Polarisation on the ethno-religious line is no longer the only dividing trench among Malaysia's diverse population. The economic divide is splitting the population apart too. Some would simplify it into the urban-rural divide after the rather divisive election results, but as the population of the urban poor expands, being urban in the future will no longer come with the crown of wealth and sophistication the word usually implies.
Nicholas Chan, fz.com
AS an non-economist, or as the euphemism would suggest, the layman economist, any attempts to discuss about the subject, especially in front of a learned audience, is bound to be turned into a self-shaming exercise.
For example, I find myself to be quite fond of the term "trickle-down economics" and have been delightfully using it to describe the sort of economy I think Malaysia would be fit for. A social market economy that is bottom-up (which means a larger consumer and tax base), slightly leftist but with a penchant for innovation and other market factors.
It is only until much later that I found out (in horror) that the term "trickle-down economics" is far from the utopian connotations I ascribed it with.
The original idea of the term that is constantly associated with the neo-conservatives is that by giving tax breaks or other economic benefits to the rich – businesses, entrepreneurs and investors, these capitalists will be encourage to increase their investment and productivity in the market, and thus benefiting the largesse through secondary effects (the trickle down), or simply said, the expanded economic pie.
It might sound good in writing but the 2008 financial crisis has since shone the word in a rather pejorative and ironic light. The Americans, or I would argue, the world has slowly come to the realisation that even when the economic pie is expanded significantly, the trickle is just too little for the lower masses to even taste a drip.
The Occupied Movement is the epitome of this, arguing the perceived injustice of America's 1% holding more than 30% of the nation's wealth while the 20% holds more than 85% of it.
The financialisation (I am not sure if this is a new term, but I swear I have read it in TIME magazine) of the US economy has been proven to be a tumour to the economy as banks have grown to be "too big to fail", while Wall Street's huge grapple over the economic does not help in the nation's recuperation process.
It simply does not generate as much jobs as the nation needs, when it is struggling to cope with an 8.0% unemployment rate (it was maintained at 5-6% pre-2008).
As the regulators are scratching their heads trying to find ways to control high risk financial ventures, calls for the return to "real" economy has been getting stronger. It was argued that a healthy economy is an economy that focuses on the production and trading of goods and services instead of bonds and capitals, and more importantly, an economy that generates jobs in sustenance of the growing population.
Germany's economy which has shown resilience in the face of global economy uncertainty and the European sovereign debt crisis is frequently cited as a good example of that.
Malaysia, although does not suffer from the same problems as the US, appeared to be suffering from a case of non-trickling economics as well.
The basic observation one could make to support this argument is that Malaysia's taxpaying population is relatively low, at about 10% of the 12.8 million workforces as of 2011; contrasting with 19.9% of the Hong Kong population that pays salaries and also Singapore with its individual taxpayers amounting to 20.7% of the population.
This means that a large portion of Malaysia's workforce does not make more than RM2,480 per month, also coinciding with the finding of the Household Income Survey 2012 that puts the national average household income at RM5,000, RM2,500 as individual income for a household with two working adults.
Many would argued that this is certainly the workings of the middle-income trap here, but then it is also as obvious that we are suffering from an imperviously, top-down, non-trickling economy.
From the Household Income Survey 2012, it is found that the top 20% of Malaysia households holds nearly 50% of our income share. It is no wonder that laments or curiosity of how the other side of Malaysia lives is constantly heard. Skyrocketing property prices, high-end dining options and glossy shopping malls swarming with international labels seems to be a norm for a portion of the population, while significantly out of reach for the others.
Polarisation on the ethno-religious line is no longer the only dividing trench among Malaysia's diverse population. The economic divide is splitting the population apart too. Some would simplify it into the urban-rural divide after the rather divisive election results, but as the population of the urban poor expands, being urban in the future will no longer come with the crown of wealth and sophistication the word usually implies.
As a government heavily invested in businesses (GLCs formed the largest of Malaysia companies) with a social restructuring agenda and protectionist traits, Malaysia's government has always been the major driver of our economic growth. And hence, the current inequitable growth could also be largely attributed to the failure of public policies.
Prime Minister Datuk Seri Najib Razak, a democrat with obvious liberal stripes, has undertaken an economic transformation project that reeks of the aspiration of the trickle-down economics of the neo-cons. Expand the economic pie and the people will automatically benefit from it.
Hence, we are seeing massive development projects, especially in Kuala Lumpur and the Iskandar region of Johor. The property market was encouraged to rise and prosper. Foreign capital, in the face of global uncertainties, flushed in like birds of flight. Even before the rakyat could feel anything, Najib was already riding into the elections with the "feel good" factor backed by world acclaimed GDP figures (reaching a peak of 7.4% growth in 2010).
A 47% popular vote gain would however, ironically suggest that besides himself, the people aren't feeling that good about the economy. Inequality is flesh pinching felt and highly pervasive.
The massive pumping of capital-laden sectors, like real estate, should not be a prime driver of Malaysia's economy. In fact, its growth should have been contained seeing the social ramifications it has on Malaysia's wider population. Housing is a necessity, by making it a difficult attainment it would lower the livability of cities as well as the disposable income of the citizens, making the definition of poor even wider.
And most importantly, it did not foster organic growth. The jobs it created for Malaysians are minute (since construction workers are mostly foreign workers), the wealth it distributed are fairly concentrated, and the little white collar Malaysians that are involved in the sector are most likely victims of the viscous cycle, if not the speculators perpetuating it.
No doubt, with foreign capital also coming in snatching our properties it may look good on our economic reports, but one may be bound to ask, at what cost? Housing loans forming the central bulk (44.5%) of our 80.5% to GDP household debt as of 2012 might be a good start for an answer.
However, under Najib's watch, the property domain has seen tremendous growth with construction and real estate and business services* finally reaching close to 10% of the national GDP in Q2 2013 as compared to 8.6% in 2010.
It would also seem the government is rather enthusiastic about cashing in from our real estate's growth with the hostile takeover of the country's largest property developer, S P Setia by Permodalan Nasional Berhad in 2011. I supposed this partially explains the reluctance in the kicking-in of speculation control measures as the costs of electoral politics would have made these earnings very useful.
As a witness of the 2008 financial crisis, the government should have realised by now, trickling down economics (as per the accepted definition, not mine) does not work very well.
The financialisation of our economy is indeed a very risky move as Najib seeks to shift our economy more and more towards a service-based one.
The truth is simple, economics might be fluid, but it's definitely not trickling at all instances, that is why wealth is so easily concentrated in the hands of few. They dwell in sectors that generate fast money but require less creation of jobs (or specifically, the type of jobs that would benefit our goal of becoming a developed nation), and when these returns are spent, the profits are contained within a very narrow spectrum of benefactors which are most likely made up of the rich as well.
I am not proposing that we rob the rich to save the poor. That would make me a communist, a title with cataclysmic consequences in Malaysia. But certainly we could do better than just building houses for the sake of growth like a monopoly board game.
Iskandar is fast turning into an expat high-end living enclave for the Singaporeans, but then what about the attracting of high value-added industries that would provide us with jobs and knowledge exchange?
It's been long since we have last heard of any reputable industrial firms making high value-added investment in Malaysia. Our small medium enterprises (SMEs) are by and large still marketing the cheap labour factor.
If there's anything trickling, it's most likely the sweat of worrisome average Malaysians of our squeezing and uncertain future.
With the talents in Pemandu (and most likely helped by the remarkable Mckinsey & Co), I suppose surely the trickling down effect of our economy can be more than having a rich man buying a packet of nasi lemak from a roadside stall in his Mercedes Benz, right?
Read more: http://www.fz.com/content/malaysias-non-trickling-down-economy#ixzz2hIQ4sX8d
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