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Tuesday, 2 December 2008

Part II - Security, Food Subsidies, and the behaviour of the Malaysian consumer.

[In this second article of mine, I would discuss 1) the problems of governmental bearing in deciding economic policy (figures and economic indicator), 2) the importance of price, 3) the problems of Malaysian consumer ethics, demands and future consumptions, and 4) the importance of restructuring food subsidies – under the purview of KPDNHEP.] 


1.       It seems obvious that figures and economic indicator were not a bearing/ factor in any of the governmental decisions whenever dealing with the disbursement of government funds such as subsidies. As this article is written, Malaysian government had spend almost RM 42.6 BILLION (yes in Billion – Capital B) in a bulk, for the whole 26 millions people disregards of who should the money goes to, what terms, which target groups, what priorities or any workable efficient plan for the food subsidies to reach the right individuals. As such, there were leakages and most often this subsidized food do not reach the targeted consumers (even though how big the number is).


2.       I want to go back to the history of the subsidizing programmes as it is important for us to understand why it was implemented before so that it will shed us clear lights for any future decisions in dealing with this issues. Our country’s subsidy programmes were carbon copies of planned economies adopted by the Communist state in Russia. We should know that Communism and socialism were systems of restraint – both by design and through their inefficiency. By design, Communist governments substituted planned economic development for growth through market – incentive system (this will include large social safety nets and governmental spending i.e. government staffs). In the red (Soviets) old days, they were basically just three stores in Moscow – bread, milk, and meat – and virtually no private automobiles. As a result, it was relatively low-impact society in terms of consumer consumptions. By implementation there were no confrontational issues in consumerism plus the Communist economies were corrupt, inefficient, and not very productive, and this also restricted everything from their people’s energy consumption to their caloric intakes (food).

3.       But in today’s world, things have significantly changed. There are a real growing of domestic populations and middle-class earners. As in 1970 the gini coefficient shows a clear in-equality 0.755 to much better 0.445 in 2008 (1.0 – total in-equality, 0.0 total equality), but still the government out of its lavish spending and self-ignorance continues to subsidizes its people. Disregard of the economic indicator, this government continues to subsidize its citizens in a bulk. This later had creates a problems in the early warning systems for the government in handling any market glitch especially in the supplies of food.


4.       According to the World Bank, the spiking demand (that happens due to the growing middle class over the years) was not immediately translated into higher prices for consumers, owing to years of massive subsidies for food in Malaysia. This helped to keep some food supplies artificially low even as domestic consumption and domestic demand (plus the world) was growing and more middle-class mouths to feed. This is what was known as a classic market distortion. Malaysian government over the years had neglect and forget the importance of price itself.


5.       Price does not only means the values of a particular items (in this context food), but also represent the nature of its resources, market potentials, the timing for the government interventions – as such I would like to state here that price is the most accurate early warning systems for the government to deduct whenever dealing with consumerism. But such things does not happen in Malaysia due to our methods of subsidizing every food even market economies have change fundamentally in the previous years - The consumers were demand driven, as so many more people suddenly are can or will be living a middle-class lifestyle.


6.       As we entered the new age of market efficiencies, we are still ignorance of how figures that were in numbers such as per capita – if we have more capita – and a 40 to 50 percent increase in population is pretty much baked into the cake already – we’re going to have a lot more pressure on resources. These resources can be food and it has been food for the previous years. I did talked about the changing standards of the consumer demands on future food – it has also been engineered to be more nutritious, so people get healthier and healthier from less and less food.


7.       The future demand would insist on higher and higher standards of items and the produces would try to get much comfort for the consumers from fewer resources. This would also require the produces to innovate, research - lab testing and eventually it would lead to the increase of the price. As such the produces would ask for market prices that will help them to obtain higher value for their products. And this government would turn bankrupt just to feed the people that can fend off themselves. There is no efficiency in dealing with such method of disbursement and as such I can say that this government never know why it decides on such a decision in the first place but merely just spending spree.


8.       After years of bad policies, this type of spending spree would nurture bad consumer behaviour that would requires a heavy work of social restructuring. Plus our people don’t exactly know what happened in the planned economic systems such as in Russia. I give you an example, in Russia today, if you dare to talk about controlling prices or subsidizing food openly, the next day metro police would find you dead in a garbage can – the Russia mafia would killed you as they had a hard time getting food on their tables for their families everyday during the planned economies era. I hate to portray such an example, but it is necessary.


9.       But such things were hard to explain to the Malaysian consumers because it involves ethics and ethics are not laws. They are not imposed by the state. Rather, they are norms, values, beliefs, habits, and attitudes that are embraced voluntarily – that we as a society impose on ourselves. Laws regulate behaviour from outside in. Ethics regulate behaviour from the inside out. Ethics are something you carry with you whenever you go to guide whatever you do. This is where we should start with.


10.     We have to develop new habits and attitudes toward consumption. Otherwise, whatever technologies we devise will simply be used to extend our current habits of profligate consumption to the huge, burgeoning middle classes of the crowded Malaysian for more demand with more governmental spending. To say that there must be an allocation of food subsidies for every household would be fools errand. As growth is not negotiable, especially in the current world where everyone can see how everyone else is living. To tell people they can’t grow is to tell them they have to remain poor forever.


11.     I believe the best method would be the issuance of food stamps through the Jabatan Kebajikan Masyarakat. Through this food stamps, the right group can obtain the subsidies food at the Jabatan Kebajikan Masyarakat branch offices (all over Malaysia – I do talked with one of their officers over this matter). The adoption of the same mechanism when this agency had to allocate poverty allowances to the hardcore/ abject poverty group is most simple solutions. The middle class earners would feel ashamed of themselves whenever thinking that they deserved the government money for their food and this will change the consumer ethics. As such, this government can save up to RM 40 Billion a year is a simple mathematical calculation (1970 – 40% abject poverty group, 2008 – 1.4% abject poverty group). I deserved Datukship for this!


12.     I do understand that this is not a very popular decision to take, as individuals would save their own neck but remember the inconvenient truth - because no one would wants to commit individual suicide; we are all committing collective suicide through the continuance of the food subsidies to the middle class earners.

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Faces of Tun Teddy

Faces of Tun Teddy