Our Infant Information Revolution


June 15, 2018

Our Infant Information Revolution

 

In the middle of the twentieth century, people feared that advances in computers and communications would lead to the type of centralized control depicted in George Orwell’s 1984. Today, billions of people have eagerly put Big Brother in their pockets.

Toddler concentrated with a tablet

 

CAMBRIDGE – It is frequently said that we are experiencing an information revolution. But what does that mean, and where is the revolution taking us?

Information revolutions are not new. In 1439, Johannes Gutenberg’s printing press launched the era of mass communication. Our current revolution, which began in Silicon Valley in the 1960s, is bound up with Moore’s Law: the number of transistors on a computer chip doubles every couple of years.

Information provides power, and more people have access to more information than ever before, for good and for ill. That power can be used not only by governments, but also by non-state actors ranging from large corporations and non-profit organizations to criminals, terrorists, and informal ad hoc groups.–Joseph S. Nye

By the beginning of the twenty-first century, computing power cost one-thousandth of what it did in the early 1970s. Now the Internet connects almost everything. In mid-1993, there were about 130 websites in the world; by 2000, that number had surpassed 15 million. Today, more than 3.5 billion people are online; experts project that, by 2020, the “Internet of Things” will connect 20 billion devices. Our information revolution is still in its infancy.

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The key characteristic of the current revolution is not the speed of communications; instantaneous communication by telegraph dates back to the mid-nineteenth century. The crucial change is the enormous reduction in the cost of transmitting and storing information. If the price of an automobile had declined as rapidly as the price of computing power, one could buy a car today for the same price as a cheap lunch. When a technology’s price declines so rapidly, it becomes widely accessible, and barriers to entry fall. For all practical purposes, the amount of information that can be transmitted worldwide is virtually infinite.

The cost of information storage has also declined dramatically, enabling our current era of big data. Information that once would fill a warehouse now fits in your shirt pocket.

In the middle of the twentieth century, people feared that the computers and communications of the current information revolution would lead to the type of centralized control depicted in George Orwell’s dystopian novel 1984. Big Brother would monitor us from a central computer, making individual autonomy meaningless.

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Instead, as the cost of computing power has decreased and computers have shrunk to the size of smart phones, watches, and other portable devices, their decentralizing effects have complemented their centralizing effects, enabling peer-to-peer communication and mobilization of new groups. Yet, ironically, this technological trend has also decentralized surveillance: billions of people nowadays voluntarily carry a tracking device that continually violates their privacy as it searches for cell towers. We have put Big Brother in our pockets.

Likewise, ubiquitous social media generate new transnational groups, but also create opportunities for manipulation by governments and others. Facebook connects more than two billion people, and, as Russian meddling in the 2016 US presidential election showed, these connections and groups can be exploited for political ends. Europe has tried to establish rules for privacy protection with its new General Data Protection Regulation, but its success is still uncertain. In the meantime, China is combining surveillance with the development of social credit rankings that will restrict personal freedoms such as travel.

Information provides power, and more people have access to more information than ever before, for good and for ill. That power can be used not only by governments, but also by non-state actors ranging from large corporations and non-profit organizations to criminals, terrorists, and informal ad hoc groups.

This does not mean the end of the nation-state. Governments remain the most powerful actors on the global stage; but the stage has become more crowded, and many of the new players can compete effectively in the realm of soft power. A powerful navy is important in controlling sea-lanes; but it does not provide much help on the Internet. In nineteenth-century Europe, the mark of a great power was its ability to prevail in war, but, as the American analyst John Arquilla has pointed out, in today’s global information age, victory often depends not on whose army wins, but on whose story wins.

Public diplomacy and the power to attract and persuade become increasingly important, but public diplomacy is changing. Long gone are the days when foreign service officers carted film projectors to the hinterlands to show movies to isolated audiences, or people behind the Iron Curtain huddled over short-wave radios to listen to the BBC. Technological advances have led to an explosion of information, and that has produced a “paradox of plenty”: an abundance of information leads to scarcity of attention.

When people are overwhelmed by the volume of information confronting them, it is hard to know what to focus on. Attention, not information, becomes the scarce resource. The soft power of attraction becomes an even more vital power resource than in the past, but so does the hard, sharp power of information warfare. And as reputation becomes more vital, political struggles over the creation and destruction of credibility multiply. Information that appears to be propaganda may not only be scorned, but may also prove counterproductive if it undermines a country’s reputation for credibility.

During the Iraq War, for example, the treatment of prisoners at Abu Ghraib and Guantanamo Bay in a manner inconsistent with America’s declared values led to perceptions of hypocrisy that could not be reversed by broadcasting images of Muslims living well in America. Similarly, President Donald Trump’s tweets that prove to be demonstrably false undercut American credibility and reduce its soft power.

Public diplomacy and the power to attract and persuade become increasingly important, but public diplomacy is changing. Long gone are the days when foreign service officers carted film projectors to the hinterlands to show movies to isolated audiences, or people behind the Iron Curtain huddled over short-wave radios to listen to the BBC. Technological advances have led to an explosion of information, and that has produced a “paradox of plenty”: an abundance of information leads to scarcity of attention.–Joseph S. Nye

The effectiveness of public diplomacy is judged by the number of minds changed (as measured by interviews or polls), not dollars spent. It is interesting to note that polls and the Portland index of the Soft Power 30 show a decline in American soft power since the beginning of the Trump administration. Tweets can help to set the global agenda, but they do not produce soft power if they are not credible.

Now the rapidly advancing technology of artificial intelligence or machine learning is accelerating all of these processes. Robotic messages are often difficult to detect. But it remains to be seen whether credibility and a compelling narrative can be fully automated.

Joseph S. Nye, Jr., a former US assistant secretary of defense and chairman of the US National Intelligence Council, is University Professor at Harvard University. He is the author of Is the American Century Over?

 

Foreign Policy: Trump’s America First is America Against the Rest of the World


June 9, 2018

Foreign Policy:Trump’s America First is America Against the Rest of the World

by Susan B. Glasser @www.newyorker.com

President Donald Trump and The G-7 leaders–Creating  an Island called America

The Canadian Prime Minister, Justin Trudeau, was less than forty-eight hours away from hosting the biggest diplomatic gathering of his career when I spoke with one of his top advisers on Wednesday afternoon. Trudeau’s team was searching for strategies to salvage the annual G-7 summit with the American President, Donald Trump, and leaders of five of the world’s other large democratic economies—all of them close allies of the United States, and all of them furious with Trump. “Look, he personally decided he wanted to be fighting with everybody,” the Trudeau aide told me, referring to Trump. “Maybe he thinks it’s in his best interests to be combative and fighting.”

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For close to a year and a half, Trudeau and his counterparts have employed various strategies to try to head off conflict with the volatile American President, from flattery to stonewalling to hours of schmoozing on the golf course. But in recent weeks Trump has confounded their efforts, unleashing a tit-for-tat trade war with allies, blowing up the Iran nuclear deal over European objections, and walking away from a deal with Canada and Mexico to overhaul NAFTA, all while lavishing praise on the North Korean dictator with whom he hopes to reach an accord next week. Adding insult to injury, Trump even cited an obscure national-security provision to justify the tariffs, as if America’s closest friends had suddenly become its biggest enemies. As a result, the G-7 meeting that Trudeau will host on Friday and Saturday was shaping up to be the most contentious, and possibly the most consequential, since the summits began, in 1975.

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Trump’s Chief Economic Adviser, Larry Kudlow, told the White House press corps on Wednesday that this was all just a “family quarrel,” but, if so, it’s one ugly fight. As Kudlow acknowledged the rift, Trudeau and France’s President, Emmanuel Macron, were meeting to plot strategy, and everyone was wondering why Trump, who is often described as averse to face-to-face conflict, had chosen the weeks preceding the annual G-7 summit to punch his allies in the face. In the days leading up to the meeting, Trump had tense phone calls with Trudeau, Britain’s Prime Minister, Theresa May, and Macron, who has been especially humiliated by the series of adverse decisions after flying to Washington to lobby Trump personally. All of them appear to fix blame on Trump himself. “We’ve gotten used to unorthodox behavior from your President,” the Trudeau adviser said.

For his part, Trump seems to relish the confrontation he has unleashed and is spoiling for more. On Thursday morning, the President tweeted that he was “getting ready to go to the G-7 in Canada to fight for our country on Trade,” insisting, as he often does, that “we have the worst trade deals ever made.” But others involved in the summit were preparing for an America more alone than ever before, and now Trump faces the very real risk of allies teaming up against him. “The American president may not mind being isolated, but neither do we mind signing a 6 country agreement if need be,” Macron tweeted pointedly to Trump, in English, later on Thursday. Trump quickly fired back. “Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers,” the President tweeted. “Look forward to seeing them tomorrow.”

Soon after that, the White House said in a statement that Trump would skip the second day of the summit entirely, and it seemed increasingly certain that the traditional joint communique signed off on by all seven leaders will be discarded because of Trump. (As of Wednesday, when it would normally be in the final stages of elaborate negotiations, the communique was not even being circulated.) Instead, the Trudeau adviser told me, the Canadian Prime Minister, as the summit’s host, was likely simply to release a “statement from the chair,” summarizing the discussions without requiring Trump to approve it. The American President has blundered his way into “opening a four-front-at-least war simultaneously,” the Trudeau adviser said, and now the goal of the summit has become unlike any other that preceded it: “to get allies together to try to contain the amount of damage he’s doing.”

Ever since Trump took office, America’s allies have desperately sought to avoid this moment. Over the last year and a half, though, many of them have come to realize, with growing dread, that it was inevitable. The rift between the world’s great democracies that Trump’s election portended is coming to pass, and it is about far more than Iran policy, obscure trade provisions, or whether Germany spends two per cent of its G.D.P. on NATO. Many senior European officials speak of it, as one Ambassador to Washington did to me recently, as nothing less than a “crisis of the West.”

As Trump’s dramatic moves have played out this spring and hardened into a Presidential narrative of American victimization at the hands of free-riding allies, senior government officials in London, Berlin, and other European capitals, and in Washington, have told me they now worry that Trump may be a greater immediate threat to the alliance than even authoritarian great-power rivals, such as Russia and China. Equally striking is the extent to which America’s long-term allies have no real strategy for coping with the challenges posed by such an American President. Trump may be reorienting U.S. foreign policy away from its closest friends, such as Great Britain and Germany, and toward those with whom Trump is more politically aligned in Israel, the Gulf, and along Europe’s restive fringes, but his traditional partners have no real strategy for how to respond.

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Last year, the German Foreign Office embarked on what two sources described to me as its first-ever effort to produce an America strategy aimed at answering that question, with the goal of producing a strategy document similar to those it has for adversaries. “Essentially, it’s an overhaul of German foreign policy,” a senior German official told me, “since the key assumption being called into question is the total reliance we have on the friendship with the U.S.” Work on the new strategy began after Trump’s Inauguration but accelerated last spring, after the German Chancellor, Angela Merkel, returned from Trump’s initial foray into international summitry rattled by him and announced that “Europeans must really take our fate into our own hands.” The painful realization, the senior German official said, was that “we might get to a situation where we see Americans not only as friends and partners but also as competitors and adversaries. We don’t want to do that. That is how we treat other great powers around the globe, like Russia and China.”

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Until now, allies have been notably divided on how to handle Trump, largely settling on an approach that Charles Kupchan (pic above), who served as President Barack Obama’s senior director for Europe at the National Security Council, characterized as “limit the damage and run out the clock.” Trump’s recent confrontational moves, however, have made it all but impossible for allies to continue with their policy of “don’t give in but don’t give up,” as Kupchan described it. In interviews in Europe and Washington over the last week, I heard a new tone of anguish and concern as the extent and consequences of the rift have become more clear. “They cruised through 2017 and they thought everything was fine,” Julianne Smith, a former Pentagon official and deputy national-security adviser for Vice-President Joe Biden who now heads the transatlantic program at the Center for a New American Security, told me. “Now he is doing in 2018 what he threatened to do, and it’s ‘Oh, no, I feel the shock and awe’ and ‘What can we do?’ ”

Daniel Vajdich, who served as a foreign-policy adviser to the Republican Presidential candidates Ted Cruz and Scott Walker in the 2016 election, agreed. “There’s no denying that the transatlantic relationship is at a low point in the post-Cold War period,” Vajdich, who is one of two Republicans who defended Trump’s approach in a debate against two Europeans at a security conference in the Estonian capital of Tallinn last week, said. Initially, the session had been titled “Eighteen Months of Trump Foreign Policy: Right Direction or Wrong Track?” Organizers decided they had to change the title because no one could make the case that relations were on the right track after last week’s tariffs decision. Instead, Vajdich’s team was asked to argue that perhaps things were “better than they seemed” under Trump’s foreign policy.

When the reframed debate terms were announced at the event, they drew a laugh from the audience, which was composed largely of European security officials and experts. Constanze Stelzenmüller, the German debater on the panel, compared Trump’s foreign policy to Margaret Atwood’s dystopian novel “The Handmaid’s Tale” and said the Europeans were the handmaids. As for Trump, she said, the American President seemed to be treating his allies like a girlfriend he could abuse, slapping her around as if that would make her more likely to accept his marriage proposal.

When I went to Berlin after the Tallinn conference, I talked with several German officials who made similar references to personal and familial dysfunction. In their view, Trump’s decision to take on his allies on so many issues all at once is quite different from the standard-issue European policy disputes with the United States, such as the 2003 rift over George W. Bush’s invasion of Iraq, or Ronald Reagan’s early nineteen-eighties military buildup against the Soviet Union. Those were differing views over how to protect the alliance; now Trump is questioning the alliance itself. “It’s like your parents questioning their love for you,” Norbert Röttgen, the chairman of the Bundestag’s foreign-affairs committee, told me on Monday. “It’s already penetrated the subconscious.”

លទ្ធផល​រូបភាព​សម្រាប់ Berlin

Nowhere in Europe has that subconscious been more rocked than in Germany, where its close relationship with the United States has defined the country’s remarkable resurrection after the Second World War. “It took Germany the longest of all partners to come to terms with someone like Trump becoming President,” the senior German official told me. “We were very emotional, because our relationship with America is so emotional—it’s more of a son-father relationship—and we didn’t recognize our father anymore and realized he might beat us.” Only in recent weeks, he said, after Trump reorganized his foreign-policy team, replacing his Secretary of State and national-security adviser with the more like-minded Mike Pompeo and John Bolton and launching his trade war, did they finally get that “this is real. And still many people haven’t come to grips with the idea that Trump is not considering us an ally and as a son but maybe even as adversary.”

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As we spoke, the latest controversy was reinforcing the idea that Germany was no longer America’s favored ally. Trump had named Richard Grenell (pic above), a Republican activist well known for his aggressive Twitter spats and dismissive views, to be the new U.S. Ambassador to Germany, and he, even before meeting his German hosts, had just given an interview to the right-wing Web site Breitbart praising the European far right; the headline suggested he saw it as his job to “empower” such leaders. Grenell later insisted on Twitter that his remarks had been misconstrued, but not before some German politicians called for him to be kicked out and the German Foreign Office asked for a formal clarification of his comments. The fracas had a certain Trumpian irrelevance, but a more consequential rebuke came in a speech this week at the conservative Heritage Foundation, in Washington, where the Assistant Secretary of State for Europe, A. Wess Mitchell, outlined a new strategy toward the Continent that suggested a shift away from longtime allies, such as France and Germany, and toward newcomers in Central and Eastern Europe, where Trump-style populism flourishes and democratic norms are being challenged.

Still, Röttgen, like Merkel herself, remains wary of outright confrontation with the Trump Administration over these policies, even as the German public becomes increasingly disillusioned. “We should choose the option of damage limitation instead of escalation,” Röttgen told me. “Trump might force us to become more confrontational, but we should try to resist.” How bad has it already gotten? A recent poll found that only fourteen per cent of Germans now believe the United States is a reliable partner, compared with thirty-six per cent in Russia and forty-three per cent in China.

A year ago, after Trump returned from his first Presidential trip overseas with deeply unsettled allies in Europe, his national-security adviser, H. R. McMaster, and his chief economic adviser, Gary Cohn, teamed up to write a reassuring op-ed in the Wall Street Journal. “America First is not America alone,” they promised. Neither of the two men still works for Trump. A few months after that, Trump himself made an appearance before the rattled global financial élites at the World Economic Forum, in Davos. “America First is not America alone,” he insisted. Now, increasingly, it is.

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  • Susan B. Glasser is a staff writer at The New Yorker, where she writes a weekly column on life in Trump’s Washington.Read more »

Can Malaysia’s Mahathir 2.0 Government deliver?


June 3, 2018

Can Malaysia’s Mahathir 2.0 Government deliver?

Jayant Menon, ADB and ANU

http://www.eastasiaforum.org
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The world has seen a number of unexpected electoral outcomes lately, the most widely reported being Brexit in Europe and the election of President Donald Trump in the United States. But the ouster of the Barisan Nasional (BN) coalition government in Malaysia was not only unexpected; it was amazing. Even the winners could hardly believe that they had won, while the losers took an ungraciously long time to accept defeat. With probably the worst gerrymander in history, the incumbents technically required only 16.5 per cent of the vote to win, but still lost.

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“Financial corruption and the corruption of Malaysia’s institutions such as the Judiciary, the Police, the press and even the Anti-Corruption Agency must be addressed. Financial and institutional corruption feed off each other. Recognising the enormity of the task, the newly elected government has created the Committee on Institutional Reforms, while the Council of Eminent Persons will focus on economic issues. Malaysia’s new leaders understand that institutional reform must accompany economic reform to deliver systemic change, even if vested interest and inertia must first be overcome.”–Jayant Menon

The new Pakatan Harapan coalition government faces many challenges, but arguably the biggest is actually governing as a coalition. None of the constituent parties have ever been part of federal government, although various members have, not least the returned Prime Minister Mahathir Mohamad. Some have formed state governments before but that’s not quite the same thing.

Holding a coalition together takes more than experience in government. This is especially true when the defining motivation for their coexistence as a coalition is convenience. Their main bond is that they opposed BN for various reasons, which brought them together to contest the 2018 elections.

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Although Pakatan Harapan has been through a few permutations, itself a reflection of the difficulties of staying intact, the current coalition (formed on 22 September 2015) consists of the Democratic Action PartyPeople’s Justice PartyNational Trust Party and Malaysian United Indigenous Party. The diversity across these parties is vast and multi-dimensional, and could pose problems going forward. Who will anchor the coalition, and how will the others react? How will differences across party platforms be resolved when it comes to policy making?

There are no clear cut answers to these questions but the difficulties that can arise are exemplified by the current problems faced by the National Unity government in Sri Lanka, which came into power in 2015 in an almost equally unexpected way. It is another coalition of convenience ‘introduced as an alternative to a corrupt, authoritarian and nationalist regime’, a description that could equally apply in Malaysia. But despite its promise, the coalition has faltered and a return of the previous government now looks likely.

The situation in Sri Lanka is not an isolated case. The Arab Spring toppled many dictatorial regimes in the Middle East, and the political void it left behind was in some cases filled by coalition governments, of which the constituent parties often made for strange bedfellows. The difficulties that these coalition governments have faced are well known and continue today.

The astonishing political change in these countries, as in Malaysia, occurred in the face of mounting  economic and social problems. Youth unemployment in Malaysia is three times the average at more than 10 per cent, while 25 per cent of university graduates remain unemployed 6 months after graduating despite employers complaining about difficulties sourcing talent. This points to a skills mismatch that has its roots in a deteriorating education system that is underfunded and wrought with distortions. Malaysia has long been a net exporter of skills despite being a net importer of labour.

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Malaysia has also been a net exporter of capital since 2005, with mixed results on investment on both the domestic and foreign fronts. It will need to stem capital flight and revive both domestic and foreign investment if it is to generate the kind of growth that creates good jobs for younger generations.

Although official statistics point to falling income inequality, the level overall and levels within Malaysia’s different communities remain high. Other indicators also point to rising wage and wealth inequality, as well as rising social marginalisation and exclusion. Unless these disparities are addressed, social and political stability will be at risk.

Financial corruption and the corruption of Malaysia’s institutions such as the Judiciary, the Police, the press and even the Anti-Corruption Agency must be addressed. Financial and institutional corruption feed off each other. Recognising the enormity of the task, the newly elected government has created the Committee on Institutional Reforms, while the Council of Eminent Persons will focus on economic issues. Malaysia’s new leaders understand that institutional reform must accompany economic reform to deliver systemic change, even if vested interest and inertia must first be overcome.

These challenges can be met if the coalition works together as an effective government. The magnitude of the challenges will require wide-ranging reforms, and this will test the integrity of a loosely bound coalition. Implementation of such policies will require support from the bureaucracy, which is not only politicised but has only known one master for 61 years.

But if strong and persuasive leadership will allow Pakatan Harapan to withstand this test and deliver, the prize will be great. The nexus between race, religion and politics may have finally be broken, and meritocracy could return in place of money politics and patronage.

Although the change in government in Malaysia was a truly remarkable event, it marks the start, not the end, of a journey towards a new beginning. Once the euphoria fades, the new government will be judged not by how much better it may be compared to its predecessor, but by how far it gets in meeting the heightened expectations of the people who put them in power. It is only when these expectations are met that a new future will truly be possible for Malaysia.

Jayant Menon is Lead Economist in the Economic Research and Regional Cooperation Department at the Asian Development Bank, and Adjunct Fellow at the Arndt-Corden Department of Economics at the Australian National University.

Prime Minister Mahathir Mohamad speaks to VOA


May 30, 2018

Prime Minister Mahathir Mohamad speaks to The Voice of America (VOA)

 

Malaysia’s Prime Minister Mahathir Mohamad, back in power after a 15-year hiatus, says his first 20 years in office were “fairly easy” compared to what is confronting him now — massive debt in a country with an international reputation for corruption. Mahathir returned to power on May 9 in a spectacular election upset that saw him unite with his former opposition foes to overthrow a prime minister — Najib Razak — who is accused of helping to steal billions from his country in one of the biggest corporate frauds in history. Najib denies all the charges. “Well my first 20 years as prime minister was fairly easy. I inherited a system that is already there. All I had to do is to introduce new ideas so that we can expedite the growth and development of Malaysia,” the 92-year-old Mahathir told VOA in an exclusive interview. “But here I am dealing with a country that has been actually destroyed. Its finances have been destroyed. The system of government has been ignored and not used and a new system, or rather an authoritarian system has been introduced,” he said.

https://www.voanews.com/a/hold-for-vi…

Is our debt really over RM1 trillion?


May 29, 2018

My Message to Finance Minister Lim Guan Eng is this: You are no longer in the Opposition. You are a Cabinet Minister with a vital portfolio. Behave like one, the sooner the better; it is for the good of your reputation and your integrity as our new Finance Minister.

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You should take Tun  H.S. Lee, and Tun Tan Siew Sin as your role models. Both men were not in the habit of giving press  conference on Malaysia’s finances. In recent times, Tun Daim Zainuddin was the quiet one. If I can recall, TDZ hardly spoke to the media. He was only heard when he was delivering his budget speech.

As Finance Minister, you  should know that what you say and do is market sensitive. It undermines investor confidence and Malaysia’s image.

“There is no need to demonise and put down the previous BN government at every turn in what are sometimes dubious ways. It is time to do what is needed and portray things in an accurate manner as possible to reflect the truth as far as that is possible. After all, the elections ended over two weeks ago.”--P. Gunasegaram

I have a lot of respect for Guna, who I know well over many years. He is one of the best analyst from Malaysia, known for his critical and incisive commentaries on business and financial issues.

His views in this article, Minister Lim, should be taken seriously. I know Najib Razak made a mess of our national finances when he was doing the job before you. He is being investigated for his malfeasance. Let the Rule of Law take over.–Din Merican

Is our debt really over RM1 trillion?

A QUESTION OF BUSINESS | The starting point of this debate was when Prime Minister Dr Mahathir Mohamad said the national debt was more than RM1 trillion without defining what the components of the debt were. Naturally, this caused a lot of confusion. Was the previous government lying about the debt figures?

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“We have found that our finance (status) eroded significantly (to the extent) we are having problems in (repaying) our debts, which have increased to a trillion ringgit,” according to a Malaysiakini report.

“This has never been done by us before […] if previously our debt stood below RM300 billion, now the debt has exceeded RM1 trillion,” Mahathir said during his first monthly assembly as head of the Prime Minister’s Department in Putrajaya.

That started alarm bells ringing and raised legitimate questions about whether there was obfuscation of government figures. This was fueled further when Lim Guan Eng in his first press conference as Finance minister confirmed what Mahathir had said.

He said this was revealed during the discovery exercise when all relevant departments were able to start consolidating their accounts and numbers, The Star reported.

“Previously, certain files were not accessible by certain people and therefore, consolidations were not available,” he said in his first press conference as the Finance Minister on Tuesday (May 22). This seemed to imply new figures after consolidations.

But when markets started to fall and former Prime Minister and Finance minister Najib Razak said the new figures “will just unsettle the financial markets, alarm the credit rating agencies and investors’ confidence in our institutions, such as our Bank Negara Malaysia”, Lim gave a breakdown (see table).

The total figure of RM1,087.3 billion (RM1.087 trillion) was given as debt and liabilities. The official government debt was given as RM686.8 billion which is about 6% higher than the figure of RM648 billion given in the Accountant-General’s report for 2016. Presumably, these are the figures for end-2017 which have not been publicly released yet. This is 50.8% of the GDP (gross domestic product – sum of goods and services produced in a year) and lower than the officially announced ceiling of 55%.

“However, let me emphasise that the obligations and financial commitments of the federal government are unchanged before May 9 and after elections today. The only change is that the new federal government has decided to call a spade a spade,” Lim clarified further. This implied that the official debt figure was correct, clearing up earlier confusion it may have been wrong and doctored.

The next line shows government guarantees. The Accountant-General’s report routinely included these as part of contingent liabilities and therefore it is not a new thing. There were concerns about contingent liabilities even during Mahathir’s previous tenure as Prime Minister from 1981-2003.

Lim explains this thus: “In addition, the government is already committed to paying for government guarantees for various entities that are unable to service their debts. This amounts to RM199.1 billion (14.6 percent of the GDP).

“The committed government guarantees would include entities such Danainfra Nasional Bhd (RM42.2 billion), Govco Holdings Bhd (RM8.8 billion), Prasarana Malaysia Bhd (RM26.6 billion), Malaysia Rail Link Sdn Bhd (RM14.5 billion) as well as an estimated RM38 billion for 1MDB.

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“Based on the two items above, the federal government debt would amount to RM885.9 billion. This represents the 65.4 percent of the GDP as highlighted by Prime Minister Dr Mahathir Mohamad yesterday.”

PPPs can be problematic

Lim should know that this is not included when the ratio is calculated in international debt figures. But, yes, government guarantees and contingent liabilities should be taken into account in assessing the overall debt picture correctly.

The next one that Lim includes is lease payments under public-private partnerships (PPP) of RM201.4 billion. But is this fair?

Here’s what Lim says: “However, in addition to the above, the federal government is also committed and obligated to make lease payments (including rental, maintenance and other charges), for a whole list of ‘Public-Private Partnership’ (PPP) projects such as the construction of schools, hostels, roads, police stations, hospitals, et cetera.

“The lease commitments which were designed specifically to circumvent the federal government guarantee and debt limits amount to RM201.4 billion (14.9 percent of GDP).’

This does not seem to be in the public domain. I tried looking for the official figures in the Accountant-General’s 2016 report but could not locate them. Yes, there are indications that this may have been on very favourable terms to those who obtained them but it is a legitimate means of reducing the government’s balance sheet practiced now in many countries around the world.

Essentially under these arrangements, the private sector undertakes a project, for example, constructing a government office. In return, the government commits to paying rent for, say, 20 to 30 years. While borrowings reduce, as a result, the government’s operating expenditure rises.

Even if including PPP as debt is considered to be the right approach, it will be inaccurate to take into account the full repayments as debt obligations, as payments are made over long periods and include interest charges. Instead, it should be the capital expenditure incurred if the government has to undertake the projects. Damansara Member of Parliament Tony Pua, who seems to be assisting Lim in these matters, puts PPPs entered into by the previous government at around RM63 billion in value.

There is no denying that PPPs can be problematic. A problem arises if the private sector investors get too high a return, and the government suffers as a result. PPPs will not be classified as debt under most classifications. But, yes both guarantees and PPPs should be taken into account in the overall assessment of the debt and liabilities situation of the government.

No, the official debt figure is still RM648 billion, not RM1 trillion. But if you include other figures, then the effective debt obligations might rise to as high as over RM1 trillion. Even for this, the contingent liabilities figure of RM199 billion is already in the public domain and analysts, including those who do ratings, have taken it into account.

Unless the Pakatan Harapan government has solid evidence to show national accounts are tampered with, they must not make statements which may make the public, including investors, conclude otherwise. It confuses, it throws up uncertainty and makes people lose confidence in the economy.

There is no need to demonise and put down the previous BN government at every turn in what are sometimes dubious ways. It is time to do what is needed and portray things in an accurate manner as possible to reflect the truth as far as that is possible. After all, the elections ended over two weeks ago.

https://www.ft.com/video/ea69ce82-ec13-4faa-aa16-45a45339335f?tagToFollow=c27e47f1-9be7-354c-a817-e79bfd535725


P GUNASEGARAM hopes that now polls are over, cyber-troopers will contribute in a real, responsible and reasoned way to discussions about our future instead of saying let those who run the government decide. That’s how we got into a mess in the first place. And please stop the personal insults and obscenities. E-mail: t.p.guna@gmail.com.

Should Economists Make Moral Judgments?


May 26, 2018

Should Economists Make Moral Judgments?

At least since the days of John Maynard Keynes, professional economists have not had to worry too much about the moral implications of their technical work. But that is quickly changing with the global march of illiberalism, and economists now must ask themselves hard ethical questions before dispensing policy advice.

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BUDAPEST – I recently attended a PhD seminar in labor economics at the Central European University in Budapest. In it, we considered whether the Hungarian government’s scheme to focus on long-term unemployment is working efficiently, and we raised a host of technical problems for the doctoral candidate to address.

But I came away disturbed by the experience, wondering whether professional economists (particularly in the West) need to reassess the moral and political context in which they conduct their work. Shouldn’t economists ask themselves whether it is morally justifiable to provide even strictly technical advice to self-dealing, corrupt, or undemocratic governments?

To be sure, reducing long-term unemployment would alleviate a social evil, and possibly ensure a more efficient use of public resources. Yet improved economic performance can shore up a bad government. This is precisely the dilemma confronting economists across a range of countries, from China, Russia, and Turkey to Hungary and Poland. And there is no reason to think that economists in the “democratic heartland” of Western Europe and North America won’t face a similar dilemma in the future.

 

Over time, economists have offered three different moral or political justifications for their technical work. The first, and simplest, justification simply assumes that the “powers that be” (the ultimate recipients of their work) are “benevolent despots” in the mold that John Maynard Keynes described (though Keynes did not consider the British bureaucrats of his time to be despots).

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In the 1970s, this defense was challenged by economists at the other end of the Western political spectrum, who pointed out that bureaucrats were a supplier lobby like any other. As such, they will always have an interest in expanding their own individual and collective importance, regardless of whether it maximizes social benefits. This assumption led economists to become “intervention skeptics” who preferred market-based solutions for any problem where the need for regulation was not obvious.

Between these two positions, most economists have been content to ply their trade on the assumption that, however self-interested bureaucrats might be, they are subject to oversight from democratic politicians whose own self-interest is to get re-elected by keeping voters satisfied. So long as the economist’s technical solutions to policy problems are offered to officials with democratic legitimacy, according to this view, there is no cause for political or moral concern.

In fact, even economists in communist dictatorships could proffer their best technical advice with a comparatively clean conscience, because they were convinced that introducing more market-mediated outcomes would inject efficiency into planned economies and increase the sphere of individual freedom. This was true even in the Soviet Union, at least after Nikita Khrushchev’s accession to power in the 1950s.

But now, for the first time in many decades, economists must consider the moral implications of giving good advice to bad people. They are no longer exempt from the moral quandaries that many other professionals must face – a classic example being the engineers who design missiles or other weapons systems.

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The new moral dilemma facing economists is perhaps most stark within international financial institutions (IFIs) such as the International Monetary Fund, the World Bank, and the World Trade Organization, where economic mandarins with significant influence over public policy earn their living.

After the fall of Soviet-style communism, the IFIs admitted Russia and the other former Soviet republics (as well as China) on the assumption that they were each on a path to embracing democracy and a rules-based market economy. But now that democratic backsliding is widespread, economists need to ask if what is good for authoritarian states is also good for humanity. This question is particularly pertinent with respect to China and Russia, each of which is large enough to help shift the balance of world power against democracy.

That being the case, it stands to reason that democratic countries should try to limit the influence of authoritarian regimes within the IFIs – if not exclude them altogether in extreme cases. But it is worth distinguishing between two kinds of international institution in this context: rule-setting bodies that make it easier for countries with hostile ideological or national interests to co-exist; and organizations that create a strong community of interest, meaning that economic and political benefits for some members “spill over” and are felt more widely.

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Among the IFIs, the WTO is an example of the first type, as is the United Nations among international political institutions. The European Union, on the other hand, is the preeminent example of a true community of interests. And the IMF, the World Bank, and many UN agencies lie somewhere in between.

From this categorization, we can derive guidelines for economists to follow when advising authoritarian regimes. Advice or scholarship that allows authoritarian governments to avoid conflict with other countries would be morally acceptable in most cases. After all, as Winston Churchill famously observed, “jaw-jaw” is better than “war-war”. A good example would be research into how best to share scarce freshwater among Middle Eastern countries.

On the other hand, economists need to take great care when providing advice or conducting research with clear policy implications for authoritarian governments. Economists should not be in the business of helping authoritarian regimes advance nefarious ends on the back of stronger economic growth or resources saved. That probably means not giving advice to Hungarian Prime Minister Viktor Orbán on how to reduce long-term unemployment.

Needless to say, every case will be unique, and economists will have to decide for themselves. As in the past, some may even embrace authoritarianism. But for the profession as a whole, the moral consequences of translating economic analysis into practice can no longer be ignored.