So, it is ‘boycottnomics’ now? – T.K. Chua

Malaysians in general like to boycott a lot of things. At one time, we boycotted cigarettes of certain brand. Then we boycotted bread. Now we want to boycott traders/middlemen in general. We think we have a simple solution to every problem: boycott.

We want to exert our consumer power, so to speak, to make manufacturers, traders and middlemen toe the line and comply with our demands.

We have blamed the traders and middlemen since professor Ungku Aziz’s thesis on rural poverty. We view the middlemen as parasites ever ready to leech on others. Get rid of the middlemen and our poor farmers and consumers will have a better life. It is akin to many newly independent countries trying to get rid of every remnant of colonialism after attaining independence. But we know they all ended in miserable failure.

Traders and middlemen have survived and thrived because they play an economic function that is demanded by consumers and producers.  Middlemen have expertise, skill and capital that is not easily replaceable. Didn’t the government try to undermine the roles of traders and middlemen through the numerous agencies it has established in the past? Off the cuff, I can think of Fama, Majuikan, Pernas, Majuternak, LPN (now Bernas) and more recently NFC.

Put it this way: a coconut in Sabak Bernam at 6 o’clock in the morning is useless to a housewife who needs it at 6 in the evening in Petaling Jaya. Only traders and middlemen can make the coconut available at the right time, at the right place and at the right price.

Price efficiency must ultimately depend on market efficiency, with some exceptions here and there of course. If we want traders and middlemen to behave appropriately, there must be enough competition in the market place. Competition, in turn, is dependent on regulations (ease of doing business), licensing, permits, ease of entry and exit, cost of doing business and embedded corruption prevailing in our system.

For years, the government has always thought it knows best.  Hence, granting of monopolies, regulating imports and supplies and exercising price control (which give rise to endemic corruption) are the usual modus operandi used by the government. But for years we have also known that this strategy does not work. Otherwise how do we explain the disconnection between fuel price and the price of other goods and services? The distortion has derailed the lower fuel cost to pass through our economic system.

Boycotting is an ill-conceived and poorly thought-out strategy, racial pun aside. What can boycott do in a market place that is inherently inefficient and uncompetitive? How long can you refrain from buying milk powder for your babies? How long can you refrain from buying the medication that you need?

Profiteering is a human instinct. The best way to deal with profiteering is not through lectures on ethics and morality which “pious” Malaysian politicians love to talk about. The best way is by creating an environment where competition is intense, while protection, restriction, patronage and monopoly power is minimised.

I know we are screwed when our PM can only promise no increase in electricity tariff this year when the price of fuel has dropped by more than 50%.

Boycott by all means, but it is not going to work.

* T.K. Chua reads The Malaysian Insider.