In high-income economies, the locals are generous in welcoming immigrants because they feel they have a lot to share as well as the immigrants will bring in new opportunities to trade things and ideas.
In very traditional communities, especially ones that have established themselves for centuries, they must have, after all those years, found their own perfect little worlds in their own perfect micro equilibrium economically and socially. If surrounding resources are plentiful and they are all willing to work hard, their communities will have grown. If not, their communities will be modest but nonetheless thriving.
By being willing to accept perfect strangers and new ideas, the locals must be in want of a new world which they must have imagined would be better. Certainly, there would be a core of elite who would be in control of the local resources and situation traditionally. Locals who accept new ideas must be those who are in want of establishing their own little niches in their respective local communities. From a stable and probably stagnant situation, a new and more dynamic situation will be created with the new influx and hence an unstable (not necessarily destablishing) situation. It is this disequilibrium which creates the new forces for change, as the immigrants and the hungry locals work together to do this that no one has ever done before.
Who is a local and who is a foreigner is a story that can only be told properly after a long evolution as time will somehow reduce the major differences and reduce everyone to the same basic features. In the immediate term, there is plenty of scope for discrimination and the ones who are likely to suffer are those who probably have very little power to fight that discrimination - the young and old offsprings of inter-racial marriages. These sufferers are a product of the locals and the immigrants and it is a shame that everybody has to suffer as a consequent of narrow mindedness. These are the silent minorities whom the extreme left and extreme right of the spectrum of colours will equally condemn as the non-pure. It is quite interesting to realise that, once discrimination rears its ugly head, it is unlikely that the capacity to discriminate will be discrete - it is likely to be part of the discriminator's indiscriminate self.
Hitler's discrimination against the migrants was that they were rich in the eyes of the local poor because of the mismanagement of the local economy (as a result of war) and claiming that the superior locals must regain their rightful place in their own fatherland, he set about obliterating the rich migrants. His discrimination policy suffered the usual problems of trying to make discrimination - it is easily to identify total immigrants, but what do you do with children whom one of their parents is a local as well as immigrants who have previously being recognised by the state for gallant service to that state. When his schemes eventually failed, as he became convinced himself to have all the solutions to all the problems, he started blaming his inner circle whom he used to trust. His final madness was when he felt so despondent with his own people that he felt that they should all be put to death because he considered them to be useless (presumably to his madness).
A nation of everybody must be a nation of people with generosity in their hearts to accept people and their ways which are not similar to their own. Malaysia has prospered because of the generosity of the Malay people (and the orang asli) as well as the generosity of the natives of Sabah and Sarawak. Their willingness to accept foreigners and make them welcome and feel at home is a major asset of theirs whom Chinese and Indians and others could well learn for their own good. Of course, because of the great differences in background and circumstances, their different worldviews produce different economic results. The most logical conclusion must be the infusion of the positive elements of all cultures that will bring out the best of the communities that have now decided to live together in perfect harmony. It is perfectly natural as well to set about identify one's own strengths, but it must immediately be accompanied by the identification of the strengths of others as well and learn from them that the world will become a better place than the circumstance we find ourselves in.
If we look at ourselves in the perspective of the long history of the world, we are nothing but the present generation, each of us regardless of our background and profile. I think each generation should make its own decision of the life they wish to live and they should live a life that is different from the parents'. In this respect, the constant change of leaders as their generational days in the sun is over is good and necessary. The old leaders, especially those who have failed in imposing their mad ideas on us before, should gracefully retire from public life (i.e., absent from the media) and let the young leaders brew their new concoctions of ideas, however wrong they may be (and who knows). We have repeatedly seen this in history and the world today is no worse than the world yesterday (whatever people may complain).
The unfairness of discrimination is that as generations change and as each newer generation becomes more similar to each other especially within a community, the lack of social and economic and political mobility merely creates a problem for the future when a outlet is necessary to release the tension of discrimination. Malaysia has started on a good footing but when on to a wrong second foot. Hopefully, the third foot will be placed plainly and squarely on the same soil when we all in Malaysia eat and excrete.
Monday, March 4, 2013
Wednesday, February 27, 2013
In Praise of Immigrants
High income economies have a history of accepting immigrants with open arms, make them feel at home so that they can devote their minds and hearts and souls to making the best of the situations they find themselves in and hence in the end contributing to providing goods and services to the respective economies and the rest of the world.
The concept of the immigrant is the anti-thesis to the concept or thesis of the citizen. The citizen is the legitimate resident of the city, so says the people of the city, and others are considered as slave labour or, in modern terms, as immigrants. In the old days when the city was protected by the city wall, a stranger could be welcomed as a citizen by the mayor with the presentation of the key to the city so that he could go in and out of the city at ease. All others had no ease of movement and they were considered as slaves or contractual labour until they were released by their masters. Even Athens, the seat of democracy, had slaves in its economy and Aristotle devoted some energy in justifying. But it is clear when there is a elite class that seeks to further its position and pleasures in life should employ slaves or migrant workers to labour for them, arguing that they are cheaper and more hard working. It is true that anyone who has left his or her home and friends and family must do so after having resolved within himself or herself that only by making such extreme sacrifice that there is going to be a chance of earning and saving enough to accumulate sufficient capital to provide a head start for a better life at home, if he or she should get home. This must have been the initial thought and intention of first generation immigrants - to work hard, save hard and then go home, for every human being must miss home and wish to return.
The immigrant worker must first work very very hard if he or she can have any chance of achieving his or her goal. Hard work, or extreme hard work, must be the central characteristics of anyone, however qualified, who happens to have the misfortune of work away from home, even if in another city in the same country, just because there is no suitable job at home. It is therefore not just the immigrant from another country but the immigrant from another town in the same country who will work very hard to justify the sacrifice made by leaving home. "I am here to make a success of myself." In contrast, the locals in the comforts of their own homes with their parents and their families, even if they are of modest means, will not be inclined to think out of the box and introduce changes to their traditional way of life which has been handled down for centuries and being upheld and defended by the elders of the respective villages. In traditional and usually farming communities, the key to a successful way of life is working together, helping each other, praying for good weather and sharing everything they have - for the weather is an absolutely unreliable thing. The migrant has nothing but energy (if he or she is fed well) as well as honesty and integrity (if the master shall decide your future). Because they are usually clustered in a relatively small area, the only thing they could do is to trade and make deals with the nearby rural villages as well as the markets in the rest of the world, usually their respective initial home land where they have the market information. As the towns grow, more buildings are being put up to house the growing population and, as property prices rise, all the urbanites simply have to work harder and harder just to pay for their food and accommodation.
The growth of productivity of an economy has mostly to do with the growth of the towns and cities for, as we all know, the productivity growth of traditional agriculture is the lowest among the three major sectors of the economy (plantation/manufacturing and services). It is therefore a strategic error in economics when the politics call for the ownership of industries to be nationalised (for want of a better term) so that those assets will be in the hands of the locals. With a change in ownership, it is presumed that the industrial or market linkages remain the same and that everything will go well into the future, provided that there is no trade or business cycle that the world economy has to deal with and that the businesses are in a position to adjust and adapt to most often increasing challenging times. On a static basis, an acquisition of an asset appears to have accomplished instantly an objective who would have taken many years to starting from scratch.
Worse still if the intention of the politics is to chase away the immigrants who have trained themselves to survive even under the most trying of times. They can withstand the pressure and do not crack. These are the cornerstones of a growing economy, people who work extremely hard, eschew themselves from unnecessary consumption, save as much as they can, learn to invest smartly with a trained insight into the future direction of things and persist in making the best of even a lousy situation. They have nothing in the first place and they have nothing to lose and they go all out for it (to achieve their vision) - with a passion and a devotion that must be total.
The most effective way to sabotage such an economy, an economy built on the international movement of finance and human capital, is to threaten the immigrants with insecurity. The insecurity has the first impact of making the immigrants work even harder and save even more because they can no longer trust the politics, and this will accentuate the disparity between the towns and the villages in terms of asset accumulation. There could be acceleration of property development and trade, but the underlying current is one of safeguarding of one's investments which would in modern times be called the "outward flow of investments." It is an evident economic truth that when there is a loss of confidence in an economy, there will be an increase in the supply of money and an increase in the outflow of funds.
Malaysia is now undergoing its second wave of immigration (some may even argue a third wave) and I would argue that it is a good thing. There are of course major implications for the politics. But purely from the view of the economist, we should take advantage of this great presence of humanity in our midst and welcome them properly by ensuring that they are properly processed and documented, that there is a clear immigrant policy as it is being implemented (rather than to have a formal policy to frustrate the law-abiding ones and a clandestine one to entertain the underclass). There should proper planning for housing and education and healthcare as well as the enforcement of law and order (not excluding jay walking and all forms of thievery).
For all we know, Malaysia may somehow find itself to be probably one of the most multi-cultural societies in the world, with its rich display of many different facets of life in all its bright and varied colours. Malaysia could be the most admired society with a unique preservation of the Malay culture, the Chinese culture, the Indian (or they say sub-continent) culture as well as the indigenous cultures (in Sabah and Sarawak and, some, they say in the Peninsula as well). A good government embraces all these cultures as its own and it should. After all, Malaysia is probably, in my estimation, the first or among the first to grapple with the issues concerning a multi-cultural society and its relative peace must reflect the great tolerance of its peoples. I think the men and women on the street accept this. It is probably those desperate for power who are inciting pockets of different groups to go against each other. This would be most unfortunate should this go unrestrainted in the public domain which has a tendency to overblow issues.
On an even more philosophical note, we are all, after all, just passing by this way and it is good fortune that we have a chance to meet or interact and we should make this the best moment all the time for all of us. In this sense, we are all immigrants of one form or another.
The concept of the immigrant is the anti-thesis to the concept or thesis of the citizen. The citizen is the legitimate resident of the city, so says the people of the city, and others are considered as slave labour or, in modern terms, as immigrants. In the old days when the city was protected by the city wall, a stranger could be welcomed as a citizen by the mayor with the presentation of the key to the city so that he could go in and out of the city at ease. All others had no ease of movement and they were considered as slaves or contractual labour until they were released by their masters. Even Athens, the seat of democracy, had slaves in its economy and Aristotle devoted some energy in justifying. But it is clear when there is a elite class that seeks to further its position and pleasures in life should employ slaves or migrant workers to labour for them, arguing that they are cheaper and more hard working. It is true that anyone who has left his or her home and friends and family must do so after having resolved within himself or herself that only by making such extreme sacrifice that there is going to be a chance of earning and saving enough to accumulate sufficient capital to provide a head start for a better life at home, if he or she should get home. This must have been the initial thought and intention of first generation immigrants - to work hard, save hard and then go home, for every human being must miss home and wish to return.
The immigrant worker must first work very very hard if he or she can have any chance of achieving his or her goal. Hard work, or extreme hard work, must be the central characteristics of anyone, however qualified, who happens to have the misfortune of work away from home, even if in another city in the same country, just because there is no suitable job at home. It is therefore not just the immigrant from another country but the immigrant from another town in the same country who will work very hard to justify the sacrifice made by leaving home. "I am here to make a success of myself." In contrast, the locals in the comforts of their own homes with their parents and their families, even if they are of modest means, will not be inclined to think out of the box and introduce changes to their traditional way of life which has been handled down for centuries and being upheld and defended by the elders of the respective villages. In traditional and usually farming communities, the key to a successful way of life is working together, helping each other, praying for good weather and sharing everything they have - for the weather is an absolutely unreliable thing. The migrant has nothing but energy (if he or she is fed well) as well as honesty and integrity (if the master shall decide your future). Because they are usually clustered in a relatively small area, the only thing they could do is to trade and make deals with the nearby rural villages as well as the markets in the rest of the world, usually their respective initial home land where they have the market information. As the towns grow, more buildings are being put up to house the growing population and, as property prices rise, all the urbanites simply have to work harder and harder just to pay for their food and accommodation.
The growth of productivity of an economy has mostly to do with the growth of the towns and cities for, as we all know, the productivity growth of traditional agriculture is the lowest among the three major sectors of the economy (plantation/manufacturing and services). It is therefore a strategic error in economics when the politics call for the ownership of industries to be nationalised (for want of a better term) so that those assets will be in the hands of the locals. With a change in ownership, it is presumed that the industrial or market linkages remain the same and that everything will go well into the future, provided that there is no trade or business cycle that the world economy has to deal with and that the businesses are in a position to adjust and adapt to most often increasing challenging times. On a static basis, an acquisition of an asset appears to have accomplished instantly an objective who would have taken many years to starting from scratch.
Worse still if the intention of the politics is to chase away the immigrants who have trained themselves to survive even under the most trying of times. They can withstand the pressure and do not crack. These are the cornerstones of a growing economy, people who work extremely hard, eschew themselves from unnecessary consumption, save as much as they can, learn to invest smartly with a trained insight into the future direction of things and persist in making the best of even a lousy situation. They have nothing in the first place and they have nothing to lose and they go all out for it (to achieve their vision) - with a passion and a devotion that must be total.
The most effective way to sabotage such an economy, an economy built on the international movement of finance and human capital, is to threaten the immigrants with insecurity. The insecurity has the first impact of making the immigrants work even harder and save even more because they can no longer trust the politics, and this will accentuate the disparity between the towns and the villages in terms of asset accumulation. There could be acceleration of property development and trade, but the underlying current is one of safeguarding of one's investments which would in modern times be called the "outward flow of investments." It is an evident economic truth that when there is a loss of confidence in an economy, there will be an increase in the supply of money and an increase in the outflow of funds.
Malaysia is now undergoing its second wave of immigration (some may even argue a third wave) and I would argue that it is a good thing. There are of course major implications for the politics. But purely from the view of the economist, we should take advantage of this great presence of humanity in our midst and welcome them properly by ensuring that they are properly processed and documented, that there is a clear immigrant policy as it is being implemented (rather than to have a formal policy to frustrate the law-abiding ones and a clandestine one to entertain the underclass). There should proper planning for housing and education and healthcare as well as the enforcement of law and order (not excluding jay walking and all forms of thievery).
For all we know, Malaysia may somehow find itself to be probably one of the most multi-cultural societies in the world, with its rich display of many different facets of life in all its bright and varied colours. Malaysia could be the most admired society with a unique preservation of the Malay culture, the Chinese culture, the Indian (or they say sub-continent) culture as well as the indigenous cultures (in Sabah and Sarawak and, some, they say in the Peninsula as well). A good government embraces all these cultures as its own and it should. After all, Malaysia is probably, in my estimation, the first or among the first to grapple with the issues concerning a multi-cultural society and its relative peace must reflect the great tolerance of its peoples. I think the men and women on the street accept this. It is probably those desperate for power who are inciting pockets of different groups to go against each other. This would be most unfortunate should this go unrestrainted in the public domain which has a tendency to overblow issues.
On an even more philosophical note, we are all, after all, just passing by this way and it is good fortune that we have a chance to meet or interact and we should make this the best moment all the time for all of us. In this sense, we are all immigrants of one form or another.
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.
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.
Tuesday, February 19, 2013
Output, Demand and Structural Issues
I suppose the current economic problem of the lack of growth in the global economy in general could mean that the understanding of professional economists of their subject is inadequate or is not suitable for the problems we now have at hand. The pricing mechanism of a market economy does not seem to give the needed signals for economic adjustment because of the difficulty of prices in the real world to adjust downwards - first of nominal wages and of nominal property prices - which are reflected in unemployed workers and unoccupied buildings. The Keynesian solution of governmental indebted spending has led to a balance sheet problem. With governmental budgetary constraint, the monetarist solution to the Keynesian problem by printing of more fiat money has led to an increased in consumer indebtedness or the so-called sub-prime problem.
The way to think about these problems is to figure out whether it is fundamental a supply problem or a demand problem. With prices failing to adjust, we have no way to tell. Manufacturing companies do not lower prices to clear stocks; they try to induce demand with offers or they simply stop production and lay off workers. There is a pricing strategy that has greatly to do with the image of quality (too cheap means too inferior) as well as that which tries to maximum profits to make up for the other loss-making models. For the firms to keep their staff, it is clear that their view of the world is that there is insufficient demand.
The second layer is the technological explosion which we are seeing at the manufacturing frontier. Convergence of technologies and miniaturisation are creating new products at lower prices and at such great speed of innovation that waves and waves of new products are coming onto the market all the time. It is tempting to say that there is an overproduction here. But this is the classic case of a dynamic market that is constantly pushing forward the production frontier. In a perfectly, structured economy, this is a good case. Workers are paid sufficiently well in line with their productivity growth so that their prevailing wages can take up the new supply and there is constant investment by the firms as they compete for supremacy.
In reality, the world is less than perfect and I wish to suggest that there are structural problems which do not allow the global economy to continue as it is without change.
It dawns on me when listening to the EU argument on transfer pricing by multinationals that, perhaps, there is now a new class of firms which operates across nations which demand tax-free status as well as incentives from poor governments which are anxious to create jobs for their people when the nations are deprived of ideas of how to grow investments indigenously. Part of the incentives is that there should be no labour unions so that their profit expectations will not be disappointed. It is a honky-dory world of multinational investments now famously called foreign direct investments, and the only risk they fall is a global recession when all bets are off and they are shown to be as incompetent as anyone else, even for their bullying power.
An FDI driven economy means that the economy is already incapable for endogenous investment. The only way the government knows how, according to conventional economic wisdom, is to go for government spending and monetary expansion, firing on both cylinders. The massive inflow of cash into the economy creates inflation. As nominal wages rise, workers are caught in higher income brackets in what is called the income tax bracket creep where the wage rise which is supposed to be adjusted for inflation is also taken a cut by the taxman. In such an economy, the disposable income of the ordinary consumers may not rise as much as expected. It could probably be world for economy without FDI as more monetary injections may be required to push for economic growth.
But it is interesting to realise that in a world dominated by multinationals, we may be facing a situation plagued by an oversupply as well as insufficient demand at the same time as a result of a bad policy mix of tax-free FDIs and fiscal and monetary expansion.
It may be difficult to get policy makers to think in terms of developing small businesses and local heroes. Neighbourhood development where a village becomes dynamic with small little services such as the baker and the butcher plus coffee shops and restaurants as well as financial services etc may be the way to develop further economic systems, even of megacities which may be a linkage of small metropolises. London is famously known to be a series of villages linked together. Kuala Lumpur is also another one composed of various villages. Putrajaya is not.
There may be a need also for the small financiers to come back and recapture the money world. We have also known the disruptive consequences of the amalgamation of banks in Malaysia into a few big giants which care mainly for the big boys and totally pushed the small individuals into the dustpan of consumer credit where they find ways of gearing the poor consumers to the hilt until they are choked of all their cashflow. If there is one cause for the asset inflation in Malaysia, it is the behaviour of unscrupulous behaviour of untrained bankers.
Whatever the World Bank may pretend that they know about how to develop the world economy, which they are not, their idea that a high income economy is made up of megacities such as London, New York, Tokyo, etc is bogus theorising. It may be true where all services are monetarised. But in small communities, where people do things for each other because they want to, it is the balance of a sufficient cash income and a high standard of living (not cost of living) that should be the focus of global economic development in a world that is livable for 95% of the people of the world. It is incredible that a few outliers should be cited as how the whole should emulate.
There is simply too much politicising of life in Malaysia. I happen to be out late last night for a quick supper in a remote part of the world and I saw and heard this native man obviously happily drunk but ranting with references to all politicians whose names have been well publicised by the media. Even in his happiest inebriated state, his little mind was filled with all things currently political. What a shame. Is modern life in Malaysia so reduced to be determined by the shenanigans of the untrusted few?
There is a flaw to the big business thing that is crawling into our little world. We have a sick old man trying to impose his misguided view of the world on the unfortunate devotees, with jealousy and hatred burning in his heart. We have a hapless incumbent hanging on his claws for dear life. We have the lost souls all looking for a way out of the hole we all are in but are encumbered by our little fears and our vulnerabilities.
One way forward is to simplify our lives. Reduce our needs to the basic so that there will be reduced effective demand for things that are polluting the world. Then there will be no economies of scale for the multinationals. There will be sufficient resources left for our daily sustenance.
The way to think about these problems is to figure out whether it is fundamental a supply problem or a demand problem. With prices failing to adjust, we have no way to tell. Manufacturing companies do not lower prices to clear stocks; they try to induce demand with offers or they simply stop production and lay off workers. There is a pricing strategy that has greatly to do with the image of quality (too cheap means too inferior) as well as that which tries to maximum profits to make up for the other loss-making models. For the firms to keep their staff, it is clear that their view of the world is that there is insufficient demand.
The second layer is the technological explosion which we are seeing at the manufacturing frontier. Convergence of technologies and miniaturisation are creating new products at lower prices and at such great speed of innovation that waves and waves of new products are coming onto the market all the time. It is tempting to say that there is an overproduction here. But this is the classic case of a dynamic market that is constantly pushing forward the production frontier. In a perfectly, structured economy, this is a good case. Workers are paid sufficiently well in line with their productivity growth so that their prevailing wages can take up the new supply and there is constant investment by the firms as they compete for supremacy.
In reality, the world is less than perfect and I wish to suggest that there are structural problems which do not allow the global economy to continue as it is without change.
It dawns on me when listening to the EU argument on transfer pricing by multinationals that, perhaps, there is now a new class of firms which operates across nations which demand tax-free status as well as incentives from poor governments which are anxious to create jobs for their people when the nations are deprived of ideas of how to grow investments indigenously. Part of the incentives is that there should be no labour unions so that their profit expectations will not be disappointed. It is a honky-dory world of multinational investments now famously called foreign direct investments, and the only risk they fall is a global recession when all bets are off and they are shown to be as incompetent as anyone else, even for their bullying power.
An FDI driven economy means that the economy is already incapable for endogenous investment. The only way the government knows how, according to conventional economic wisdom, is to go for government spending and monetary expansion, firing on both cylinders. The massive inflow of cash into the economy creates inflation. As nominal wages rise, workers are caught in higher income brackets in what is called the income tax bracket creep where the wage rise which is supposed to be adjusted for inflation is also taken a cut by the taxman. In such an economy, the disposable income of the ordinary consumers may not rise as much as expected. It could probably be world for economy without FDI as more monetary injections may be required to push for economic growth.
But it is interesting to realise that in a world dominated by multinationals, we may be facing a situation plagued by an oversupply as well as insufficient demand at the same time as a result of a bad policy mix of tax-free FDIs and fiscal and monetary expansion.
It may be difficult to get policy makers to think in terms of developing small businesses and local heroes. Neighbourhood development where a village becomes dynamic with small little services such as the baker and the butcher plus coffee shops and restaurants as well as financial services etc may be the way to develop further economic systems, even of megacities which may be a linkage of small metropolises. London is famously known to be a series of villages linked together. Kuala Lumpur is also another one composed of various villages. Putrajaya is not.
There may be a need also for the small financiers to come back and recapture the money world. We have also known the disruptive consequences of the amalgamation of banks in Malaysia into a few big giants which care mainly for the big boys and totally pushed the small individuals into the dustpan of consumer credit where they find ways of gearing the poor consumers to the hilt until they are choked of all their cashflow. If there is one cause for the asset inflation in Malaysia, it is the behaviour of unscrupulous behaviour of untrained bankers.
Whatever the World Bank may pretend that they know about how to develop the world economy, which they are not, their idea that a high income economy is made up of megacities such as London, New York, Tokyo, etc is bogus theorising. It may be true where all services are monetarised. But in small communities, where people do things for each other because they want to, it is the balance of a sufficient cash income and a high standard of living (not cost of living) that should be the focus of global economic development in a world that is livable for 95% of the people of the world. It is incredible that a few outliers should be cited as how the whole should emulate.
There is simply too much politicising of life in Malaysia. I happen to be out late last night for a quick supper in a remote part of the world and I saw and heard this native man obviously happily drunk but ranting with references to all politicians whose names have been well publicised by the media. Even in his happiest inebriated state, his little mind was filled with all things currently political. What a shame. Is modern life in Malaysia so reduced to be determined by the shenanigans of the untrusted few?
There is a flaw to the big business thing that is crawling into our little world. We have a sick old man trying to impose his misguided view of the world on the unfortunate devotees, with jealousy and hatred burning in his heart. We have a hapless incumbent hanging on his claws for dear life. We have the lost souls all looking for a way out of the hole we all are in but are encumbered by our little fears and our vulnerabilities.
One way forward is to simplify our lives. Reduce our needs to the basic so that there will be reduced effective demand for things that are polluting the world. Then there will be no economies of scale for the multinationals. There will be sufficient resources left for our daily sustenance.
Wednesday, February 6, 2013
Of Culture & Identity
The recent spate of festivities in Malaysia, which gets big bosses quite upset over productivity or lack of, is a good clue for one to contemplate on culture and sense of identity. This is an issue I have battled in the initial years of my thinking life.
When I was young, I grew up in an environment where poverty is the biggest enemy and the only solution for my parents was to work hard and save, and for the younger generation like me then, according to my parents, was to study hard and excel. These are the basic traits that define the culture I was immersed in, as I saw everybody doing that. To be good, in all sense of the word, is my motto in life. This is translated into my quest to form good habits.
So the only criterion by which I was told when mixing around was not to mix with "bad" people and to mix only with "good" people. This is translated, in working life, to work for "good" companies, as I had decided quite early in life not to get into business. It must be challenging, in business, to walk the straight and narrow and not tell lies, both white and black, while in pursuit of a profit. How do you get round to charging more than the cost without feeling guilty. Are you sure the things you sell are really that good, or are you simply like to be extremely persuasive even to friends in order to make a sale? Probably, the most morally acceptable reason for trying to make a profit is that one has to live and one has to feed one's family. Nobody can argue over the urgency and primacy of personal survival - the sense of self preservation.
I cannot handle this profit issue so I rather settle for the more mundane stuff of earning a salary. It is quite easy to work very hard, because we have been trained from very young to work very hard. Working hard is a good habit to form for any individual. Working hard gives one a sense of being, a sense of being alive. You only truly know that you are alive when you sweat, when your muscles ache, your brain hurts, and only after you have been through the strain and stress do you finally get a sense of relief and calmness deep inside oneself.
When I first started out to work and the salary was low, I could not help feeling that I was being underpaid for the hard work that I was putting myself through. The only justification for my anguish was that I had to live and I was just scrapping by. But I wasn't feeling a sense of being deprived because I had been taught to get by in life with very little, but it was such a chore having a budget all the time just to make sure that there was no major gap between the last dollar and the next dollar. Somehow life passed by without any experience of starvation.
The only way to fight for more dollars the legitimate way is to work smart, or rather, to work hard and to work smart. One has to think, to strategise, to deliver services that people are willing to pay good money for. There is no harder work than trying to play god by looking into the future and tell the fortune that is yet to come. While it is usually called prediction, to me, it is more like trying to create certainty or reduce uncertainty over the unknown future which is nothing more than trying to allay fears in the hearts of ordinary human beings. It is in trying to provide assurance - but not in the insurance sense.
In time, of course, I learned that the world is quite predictable because human beings are creatures of habits, good or bad, and they will carry on doing the same old things over and over again, because they have really nothing better to do, until they are tried of it and then try something new. Life can be quite tiresome sometimes, but others call it perseverance. We doggedly prod on. This is why I advise my children to pursue which they have an interest, for then at least the drudgery is minimised and the work itself is self-rewarding, rather than getting into an activity purely on the basis of money for which one wants to demand a lot because one doesn't really like to do it and then to spend all that extra money to de-stress and hope in the end to retire early because one doesn't like the job. To pursue a life that one sees fit is, after call, nothing more than to life.
It is generally acknowledged by students of the theory of money that the urban life we have created for ourselves is an artificial world stimulated by sensory perceptions and motivation by the accumulation of cash and locational spots called real estate or slices of. When we die, there is nothing left but the pile of stones that we vacated as homes for others to use. We are nothing but seeking temporary shelter from the storm until we die. The ultimate question is what do we do while we are waiting for it.
So, the essence of education and the purpose of life, for me, is to use my skills and knowledge to help those who are less fortunate than me. As economist, the only thing to do is to make accurate assessment while means understanding economic systems and behaviour which means understanding human thinking and behaviour which, in the end, understanding what life is all about. Economics, to me, may be nothing more than an artificial system built by people to reduce uncertainty and alleviate fears from their lives - which may be quite impossible. The politicians would like us to believe they can.
I think it is an art to try to live with the barest minimum, just sufficient to achieve all the crucial goals in one's life, save for a beer or two, and to leave the smallest footprint on planet earth. Zen masters just breath. It is therefore incredible that there should be people who think in terms of billions of dollars as a measure of their success and they go around espousing morals and virtues. They should have cut down on their profit margins in the first place. Any way, they do what they do best, while I while away my little spare time tapping little letters and small words and humble thoughts to hopefully some cheer to my readers.
When I was young, I grew up in an environment where poverty is the biggest enemy and the only solution for my parents was to work hard and save, and for the younger generation like me then, according to my parents, was to study hard and excel. These are the basic traits that define the culture I was immersed in, as I saw everybody doing that. To be good, in all sense of the word, is my motto in life. This is translated into my quest to form good habits.
So the only criterion by which I was told when mixing around was not to mix with "bad" people and to mix only with "good" people. This is translated, in working life, to work for "good" companies, as I had decided quite early in life not to get into business. It must be challenging, in business, to walk the straight and narrow and not tell lies, both white and black, while in pursuit of a profit. How do you get round to charging more than the cost without feeling guilty. Are you sure the things you sell are really that good, or are you simply like to be extremely persuasive even to friends in order to make a sale? Probably, the most morally acceptable reason for trying to make a profit is that one has to live and one has to feed one's family. Nobody can argue over the urgency and primacy of personal survival - the sense of self preservation.
I cannot handle this profit issue so I rather settle for the more mundane stuff of earning a salary. It is quite easy to work very hard, because we have been trained from very young to work very hard. Working hard is a good habit to form for any individual. Working hard gives one a sense of being, a sense of being alive. You only truly know that you are alive when you sweat, when your muscles ache, your brain hurts, and only after you have been through the strain and stress do you finally get a sense of relief and calmness deep inside oneself.
When I first started out to work and the salary was low, I could not help feeling that I was being underpaid for the hard work that I was putting myself through. The only justification for my anguish was that I had to live and I was just scrapping by. But I wasn't feeling a sense of being deprived because I had been taught to get by in life with very little, but it was such a chore having a budget all the time just to make sure that there was no major gap between the last dollar and the next dollar. Somehow life passed by without any experience of starvation.
The only way to fight for more dollars the legitimate way is to work smart, or rather, to work hard and to work smart. One has to think, to strategise, to deliver services that people are willing to pay good money for. There is no harder work than trying to play god by looking into the future and tell the fortune that is yet to come. While it is usually called prediction, to me, it is more like trying to create certainty or reduce uncertainty over the unknown future which is nothing more than trying to allay fears in the hearts of ordinary human beings. It is in trying to provide assurance - but not in the insurance sense.
In time, of course, I learned that the world is quite predictable because human beings are creatures of habits, good or bad, and they will carry on doing the same old things over and over again, because they have really nothing better to do, until they are tried of it and then try something new. Life can be quite tiresome sometimes, but others call it perseverance. We doggedly prod on. This is why I advise my children to pursue which they have an interest, for then at least the drudgery is minimised and the work itself is self-rewarding, rather than getting into an activity purely on the basis of money for which one wants to demand a lot because one doesn't really like to do it and then to spend all that extra money to de-stress and hope in the end to retire early because one doesn't like the job. To pursue a life that one sees fit is, after call, nothing more than to life.
It is generally acknowledged by students of the theory of money that the urban life we have created for ourselves is an artificial world stimulated by sensory perceptions and motivation by the accumulation of cash and locational spots called real estate or slices of. When we die, there is nothing left but the pile of stones that we vacated as homes for others to use. We are nothing but seeking temporary shelter from the storm until we die. The ultimate question is what do we do while we are waiting for it.
So, the essence of education and the purpose of life, for me, is to use my skills and knowledge to help those who are less fortunate than me. As economist, the only thing to do is to make accurate assessment while means understanding economic systems and behaviour which means understanding human thinking and behaviour which, in the end, understanding what life is all about. Economics, to me, may be nothing more than an artificial system built by people to reduce uncertainty and alleviate fears from their lives - which may be quite impossible. The politicians would like us to believe they can.
I think it is an art to try to live with the barest minimum, just sufficient to achieve all the crucial goals in one's life, save for a beer or two, and to leave the smallest footprint on planet earth. Zen masters just breath. It is therefore incredible that there should be people who think in terms of billions of dollars as a measure of their success and they go around espousing morals and virtues. They should have cut down on their profit margins in the first place. Any way, they do what they do best, while I while away my little spare time tapping little letters and small words and humble thoughts to hopefully some cheer to my readers.
Tuesday, February 5, 2013
Of Politicians & Promises
Politicians make promises to the people in order to get the power to do as they like for the next four years.
As absolute power corrupts absolutely - the wholesale dismantling of the economy twice - I suppose there is really nothing much to fear, as there is nothing much more to plunder, except the future of our children and grandchildren - by creating widespread inflation and asset bubbles through reckless creation of loans and debts - the last frontier of economic exploits.
The dispensing of freshly printed cash to all and sundry by both sides, ostensibly as a means of partially and temporarily mitigating the adverse effects of all-round inflation such as to help the poor, by nothing but plainly election-centred. Obviously, much is at stake here, not just to the politicians (whom we know will spare no efforts to dominate the world with their own sense of truth), but to our society at large when so many of us are feeling so disenfranchised by a government machinery that is spattered as it tries to keep pace with the developments in our society and the rest of the world. We have never seen a government so out of breath.
Let us not simply put the whole blame of the mess on the current government which, unfortunately, has inherited it from its own elder party-members who now seem to be up to their usual mischief of doing their masterful prognostications through the agency of mediums and the artful application of doublespeak. Big Brother has never been so present in the Malaysian society as today.
The opposition is selling nothing but the anti-thesis. They vow to right every wrong that has happened in the country (restore history?) or is happening in the country (by getting rid of the present government?).
There are many things to do to reconstruct the nation and the national economy.
The reversal of the psychology of the corruption culture will take a bit of time - and this can only be achieved by destroying the monopoly power that has stretched its tentacles to every nook and corner of our society. It is quite clear that at the centre of the corruption is the political structure of collusion to dominant the rest of society. The political structure for absolute political power must be dismantled. The Malaysian mindset has shown itself to be incapable of decency when there is no formal supervision. The current structure of the collective power of the incumbent government and that of the opposition with its own brand of extreme anti-thesis is something that we have to lose sleep over.
The Malaysian economy is now in shambles. So much money has been siphoned out of the economic system that no amount of government debt-fueled injections can hope to revitalised. The vast amount of unidentified capital outflows is a reflection of the severity of the corruption of the government, not necessarily only of the present but of the cumulative effects of the past. With the loss of confidence of the people on the government, there is no choice but private sector to get out in the guise of "outward" investments as allowed by government policy. The private sector has voted that there is no economic future in the country, and foreign countries are seem to have a better future. Banks and other financial institutions have no choice but to ambush and capture the poor and impoverished consumers who find it hard to carry on without mortgaging their future. The current real estate boom is a sham.
I am keenly aware that it can be argued the Malaysian economy of today is as good as it can given the state of the world economy. This is true only when we are hapless. I am arguing that we are where we are as a result of our own doing and we only have ourselves to be blamed and also we are the only ones who should try to fix it.
The restoration of our economic system to a self-sustaining economy can only be done when we put back all our supporting institutions which can act as checks and balances for the excesses that are likely to occur in any democratically-elected majority-based governments. It is this constant balancing act that will put us Malaysians back into an even keel so that we are can, without fear, live our lives in the best way we see fit without harming ourselves and with the self-assurance that our future will be good because we get to enjoy the fruits of our own labour.
I am therefore apprehensive of all politicians no matter how good their intentions. Politicians are nothing but power-hungry people who are least technically competent in whatever they become in the political arena subject when killing each other or colluding with one another all for the sack of power. They take credit which is not their and blame others for the ruin they have created or do not even choose to realise the ills they done. I look for learned professionals who know how to build institutions that will keep civil society in check while at the same time providing a sense of security over the uncertain future in the things that people choose to do with their lives within the confines of a decent society. Politicians should just leave the people alone to get on with their lives rather than making promises they cannot keep.
As absolute power corrupts absolutely - the wholesale dismantling of the economy twice - I suppose there is really nothing much to fear, as there is nothing much more to plunder, except the future of our children and grandchildren - by creating widespread inflation and asset bubbles through reckless creation of loans and debts - the last frontier of economic exploits.
The dispensing of freshly printed cash to all and sundry by both sides, ostensibly as a means of partially and temporarily mitigating the adverse effects of all-round inflation such as to help the poor, by nothing but plainly election-centred. Obviously, much is at stake here, not just to the politicians (whom we know will spare no efforts to dominate the world with their own sense of truth), but to our society at large when so many of us are feeling so disenfranchised by a government machinery that is spattered as it tries to keep pace with the developments in our society and the rest of the world. We have never seen a government so out of breath.
Let us not simply put the whole blame of the mess on the current government which, unfortunately, has inherited it from its own elder party-members who now seem to be up to their usual mischief of doing their masterful prognostications through the agency of mediums and the artful application of doublespeak. Big Brother has never been so present in the Malaysian society as today.
The opposition is selling nothing but the anti-thesis. They vow to right every wrong that has happened in the country (restore history?) or is happening in the country (by getting rid of the present government?).
There are many things to do to reconstruct the nation and the national economy.
The reversal of the psychology of the corruption culture will take a bit of time - and this can only be achieved by destroying the monopoly power that has stretched its tentacles to every nook and corner of our society. It is quite clear that at the centre of the corruption is the political structure of collusion to dominant the rest of society. The political structure for absolute political power must be dismantled. The Malaysian mindset has shown itself to be incapable of decency when there is no formal supervision. The current structure of the collective power of the incumbent government and that of the opposition with its own brand of extreme anti-thesis is something that we have to lose sleep over.
The Malaysian economy is now in shambles. So much money has been siphoned out of the economic system that no amount of government debt-fueled injections can hope to revitalised. The vast amount of unidentified capital outflows is a reflection of the severity of the corruption of the government, not necessarily only of the present but of the cumulative effects of the past. With the loss of confidence of the people on the government, there is no choice but private sector to get out in the guise of "outward" investments as allowed by government policy. The private sector has voted that there is no economic future in the country, and foreign countries are seem to have a better future. Banks and other financial institutions have no choice but to ambush and capture the poor and impoverished consumers who find it hard to carry on without mortgaging their future. The current real estate boom is a sham.
I am keenly aware that it can be argued the Malaysian economy of today is as good as it can given the state of the world economy. This is true only when we are hapless. I am arguing that we are where we are as a result of our own doing and we only have ourselves to be blamed and also we are the only ones who should try to fix it.
The restoration of our economic system to a self-sustaining economy can only be done when we put back all our supporting institutions which can act as checks and balances for the excesses that are likely to occur in any democratically-elected majority-based governments. It is this constant balancing act that will put us Malaysians back into an even keel so that we are can, without fear, live our lives in the best way we see fit without harming ourselves and with the self-assurance that our future will be good because we get to enjoy the fruits of our own labour.
I am therefore apprehensive of all politicians no matter how good their intentions. Politicians are nothing but power-hungry people who are least technically competent in whatever they become in the political arena subject when killing each other or colluding with one another all for the sack of power. They take credit which is not their and blame others for the ruin they have created or do not even choose to realise the ills they done. I look for learned professionals who know how to build institutions that will keep civil society in check while at the same time providing a sense of security over the uncertain future in the things that people choose to do with their lives within the confines of a decent society. Politicians should just leave the people alone to get on with their lives rather than making promises they cannot keep.
Thursday, January 31, 2013
Of Professionals & Predictions
I read with interest here the case of the bank economist who was suspended from work for making a prediction. What is "wrong" about the prediction?
As economists, ours is a thankless job in the commercial world. Every company feels it needs an economist to dissect what is going on the local and global economies probably half-heartedly because most CEOs feel that they do know their economics and they have a view which is correct because they are already so successful. So, an economist in a company is nothing more than just a security blanket to do the needed job of writing about what is happening or has happened and to tell them everything is alright.
This is the terrible job of an economist, and this is what we were taught in schools with all our models and econometric estimations which are really all about the past because we need data (which necessarily have to be historical and of the past) to prove whatever we have chosen to prove. The only really useful thing that comes out of econometric modelling is the estimation of key parameters, to know whether a coefficient is a low or high value - as this will help us to conclude about the responsiveness of economic variables to one another.
Once we have a fairly good idea of what the model looks like, then maybe we can have a certain of confidence to make a projection from the past into the future on the assumption that the structure of the model remains intact and relevant for the future. So, projection is a mechanical thing to do and it does not require must thinking. Of course, the problem with using a variable-dependent model to make projections is that, if you have five variables that will project one variable, and that we need to put in five future variables to project one, it might just be easier to simply give a future value for that one variable that we are interested in in the first place. Of course, we will not have a story to tell. So the model-based projection is "better" because you can say, if this is true and if that is likely to happen, then this will be the projected outcome.
But predictions, to my mind, are an entirely class of creatures all together. Projections, after all, are often argued and justified and hidden behind conditions; projections are conditional predictions. But a prediction, on its own, is a unconditional prediction. "I say the world will end tomorrow." This is a prediction and the only thing left to do is to see whether tomorrow comes. In my mind, predictions are meant for prophets and for those who are brave enough to be able to give a pronouncement that "having considered the current situation and assessed all the possibilities for the future, what it is, I say that this is going to happen in the new year." A categoric pronouncement.
While projections are usually straight-line projections, predictions are interesting only because they are most spectacular when they deal with turning points. When the structure of the model breaks, and a completely new outcome catches everyone by surprise - or rather that they make incumbents very uncomfortable and unhappy because the prediction says that they are not going to be tomorrow where they are today. So predictions are based on an insight into the conditions under which the prevailing system breaks down. Theoretically, this goes into the realm of chaos theory, or more dramatically, catastrophe theory.
So, the said bank economist thought that he was making an innocent prediction about the change of government based on facts which he must argued quite convincingly, maybe too convincingly, of its likely outcome. If true, then this will be bad not to his employer (which is a bank) but his superior who is a person presumably appointed by the power of the day who have been predicted to be out of business by the next election. No to remove the economist will be tantamount to admitting the likely defeat; removing him can only be justified on the ground that is necessary to maintain public confidence, especially in the stock market is unfortunately has been taken to be barometer of the soundness of the economy. So much for the health of the system.
I can assure you that I have not written with great insight but rather with great experience and wisdom. I was lucky that I had a good boss who defended me, but at the same time, all predictions by me were unpublished until I joined an industry where all kinds of predictions including hearsay and bad dreams are considered gems which clients "would love" to read. I suppose we all earn our living by our wits, literally, in the end.
As economists, ours is a thankless job in the commercial world. Every company feels it needs an economist to dissect what is going on the local and global economies probably half-heartedly because most CEOs feel that they do know their economics and they have a view which is correct because they are already so successful. So, an economist in a company is nothing more than just a security blanket to do the needed job of writing about what is happening or has happened and to tell them everything is alright.
This is the terrible job of an economist, and this is what we were taught in schools with all our models and econometric estimations which are really all about the past because we need data (which necessarily have to be historical and of the past) to prove whatever we have chosen to prove. The only really useful thing that comes out of econometric modelling is the estimation of key parameters, to know whether a coefficient is a low or high value - as this will help us to conclude about the responsiveness of economic variables to one another.
Once we have a fairly good idea of what the model looks like, then maybe we can have a certain of confidence to make a projection from the past into the future on the assumption that the structure of the model remains intact and relevant for the future. So, projection is a mechanical thing to do and it does not require must thinking. Of course, the problem with using a variable-dependent model to make projections is that, if you have five variables that will project one variable, and that we need to put in five future variables to project one, it might just be easier to simply give a future value for that one variable that we are interested in in the first place. Of course, we will not have a story to tell. So the model-based projection is "better" because you can say, if this is true and if that is likely to happen, then this will be the projected outcome.
But predictions, to my mind, are an entirely class of creatures all together. Projections, after all, are often argued and justified and hidden behind conditions; projections are conditional predictions. But a prediction, on its own, is a unconditional prediction. "I say the world will end tomorrow." This is a prediction and the only thing left to do is to see whether tomorrow comes. In my mind, predictions are meant for prophets and for those who are brave enough to be able to give a pronouncement that "having considered the current situation and assessed all the possibilities for the future, what it is, I say that this is going to happen in the new year." A categoric pronouncement.
While projections are usually straight-line projections, predictions are interesting only because they are most spectacular when they deal with turning points. When the structure of the model breaks, and a completely new outcome catches everyone by surprise - or rather that they make incumbents very uncomfortable and unhappy because the prediction says that they are not going to be tomorrow where they are today. So predictions are based on an insight into the conditions under which the prevailing system breaks down. Theoretically, this goes into the realm of chaos theory, or more dramatically, catastrophe theory.
So, the said bank economist thought that he was making an innocent prediction about the change of government based on facts which he must argued quite convincingly, maybe too convincingly, of its likely outcome. If true, then this will be bad not to his employer (which is a bank) but his superior who is a person presumably appointed by the power of the day who have been predicted to be out of business by the next election. No to remove the economist will be tantamount to admitting the likely defeat; removing him can only be justified on the ground that is necessary to maintain public confidence, especially in the stock market is unfortunately has been taken to be barometer of the soundness of the economy. So much for the health of the system.
I can assure you that I have not written with great insight but rather with great experience and wisdom. I was lucky that I had a good boss who defended me, but at the same time, all predictions by me were unpublished until I joined an industry where all kinds of predictions including hearsay and bad dreams are considered gems which clients "would love" to read. I suppose we all earn our living by our wits, literally, in the end.
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