Time to reject race-based socio- economic policies


October 23, 2016

Time to reject race-based socio- economic policies

by Wan Saiful Wan Jan, CEO IDEAS

Image result for Tun Razak and The New Economic Policy

Tun Razak was wrong, Najib made it racist and utterly corrupt, so time to go back to Tunku Abdul Rahman’s Vision of Small but Pro-Business Government

The philosophy guiding how a government relates with the people is something that not many Malaysians talk about these days. But if we go back to the early days of this country, ideology used to matter.

In a speech delivered at IDEAS Annual Dinner on February 20, 2016, Tun Musa Hitam, Malaysia’s former Deputy Prime Minister who started his political career under Tunku Abdul Rahman, said, “In those early days of our history, politics was more ideological than material. There were indeed, yes, indeed, two camps in UMNO: the Tunku camp and the Razak camp.

Image result for tunku abdul rahman vs Tun Razak

“The Tunku camp was clearly and unapologetically right-wing, pro-west and pro-business. The Razak camp was allegedly socialist-communist inclined, a brand enough to scare and scuttle people away all the way in those days when communist terrorists were the biggest threat to our independence.”

This was a telling statement, because Musa was suggesting that the liberal administration of the Tunku was eventually replaced by a socialist-communist inclined administration of Tun Abdul Razak Hussein, Malaysia’s second Prime Minister.

If we analyse history carefully, indeed we could see how Razak was leaning in a leftist direction. Among the most significant foreign relations built by Razak was with Mao’s communist China, when he visited the country in May 1974. Razak was also the one who introduced huge government intervention into Malaysia’s socioeconomic system when he introduced the New Economic Policy (NEP) in 1971.

Government domination of the economy is an important feature of a leftist ideology, and this naturally led to the government imposed ethnic-based affirmative action, and all its related policies, that plague our country until today.

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Razak’s ideology was almost completely opposite to the market economy envisioned by the Tunku when he said that Malaysia is a country that believes “in the system of free enterprise”.

We must acknowledge that government intervention has existed since the time of the Tunku. Several times the Tunku too used government powers to stifle dissent. But government interventionism grew much bigger and was formalised under Razak’s administration.

It was Razak’s desire effort to create an ill-defined “social justice” that gave birth to the New Economic Policy (NEP). As a result of their wrong definition of social justice, the NEP was implemented is such a way that nudged us to live our lives along communal lines until today.

Even worse, today we can’t even discuss this supposed temporary policy in rational way anymore. Today we live in a country where if you speak honestly on difficult and sensitive issues, you risk being accused of disloyalty to the country, or worse, being seditious.

It will take a lot more time to change this situation. But it is important for those of us who dream of a more liberal future for the country to persist. We cannot allow the country to continue on the trajectory of big government paved by, as Musa Hitam puts it, Razak’s “socialist-communist inclined” thinking. Instead of a big government philosophy, I propose that we should return to the philosophy of a liberal, small and limited government as originally envisioned by the Tunku for this country.

The liberal belief stems from a commitment to the principle of liberty, which is commonly described as the right to live our lives in any way we want to so long as we do not do any harm to others. It is important to stress the second part of the description: “as long as we do no harm to others”.

A liberal way of life a highly responsible one. We take it as our responsibility to do no harm to others and we acknowledge that we will have to account for any harm that we do. Yes we want to live our lives how we wish. But we also undertake not to harm others. Tunku Abdul Rahman puts it nicely when he said that “Life in this world is short. Let us make use of our lives in the pursuit of happiness and not trouble.”

In fact, the Tunku even put in the Proclamation of Independence that one of the roles of government is “ever seeking the welfare and happiness of its people”. It is not the role of government to stop us from enjoying our happiness in the way we want. Instead the role of government is to help and to allow us to seek our own happiness in our own ways.

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The By-Product of Malaysia’s NEP

As I said above, it will take time before we can truly enjoy the fruits of the Tunku’s vision for liberty for this country. The liberal journey of this country was disrupted in 1970 and that disruption continues until today.

We need to realign the country back to the right trajectory. And the realignment process needs to start with us appreciating the importance of having a philosophy based on freedom and liberty to guide all our policies.

Wan Saiful Wan Jan is the chief executive of the Institute for Democracy and Economic Affairs, (IDEAS)

Source: MYSINCHEW

A Toast to the Right to Development


New York

June 22, 2016

A Toast to the Right to Development

by Martin Khor

http://www.thestar.com.my

Many problems threatening the world can be addressed through the lens of the Right to Development – that should be celebrated on its 30th anniversary.

THE Declaration on the Right to Development is 30 years old. Adopted by the United Nations General Assembly in 1986, it has had an illustrious history, having great resonance among and giving a boost to people fighting for freedom and more participation in national affairs, as well as to developing nations striving for a fairer world economic order.

It has been invoked by the leaders and diplomats of developing countries on numerous occasions, when they try to convince their counterparts of the developed countries to show more empathy for the needs of the poorer countries.

It has a central place in the Rio Principles of the 1992 Earth Summit, and most recently it was mentioned in the 2015 Paris Agreement on climate change.

On this 30th anniversary, it is fitting to recall the important elements of this right to development. It is human and people-centred, an inalienable human right “to participate in, contribute to, and enjoy economic, social, cultural and political development, in which all human rights and fundamental freedoms can be fully realized.”

Politicians and policy makers should take human beings as the central focus of their development policies, and ensure they can actively participate in the process of development and development policy, as well as benefit from the fruits of development. (Article 2.3).

But the Declaration also places great importance on the international arena. States have the duty to cooperate with each other in ensuring development and eliminating obstacles to development (Article 3.3).

And effective international cooperation is essential in providing developing countries with appropriate means and facilities to foster their comprehensive development (Article 4.2).

The right to development recognises that there are national and international obstacles to the realisation of the right to development, and it calls for states to take steps to eliminate these obstacles.

It is useful to identify some present global problems and how they affect the right to development.

First, the global economy in crisis. The economic sluggishness in developed countries has had adverse impact on developing economies.

They are facing low commodity prices, and reduced export earnings. They face great fluctuations in the inflow and outflow of funds, due to absence of controls over speculative capital flows and fluctuations in the value of their currencies due to lack of a global mechanism to stabilise currencies.

Some countries are on the brink of another debt crisis. There is for them no international sovereign debt restructuring mechanism and countries that do their own debt workout may well become victims of vulture funds.

Second, the challenges of implementing appropriate development strategies.

There are challenges in developing countries to have policies right in agricultural production, ensuring adequate incomes for small farmers, and national food security.

Industrialisation involves the challenges of climbing the ladder, moving from labour-intensive low-cost industries to higher technology industries and overcoming the middle-income trap.

There are the challenges to providing social services like health care and education and water supply, lighting and transport as well as developing financial services and commerce.

This policy-making is even more difficult due to premature liberalisation, some of which is due to loan conditionality and to trade and investment agreements which also constrain policy space.

In particular, many investment agreements enable foreign investors to take advantage of imbalanced provisions and shortcomings in the arbitration system that cause countries to lose a lot in compensation and also have a chill effect on their right to regulate and to formulate policies. A review is needed.

Third, climate change is an outstanding example of an environmental constraint to development and the right to development. There is an imperative to cut global emissions as sharply and quickly as possible. But which countries and which groups within countries should cut emissions, and by how much?

The danger is that the burden will mainly be passed on to developing and poorer countries and to the poor and vulnerable in each country.

The Paris Agreement of December 2015 was a success in terms of reaching a multilateral deal.

But it is not ambitious enough to save humanity, and it also failed to deliver confidence that the promised transfers of finance and technology will take place. Much more has to be done and within a few years.

Fourth, the crisis of anti-microbial resistance brings dangers of a post-antibiotic age. Many diseases are becoming increasingly difficult to treat because bacteria have become more and more resistant to anti-microbials.

The World Health Organisation Director General has warned that every antibiotic ever developed is at risk of becoming useless and that we are entering a post-antibiotic era.

The World Health Assembly in 2015 adopted a global plan of action to address anti-microbial resistance but the challenge is in the implementation.

Developing countries require funds and technology such as microscopes and diagnostic tools; they also need to have access to existing and new antibiotics at affordable prices.

Fifth, the challenges of implementing the Sustainable Development Goals, which are closely linked to the right to development.

For example, Goal 3 is “to ensure healthy lives and promote well-being for all at all ages”. One of the targets is to achieve universal health coverage, that no one should be denied treatment because they cannot afford it. But unless there are sufficient funds, this will remain an unfulfilled noble target.

The treatment for HIV/AIDS became more widespread only when generics were made available at cheaper prices, and since then millions of lives have been saved.

Many of the new cancer drugs and the new “biologics” are priced above US$100,000 (RM408,850) for a year’s treatment. Unfortu­nately, due to global patent rules, most patients have no access to cheaper generics.

For the SDGs to succeed, finance and technology have to be transferred to developing countries and some international rules on trade and intellectual property have to be altered if they are found to be obstacles to the right to development.

All the above global challenges have to be diagnosed as to where they comprise obstacles to realising the right to development, and the obstacles should then be removed.

That is easier said than done. But the Declaration has thrown light on the way ahead.

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

 

 

 

Chris Hedges: America 2016


May 23, 2016

Chris Hedges:  America 2016

Erudite “ChrisHedges  is an American journalist, activist, author, and Presbyterian minister. Hedges is also known as the best-selling author of several books including War Is a Force That Gives Us Meaning (2002)—a finalist for the National Book Critics Circle Award for NonfictionEmpire of Illusion: The End of Literacy and the Triumph of Spectacle (2009), Death of the Liberal Class (2010), the New York Times best seller, written with cartoonist Joe Sacco, Days of Destruction, Days of Revolt (2012), and his most recent Wages of Rebellion: The Moral Imperative of Revolt (2015). http://www.wikipedia.org.

I like his views about government-big business– big bank partnerships.  His comments also seem to resonate well, especially among young American voters since The Bern (Bernie Sanders) has been making headlines in the US  primaries by giving Hillary Clinton a run for her money. So I thought I should share them with you on my Double 7 Day. And of course, I expect responses from all of you.–Din Merican

 

 

 

The Panama Papers– Watch Video


 

May 11, 2016

The Panana Papers– Watch Video

Staggering  amounts of dubious/illicit money are involved. No small wonder the rich are getting richer and the gap between the filthy rich and the miserable poor is widening. The rest of us in between are suffering suckers who are made to bear the burden of heavy taxes.

It makes me wonder what central bankers and monetary and fiscal authorities around the world are doing to keep the financial system honest.–Din Merican

Politicians, Bankers and Illicit Cash


April 24, 2016

Politicians, Bankers and Illicit Cash

by Dr. KS Jomo*

http://www.malaysiakini.com

Unlike earlier Wikileaks’ exposes, the recent Panama Papers revelations were quite selective, targeted, edited and carefully managed. Most observers attribute this to the political agendas of its mainly American funders.

Nevertheless, the revelations have highlighted some problems associated with illicit financial flows, as well as tax evasion and avoidance, including the role of enabling governments, legislation, legal and accounting firms as well as shell companies.

The political tremors generated by the edited release of 11 million documents were swift. Nobody expected Iceland’s Prime Minister to resign in less than 48 hours, nor the British Prime Minister to publicly admit that he benefited from the hidden wealth earned from an opaque offshore company of his late father.

How low can you go?

In the 1960s, there was a popular dance called the ‘limbo rock’, with the winner leaning back as much as possible to get under the bar. Many of today’s financial centres are involved in a similar game to attract customers by offering low tax rates and banking secrecy. This has, in turn, forced many governments to lower direct taxes not only on income, but also on wealth.

From the early 1980s, this was dignified by US President Ronald Reagan’s embrace of Professor Arthur Laffer’s curve which claimed higher savings, investments and growth with less taxes.

With the decline of government revenue from direct taxes, especially income tax, many governments were forced to cut spending, often by reducing public services, raising user-fees and privatising state-owned enterprises. Beyond a point, there was little room left for further cuts. Hence, governments had to raise revenue, typically from indirect taxes. These were mainly on consumption, as trade taxes were discouraged to promote trade liberalisation.

Many countries have since adopted value-added taxation (VAT), long promoted in recent decades by the International Monetary Fund (IMF) and others as the superior form of taxation: after all, once the system is in place, raising rates is relatively easy.

Malaysia not progressive

A progressive tax system would seek to ensure that those with more ability to do so would pay proportionately more tax than those with less ability to do so. Instead, tax systems have become increasingly regressive, with the growing middle class bearing the main burden of taxes.

Meanwhile, tax competition among countries has not only reduced tax revenue, but also made direct taxation less progressive, while the growth of value-added tax (VAT) has made the overall impact of taxation more regressive as the rich pay proportionately less tax with all the loopholes available to them, both nationally and abroad.

Although there are many reasons for income inequality, hidden untaxed wealth has undoubtedly also increased wealth and income inequality at the national and international level.

As my late colleague, Professor Ismail Muhd Salleh showed, overall tax incidence in Malaysia has long been regressive, but has also become more regressive over time. Later work by Professor Wee Chong Hui confirmed that income inequality is not only worse after taxes, but has also become worse, especially since the mid-1980s.

Recent public resistance to the goods and services tax (GST) suggests that many have a gut feeling that all is not well, let alone fair.

Illegal capital outflows

According to Global Financial Integrity (GFI), Malaysia lost US$418.542 billion during 2004-2013, losing US$48.25 billion in 2013 alone.

The illegal capital outflows stem from tax evasion, crime, corruption and other illicit activities. Malaysia is fifth, among the top five countries for illegal capital flight, after China, Russia, Mexico and India, but tops the list, by far, on a per capita basis.

GFI’s December 2015 report found that developing and emerging economies had lost US$7.8 trillion in illicit financial flows over the decade, with illicit outflows increasing by an average of 6.5 percent yearly.

Over the decade, an average of 83.4 percent of illicit financial outflows were due to fraudulent trade mis-invoicing, involving intentional misreporting by transnational companies of the value, quantity or composition of goods on customs declaration forms and invoices, usually for tax evasion.

Blatant defence

Following the Panama revelations, most Western government leaders have pledged tougher action against tax evasion and avoidance, especially by those using developing country havens. In the face of declining aid flows to poor countries, the OECD’s Development Assistance Committee (DAC) chair, Erik Solheim, has suggested greater tax efforts instead.

But since they receive most of the funds in the tax havens in the world, the OECD has historically focused on very limited matters. Hence, these same governments have blocked efforts to give the United Nations (UN) a stronger mandate to advance international cooperation on taxation, culminating in the modest Addis Ababa Action Agenda declared at the third UN Financing for Development conference in July last year.

As major users of such facilities, many developing country leaders have been conspicuously silent in the face of recent revelations of what they have long enabled and practiced. After all, much of what is involved is publicly considered illicit, immoral, even ‘sinful’, even if it is not illegal. Very often, the rich currently pay less in taxes than most of their lowest paid employees.

But what is shocking in Malaysia is the blatant defence, even advocacy of tax avoidance, by leaders of a government which has been running major budgetary deficits for two decades. While the Malaysian public is being burdened with GST, incredibly, ministers are insisting that tax avoidance is fine.

Rather than blame the political opposition, scurrilous rumour-mongers or critical social media for the lack of public trust in the authorities, those concerned may wish to look in their mirrors first.


Dr. JOMO KS was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The American Dream: Detroit’s resuscitation


April 4, 2016

The American Dream: Detroit’s resuscitation

by Shrey Srivastava

If one could epitomise the phrase “could have been” in one simple image, it would indubitably be the image of Detroit. The unyielding forces of time have taken a once great city and denigrated it to the status of one of not only one of America’s most economically destitute, but also one of its most dangerous regions. Nowadays, Detroit carries many of the hallmarks of the lesser developed countries of the world, especially with roughly 47% of the population being described as “functionally illiterate” by The National Institute for Literacy, a rate only 13.8% higher than that of Afghanistan. Despite this, Detroit still carries as much, if not more potential as it did in the 20th century, and is simply crying out for some economic solutions to its varied and diverse range of problems. Much of Detroit’s high crime rate can, in truth, be narrowed down to a high unemployment rate, leading to a lack of jobs for people to occupy themselves with, so even this ailment, is, at its core, financial. What this means is that there is still hope for this long-suffering city, as long as the relevant American policymakers act in a fashion that is both effective and sustainable; alas, it is clear to see that this has not happened thus far. Nevertheless, what I endeavour to achieve with this article is to perhaps shed some light on how Detroit can again become the bustling, cosmopolitan hub that it once was, through, primarily, the introduction of a special economic zone.

Special economic zones, which seem like a highly unusual step for a developed country such as the USA, may in fact be a simple and effective solution to revitalise the city of Detroit. The step of making the city a special economic, or more specifically, an industrial zone could potentially be the catalyst for a holistic revitalisation of the Detroit economy. In a nutshell, an industrial zone is a zone specifically made out for industrial development, where tax cuts and tax holidays, among other financial incentives, would incentivise corporations to set up operations in Michigan’s largest city.

Detroit’s unemployment rate was a whopping 29% during the worst that we saw of the 2008 recession, meaning that more than 1 in 4 people were unemployed at the time. Despite having reduced somewhat due to, among other causes, a steady outflow of people from the city, unemployment rates are still grossly high, and if Detroit wants to reverse its fall from grace, this is one of its first facets that need changing. The only way to do this, in truth, is by somehow persuading businesses to come to this dilapidated zone of urban decay, and invest in the revitalisation of the area. Now, feasibly, the only way in which this can happen is by supplying them with the aforementioned financial incentives to encourage them to locate in Detroit, supplying jobs for a great proportion of the population. This is the intuitive first step to Detroit’s regeneration.

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Functional illiteracy, as alluded to above, is also a major proverbial roadblock to the future success of Detroit. The solution to this is almost as obvious as its problems itself; to invest more in education. Despite politicians’ repeated assertions stating the importance of education, they themselves seem not to believe in what they say, the evidence of which lies in Detroit’s astonishingly abysmal literacy rates. Regardless, education is quite frankly one of the most important facets of any developed region, so for Detroit’s schools to be in the state they are in (as repeatedly shown by the mass media) is frankly shocking. Needless to say, this can only be solved through an increase in education spending in the city, which would give a better education to many residents of the city, thus giving them more transferable skills with which to work and earn money. In addition to this, education has a vital role to play in keeping school-aged adolescents off the streets, thus reducing crime rates, and making the city overall more attractive for people to relocate to. With the low house prices across the whole of Detroit nowadays, it could prove a popular location for many individuals desiring a lower cost of living, if only there was a basic level of security and educational services in the area. By spending more on education, many of Detroit’s fundamental problems could perhaps be ameliorated or even eradicated altogether.

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To make sure that Detroit does not fall prey to the same evils which caused its dilapidation decades ago, they need to learn from their various mistakes. The biggest of these was to rely far too much on the car industry, which turned into its Achilles heel when Ford Motors, among other corporations, left the city. Diversification is the key here to financial prosperity, as Detroit needs to ensure that when one industry perhaps fails in the city, there are many others to continue to back up the city financially. This was exactly the problem with the city before; they did not have a backup plan for when demand for automobiles lessened. The conversion of Detroit into an industrial zone and a renewed focus on education will only be sustainable if the city manages to provide wide-ranging sources of income; otherwise, they will simply consign themselves to the same fate as before. In addition, without diversification, a great deal of brain drain would occur, with talented residents leaving the city due to lack of opportunity in their chosen field of expertise. As such, it is crucially important for Detroit to spread its roots far, not deep, if they want to ensure their continued financial prosperity. Of course, in addition to the 3 economic reforms outlined here, much social reform needs to take place in the city before we can truly say that it has been regenerated, but these financial steps provide the building blocks to restore Detroit, again, into a great pillar of the USA.