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Sakmongkol ak 47

Friday, 1 June 2012

The `G' in the C+I+G=Y formula

When Kenyesians dan Hayekians debate each other, they don’t debate on the science of economics as a science. As a science which studies the allocation of scarce resources among competing wants and needs, that part is settled. They debate on the bigger issue of how to manage the economy. Keynesians want to steer the economy while Hayekians want to set the economy free.  One side thinks they can plan for others. The other side wants the planning to be done by many as individuals adapting themselves to the free market.
They debate on the efficacy of polices- whether managing aggregate spending or freeing the market is better in order to increase income. Controlling aggregate spending suggest some control over the aggregates- whether consumption, investment or government spending. Who controls them? The answer: The government. Control suggests the omnipotence of government and of course governments all over the world, like to control things.
Hayekians support the free market relying instead on the actions of individual economic actors with motivations and self-interests (what interests the individual) to make the economy work. Free market does not mean free from government involvement absolutely. Rather, government’s scope is limited over a few matters such as keeping peace from within and without. Government’s role is that of an umpire and the umpire must be neutral.
Our government of course supports the Keynesian approach without a doubt. They are adherents to the dictum, we are Keynesians now. But here is where the similarities end. While in western economies, the focus is on actually seeing the economy succeed, the emphasis in our country is different. The focus here is to concentrate steering power into our hands as much as possible, so that in the name of guiding the economy, the state plays the role of allocating resources to who they think can advance the economy.  The state assumes omnipotence stature. And  because of this status, they get to choose who succeed and who fail.
We are digressing too far I am afraid. We can already anticipate the headlines. “We must avoid what happens to Greece. In order to do that, we must spend more. To hell to those who complain of increasing public debt to GDP share. If we cut spending, the economy will contract. The opposition is stupid. They are just following the IMF’s prescriptions”.
What we fear most from the Tragedy of Greece is that, it will be used as justification for more deficit spending. The dependents to government contracts and the tenderpreneurs, the rent seekers will support the government. Greece , Ireland will be used as examples NOT to be stingy but to spend more. It will give a carte blanche for the powers that be to pick and choose winners based on whether the chosen are liked or disliked. The business elite will be celebrating the fall of Greece in anticipation of windfalls from our Santa Clausian government.  
The real issue of restructuring is kept on the backburner.
The basic idea behind Keynes Theory is to spend more to get out from economic slowdown. Mahathir before and Najib now, like spending. They like the G in the C+I+G = Y formula. Najib likes announcing spending plans- when the private sector created a shopping paradise for high end products in JB, Najib was there hailing Premium Outlets as an example of government initiatives. Did that initiative increase productive capacity of the economy? Consumption spending does not create productive capacity of the economy.
When Guocoland announced that it will spend billions to create an Eco city in Sungai Pelik, Sepang, we all feel pelik too, he was there behaving like the midwife delivering a new economic initiative.  Clever, by strategically officiating such private sector initiatives, Najib can be seen as the originator of the business plans. Didn’t I say before- the ETP was just a collection of private businesses business plans adopted by the government as its own National Economic Transformation Plan?
It’s going to be spend baby spend after this. Before FGVH lists, Najib got money to pay settlers RM 15,000 per Felda household. Where did the money come from? Advances by underwriting banks? Loan from EPF? Internal Felda funds? Then it’s the settlers’ own money they are getting and they are jumping up and down in euphoric hysteria.
The missus is now demanding that, the next RM 5,000 installment must be paid directly into her account lest her husband in Felda Chini goes south to Segamat and patronizes one of the massage parlors there. The son will demand the subsequent RM 5000 be banked direct into his BSN account so that he can finally get that Kris Motorcycle he planned to get to rempit on the nice Felda roads.
What happened to Greece will be used gleefully by the pro-deficit people who hate the idea of austerity. Because to them, cutting back on government spending means painful cuts that is hurting growth. Their growth that is. No more negotiated tenders. No more free passages.
That, they say is silly economics. The PM says the economic plans by the opposition don’t make sense. The people must choose between austerity and growth. Let us clarify some of the issues here. The issue here is to curtail public (government spending) but free the people to do the real economic work. Allow them to be taxed lower and give easier credit and capital.


bruno,  1 June 2012 at 08:40  

Datu,our Umno GOM wants to control and steer the economy.To steer them directly into the hands of their cronies.So it can be 60% for them and the remaining 40% for the cronies.They have to milk the economic cow's tits sore,red and dry before they go into exile.

Commonsense tells us that countries with controlled economy do not prosper.With no competition the workforce are no longer productive and competitive.

Just look at us.Malaysia was among the first of the roaring tigers of Asia.Two decades later we are a beaten cat with its tails between its legs.While our competitors became grand tigers we are having kittens for grandbabies.Umnoputras please go figure.

Anonymous,  1 June 2012 at 10:07  

Dato', no comment on the altantunya issue ah?Your boss just got implicated

Anonymous,  1 June 2012 at 10:10  

I know nothing about economics but as I see it, all these Felda settlers are being taken for a ride on Aladin's carpet.
It seems to be the settlers will not own the land anymore since it is going public and even foreigners will be owners of their land - bumi reserve and all. Not sure if I am getting this right.
Secondly, many idiots who have not planted a single oil palm for Felda or helped in its growth will be reaping tons of money from the IPO.
Lembu punya minyak sapi dapat wang.
Am I right sir.

Anonymous,  1 June 2012 at 13:03  

Suddenly, the topic change to economics, drastic diversion.

I wonder majority of the readers understand economics.

The more gov spend on projects, "konon" to increase GDP & employment etc, the more commission goes into their pockets & selective cronies made billionaires.

linguini,  1 June 2012 at 15:08  


What you mentioned regarding ETP 're-branding' we already quite know much earlier. For example, "I" (investment, newly-produced capital goods) is already planned by private firms. Then why is Najib jumping around as if it is the government's own initiative? I find this hilarious. All in all, this ETP alphabet soup is just the 5-year plan we used to. Its just re-branding with no real, new input to the economy.

In addition, the Felda listing does not excite me much either. Ask ourselves: is there value-add?

Anonymous,  1 June 2012 at 17:40  

Cost allocation to projects is more important than benefit it bring to the people.....strong vested interest groups are controlling the direction of the economy at the great expense of the ordinary people.

Anonymous,  1 June 2012 at 22:15  

Sak, your article on economics is in the right direction, to shed some light as you are the expert and welcome some excellent ideas and argument from your friends, supporters and guests here. Not too much though, as QD the Squealer is taking notes. Perhaps you want to consider using the laymen's term to be more effective.

Keynesian want to steer the economy while Hayekians want to set the economy free. One side thinks they can plan for others. The other side wants the planning to be done by many as individuals adapting themselves to the free market ?

It doesn't jive with the rationality and efficiency in bringing the best outcome to the majority of the rakyat's in enjoying better and fairer business opportunities, more creation of jobs, better wages, to improve the living standard of the rakyat in the cities, to eradicate poverty pockets in urban areas and in the kampong, in the interior and to curb inflation.

In fact, Sak like you said there is absolute involvement by the the government.

And definitely their cronies, too, by planting their own "favorites" as Kenyesians and Hayekians.

As i agree with Bruno, "So it can be 60% for them and the remaining 40% for the cronies and

Anon 13:03, Quote : The more commission goes into their pockets & selective cronies made billionaires." Unquote.

Both ways and in between they enjoy the immense wealth and increasing wealth while the donkeys of us, common rakyat have to graze the twigs
and touch- me- not.

And using rakyat's money or borrow excessively for more bailouts if their entities fail. What's the latest EPF's high risk investment in central London ? We must step in fast by voting in a new government or we'll end up as well done anchovies in our senior age many years from now.

Why EPF invested for a renewed altered ego Malaysia Boleh ? by the crony Kenyesians and Hayekians ? Why not Singapore, Hongkong, Taiwan or Brunei ?

2020,  1 June 2012 at 23:51  

Dato - what is our economy blueprint be it inthe mid or long term? Our budget indicates a heavy reliance on petro, our theme seems to indicate a manufac/trading based nation, our largest IPO will be an agri based platform.... And we are aiming what was it for 2020 - high intake & consumption of alphabetical soup you say???

This is coming from a nation that lacks the economical scale due to its population size (thai is 79+mil & indon is 200++mil) and sing has the default strategic position geographically. Having this in mind, we dare to propose minimum wages on the background of how many consecutive defisit budget (which occurs during good and bad times, talk about consistency).

So instead of talking about the dreams of the future.... Which is what everyone naturally aspires,... Yes,It will be different from one another but everyone dreams nevertheless - our great leaders now purpose to us "how to dream" which may to some degree explain the current alphabetical soup being force fed to the mass... So that by 2020 -we will have a GDP of x and a CPI of y and felda's price will be trading at z (cant resist that one, thehe)...., so by 2020 Malaysia will be an agri or trading or manufac or tech based nation... And we say that we have plan , it shudder me to think of what we do when we dont.

Anonymous,  2 June 2012 at 02:39  

Hi Dato Sak,
Me thinks BN is rushing for the FGV listing to get the cold hard cash to fund its war chest for the up-coming mother of all GE's!

Anonymous,  3 June 2012 at 21:25  

Dear Sak’s friends & supporters,

Salam. I sincerely hope someone could present Sak, Sdr Aspan, Walla, Bruno, Uncle Pak Yeh the following most remarkable book as a gift for writing so passionately for us with their refined razor sharp mind.

What Money Can’t Buy : The Moral Limits of Markets by Michael Sandel, a political philosophy professor at Harvard University.

In the near future, we will converge here to discuss, to work collectively that excellent ideas are implemented for our societies as a nation.

It looks like this is one phenomenal book which we have never read before, but will definitely and powerfully impact readers, leaders and nations.

Get it fast ha ha … Merci.

p/s a very good friend will give me a copy for wee hours reading real soon =

Anonymous,  11 June 2012 at 13:15  

Part 1
Regardless of whether Kenyesians or Hayekians, Malaysia needs to re-construct its check and balance. It is always difficult to have a perfect system but one system usually works, that is moderation, thus maybe a mix of Kenyesians & Hayekians.
On our govt.’s preference for Kenyesians, that is to steer the economy is a good concept but thoroughly abused. For example, the beautiful lamp posts one sees around Putrajaya, cost RM80,000 per piece. This is a gross abuse of power and is a form of corruption. I refrained from calling it outright corruption because our former PM, Tun M would argue that there is no corruption, it is a case of willing seller and willing buyer, where the seller is a crony of the power-to-be and the buyer is the govt. He would go on to say “Apa salahnya org Melayu kaya raya”, this was the phrase he used in one of the UMNO General Assemly that was met with a rousing ovation. When I first saw that Assembly, I was sick to the gut but that was about over 15 years ago and would I had dared to project my displeasure openly at that point in time? What he conveniently left out was the org Melayu kaya raya was limited to only a handful and from the ruling Elite, it was a case of “F” the poor. Make no mistake; the plundering of the Nation began soon after the ascension of the Tun. He had ensured that all the bodies of check & control were firmly in his control. The Central Bank, The Securities commission, The Judiciary & the Law Enforcement, the 4 Pillars of Check & Balance, were successfully destroyed.
I could go on and on regarding the abuse of power, injustice & corruption, to put it briefly all the immoral & injustice in society that are imaginable under the sun were and still are being practiced by our current leadership. There is not one glint of virtue in the current administration.
The govt under Tun M had shamelessly used the pretext of subsidy to siphone off taxpayers’ money into pockets of cronies, of course in cahoots with the power to be. At the same time, the people are supposed to be grateful for having received this subsidy. People were just too blind to see even back then. Our former PM goes round the world not to sign lopsided treaties with everyone but back home, every agreement signed was so revoltingly lopsided. The true nature of subsidy is to ease the burden of the people while the Nation is on the road to achieve 1st world satus with a high disposable income and eventually subsidies to be removed and re-channeled to other areas of need. In our case, the subsidy was used to bleed the Nation dry at the expense of the sufferings of the people for few generations. Of course our Tun M will claim that this was not corruption, it was a case of willing buyer willing seller.

Anonymous,  11 June 2012 at 13:16  

Part 2
Thus, it is imperative that Malaysia re-contruct its Pillars of Check & Control, without which, be it Kenyesians or Hayekians, the People will not see progress. The basis of success of the 1st world countries was high disposable income. The money wasted via abuse of power, wastefulness, reckless spending can reduce our cost of products, consequently release at least RM400/income earner. This RM400 can be easily achieved via re-negotiation of Toll Agreement, IPP, Water & removal of Protection for Proton. Proton is only prolonging the agony of Malaysians and the extension of Car repayment from 6 years to 9 or even 11 years at one time is a recipe for disaster. It will guarantee prolong suffering. The removal of protection for Proton will cap the repayment period to 6 years at the same installment rate, thus we have cut short our agony by at least 3-5 years. Imagine RM400/income earner being freed up into the mkt and with a workforce of say 14 million people, we’re looking at RM5.6 billion per month into the economy, instead of the 2% reduction in EPF contribution initiated by our current PM, this is the most idiotic solution and to divert the attention of the Public, the sad thing is, there were still people who bought it.
Although Malaysia had embarked on a Multi-media concept years ago, but it is only recently that we begin to see its effectiveness. Majority of people were dependent on our mainstream media for information. It is realistic to think that our current leadership is not interested in developing the rural areas and will continue to stifle & supper growth in these areas for one simple reason, Modernization via Good Education may well mean its downfall.
My conclusion is regardless of Kenyesians or Hayekians, our primary objective is to re-construct our Pillars of Check & Control for an Equitable System of wealth Distribution. To achieve this goal, we first need a Clean, Free & Fair Election. One cannot expect to run, when one has not learnt to walk. Our Nation is now in dire straits because we have taken a step backwards and we are only crawling now. There is no reason to perceive that our current leadership will want an EC that is fair simply because the stakes are just too high. 30 years of suppression & abuse of power speak volume.

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