles. Try and spell out the real measure of economic performance after removing the subsidies while keeping the corruption. Will the situation still look rosy?

walla said...

Against all that as background, we can reflect now the situation of the young.

The productivity of their employing organizations is very low. This means they are underutilized. Which implies they have not been adequately trained to world standards. Which denotes a lack of real quality management. Which suggests hindrances, hurdles and hype are occupying places when they should have none.

And that is all because of resistance to make real changes.

If a government is truly progressive, it will seal its lips and start cracking on real issues.

Governance and competitiveness are real issues. From these duo dangers, everything else emanates and devolves.

Including the couldn't care less attitude coupled to smug self-denial add on a sheer lack of both mental and physical discipline bordering on escapism but for vacuousness.

walla said...

Unless the people of this country are shaken out of their mental and other stupor, this country will never ever realize or achieve its highest and fullest potential.

When one stands still in a tide of forward changes by others, any theory of relativity will suggest one is actually falling backwards, won't it?

Our youths have been torn asunder by some of the stupidest and most backward approaches in national administration which to add double damage, still have the gall to make them think they are actually making progress.

Yet those who really do make progress are invariably those who swim against the tide, growing stronger by their own strength and sacrifice, standing up despite their misery when some government help could have saved many more deserving in all aspects.

This tragedy could have been avoided. It was deliberately neglected.

walla said...

So what style will prevail after the election results are out, it is read asked.

If the incumbent is returned, it will do so no better than the last time, perhaps with only a razor-thin margin. That implies the present caretaker PM will be booted out by the racialists in his midst which will therefore end any remnant semblance of a progressive future that he has only ambivalently been projecting.

In a nutshell, at most lip service and denialism will continue, the resource curse will magnify and the drug of deficit spending will be indoctrinated as standard fare leading to the final wake-up call when the economy folds on itself despite the surrounding splendor of insipid and empty buildings all over the place.

If the incumbent is sent packing, openings will sprout for the young to play real roles to transform this nation from one with too many charades and too much form to one with integrity and substance. In which case those presently in the incumbent can switch camp and lend their knowhow, making the transition smoother, even for a three-mandate coalition.

Then... any promise becomes doubly achievable.

walla said...