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Sakmongkol ak 47

Thursday, 5 July 2012

Chief of the Rentier Class and his Economic Transformation

In practical sense, the term rent seeking or rent seeker or rentier classs- refer to the activity by some people capturing offices of state and using the power of the state to capture economic benefits. So, the rentier class consists of the people making use of their official and political positions to capture economic benefits. They get these benefits not by actually providing or actually producing a service or product, but by virtue of holding a political or bureaucratic position.
So what? So the above arrangement leads to disparities in income not due to natural abilities or difference in character. Such arrangement becomes objectionable and unconscionable when the disparities in income do not arise because of abilities or character. The lazybones and laggards get ahead of the industrious and cleverer because they have found a way to cut corners by earning state positions. And so because of the positions they hold, in the offices of state, political positions and being proximate to the corridors of power allow them to get ahead of others.
Generally speaking that is why some people are very critical of the DEB because it allows and perpetrates such `economic arrangements’. Those who get ahead are those having political and bureaucratic powers and their cronies and fronts. We don’t believe in organic growth. We want to give those bumiputeras short cut solutions by giving them licenses and monopolies instead of creating the culture of organic growth. We prefer the picking winners strategy instead of allowing the people go through the learning curve and process and making them into the rugged and robust society. We have created wimps who can’t take on the world and we create a system that reinforces the people to be overly dependent on the state.

I am reminded of an instructive story of an n economics professor who failed an entire class to disprove the students’ insistence that some form of centrally directed economic arrangement would ensure that no one would be poor and no one would be rich. In other words a centrally directed arrangement by people who also insist the age of big government is still very much alive and kicking will be an equalizer.
So the professor informed from now on, he will give the same average grades in exams so that everyone will receive the same grade so no one will fail but no one will receive an A.
After the first test, the grades were averaged and everyone got a B. The students who studied 'hard' were upset and the students who studied 'little' were happy. As the second test rolled around, the students who studied little had studied 'even less' and the ones who studied hard decided they wanted a free ride too so they studied 'little'. The second test average was a 'D'. No one was happy. When the 3rd test rolled around, the average was an F.
As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
To their great surprise, ALL FAILED and the professor told them that "central command economy  would also ultimately 'fail' because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.
 A simple story has provided us with some useful insights on how to manage society. 
1.     You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2.     When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Take the case of the FGV listing recently. The people actually involved in producing the economic resource, i.e. the settlers and felda workers get 5.5 % of the benefits while those holding positions( in UMNO) and in government and those who hold executive positions in Felda get the lion share of the shares issued. Also benefiting are those in close proximity to those in first line of power. We know them by the term cronies. So friends of the deputy trade minister were allocated handsome number of shares because he has plans to move higher up the political ladder.
This is the kind of economic arrangements perpetuated by UMNO and BN that create mistrust and animosity and lower economic output eventually.
Most inimical is the creation of an entire race of dependents on the benevolence of big government. So next time anyone comes along and says, THE AGE OF BIG GOVERNMENT IS OVER, let us all show him the patriotic one Malaysia finger and in unison say, up yours!


dukuhead 5 July 2012 at 10:12  

haha, well said. it's funny when people who were the products of big government decide now to "abolish" big govt. what are the chances of them succeeding? NIL.

Anonymous,  5 July 2012 at 12:40  

That is why Dato, whenever I see a Malay using an expensive BMW, Mercedes, Ferrai etc I NEVER see him as a successful man but an UMNO crony.
Malays don't need to think or work hard to become rich.
However, I will respect any non-Malay who owns a big car or big house because I know he got it through sheer hard work.
What is there to admire in a Malay when the riches he owns came from government contracts and APs... and of curse corruption.
How long can such wealth, acquired through skin colour, last?
The Chinese say in two generations.

Anonymous,  5 July 2012 at 12:47  

Dato Sak,

Can we demand the government to reveal the names and amount of shares allocated to selected bumiputera individuals and companies, both by management of FGV and MITI? The government's leaders now talk a lot about being transparent. They should also walk the talk.

Anonymous,  5 July 2012 at 12:48  

Check the background of Malays driving S class, BMW 7 series and SUVs, Lexus, Porsche Cayenne, Audi Q5 and 7 and you will discover that they are either politicians or rent seekers. Very few of these Malays are doing productive work.

Those Malays who got their money through the hard way will not splash them on these luxuries. Furthermore, it is not worth it as prices of cars in this country is the highest in the world.

But for those who got money the easy way (rent seeking, corruption, kickbacks, illegal commission etc)will have no qualms spending on this depreciating assets. To them prestiege and showing off is the way of life.

After Felda IPO's and the soon to be listed IHH (360 million shares under MITI), many more of this luxury vehicles will be on the road owned by these rent seekers. Don't believe me just check with the AP holders, their own cronies where they purchase the car.

When more that 50% of Malaysian household are earning less than RM2000/month, these people are buying 'toys' worth more that RM400k each. That happens only in Malaysia.

etheorist 5 July 2012 at 13:15  

Brilliant illustration! Now, Malaysia need to find a professor who knows how to set the exam questions and mark them properly, even if we now want to come back to meritocracy.

OneMalaysian,  5 July 2012 at 13:33  

Dear Sakmongkol

“We have created wimps who can’t take on the world and we create a system that reinforces the people to be overly dependent on the state.”

Yes, there are indeed two big issues here. The first is about this rent-seeking class, who attain wealth by not adding value. In local terminology we call it the Ali-Baba arrangement. They succeed by using their political power once in office. Of course Baba is the crony. But during elections the same Baba is the bogeyman, so Malays are hoodwinked into voting for their “protectors”, the UMNO rent-seeking class, or Umnoputras – a nice sounding term.

This must stop because if we do not add value society is that much poorer. It is unfair because only a tiny number of people benefit. It is criminal because it comes from an abuse of power. Can we put it into simple terms so the poor, exploited Malays can understand this? The fact that election after election these folks put this class of Malays into power show they really don’t know they are being exploited.

As for Baba, he usually gets monopolies or special concessions that gives him a way to make super profits that he can share with Ali, and this impoverishes all Malaysians. If we need to know the latest Ali-Baba deals look at the award of the RM960 million Ampang LRT contract to Tan Kay Hock, golfing buddy of Najib. George Kent, his company that “won” the contract, has no experience with LRT and whose biggest prior contract was a piping job for RM40 million. Then there is this “privatize” the right to collect fines to a RM2 company. Malaysians must be very tolerant people. Wake up!

So we must liberalise the economy. Let everyone compete to the betterment of all. Competition makes us all stronger. Even the loser wins. In 1978, before Deng Xiao Peng declared that he didn’t care if the cat was black or white, farmers (80% of Chinese) had an average income of RMB134, while the better off urban folks had RMB343. By 2007, rural incomes had risen to RMB4140 per capita (7.1% p.a. real growth). But city folks’ income rose faster at 7.2% p.a. to RMB 13785 (real terms). The income gap between these 2 groups increased from 2.5 times in 1978 to 3.3 times in 2007. So the economic opening up of China to private enterprise, like the rising tide, lifted all boats. Although the “rich” got richer, the “poor” too got better. Should they prefer 1978 “equality” in which everyone was poor? There is surely a lesson in here for us too. Liberalise the economy and let everyone compete. Do not worry who got richer. Everyone will be better off. Economic theory will back up the Chinese experiment. And it will apply to Malaysia, too.

Anon,  5 July 2012 at 13:43  

Dato, correction:
because it allows and perpetrates such `economic arrangements’.

should read perpetuates.


Anon,  5 July 2012 at 17:01  

Why was the process of awarding FGV shares not published before listing? How was the process of selection carried out, by ballot? If it was by ballot, were settlers's representatives there? Why wasn't the selection process telecast live on TV and broadband to show complete transparency?

The list of people receiving IPO shares allocated by the relevant Ministry was once published by NST (over two days?), thanks to Tun Mahathir's cynical move to silence "Melayu yang senang lupa" in the post-1997 crisis. This is justification enough for the BN government today to do the same with regard to FGV lucky draw winners. If Felda settlers will be jumping up and down, again, after looking at the list, then I think the P.M.and his friends can be sure that there will be lots of well-wishers for them this Hari Raya, and enough reason for all of them to give notice to caterers now for the mother of all celebrations.

As a loser, I would stay away, and instead do penance by volunteering to help clean up after the big do.

But, should razor-barricades in front of these mansions become necessary,I am not available.

Anonymous,  5 July 2012 at 17:09  

I hope the Felda folks will punish Najib and BN comes 13 th GE, and not due to their gratitude to Najib' father Tun Razak , let the thieves and robbers go scotch free.

Anonymous,  5 July 2012 at 18:02  

What happen to our boy QD? Busy renting or collecting rent?

Ibnu Hasan,  5 July 2012 at 18:15  

the article fits one of the definition of politics ... politics is who gets what and how... and i would add much. what is worse.. its self-perpetuating. to cut it off... change the WHO, WHAT n HOW.

idrisfaizal 5 July 2012 at 21:11  

Actually,to me it is a sad.What is funny(pathetic actually)is looking at those who are still in denial and continue lying to themselves that all is fine.History has shown that no government is that "big".

Anonymous,  5 July 2012 at 23:29  

Anon 5 July 12:48

Some have a few or several posh cars for different type of cruising and moments of the day : horseback riding, playing polo, shopping, etc.

When more that 50% of Malaysian household are earning less than RM 2000/month, these people are buying 'toys' worth more that RM400k each.

Did you mean 40 K ? That would be attainable. Thanks.

Anonymous,  6 July 2012 at 00:48  


What about without the Baba - the new partnership in super / huge business deals with Arabs, Korean, Mat Salleh ? They are the new big boys. Malaysians only get to be employed as window dressers doing donkey jobs. The outsourcing ? The new players enjoy super wealth and giving loose change to Malaysians, huh ? The Japanese have shown their huge consistent sincerity and Friendship ( not solely on business advantage ) to this nation, look at the number of new ambulances of highest quality given to St John Ambulance ( need to check this ).

Hopefully the Koreans will catch up in employing all Malaysians tangibly ( 90 % ) in the middle and top level of management, ease up its monopoly of supermarkets, etc you just name it.

The Baba, like it or not have contributed immensely to Malaysia through the decades in employing Chinese, Malay and Indian as well as extensive charities. Who can beat the Chinese in making huge donations for social welfare. In the same context of making wealth, have the wealthy or super wealthy Malay made major donations to all the poor of the three communities or even to upgrade their elite residential schools like TKC, MCKK, RMC, etc ? What more through the decades ?

Now the critical unemployment consisting the poor Indian, Chinese and many graduates in the 40s made redundant in this nation ?

Is it because the Baba have been marginalized or of lesser use, after the selective political and discrimination ? What about the unemployed youths and graduates of all three communities ?

Now back to the doing businesses with Malaysians FIRST. There are ways both partnership must make equal contributions back to the Malaysian societies and tangibly.

Not referring to you; harping on the Baba issue, including myself will not solve many bread and butter issues. Haven't gone into other issues yet, fast forwarding by 5 / 10 years.

Dato Sak, Sdr Aspan, TS Khalid, many new honest leaders will have that privilege to build bridges inclusive of all Malaysians to right things umno can't do for decades. Did attempt lately, but too late and inconsistent. And not collectively across the board.

Really too concerned about how this antagonistic view of Baba this that will hurt all communities further. Build bridges, prosper ones' community and interlink all communities with accountability and sincerity as kasih and being patriotic to our beloved nation. The rebirth of a new and united Malaysia.

Do you know what it is like to be color blind, one could be ignored by own's community, but in some developed nations, one is not tolerated for being racist. We can each be proud of own community but be real nice, compassionate, fair, honest and inclusive. These values are civilized, international, with eternal values as well.

Anonymous,  6 July 2012 at 01:07  

Well,it is a bigger classroom.Dato,you have a point there.

Anonymous,  6 July 2012 at 02:06  

Everything is subjected to natural forces - the Tao - to come to rest at equilibrium - sooner or later even if it takes a hundred years.

You can see that this is happening in some middle east states...Karma-vipaka is natural law at work.

Anon,  6 July 2012 at 09:35  

Not to sure with affirmative action in practice, Baba is needed anymore. This is because I see so many Ali Ha Ha(s) laughing their way to the bank every day with no time to spare for their children. Quality parenting is reduced to buying bikes for their brainless, aimless morons who then strike terror on the streets.

Some years ago a senior lady police officer in Bukit Aman who had these Mat and Minah Rempits punished was quickly sent to cold storage.

Rent seeking in whatever manner is the surest way to impoverish a nation. It amazes me, over the last 30 years, how we can sedulously deconstruct this nation every which way BN can think of after prayer times.

The road to perdition!

Anonymous,  6 July 2012 at 14:07  

This is nothing new.

Our " leaders " knew about it but do nothing for narrow and self interest.

There is a strong culture of rent seeking and corruption...until the country goes to the dogs, real and permanent change will not come.

Anonymous,  6 July 2012 at 15:16  

I believed when the election is around the corner, najib will announce an additional durian runtuh
for the Felda settlers, and all the grouses and anger of the settlers will be forgotten, and they will be praising the almighty najib no end.


Anonymous,  6 July 2012 at 18:26  

Anon said," This is because I see so many Ali Ha Ha(s) laughing their way to the bank every day with no time to spare for their children. "

If ones keep brewing the baba issue, and yes, your sharing, still does not justify any means of discrimination against the minorities ! SOME Malaysians have the mentality if an issue can't be resolved, ones give up and shift the blame.

Aren't there super rich Malay and Chinese and Indian mak datins, etc laughing all the way to the banks; exclusive malls carrying LV, etc with maids, and nannies in tow that their dear husbands whimper, without pants as well ? However, some with class will never resort to being showy, just be cool and unpretentious.

Coming back to the concern, we need to move away from zeroing into a race of their super wealth to justify things will never change for the better. It can, it must, there is no option left for us, the rakyat.

This concern is raised so that both minorities, and the majority can move away from this mentality and move beyond to prosper each other's communities.

Another concern, in years to come, i hope the rich and successful Chinese, Indians, Malays ( not necessary in this order ) that emerge from the new era, after GE 13 will REMIND EACH OTHER that they owe and need to pay forward by empowering other communities be they Malay, Chinese, Indian or orangasli.

It was too embarrassing to watch how some wealthy Malaysians spun in their luxury cars, or sashaying along the shopping aisles while my expat friends just shook their heads, left things unsaid out of good respect. We smiled and cringed.

If ones have young adult children and relatives returning home after their university studies or extensive work, they will most likely feel the same way, cringing in embarrassment. It is not their culture anymore to be showy. A Plus point for parents, haha.

We have experienced, read or heard that there is a high percentage of caring and responsible citizens in the US, UK and Europe can be toward their fellow citizens regardless of their academic achievement.

However there seems to a systematic plan of hatred and intense hatred worlwide in the public forum. Hence we have to be equipped with new survival skills, to have self- worthy and good respect for others as well to face the new social onslaughts.

All good values are already ingrained in our societies for fellow Malaysians. We just need to jump-start them again. The benchmark is real high, that is how it works personally and collectively as a community. We aim low, we may end up in the froggie pond. But again, doing good without pressure, just easy as a way of life, taking a walk in the park - being courteous, help and compassionate to all. We began it that way, but somewhere, somehow in the past 25 years, it had stopped...

For those have already been making contributions , keep doing it better, for those haven't started, ones can start little by little, no worries, but never be inertia. Life is more meaningful, give it go and inculcate it in family members.

Things are moving in that direction in many NGOs, I see a new vibrant strength of collaboration of the teens, youths, y gen and our beloved x generations sharing and helping each others.

Malaysia will be better than S'pore ( many like the idea ) but i see it as our nation having the best from the developed nations and merging with the best of Asia - filial, hard or hardest working, faith in God, muhibbah friendship, time for relaxation, caring and sharing tangibly, meaningful jobs for all.

We have too much at stake, but great betterment by voting for a new government. Spread it around.

Anonymous,  6 July 2012 at 20:19  

Talking of FGVH dont you see the price soared positively much to our surprise.You only see this way back in the 90's before the 97 crises. I look forward to your sparring partner Pirates of Putrajaya blog closing after 13 July the promised date for price fall below IPO.I am certain it will be above IPO in fact above RM5.00 I too believe felda settlers will rally behind UMNO/BN .What do you think ?


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