Beauty lies in the eye of the mind.
I do not mind graffiti on the walls of Malaysian houses which often are nothing but rows and rows of cut-and-paste designs by local architects who work for local developers keen to extract even sen from innocent housebuyers (and some not-so-innocent housebuying speculators!).
I will not even argue the design or the method of painting or even the messages. For all I care, we could have whole towns painted red or black, if it seems OK for towns to be whitewashed or, now increasingly, spinning in various hues of yellow, green and blue.
After all, we are democracy and where people do have a certain right to do as they wish, so long as their actions are not hurtful on others. But for authorities to tell the general population that they cannot scribble on their walls is for these authorities to exercise their sense of apparent power and authority over the seemingly ignorant and brainless citizens.
We have now, just discovered, that the city hall, despite its grand sounding name, is nothing but a bunch of bureaucrats acting at the whim and fancy of some politician who happens to sit on top of everyone and telling everybody want to do. I shudder to imagine what would become of this country when we have policy decisions made in this manner.
Maybe it is a bit too late for me to worry. It is already here.
Malaysia's biggest piece of graffiti (assuming the ugly ones) are already etched into our national mindset where it is OK to pursue and continue to pursue discriminatory policies which serve to explicitly benefit a particular section of society. It is not OK to pursue discriminatory policies because it perpetuates social and economic injustice.
But the worse of the act of discrimination is the rationale that is cooked up to justify that discrimination. All major atrocities committed in the history of this world started with a word and then a book. That justification is then twisted and misrepresented to suit the circumstances and purposes of groups for their own peculiar purposes. This twisting and turning of logic on the same basic premises become the great intellectual entanglement that we now see in the national life of their otherwise fair and beautiful country.
So, like all good deeds, evil is also first ignited by a person who thinks he is doing good when in fact he is only out to kill his own personal demons, demons which are only figments of his own imagination.
I therefore do not mind physical graffiti for open paints in the tropics will crack and walls in time will crumble. We can always rebuild. But the mental graffiti that is being persistently dished out to us by old men who, after having terrorised their own generations and then our own, will now try to terrorise the younger generations.
If we are looking for the reasons why this nation cannot progress as much as it should, we only have to look inwards within our midst. We just have to whitewash those ugly mental graffiti.
Thursday, November 28, 2013
Wednesday, November 20, 2013
Securing the Future: Children or Environment
China's recent relaxation of its one child policy is to counter the problem of a declining population (which it was designed in 1979 to achieve in the first place) and more critically of the working-age group (as to be expected). If this line of reasoning is correct, then I think we have a problem in thinking about how to take care of the future of the human beings on this earth.
The issue of the so-called aging population is in almost all developed or even developing countries but more pronounced in Japan. Not only is a fallen birth rate the issue - which could also be due to the rising and high cost of living in the world today - as well as to the improvement in human life longevity, I presume as medicine and diet improve. I am sure there are also other factors that lengthens the life of human beings, but there are not the critical issues for us here.
I wish to suggest, from the macro perspective, that we seem to have our thinking a bit twisted as we worry about escalating population growth, dwindling natural resources and environment, as well as economics of growing old. We want to slow down the population growth and ease off the pressures on the natural environment while at the same time we are arguing for a rise in the working population to get the economy to grow and to feed the old.
I think we have a problem with the concept of economic growth.
Bear in mind that the current concept of the GDP was invented by Keynes (and translated into the national accounts by Richard Stone in Cambridge in 1941, who gave, for me, his famous quote: "Data, unanalysed, are dead as mutton") on the fundamental idea that there is a direct and positive correlation between income or output produced and labour employed. It is this simple idea that keeps economists and politicians today pushing for GDP growth at all cost and as fast as possible - with not entirely positive results.
Instead of the increase in output resulting in higher wages, the rise in output leads to higher profits and often at the expense of wages. There is a disproportionate distribution of income between corporations and people, and this seems to be justified on the basis that corporations need to make huge profits in order to keep investing. While the rise in investment creates more jobs, the tendency for governments to give tax concessions to corporations (often foreign ones) ostensibly to induce investments has led to a disaster in the management of the government budget, especially when too the government is getting into the act of investment in the hope of raising those jobs that do not seem to benefit the local population.
The budget deficit now being the scourge of government, the fall of the knife is often on those "unnecessary" operating expenditures which deal with the welfare of people including pensions and retirement benefits. At the same time, to encourage work and income (which means to cut income taxes) and to reduce consumption, the now ubiquitous goods and services tax or the value-added tax is now proposed to be the panacea of all human material problems on earth.
But in the original conceptualisation of indirect taxes such as the GST or the VAT, the notion is that income which is not consumed is invested, by definition. This is true in agrarian economies where the rice that is not consumed today is saved for consumption tomorrow or as seeds for planting in the next season. In the heavily monetised world of today, that which is not consumed is considered as unsold goods or redundant labour and the resultant action by investors is to abandon the old investments and find new ones. There is a constant search for new ideas and new skills which calls for a certain degree of agility and hence "disloyalty" though not necessarily loss of "integrity" especially to one's own confidence in one's own skills and ability (without which they cannot survive).
As such, therefore, safety net for these workers probably relatively young ones is not there as they jump from one new opportunity to the next. It would seem that that safety net can probably best be provided by the extended family (if it is capable) for the state fears that the provision of an unemployment benefit or support of in-between jobs will lead to universal laziness. The systematic pressures that are being put to the working individual to work hard in order to keep up with the rising cost of living in order to keep the GDP growing is, I think, the biggest error in policy making today - for they lead to what governments are also worrying, which is the lack of sufficient energetic workers to support the workers who have grown too old to be productive in contributing to the concept of sustained GDP growth.
(There is currently an attempt to rethink on the concept of poverty for the urban poor.)
The problem economic policy is that there seems to be a believe that the printing of money by fiat is the only way to stimulate economic growth. This is the tail wagging the dog. The growth of an economy will result in the rise of the money supply, either in the monetary base or the velocity of the circulation of money through the economy. Attempts to increase the money supply to increase the economic growth runs the risk of throwing good money after bad investment ideas with the cost of the loss being borne by the general population which can be made to bear these systematic losses with too violent a struggle is through persistent rise in prices for all commodities and services. It is without doubt that, at the end of the day, the economic battle is fought over who gets to consume what and how much and for how long. The almost universal application of the GST (a fact that is now being touted as the rationale for its introduction in this country!) is testimony to the loss of general human welfare from the abuse and mismanagement of the money supply or rather of the international reserves by the reserve issuer.
I think the future direction of the world economy is to reduce the family size and hence slow down the world population, to reduce the overproduction of physical goods in order to slow down the utilisation of real resources, to reduce income growth and consumption growth, with poverty due to incapacity and old age being handled by direct transfers by governments through welfare programmes. I don't think we can salvage the self-destruction of the earth in its ultimate eventuality, or are human beings likely to be the last life on this earth; at the very least, we should moderate our wants and leave rooms for those less fortunate than us in this space and time.
The issue of the so-called aging population is in almost all developed or even developing countries but more pronounced in Japan. Not only is a fallen birth rate the issue - which could also be due to the rising and high cost of living in the world today - as well as to the improvement in human life longevity, I presume as medicine and diet improve. I am sure there are also other factors that lengthens the life of human beings, but there are not the critical issues for us here.
I wish to suggest, from the macro perspective, that we seem to have our thinking a bit twisted as we worry about escalating population growth, dwindling natural resources and environment, as well as economics of growing old. We want to slow down the population growth and ease off the pressures on the natural environment while at the same time we are arguing for a rise in the working population to get the economy to grow and to feed the old.
I think we have a problem with the concept of economic growth.
Bear in mind that the current concept of the GDP was invented by Keynes (and translated into the national accounts by Richard Stone in Cambridge in 1941, who gave, for me, his famous quote: "Data, unanalysed, are dead as mutton") on the fundamental idea that there is a direct and positive correlation between income or output produced and labour employed. It is this simple idea that keeps economists and politicians today pushing for GDP growth at all cost and as fast as possible - with not entirely positive results.
Instead of the increase in output resulting in higher wages, the rise in output leads to higher profits and often at the expense of wages. There is a disproportionate distribution of income between corporations and people, and this seems to be justified on the basis that corporations need to make huge profits in order to keep investing. While the rise in investment creates more jobs, the tendency for governments to give tax concessions to corporations (often foreign ones) ostensibly to induce investments has led to a disaster in the management of the government budget, especially when too the government is getting into the act of investment in the hope of raising those jobs that do not seem to benefit the local population.
The budget deficit now being the scourge of government, the fall of the knife is often on those "unnecessary" operating expenditures which deal with the welfare of people including pensions and retirement benefits. At the same time, to encourage work and income (which means to cut income taxes) and to reduce consumption, the now ubiquitous goods and services tax or the value-added tax is now proposed to be the panacea of all human material problems on earth.
But in the original conceptualisation of indirect taxes such as the GST or the VAT, the notion is that income which is not consumed is invested, by definition. This is true in agrarian economies where the rice that is not consumed today is saved for consumption tomorrow or as seeds for planting in the next season. In the heavily monetised world of today, that which is not consumed is considered as unsold goods or redundant labour and the resultant action by investors is to abandon the old investments and find new ones. There is a constant search for new ideas and new skills which calls for a certain degree of agility and hence "disloyalty" though not necessarily loss of "integrity" especially to one's own confidence in one's own skills and ability (without which they cannot survive).
As such, therefore, safety net for these workers probably relatively young ones is not there as they jump from one new opportunity to the next. It would seem that that safety net can probably best be provided by the extended family (if it is capable) for the state fears that the provision of an unemployment benefit or support of in-between jobs will lead to universal laziness. The systematic pressures that are being put to the working individual to work hard in order to keep up with the rising cost of living in order to keep the GDP growing is, I think, the biggest error in policy making today - for they lead to what governments are also worrying, which is the lack of sufficient energetic workers to support the workers who have grown too old to be productive in contributing to the concept of sustained GDP growth.
(There is currently an attempt to rethink on the concept of poverty for the urban poor.)
The problem economic policy is that there seems to be a believe that the printing of money by fiat is the only way to stimulate economic growth. This is the tail wagging the dog. The growth of an economy will result in the rise of the money supply, either in the monetary base or the velocity of the circulation of money through the economy. Attempts to increase the money supply to increase the economic growth runs the risk of throwing good money after bad investment ideas with the cost of the loss being borne by the general population which can be made to bear these systematic losses with too violent a struggle is through persistent rise in prices for all commodities and services. It is without doubt that, at the end of the day, the economic battle is fought over who gets to consume what and how much and for how long. The almost universal application of the GST (a fact that is now being touted as the rationale for its introduction in this country!) is testimony to the loss of general human welfare from the abuse and mismanagement of the money supply or rather of the international reserves by the reserve issuer.
I think the future direction of the world economy is to reduce the family size and hence slow down the world population, to reduce the overproduction of physical goods in order to slow down the utilisation of real resources, to reduce income growth and consumption growth, with poverty due to incapacity and old age being handled by direct transfers by governments through welfare programmes. I don't think we can salvage the self-destruction of the earth in its ultimate eventuality, or are human beings likely to be the last life on this earth; at the very least, we should moderate our wants and leave rooms for those less fortunate than us in this space and time.
Monday, October 28, 2013
Budget 2014: Significant for 2015
Malaysia's Budget 2014 announced on Friday 25 October 2013 is significant.
1. The Budget prepares the ground for a major tax reform in 17 months' time when the proposed 6% GST (Goods and Services Tax) will be implemented on 1 April 2015 and presumably the proposed income tax reduction will also be applicable for the assessment year 2015.
For this reason (that it is still in the future) that we cannot get the details for these tax proposals, except for these:
>GST will not be imposed on basic food items such as rice, sugar, salt, flour, cooking oil, lentils, herbs and spices, salted fish, cencalok, budu and belacan; nor piped water supply on the first 200 units of electricity per month for domestic consumers;nor services provided by the Government such as the issuance of passports, licences, health services and school education; nor transportation services such as bus, train, LRT, taxi, ferry, boat, highway toll as well as education and health services; nor sale, purchase and rental of residential properties and selected financial services.
Individual income tax rates will be reduced by 1 to 3 percentage points for all tax payers. Families with monthly income of RM4,000 will no longer have tax liability (from RM3,000). Individual income tax structure will be reviewed to with the chargeable income subject to the maximum rate raised from exceeding RM100,000 to exceeding RM400,000. The current maximum tax rate at 26% will be reduced to 24%, 24.5% and 25%. Corporate income tax rate be reduced by 1 percentage point from 25% to 24%. These measures will be effective from 2015.<
Since these proposals will be implemented in the future, there will be time for things to be adjustment presumably according to the more refined calculations in Budget 2015 in twelve months' time.
Nonetheless, I am happy that there is thought of a significant structural adjustment to the personal income tax structure which I think is long overdue as a result of the persistence of strong inflationary pressures in the economy. I like the shift of the top chargeable income bracket from RM100,000 to RM400,000 which is very much to be applauded.
2. The other significant measure of Budget 2014 is the serious attempt at reining in the escalation of property prices in Malaysia.
> The Real Property Gains Tax (RPGT) will be reviewed. For RPGT is raised to 30% for properties disposed up to three years, 20% up to four years, 15% up to five years and no RPGT after five years for citizens and 5% for companies. For non-citizens, 30% RPGT for properties disposed up to 5 years and 5% in the sixth and subsequent years. The minimum price of property that can be purchased by foreigners is raised from RM500,000 to RM1,000,000.
Developers cannot implement projects with features of Developer Interest Bearing Scheme (DIBS), where developers incorporate interest rates on loans in house prices during the construction period, and financial institutions are prohibited from providing final funding for such projects.<
It is still unclear when this will come into force. But this is significant.
Developers and financial institutions seem to be in cahoot serving their own vested interests at times when the talents of financial institutions should be trained at developing the fundamentals of the economy. I am sure there will be plenty of counter-arguments by these two major types of institutions which so far have been quite happy to be calling all the shots in the economy. I am glad that someone has finally stood up to try to correct the situation. Of course, recent property price increases were due to higher building material costs and greater demand, etc. But there must be some control.
The rest of the Budget, as the man himself said, is a post-election budget which means that as many projects so promised will be mentioned. Including national security, education, etc. There is of course whether the sums allowed are sufficient to do their proper jobs. That may be for future budgets to deal with as typically development projects takes several years to finish. The success of the collection of the GST will determine the degree of completion of those projects and others.The government deficit is likely to be significantly unchanged as of now, with hope that the GST will be the answer to all problems, as the advisers will surely reassure the PM as such.
I don't quite like the racial stuff though.
I think Budget 2014 is a significant budget for 2015.
1. The Budget prepares the ground for a major tax reform in 17 months' time when the proposed 6% GST (Goods and Services Tax) will be implemented on 1 April 2015 and presumably the proposed income tax reduction will also be applicable for the assessment year 2015.
For this reason (that it is still in the future) that we cannot get the details for these tax proposals, except for these:
>GST will not be imposed on basic food items such as rice, sugar, salt, flour, cooking oil, lentils, herbs and spices, salted fish, cencalok, budu and belacan; nor piped water supply on the first 200 units of electricity per month for domestic consumers;nor services provided by the Government such as the issuance of passports, licences, health services and school education; nor transportation services such as bus, train, LRT, taxi, ferry, boat, highway toll as well as education and health services; nor sale, purchase and rental of residential properties and selected financial services.
Individual income tax rates will be reduced by 1 to 3 percentage points for all tax payers. Families with monthly income of RM4,000 will no longer have tax liability (from RM3,000). Individual income tax structure will be reviewed to with the chargeable income subject to the maximum rate raised from exceeding RM100,000 to exceeding RM400,000. The current maximum tax rate at 26% will be reduced to 24%, 24.5% and 25%. Corporate income tax rate be reduced by 1 percentage point from 25% to 24%. These measures will be effective from 2015.<
Since these proposals will be implemented in the future, there will be time for things to be adjustment presumably according to the more refined calculations in Budget 2015 in twelve months' time.
Nonetheless, I am happy that there is thought of a significant structural adjustment to the personal income tax structure which I think is long overdue as a result of the persistence of strong inflationary pressures in the economy. I like the shift of the top chargeable income bracket from RM100,000 to RM400,000 which is very much to be applauded.
2. The other significant measure of Budget 2014 is the serious attempt at reining in the escalation of property prices in Malaysia.
> The Real Property Gains Tax (RPGT) will be reviewed. For RPGT is raised to 30% for properties disposed up to three years, 20% up to four years, 15% up to five years and no RPGT after five years for citizens and 5% for companies. For non-citizens, 30% RPGT for properties disposed up to 5 years and 5% in the sixth and subsequent years. The minimum price of property that can be purchased by foreigners is raised from RM500,000 to RM1,000,000.
Developers cannot implement projects with features of Developer Interest Bearing Scheme (DIBS), where developers incorporate interest rates on loans in house prices during the construction period, and financial institutions are prohibited from providing final funding for such projects.<
It is still unclear when this will come into force. But this is significant.
Developers and financial institutions seem to be in cahoot serving their own vested interests at times when the talents of financial institutions should be trained at developing the fundamentals of the economy. I am sure there will be plenty of counter-arguments by these two major types of institutions which so far have been quite happy to be calling all the shots in the economy. I am glad that someone has finally stood up to try to correct the situation. Of course, recent property price increases were due to higher building material costs and greater demand, etc. But there must be some control.
The rest of the Budget, as the man himself said, is a post-election budget which means that as many projects so promised will be mentioned. Including national security, education, etc. There is of course whether the sums allowed are sufficient to do their proper jobs. That may be for future budgets to deal with as typically development projects takes several years to finish. The success of the collection of the GST will determine the degree of completion of those projects and others.The government deficit is likely to be significantly unchanged as of now, with hope that the GST will be the answer to all problems, as the advisers will surely reassure the PM as such.
I don't quite like the racial stuff though.
I think Budget 2014 is a significant budget for 2015.
Wednesday, October 23, 2013
Budget of the Government or People
The Budget is a tug of war on a shoe string between the government and the people when the government has the only say. The government will have free rein while the people must tighten their belts. The poor shall be used as the straw man.
Tuesday, October 15, 2013
Politics Of God, God Of Politics
Today, we learn that God in Arabic has become a word in Malaysia forbidden to non-Muslims in Malaysia for fear that Muslims in Malaysia will mistaken other Gods for their God.
Monday, September 30, 2013
Certainty, Uncertainty
I wish to examine the impact of a sense of uncertainty on the need to save for the unknown future.
Uncertainty, in the sense I am trying to use the term, is a situation where the likelihood of the future is simply unknown. I would think it to be a zero or one probability situation - either it happens or it does not happen - binary - digital - I Ching - zen. Uncertainty is the stark situation faced by each and every individual as he or she confronts the world. You do not know what will happen. So, what do you do when you are faced with uncertainty?
To reduce the uncertainty, you train yourself up to maximum your opportunity. This in fact is the only thing that a person can do, seriously for himself. This is making the best use of the talents that God has given you, in religious parlance. This is to know what you are, to know what you can do. In Greek philosophy, "know thyself" is the most well-known saying of Delphi. In philosophy, the most basic question is you do not know when you are going to die, and this determines how you are going to live. If you know exacting when you are going to live, you can very specific plans about what you are going to do. (Same as contemplating whether to tell a cancer patient the "truth" or to pretend that everything is going to be OK.) If you leave the future indeterminate, then you will have to make plentiful of preparations which are likely to be overdone, more than sufficient, because you do not want to be caught short. A person caught with an uncertain future but with the greatest confidence in himself or herself will do the maximum by working ceaselessly so as not to waste time and be caught idling. If this uncertainty affects a whole society, then such behaviour will be exhibited as a social cultural trait. There is this constant struggle to do one's best and to continue to work and to do so that there will be no let up in efforts. Life because one of the amassing of natural energy and to dispense that energy to its most fruitful or effective impact. Kung fu, Shaolin, Bruce Lee. In the same way that life force is seen to be the most fundamental element of life, so some (or rather many) will see, in modern society, that money and wealth is the most fundamental element of living in the material world. The accumulation of capital and the store of value become the sole quest in life for those who are psyched to vow never to be poor again, like how their immediate forebears were.
But for a community where the recent history or social culture is one which has established a certain amount of stability, the tendency of such a community is to maintain the status quo. A hierarchy is set so that no one upsets the apple cart and everybody has their proper station in life according to recent history. The political power structure takes over to control the situation. There is nothing much an individual person can do except to fight to get on top of the heap, as Frank Sinatra would say. Once on top, all favours drips down to the very bottom so that everyone in society can benefit. Such benefits will dispensed onto to those who are obedient or in the terms of that ideology, loyalty. Loyalty is a term that is used to reinforce the strengthen of the status quo and the prevailing hierarchy. Once that power structure is established, everything else can be accommodated within that structure, including the hiring of talents and skills. In such a community, there is readiness to sacrifice growth for distribution in order that the apple cart is not upset. But when that power structure, or any power structure, breaks down, the aftermath can be very messy, as we seen on TV. But because the emphasis here is less on maximising talents but in strengthening the political power, there is a tendency to take from the output of the productive or talented to share with the rest of the entourage or retinue of advisers, bodyguards, foot soldiers and servants. This gives rise to a disincentive to work and there will be a tendency to downplay signs of prosperity by the likely victims.
It is interesting to realise that the flavour of the type of community or social we try to create has a profound impact on our daily behaviour as we are tend to act in such a way as to make ourself comfortable or justifiable or at peace with ourselves. In realising our sense of being, as broadly dictated by the general environment we find ourselves which of course are all in turn influenced by public policies and private treaties and communal habits, we find ourselves living particular lives according to our immediate circumstances. We are not really our self-determined selves as we wish to imagine, but justified selves in the face of the circumstance.
This is a obtuse a piece I can muster to write.
Uncertainty, in the sense I am trying to use the term, is a situation where the likelihood of the future is simply unknown. I would think it to be a zero or one probability situation - either it happens or it does not happen - binary - digital - I Ching - zen. Uncertainty is the stark situation faced by each and every individual as he or she confronts the world. You do not know what will happen. So, what do you do when you are faced with uncertainty?
To reduce the uncertainty, you train yourself up to maximum your opportunity. This in fact is the only thing that a person can do, seriously for himself. This is making the best use of the talents that God has given you, in religious parlance. This is to know what you are, to know what you can do. In Greek philosophy, "know thyself" is the most well-known saying of Delphi. In philosophy, the most basic question is you do not know when you are going to die, and this determines how you are going to live. If you know exacting when you are going to live, you can very specific plans about what you are going to do. (Same as contemplating whether to tell a cancer patient the "truth" or to pretend that everything is going to be OK.) If you leave the future indeterminate, then you will have to make plentiful of preparations which are likely to be overdone, more than sufficient, because you do not want to be caught short. A person caught with an uncertain future but with the greatest confidence in himself or herself will do the maximum by working ceaselessly so as not to waste time and be caught idling. If this uncertainty affects a whole society, then such behaviour will be exhibited as a social cultural trait. There is this constant struggle to do one's best and to continue to work and to do so that there will be no let up in efforts. Life because one of the amassing of natural energy and to dispense that energy to its most fruitful or effective impact. Kung fu, Shaolin, Bruce Lee. In the same way that life force is seen to be the most fundamental element of life, so some (or rather many) will see, in modern society, that money and wealth is the most fundamental element of living in the material world. The accumulation of capital and the store of value become the sole quest in life for those who are psyched to vow never to be poor again, like how their immediate forebears were.
But for a community where the recent history or social culture is one which has established a certain amount of stability, the tendency of such a community is to maintain the status quo. A hierarchy is set so that no one upsets the apple cart and everybody has their proper station in life according to recent history. The political power structure takes over to control the situation. There is nothing much an individual person can do except to fight to get on top of the heap, as Frank Sinatra would say. Once on top, all favours drips down to the very bottom so that everyone in society can benefit. Such benefits will dispensed onto to those who are obedient or in the terms of that ideology, loyalty. Loyalty is a term that is used to reinforce the strengthen of the status quo and the prevailing hierarchy. Once that power structure is established, everything else can be accommodated within that structure, including the hiring of talents and skills. In such a community, there is readiness to sacrifice growth for distribution in order that the apple cart is not upset. But when that power structure, or any power structure, breaks down, the aftermath can be very messy, as we seen on TV. But because the emphasis here is less on maximising talents but in strengthening the political power, there is a tendency to take from the output of the productive or talented to share with the rest of the entourage or retinue of advisers, bodyguards, foot soldiers and servants. This gives rise to a disincentive to work and there will be a tendency to downplay signs of prosperity by the likely victims.
It is interesting to realise that the flavour of the type of community or social we try to create has a profound impact on our daily behaviour as we are tend to act in such a way as to make ourself comfortable or justifiable or at peace with ourselves. In realising our sense of being, as broadly dictated by the general environment we find ourselves which of course are all in turn influenced by public policies and private treaties and communal habits, we find ourselves living particular lives according to our immediate circumstances. We are not really our self-determined selves as we wish to imagine, but justified selves in the face of the circumstance.
This is a obtuse a piece I can muster to write.
Thursday, September 19, 2013
Value & Market Price
This is the age-old problem in economic theory - the difference between the value of an item and its market value.
The famous example is that air and water are precious for human life but they are practically free (not wholly true for fresh air and mineral water). Diamonds are practically useless but they fetch high market prices. As Adam Smith concluded (I think), the market price of an item does not reflect its use-value but rather the interplay between supply and demand. Air and water have little market value because it is ubiquitous whereas diamonds are expensive because of there limited supply and insanely huge demand.
When we look at the issue of the distribution of income and wealth, we have to be careful to realise that we are talking about market prices or market values.
Land in the urban centres cost more than land in the rural areas because there is a limited supply of land in town and there is a huge supply of land ready to be offloaded onto the market from the vast hinterland as we go into the rural areas. If all the rural folks try to flock to the urban areas in search for high paying jobs, then there will be an escalation in the cost of urban properties - which is another way of saying that the real incomes in the urban centres will fall, and hence the problem of the rising cost of living.
If urbanites want to live a decent life, they must try to raise their incomes which means they have to work much much harder in order to produce services for which there is demand. Urbanites cannot be arrogant about things for they are mere slaves to the way of life that they have chosen to live, although they must be arrogant when they have made it because of the immense suffering - physically and emotionally - that they must go through to struggle and fight and then to be able to emerge out and land on the shore of financial independence.
Rural folks generally have great assets of land - which if valued at the nearby urban prices would amount to a lot - and their major concern is only income for their daily needs and possibly the education of their children if they do not intend to work on the land. The great wealth of rural families can be passed on to the next generation which, I am sure, as development expands, will mean great wealth for their future generations. It is precisely because of the likelihood or the desire to hold onto the land and to keep that wealth within the community and to pass it on within the community that land-rich families eschew unnecessary consumption in order to save for the long-term wealth of the family.
I know there is a great desire by many Bumiputera families (or some family members) to sell their land immediately so that they "do not have to work so hard anymore and have money to spend." This is the story of the Malay reserve land and that of Kampong Baru in KL. Of course, if you are not putting the property into the market or if you are restricting the market to a smaller section of society, then you should not expect the full market price as can be got elsewhere there is a scarcity of supply and ample demand (fueled by generous bank loans).
As a way of reducing the income and wealth gap between the urban centres and the rural areas, I like the strategy of developing economic corridors in the various states so that more new urban centres can be created in existing rural areas, thereby raising the market price of the land and labour in remote areas. This is now not a popular view. The World Bank thinks that the fastest way for a nation to climb the income ladder is for developing nations to concentrate their scarce resources on the existing urban centres and intensify economic activities there, on the argument of creating more value from synergy. This is true, but this only means that the gaps in income and wealth distribution will widen. While greater inequalities may be argued to be an inevitable evil of development, it does not have to be the case. I prefer a more spread-out and dispersed development strategy geography so that there will be less depletion of human resources from the rural areas and faster development of the rural areas.
We all know that rapid economic development is pursued at great social and cultural costs, for this is real transformation of society and the economy. In developing nations like Malaysia, we obviously have a very strong cultural sense of ourselves for each of different communities - and it is this great cohesion that is at once a strength and a weakness. Closely knit families with strong parental guidance tend to create also material success and sustain it, whereas families with weak cultural and social sense will have to struggle to find alternate new pathways to rise above their respective situations. However, strong traditional families are at best good at maintain the status quo, and may not lend themselves to be the agents of change and high incomes. The cultural and communal pull is too strong. This is where enlightened education sets the society free, not that education is needed for entrepreneurship (although literacy is definitely needed for communication) but the courage to explore new frontiers with courage and confidence. The ability to think and the ability to think for oneself are assets to anyone who have them and to those who are fortunate to be their neighbours.
Future success can only be assured when it is properly nurtured. Affirmative actions are desirable, but these are double-edged swords especially when they are used to change the dynamics of the game. We are talking about changing the game for one group to compete with another group. Adaptation will come in to ensure continued success and that adaptation creates a new game which the old affirmative actions may be inadequate to deal with. The affirmative actions themselves, if badly designed, may probably accentuate the discrepancy by weakening the affirmed group and toughening up the unhelped group. My point is that one cannot be too careful in designing policy instruments. Numbers are not facts, and they need careful analysis and understanding or they can become dangerous.
There is a need to be clear about real value and market prices. I believe our policies tend to focus on market values rather than creating real values that will last.
The famous example is that air and water are precious for human life but they are practically free (not wholly true for fresh air and mineral water). Diamonds are practically useless but they fetch high market prices. As Adam Smith concluded (I think), the market price of an item does not reflect its use-value but rather the interplay between supply and demand. Air and water have little market value because it is ubiquitous whereas diamonds are expensive because of there limited supply and insanely huge demand.
When we look at the issue of the distribution of income and wealth, we have to be careful to realise that we are talking about market prices or market values.
Land in the urban centres cost more than land in the rural areas because there is a limited supply of land in town and there is a huge supply of land ready to be offloaded onto the market from the vast hinterland as we go into the rural areas. If all the rural folks try to flock to the urban areas in search for high paying jobs, then there will be an escalation in the cost of urban properties - which is another way of saying that the real incomes in the urban centres will fall, and hence the problem of the rising cost of living.
If urbanites want to live a decent life, they must try to raise their incomes which means they have to work much much harder in order to produce services for which there is demand. Urbanites cannot be arrogant about things for they are mere slaves to the way of life that they have chosen to live, although they must be arrogant when they have made it because of the immense suffering - physically and emotionally - that they must go through to struggle and fight and then to be able to emerge out and land on the shore of financial independence.
Rural folks generally have great assets of land - which if valued at the nearby urban prices would amount to a lot - and their major concern is only income for their daily needs and possibly the education of their children if they do not intend to work on the land. The great wealth of rural families can be passed on to the next generation which, I am sure, as development expands, will mean great wealth for their future generations. It is precisely because of the likelihood or the desire to hold onto the land and to keep that wealth within the community and to pass it on within the community that land-rich families eschew unnecessary consumption in order to save for the long-term wealth of the family.
I know there is a great desire by many Bumiputera families (or some family members) to sell their land immediately so that they "do not have to work so hard anymore and have money to spend." This is the story of the Malay reserve land and that of Kampong Baru in KL. Of course, if you are not putting the property into the market or if you are restricting the market to a smaller section of society, then you should not expect the full market price as can be got elsewhere there is a scarcity of supply and ample demand (fueled by generous bank loans).
As a way of reducing the income and wealth gap between the urban centres and the rural areas, I like the strategy of developing economic corridors in the various states so that more new urban centres can be created in existing rural areas, thereby raising the market price of the land and labour in remote areas. This is now not a popular view. The World Bank thinks that the fastest way for a nation to climb the income ladder is for developing nations to concentrate their scarce resources on the existing urban centres and intensify economic activities there, on the argument of creating more value from synergy. This is true, but this only means that the gaps in income and wealth distribution will widen. While greater inequalities may be argued to be an inevitable evil of development, it does not have to be the case. I prefer a more spread-out and dispersed development strategy geography so that there will be less depletion of human resources from the rural areas and faster development of the rural areas.
We all know that rapid economic development is pursued at great social and cultural costs, for this is real transformation of society and the economy. In developing nations like Malaysia, we obviously have a very strong cultural sense of ourselves for each of different communities - and it is this great cohesion that is at once a strength and a weakness. Closely knit families with strong parental guidance tend to create also material success and sustain it, whereas families with weak cultural and social sense will have to struggle to find alternate new pathways to rise above their respective situations. However, strong traditional families are at best good at maintain the status quo, and may not lend themselves to be the agents of change and high incomes. The cultural and communal pull is too strong. This is where enlightened education sets the society free, not that education is needed for entrepreneurship (although literacy is definitely needed for communication) but the courage to explore new frontiers with courage and confidence. The ability to think and the ability to think for oneself are assets to anyone who have them and to those who are fortunate to be their neighbours.
Future success can only be assured when it is properly nurtured. Affirmative actions are desirable, but these are double-edged swords especially when they are used to change the dynamics of the game. We are talking about changing the game for one group to compete with another group. Adaptation will come in to ensure continued success and that adaptation creates a new game which the old affirmative actions may be inadequate to deal with. The affirmative actions themselves, if badly designed, may probably accentuate the discrepancy by weakening the affirmed group and toughening up the unhelped group. My point is that one cannot be too careful in designing policy instruments. Numbers are not facts, and they need careful analysis and understanding or they can become dangerous.
There is a need to be clear about real value and market prices. I believe our policies tend to focus on market values rather than creating real values that will last.
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