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Wednesday, 2 September 2009

How Socialism and Mixed Markets (confused Capitalism) Destroyed Malaysian Economy

How Socialism and Mixed Markets (confused Capitalism) Destroyed Malaysian Economy


By: Ahmad Syah Ejaz Bin Hj. Ismail


Malaysia went through the 21st Century with a confused economic market. Losing it’s competitiveness to the newly developing nations mostly from the old block of Communist countries in Southeast Asia particularly Vietnam. The concerned issues were not only the Foreign Direct Investment (FDIs) were siphoned out of the Malaysian domestic markets but also the shifting of the potentially new growth areas such as Halal Industry where the Capital seems to be uninterested and nowadays are more interested to venture into another form of business profits in other countries where there seems to be no boundaries in everything.


The new kind of markets that currently are developing in the 21st Century cannot be comprehended by the Malaysian policy makers. End were the days of the government spending makes the domestic economy moving and enter the new type of business warfare where efficiency, sharp edges developmental initiatives, and peoples power (democracy) is spearheading the nations development. One of the most important factors that were not understood by the Malaysian policy makers were consumer demand and consumer purchasing power. These two factors determine how the domestic markets behave and up to an extent explained how the well being of the domestic communities were measured mostly resulted a referendum through the ballot box.


During the Cold War, Malaysian economy took a safe passageway by adopting the so called mixed markets systems where private enterprises were controlled thoroughly by the government. It is understandable that by taking such a mixed markets policy, Malaysia would create a friendly relation among both block either the Capitalist or the Communist. This method does give an advantage towards Malaysia where at that time they were only competing mostly among the few democratic Capitalist countries such as Singapore, and others were a failed state such as Philippines that at that time were marred by unending corrupt authoritarian regime meanwhile an industrious countries such as Vietnam, Cambodia, Indonesia were still closing its domestic market from foreign competition. This scenario changed abruptly in the 21st Century where an industrious country such as Vietnam begins to open its markets to open trade and open competition.


Mixed markets systems sound very benign but on reality they are meaningless. Mixed markets would encourage the government to spend money endlessly in an effort to create a consumer demand. Most of the spending done is without bearing where the emphasized would only be the amount of the spending not on the effect of the spending done. There would be no break even point to determine how successes the spending efforts were done but only on who the spending had been made. This would only create an unproductive community marred by corrupt practices among the government agencies themselves. Not to mention the unproductive and uncompetitive psychological effects among the citizens that keeps asking for government assistance in their daily life.


Mixed markets systems had created a confused domestic market with an unbalanced psychological effect towards the Malaysian consumers. In lieu of the situations, the domestic markets is having a difficulties in determining the true demand of the domestic consumers as this can be see through the experienced of a glitch in the chain of the food supplies such as sugar, flour or cooking oil especially during the festive seasons where the usage of these materials were far high than usual. This problem arises due to how unnecessarily the government intervenes in the reactive markets of price and demands where normatively the government would impose a cap on the price of an item to stem inflation. Even benign in the intention, but such a quixotic method would destroy the connection between price and demand which would result in difficulties among the traders or suppliers to supply the demanded items to the consumer especially into where, when and what amount?


The above problems happens in the semi open domestic markets where the current consumers are having a high purchasing power to purchase basically anything that they coveted but on the contrary not the daily necessaries. This classic Soviet Russia problem happened in Malaysia in the new era due to the break up of the chain of supply and demand factors and the absence of the price signal to the private enterprises in order for them to give services unto the vacuum of a basic essentials in the domestic market and a surely profited demands stemmed unnecessarily by the kiasu government.


Reference:

The Economics of Innocent Fraud by John Kenneth Galbraith. Houghton Mifflin Company, BostonNew York, 2004.

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