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Sakmongkol ak 47

ariff.sabri@gmail.com

Friday, 12 December 2008

Moralising about economic slump

The moral preaching explaining economic slump.

In the next few weeks, the khutbah in mosques will be very predictable. So too the subject matter debated on Forum Perdana and similar programs. The theme will be the same- that the economic slump we are facing is a form of moral comeuppance. We have been spending beyond our means. Membazir! They thundered. And some pious looking personages with their skullcaps will preach that this behaviour is irreligious.

How can the average Malay be spending beyond their means where, in the first place, on average they have lower incomes than other ethnic groups? Or even the average Malays have incomes and income means very much lower than say incomes earned by not the average Malays as in UMNOputras and those fat cats living off some commission fees?

On the other hand, the "living beyond our means" argument, with its thinly-veiled suggestion of moral turpitude, is technically correct. Over the last few(10-15) years, average household debt has soared to record levels, and the typical family has taken on more of debt than it can safely manage. Our property market will soon flip over. Then the housing bubble will burst and home/property prices will fall, eliminating easy home equity loans and refinancing.

But this story leaves out one very important fact. Why do people take loans? Go into debts? For the fun of it? If we analyse close enough, I think we should be able to see that median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes. It's not as if the typical family suddenly went on a spending binge --- buying hummers or Aston Martins, and taking ocean cruises on liners owned by Genting Group, going for holidays on the Riviera. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like food, health costs, and even college/university tuition fees all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.

The "living beyond our means" argument suggests that the answer over the long term is for families to become more responsible and not spend more than they earn. Accordingly as if on cue, the preachers and imams in mosques will pontificate about being extravagant. They will harangue the public that to spend beyond our means are indications of moral depravities.

The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living. And that requires, among other things, affordable health costs, maybe tax credits for college tuition, good schools, and an energy policy that's less dependent on oil, the price of which is going to continue to rise as demand soars in China, India, and elsewhere. In other words, the way to make sure we don't live beyond their means is to give them back the means to keep their incomes.

People never learn that the means include better education so that they acquire skills and become more competitive, better management of the economy, disciplined budgeting etc. The people tasked to moralise on us about being spendthrift and so on just refuse to understand the public’s predicament. But then as the American social critic, Upton Sinclair used to say: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

9 comments:

etheorist 12 December 2008 at 02:24  

Sakmongkol

The worm looks at the bird losing its balance at the gush of the wind and says, "Because you fly." The bird replies, "You worm that crawls."

Dhahran Sea,  12 December 2008 at 03:05  

Salam Tok Sak,
I do share your views... wish we could make these sink in the gray(ing) matter of pak lah, sil & co (IF he still has it?), najib & bros, zety & merry men & women of bnm, etc. Its easy for them to blame the rakyat for not being "thrift" enough when they live in their dream worlds & out of touch with reality...

walla 12 December 2008 at 08:37  

Datuk has hit upon an important point which remains a sore nerve with many thinking rakyat. They see a disconnect between their real take-home situation and the people who pontificate that their lifestyles must change just because these people extrapolate what they see at a few places into the entire populace.

The situation at the ground level is hardly stratospheric in reassurances. Even when there were subsidies, the urban middle-classes were already only coasting along. I remember the case of the Malay couple who tried to balance their daily budget by pumping only RM10 petrol into their car before going to work. How many kilometres would that take them when the fuel was already subsidized and what could they do when it would not?

Next year, matters will be tougher for them. What if their children get retrenched or those working overseas are back-flowed to return to a job market which has shrunk? In weeks to come, school will start and new costs will be incurred. Those who have got their retrenchment letters recently will be wondering how to splice the sum to last for an indefinite time while they scramble to look for poorer-paying jobs in a market already over-saturated with over a hundred thousand more highly qualified jobless graduates.

And yet this lamentable situation is not the first time Malaysia has experienced the sinking feeling. It has happened before. To say we can pull out of it as we have done so before is to do grave injustice to the sacrifice and suffering of too many households. The destinies of entire families have been changed downhill. After the landslides of economic downspin.

Datuk has said what needs to be done. It is political will which remains missing to proceed and clean up the mess before us. We cannot afford another slide because not only oil is dwindling, natural gas reserves too are shrinking. In a few years time we will be net importers of both, and i understand Peninsular Malaysia is already a net energy importer.

We are actually at a crossroad. If we continue the incremental way of doing things, then the trajectory will be a recovery that will only be facetious because the govt will soon not be having substantial energy revenues. A net fuel bill on the nation is hardly something that can be de-factored when our productivity levels are still called into question in this fiercely competitive global market. You need some really painful out-of-the-box thinking. I suspect Najib knows this but will he have the right people to help him see the bigger world picture that can be reshaped for a real action plan for Malaysia?

Malaysian Tigress 12 December 2008 at 10:23  

Dato,

For a fertile nation, we surprisingly depend a lot on imports. We produce like what, only 70 percent of our main staple, rice when we have vast tracts of unutilised lands. Daging pun import, telur pun import, cili pun import...semua import. Bukan kita negeri padang pasir. Itu pun sekarang ada technology to irrigate. Remember when we were begging Thailand for rice, and India? And gomen was so proud to announce we had like what, 3 months buffer?

Do you think we must strive to be totally self-sufficient in terms of agriculture?

I found an interesting read on Nabi Yusuf's seven year rule of thumb. A paper presented on the scientific validity of the rule:

http://eprints.utm.my/5365/1/INSIST_2008.pdf

Of course I am not saying we should become an agricultural nation, we still need to urgently address massive problem of the lack of skills and innovation in the move towards becoming an advanced economy.

Agricultural practices nowadays too depend on new technology and innovation in order to increase production and quality. (but not the GM kind lah...don't want to become Frankensteinista, but can't totally rule out some benefits)

Hantu Laut 12 December 2008 at 18:22  

We can't be fully sufficient in all food products but at least we should be fully sufficient in rice.

We are also lacking in homemade technology.Take oil palm for example,if that crop is grown in the West it would have been fully mechanised by now, in our case we are still labour intensive and mostly dependent on imported labour.Those money leaving the country could have been used to fund R&D on new technology for the industry.

Too bad we have a lazy government and not forward looking.

sakmongkol AK47 12 December 2008 at 20:27  

hantu laut,
i am also sure, kalau in the west, we would have the technology to harvest the oil palm fruits. in Italy they have machines harvesting olives. in California, machines to harvest oranges.

Malaysian Tigress 12 December 2008 at 21:50  

We can actually be self sufficient in the more important areas if the gomen takes it seriously. The extract below on deep tropical farming is by our own UPM professors. This is only one of the systems proposed. We actually have quite a fair amount of research done at UPM, even on waste management, tapi why doesn't it reach past the innovative stage and be put to use?

"Agriculture in the Tropics:
Seeking To Be Self-Sufficient
by Mohd Peter Davis:

Our Deep Tropical animal production system, which took
20 years to develop from basic research, right up to successful
commercial farms, is designed to help meet this challenge and
supplement the milk and meat now produced mainly in temperate
climates by grazing animals on pastures. Europeantype
grazing of animals in the humid tropics has a sorry history
due to four basic biological problems that have proved
extremely difficult to overcome by conventional farming:
1. Poor productivity of temperate animals and crosses
with tropical animals in the humid tropics;
2. Heat stress;
3. High tropical disease and parasite burden; and
4. Poor nutrition from native grasses and high maintenance
of improved pastures to keep out the jungle plant species.
These problems have prevented Malaysia from becoming
self-sufficient in milk, beef, and mutton. Despite the country’s
historically tiny population, now only 27 million, Malaysia
has never been more than 50% self-sufficient in food.

The Deep Tropical system simultaneously solves all these
biological limitations, by housing productive temperate
breeds in cool-climate barns and hand feeding with young cut
grass from grass farms. This stunningly simple solution improves
the health, nutrition, and welfare of what we term
happy domestic animals. Successful models of small-scale
commercial Malaysian sheep and goat farms already exist

A RM 50 million [$15.4 million] dairy farm in Pahang has
just been established with pregnant Jersey cows air freighted
from Australia and housed in cool, hygienic climate barns.

These are being fed highly nutritious 35-day-old, fresh-cut
grass from a nearby grass farm. Grass greatly reduces feed
costs, is the natural food of ruminant animals, and is useless as
human food, or for anything else. Malaysia’s all-year-round
perfect rainforest climate supports the highest rate of biomass production in the world, and with our management techniques,
grass grows 91 cm in 35 days, and can be harvested ten times per year for up to three years before ploughing and re-seeding.

The first calves and marketable milk from the new dairy
farm are scheduled in June. Scaling up, a RM 1 billion [$300
million] investment with farms totalling 60,000 cows would
lift Malaysian self-sufficiency in milk from the present 5% to
25%. The same dairy farms will produce cattle for the prime
beef market and replace 75% of live cattle presently imported
for fattening in Malaysia.

Pilot studies on smaller commercial farms demonstrate
that the Deep Tropical farming system can produce three
times more milk and beef per hectare of land compared to the
best New Zealand grazing farms. Sheep farming based on the
same system is even easier and can be established more rapidly
than dairy farms, and with less investment to meet the
urgent food demand. The minimum commercial scale is a
100-sheep farm.

Call for Emergency Action!
Looking to the future, Malaysia can become self-sufficient
in milk and ruminant meat in a remarkably short time
with the Deep Tropical system. The future also looks bright
for Malaysian and Indonesian Borneo, with vast lands for
Deep Tropical farming to supply top quality milk and halal
meat for world markets."

Dhahran Sea,  12 December 2008 at 23:01  

Tok Sak,
I refer to M'sian Tigress note on Deep Tropical dairing farming in M'sia. I say, if there is a will there'll be a way! Here in Saudi we have Al-Marai Co. (PLC), a home grown dairy company that boasts the largest single dairy farm in the world with > 35K cattle heads! Right in the middle of the desert kingdom! Saudi now is self-sufficient in dairy products and have exported them to other countries in the GCC. Maybe our Menteri could learn something from the Saudis in this regards?

Malaysian Tigress 13 December 2008 at 00:00  

Ya, I mentioned it to dr lo lo. she was receptive, but I didnt have time to bring her to meet the prof yet. schedule depa tak click. maybe they can try in kelantan or PR states (if the PR is really serious abt change)

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