Najibnomics- Does it Work?

As I walked into him room, before I could even sit down, the Oracle shot me a question. What is happening to our country? I thought I wanted to ask him the very same question.

And he further questioned- what’s delaying Mr X from doing what is the most important agenda now? - getting rid of Najib? It’s important to dismiss Najib because he has induced a climate of complicit silence. The UMNO men know the country is in a mess because of najib but no one is questioning. Because of the complicity, the entire cabinet must be replaced.

I could only managed an enfeebled- it’s coming.

In one particular meeting with The Oracle of Syed Putra aka Tun Daim Zainudin ,I asked him how does one manage an economy. He answers as a matter of factly that he eschews all economic theories. The most important tool is the application of good business sense. The business sense of running a country.

It’s the common thread among practical men and minds. Deng Xiaoping was famous for the "It doesn't matter whether a cat is white or black, as long as it catches mice." Translated for our present purpose, it means, does this line of thinking and action works.  

Nearer to home, the late Lee Kuan Yew was recorded to have said, he doesn’t care too much about economic theories- Milton Friedman or Keynes. He was interested whether a line of thinking and action taken, works. Does it work? When he presses a bell, he wants to know, does it work?

I was privileged to have seen and read a manuscript of an upcoming book on Daim Zainudin written by an Australian setting out how he managed the economy when he was the finance minister. 

First Daim got a free hand in managing from Dr Mahathir. He then sets on applying the principle of living within one’s means. Read: its practical to have separate people be the PM and the FM.

He cuts down expenditure. He cuts salaries of ministers, reduced traveling and entertainment. Admittedly he says, that was more of a show so that people start thinking the government is serious in wanting to cut down spending. Budgets were reduced causing unhappiness among UMNO leaders who saw projects as a means to skim from the cookie jar.

The main issue now is managing the economy. This is where Najib has failed. Take any measure of an economy. Our reserves are low. The Ringgit is falling. The price of commodities is low. The cost of living is high. The rate of inflation is suspicious. Employment is decreasing as industries have to cut back. The price of oil on which we depend heavily on revenue is below USD30. 

The country is calamitously paced. It’s placed that way because of inept management. It is this way because the leader of the country is inept. The umno people ae consorting with a weak leader and his leadership

Of course by good business sense, he means the sum total of experience and learning that allow a person to make considered judgement quickly. In that sense, the current PM doesn’t seem to have any. He merely plods along.

There are growing suspicions he says that someone must be doing the thinking for Najib. Najib can’t do complex thinking. To me that is an admission that Najib does not do serious thinking. The most recent being the introduction of a National Security council Act. An act that actually transfers the power of declaring emergency from the Agong to the PM.

It’s out of Najib's character. Somebody else must be doing the thinking for Najib. Najib is too soft to carry out the chop chop job. He came on as PM promising to retire some characters from the cabinet. He hasn’t done what he said he wanted to do. Judging from that, there is no way Najib thought about the NSC Act.  

As an aside, its rumoured that there will be a cabinet reshuffle soon. It will involve Zahid Hamidi because Zahid is seen to becoming more powerful. Suddenly Najib realises that Zahid is more dangerous than contented looking Muhyidin.

Najib has successfully pushed through the Act simply because his government has the numbers. He has 134 MPs against 88 of the opposition. He forgets that his government only got 47% of the popular votes. He is accountable to the people. And as long as the people can be hoodwinked into thinking that najib acts out in the best interest of the country, he is safe. But that kind of thinking is quickly dissipating.

Has he managed the Malay economy well?

In 2012, the average monthly household income of the top 20% bumiputera was RM10,666. The corresponding monthly income of the bottom 40% was 1686.

The absolute difference was RM8980.

In 2014, the average monthly income of the top 20% was RM 12,630. The income of the bottom 40% was RM2367.

 The absolute difference was RM10, 263.

In absolute terms, the income gap has increased. It has widened from M8980 to RM10,263. The income of the b40 has increased by RM681 while the t20 has increased by RM1964.

The bottom 40% would have loved to have his income increased by RM1964 instead of RM681. This tells us, absolute numbers are preferred.  A 10% increase on RM1 is 10sen. A 5% increase on 100 is RM5. The ordinary man with the common wisdom would prefer to get RM5 to 10 sen. A high percentage increase on a low base is less desirable than a low percentage increase on a bigger base.

This is what happens if one looks at the figures produced by the epu. The percentage increase of the top 20% is very much lower (18%) compared to the percentage increase of the bottom 40 %( 40%). The government will say- look fellas, the average income of the bottom 40% has increased by 40%.  How much is that? RM681. And by how much has the average income of the top 20% increased? By RM1964.

But the people who considers the opposition’s criticisms of this state of affairs as being just another stick to wallop the government will say, be satisfied with the glad tidings we have brought about. Last time you had no roads, we built them. Last time you had no bridges, we built them. Last time you had no electricity, water, public amenities, and public transport. Now you have them. Rejoice. This is a just world.

It’s not just. With widening income disparities come widening gain of opportunities for the richer. It reflects the working of policies that favour the selected few and prejudices the many.  

Since 1970, the rich has always gained more in absolute terms. If we remember 1970, was the year we implemented the New Economic policy. The policy was effectively translated into choosing winners among the Malays. Selected Malays were given preferential treatment while the common Malay has only to satisfy himself with improved education, housing, general wellbeing and so forth.

These are appreciated of course but can only be considered as being the product and outcome of a dutiful government. They have to apply the revenue they collected in the form of taxes and give back to the people.

The selection of winners was expected to produce another positive externality- a benefit not asked and paid for. The positive externality is the trickle down effects. Those made rich will help out those left behind in the race. Rich people reinvested their income. This help create jobs and opportunities for others who did not make it.

The record in Malaysia has been dismal. Not only a large proportion of beneficiaries from NEP did nor reinvest or create jobs and business opportunities, they sold the equities they got on the cheap. They cashed out to enjoy the benefits of being rich. Hence out of the R54 billion worth of equities, RM52 billion were sold. Those rich people upstairs did not help the people downstairs.