19-12-2008:- RM432m in micro financing loans
PUTRAJAYA: Until the end of September, a total of RM432 million in loans were disbursed through the micro financing scheme, said Deputy Finance Minister I Datuk Ahmad Husni Mohamad Hanadzlah.
“The loans have provided benefits to more than 40,000 borrowers since it was launched in 2006,” he said in his speech when officiating the seminar on Overcoming the Problem of Illegal Lenders, here yesterday.
He said the micro financing scheme was among the government’s efforts to ensure that the lower income group as well as entrepreneurs involved in micro businesses found it easy to secure loans and not fall prey to illegal lenders.
At the same time, Ahmad Husni said zakat institutions and Baitulmal needed to be proactive in channelling financial resources as an alternative to what was already available. — Bernama
Source: http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_4da1ab4d-cb73c03a-53897400-e6c93816
Saturday, December 20, 2008
Saturday, November 8, 2008
The Lamppost Theory
A drunkard is looking for the keys to his house under a lamppost near his home. A neighbor comes to the rescue and helps him search. As they don't find anything, the neighbor begins to have doubts:
Are you sure you lost your keys under this lamppost ?
Well no, but there's no way I'll find them elsewhere; it's too dark !
The drunkard is right when it comes to scientific investigations: Don't ever look for obscure solutions, because you can't find anything in the dark vicinity of such solutions. If there's nothing under the lamppost, just give up.
If you're lucky, there might be a flashlight under some lamppost, though.
WHO IS THE PRACTITIONER OF POLITICAL ECONOMY? Daniel Klein
The emphasis on formal model building and econometric exploration in academia is crowding out other modes of discourse that could serve as handy flashlights in helping practitioners find their keys. A list of other modes of discourse might include the thought experiment, the parable, metaphors aside from formal models, introspection, typology, ideal types, case studies, institutional comparisons, comparative history, interviews with the actual subjects, exegesis of great texts, and various forms of quantitative and textual evidence. Genres of economic scholarship that might receive greater attention include business and economic history, institutional case study, the essay, the literature review, and most especially the policy study that is not overly reserved in exercising judgment and generating dialogue. All these genres and forms of argument are practiced extensively in the profession, but their standing relative to the two dominant modes of discourse, in terms of esteem and rewards, is lower than it should be.
WHO IS THE PRACTITIONER OF POLITICAL ECONOMY?
Daniel Klein
This article appears in Challenge, Vol. 41, 1998
This economist urges other economists to take up the practice of political economy again. Otherwise, it is left to those who know little economics themselves.
Daniel Klein
This article appears in Challenge, Vol. 41, 1998
This economist urges other economists to take up the practice of political economy again. Otherwise, it is left to those who know little economics themselves.
The ordinary person makes decisions every day that are important to maintaining his health. But those decisions are familiar and routine. For new decisions, important decisions, he would usually appoint a doctor to the task. The practice of serious medicine is the province of the doctor, just as the practice of architectural safety is the province of the engineer, and food safety the province of chemists and pharmacologists. In these fields, the practitioner is a specialized expert. Even when the ordinary individual takes on medical decisions himself, he does so after gaining some pointed knowledge of his particular condition and, in a meaningful sense, becoming a narrow sort of expert. (A Yiddish proverb says: "Don't ask the doctor - ask the patient.")
Who makes the important decisions in political economy? Unlike the case in medicine, engineering, and other technical fields, the decision-maker is not the trained expert. The practitioner of political economy is not the professor of economics. Rather, decisions are made by public officials and the ordinary voter - the Everyman (which, of course, includes every woman). The Everyman makes not only the minor and routine decisions of public policy but also the great and awful decisions. Economists have no particular power in this process. Does it makes sense for the discipline of political economy to be fashioned a science in the manner of biology and physics when the actual practitioner of the discipline is not an expert?
The Great Faith of Many Academic Economists
Academic economists have not improved the practice of political economy as much as they might. They neglect talking to the practitioner. By generally talking exclusively among themselves, economists on the whole have left the practitioner stranded in darkness.
Academic economists have become focused largely on their own concerns of establishing and maintaining a set of professional standards for legitimacy in research. Academics require a set of standards that can, relative to other possible standards, be applied like a rubber stamp, to reduce vexing internecine conflict over every orals examination, job candidate, or tenure case. Without common standards and values, an academic community is not a community. The profession has adopted certain modes of discourse that serve the communal and institutional needs. The two dominant modes of discourse are equilibrium model building and econometric exploration of data sets. These have become the bona fides of academic economic discourse. Brilliance in practicing these academic arts becomes the highest achievement.
But as Professor Deirdre McCloskey reminds us, sometimes we make the mistake of looking for our lost keys under the lamppost simply because the light is better there (If You're So Smart: The Narrative of Economic Expertise [Chicago: University of Chicago Press, 1990]). To change the parable slightly; the Everyman is searching for the keys, and the economist might decide to help him. But sometimes it seems that the economist is not interested in helping but, rather, in pacing proudly under the light of his profession's lamppost. Too often the Everyman fails to find the keys, not because the economist cannot tell him where they are but because he neglects to tell him. If political economists are going to assist the practitioner, if they are going to advance understanding of public issues, they are going to have to talk to the Everyman.
One can walk into bookstores such as Barnes and Noble and find certain scholarly quarterlies. But can anyone imagine Barnes and Noble carrying the American Economic Review or Journal of Political Economy? When economists put themselves to "the market test," the markets consulted should be ones in which the fundamental practitioners of political economy play some role, at least indirectly.
One might argue that the current emphasis in academic economics on high-tech discourse does ultimately result in better public understanding. Economic understanding depends at its highest reaches on the top departments and the most austere journals, and a wise and delicate process filters this understanding down to policy-makers and the Everyman. Perhaps. But I have often wondered how economists can spend so much time studying the failures of markets, governments, and other institutions, yet place so much faith in their own institutions. And it is a faith. (Where's the model?! Where's the data?! Or any of the other forms of argument?) Perhaps "public choice" economists, who explain politics by self-interest, can help us formulate a satisfying theory in this connection.
Six Realms of Practice for Political Economy
Instruction in political economy can be useful for a wide variety of human purposes. These may be divided into six realms of practice. The first four realms are fundamental, in the sense that political economy is practiced by ordinary people and public officials, for daily activities. Then come two vocational realms for political economy, where the practitioner is something closer to the credentialed economist.
The first realm in which political economy is practiced is that of the ordinary individual forming attitudes toward the economic and social affairs of his or her own environment. What am I to think of my employer, my work, and the money I receive in exchange for my work? Am I being cheated and victimized by the real estate broker or the direct marketer? Am I being beguiled by the fancy stores in the shopping mall? Is it fair that I don't make as much money as all those people who seem no better than I? Are the payments I make to the Internal Revenue Service like the payments I make to the supermarket or like money given to a robber? Here political economy may play a crucial role in the formation of the individual's moral and personal philosophy. The practitioner is the Everyman. The teachings that are most called for in this practice are the basics of political economy, adapted to the economic affairs and institutions of ordinary life.
The second realm in which political economy is practiced is in talking about public affairs or even in simply following events. Conversation is the staple of society and conviviality, and public affairs make for stimulating and gratifying conversation. Everyone takes part to some degree in this form of social interaction. Learning some basic political economy can certainly enrich this area of one's life.
The third realm of practice is using political economy to advance one's career in worldly affairs. The merchant, the banker, the investor, the accountant, and the marketer may profit by having a command of the vocabulary of economics (such as "economies of scale and scope," "comparative advantage," and "transactions cost"). Again, what the Everyman most needs is the basics, with competent application to worldly institutions.
The fourth political economy realm is the formulation of public policy. Only when holding a Ph.D. in economics becomes a requirement for public office will professional economists be able to claim to be practitioners in this realm. In the meantime, they are at most pundits and prophets. The true practitioner is every public official and ordinary voter. The teachings of political economy called for by this realm, whatever the sophistication of the practitioner, are the basics of the discipline, knowledge of institutions, and maybe some high school-level mathematics. The vast majority of articles in the austere academic journals are of no help here, and would not be even if economists were the policy-makers. It is the policy-research think tanks that are best meeting this need.
The two vocational realms of political economy come next - they are the fifth and sixth realms. Practitioners in the fifth realm use political economy to enhance their participation and effectiveness in public discourse as public commentators and teachers. Whether they be journalists or grade school, high school, or graduate school teachers, by studying political economy they can perform their jobs better and advance their careers. The teachings called for are the basics, with application to public issues. Again, I find that these practitioners are being best served in a timely fashion by think tanks. (Much think-tank literature, however, is written by economists in academia.)
In the sixth realm practitioners use political economy to advance their position in academic circles. As this realm currently operates, a command of the basics and competent, useful application to important public issues will certainly not suffice. In fact, doing useful applications in the form of, say, think-tank policy studies, will sometimes count against practitioners in academia. The ambitious economist in academia will instead strive to demonstrate some special talents in dynamic optimization techniques or sophisticated statistical methods. This practitioner will need to show a supreme competence in at least one of the profession's two dominant modes of discourse, equilibrium model building and econometric exploration of data sets.
The legitimacy of the two vocational realms of political economy rests on the four fundamental realms. Like the worth of professors of history, literature, ethics, and political philosophy, the worth of professional economists is derived from their contributions to realms where the practitioner is the public official or Everyman. Political economy belongs alongside history, literature, and philosophy as a liberal arts discipline. It differs from biology, physics, chemistry, computer science, and other technical disciplines in that the fundamental practitioners in those disciplines are learned experts.
What Is Being Lost
The emphasis on formal model building and econometric exploration in academia is crowding out other modes of discourse that could serve as handy flashlights in helping practitioners find their keys. A list of other modes of discourse might include the thought experiment, the parable, metaphors aside from formal models, introspection, typology, ideal types, case studies, institutional comparisons, comparative history, interviews with the actual subjects, exegesis of great texts, and various forms of quantitative and textual evidence. Genres of economic scholarship that might receive greater attention include business and economic history, institutional case study, the essay, the literature review, and most especially the policy study that is not overly reserved in exercising judgment and generating dialogue. All these genres and forms of argument are practiced extensively in the profession, but their standing relative to the two dominant modes of discourse, in terms of esteem and rewards, is lower than it should be.
Besides crowding out other modes of discourse, the two dominant modes force economics as an academic discipline to neglect important realities that cannot be neatly modeled or quantified. Important facets of reality that are not well captured by model-building include the heterogeneity and fluctuation of conditions, bounded intelligence, sheer ignorance (not knowing what it is that one is ignorant of), serendipity, asymmetric interpretation, the economic roles of voice and conversation, the multiple self, and the dependence of well-being on cultural, moral, and spiritual factors. For example, all humans know that the process itself - of providing community services, of educating one's children, of saving for retirement - is a cardinal issue of well-being. Individuals care not only about getting "the goods" but also about the process of doing so, the process that becomes the story of their lives. Equilibrium analysis, which relies on mathematical functions and a logic of static states, can scarcely shed light on this cardinal issue.
The Economist's Responsibility
Political economy was established as a discipline mainly by Adam Smith's Wealth of Nations, which Jacob Viner described as "a tract for the times, a specific attack on certain types of government activity which Smith was convinced, on both a priori and empirical grounds, operated against national prosperity" ("Adam Smith and Laissez Faire," Journal of Political Economy 35 [April 1927]: 218; italics added). Smith felt responsible for improving political economy as it is practiced by the true practitioners. Today in the academic world this tradition is being lost. It faces its most formidable opponents in the most eminent departments.
Decision-making in political economy is practiced not by experts but by individuals apt to be terribly innocent of basic economics. The practice of political economy is fated to malpractice. Let us hope that academic economists will rectify the malpractice, that they will take as their greatest roles serving as teachers and participants in public discourse.
Tuesday, November 4, 2008
Herding Behaviour vs Efficient Market Hypothesis
HOW A BUBBLE STAYED UNDER THE RADAR
By ROBERT J. SHILLER
ONE great puzzle about the recent housing bubble is why even most experts didn’t recognize the bubble as it was forming.
Alan Greenspan, a very serious student of the markets, didn’t see it, and, moreover, he didn’t see the stock market bubble of the 1990s, either. In his 2007 autobiography, “The Age of Turbulence: Adventures in a New World,” he talks at some length about his suspicions in the 1990s that there was irrational exuberance in the stock market. But in the end, he says, he just couldn’t figure it out: “I’d come to realize that we’d never be able to identify irrational exuberance with certainty, much less act on it, until after the fact.”
With the housing bubble, Mr. Greenspan didn’t seem to have any doubt: “I would tell audiences that we were facing not a bubble but a froth — lots of small local bubbles that never grew to a scale that could threaten the health of the overall economy.”
The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks.
Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble. In this connection, it is helpful to refer to an important bit of economic theory about herd behavior.
Three economists, Sushil Bikhchandani, David Hirshleifer and Ivo Welch, in a classic 1992 article, defined what they call “information cascades” that can lead people into serious error. They found that these cascades can affect even perfectly rational people and cause bubblelike phenomena. Why? Ultimately, people sometimes need to rely on the judgment of others, and therein lies the problem. The theory provides a framework for understanding the real estate turbulence we are now observing.
Mr. Bikhchandani and his co-authors present this example: Suppose that a group of individuals must make an important decision, based on useful but incomplete information. Each one of them has received some information relevant to the decision, but the information is incomplete and “noisy” and does not always point to the right conclusion.
Let’s update the example to apply it to the recent bubble: The individuals in the group must each decide whether real estate is a terrific investment and whether to buy some property. Suppose that there is a 60 percent probability that any one person’s information will lead to the right decision.
In other words, that person’s information is useful but not definitive — and not clear enough to make a firm judgment about something as momentous as a market bubble. Perhaps that is how Mr. Greenspan assessed the probability that he could make an accurate judgment about the stock market bubble.
The theory helps explain why he — or anyone trying to verify the existence of a market bubble — may have squelched his own judgment.
The fundamental problem is that the information obtained by any individual — even one as well-placed as the chairman of the Federal Reserve — is bound to be incomplete. If people could somehow hold a national town meeting and share their independent information, they would have the opportunity to see the full weight of the evidence. Any individual errors would be averaged out, and the participants would collectively reach the correct decision.
Of course, such a national town meeting is impossible. Each person makes decisions individually, sequentially, and reveals his decisions through actions — in this case, by entering the housing market and bidding up home prices.
Of course, such a national town meeting is impossible. Each person makes decisions individually, sequentially, and reveals his decisions through actions — in this case, by entering the housing market and bidding up home prices.
Suppose houses are really of low investment value, but the first person to make a decision reaches the wrong conclusion (which happens, as we have assumed, 40 percent of the time). The first person, A, pays a high price for a home, thus signaling to others that houses are a good investment.
The second person, B, has no problem if his own data seem to confirm the information provided by A’s willingness to pay a high price. But B faces a quandary if his own information seems to contradict A’s judgment. In that case, B would conclude that he has no worthwhile information, and so he must make an arbitrary decision — say, by flipping a coin to decide whether to buy a house.
The result is that even if houses are of low investment value, we may now have two people who make purchasing decisions that reveal their conclusion that houses are a good investment.
As others make purchases at rising prices, more and more people will conclude that these buyers’ information about the market outweighs their own.
As others make purchases at rising prices, more and more people will conclude that these buyers’ information about the market outweighs their own.
Mr. Bikhchandani and his co-authors worked out this rational herding story carefully, and their results show that the probability of the cascade leading to an incorrect assumption is 37 percent. In other words, more than one-third of the time, rational individuals, each given information that is 60 percent accurate, will reach the wrong collective conclusion.
Thus, we should expect to see cascades driving our thinking from time to time, even when everyone is absolutely rational and calculating.
This theory poses a major challenge to the “efficient markets” view of the world, which assumes that investors are like independent-minded voters, relying only on their own information to make decisions. The efficient-markets view holds that the market is wiser than any individual: in aggregate, the market will come to the correct decision. But the theory is flawed because it does not recognize that people must rely on the judgments of others.
NOW, let’s modify the Bikhchandani-Hirshleifer-Welch example again, so that the individuals are no longer purely rational beings. Instead, they are real people, subject to emotional reactions.
Furthermore, these people are being influenced by agencies like the National Association of Realtors, which is conducting a public-relations campaign intended to show that putting money into housing is a reliable way to build wealth. Under these circumstances, it’s easy to understand how even experts could come to believe that housing is a spectacular investment.
It is clear that just such an information cascade helped to create the housing bubble. And it is now possible that a downward cascade will develop — in which rational individuals become excessively pessimistic as they see others bidding down home prices to abnormally low levels.
Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC.
Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC.
Monday, November 3, 2008
Psychology Matters in Economic Events
Below is a view from Robert J. Schiller, an economic and finance professor at Yale University, USA on the current financial crisis. What I find interesting in this article is his view on this question: Why do professional economists always seem to find that concerns with bubbles are overblown or unsubstantiated? I have wondered about this for years, and still do not quite have an answer. It must have something to do with the tool kit given to economists (as opposed to psychologists) and perhaps even with the self-selection of those attracted to the technical, mathematical field of economics. Economists aren’t generally trained in psychology, and so want to divert the subject of discussion to things they understand well. They pride themselves on being rational. The notion that people are making huge errors in judgment is not appealing.
Read the rest of the article below:
CHALLENGING THE CROWD IN WHISPERS, NOT SHOUTS
ALAN GREENSPAN, the former Federal Reserve chairman, acknowledged in a Congressional hearing last month that he had made an “error” in assuming that the markets would properly regulate themselves, and added that he had no idea a financial disaster was in the making. What’s more, he said the Fed’s own computer models and economic experts simply “did not forecast” the current financial crisis.
Mr. Greenspan’s comments may have left the impression that no one in the world could have predicted the crisis. Yet it is clear that well before home prices started falling in 2006, lots of people were worried about the housing boom and its potential for creating economic disaster. It’s just that the Fed did not take them very seriously.
For example, I clearly remember a taxi driver in Miami explaining to me years ago that the housing bubble there was getting crazy. With all the construction under way, which he pointed out as we drove along, he said that there would surely be a glut in the market and, eventually, a disaster.
But why weren’t the experts at the Fed saying such things? And why didn’t a consensus of economists at universities and other institutions warn that a crisis was on the way?
The field of social psychology provides a possible answer. In his classic 1972 book, “Groupthink,” Irving L. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes. People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.
Members of the Fed staff were issuing some warnings. But Mr. Greenspan was right: the warnings were not predictions. They tended to be technical in nature, did not offer a scenario of crashing home prices and economic confidence, and tended to come late in the housing boom.
A search of the Federal Reserve Board’s working paper series reveals a few papers that touch on the bubble. For example, a 2004 paper by Joshua Gallin, a Fed economist, concluded: “Indeed, one might be tempted to cite the currently low level of the rent-price ratio as a sign that we are in a house-price ‘bubble.’” But the paper did not endorse this view, saying that “several important caveats argue against such a strong conclusion and in favor of further research.”
One of Mr. Greenspan’s fellow board members, Edward M. Gramlich, urgently warned about the inadequate regulation of subprime mortgages. But judging at least from his 2007 book, “Subprime Mortgages,” he did not warn about a housing bubble, let alone that its bursting would have any systemic consequences.
A search of the Federal Reserve Board’s working paper series reveals a few papers that touch on the bubble. For example, a 2004 paper by Joshua Gallin, a Fed economist, concluded: “Indeed, one might be tempted to cite the currently low level of the rent-price ratio as a sign that we are in a house-price ‘bubble.’” But the paper did not endorse this view, saying that “several important caveats argue against such a strong conclusion and in favor of further research.”
One of Mr. Greenspan’s fellow board members, Edward M. Gramlich, urgently warned about the inadequate regulation of subprime mortgages. But judging at least from his 2007 book, “Subprime Mortgages,” he did not warn about a housing bubble, let alone that its bursting would have any systemic consequences.
From my own experience on expert panels, I know firsthand the pressures that people — might I say mavericks? — may feel when questioning the group consensus.
I was connected with the Federal Reserve System as a member the economic advisory panel of the Federal Reserve Bank of New York from 1990 until 2004, when the New York bank’s new president, Timothy F. Geithner, arrived. That panel advises the president of the New York bank, who, in turn, is vice chairman of the Federal Open Market Committee, which sets interest rates. In my position on the panel, I felt the need to use restraint. While I warned about the bubbles I believed were developing in the stock and housing markets, I did so very gently, and felt vulnerable expressing such quirky views. Deviating too far from consensus leaves one feeling potentially ostracized from the group, with the risk that one may be terminated.
Reading some of Mr. Geithner’s speeches from around that time shows that he was concerned about systemic risks but concluded that the financial system was getting “stronger” and more “resilient.” He was worried about the unsustainability of a low savings rate, government deficit and current account deficit, none of which caused our current crisis.
In 2005, in the second edition of my book “Irrational Exuberance,” I stated clearly that a catastrophic collapse of the housing and stock markets could be on its way. I wrote that “significant further rises in these markets could lead, eventually, to even more significant declines,” and that this might “result in a substantial increase in the rate of personal bankruptcies, which could lead to a secondary string of bankruptcies of financial institutions as well,” and said that this could result in “another, possibly worldwide, recession.”
I distinctly remember that, while writing this, I feared criticism for gratuitous alarmism. And indeed, such criticism came.
I gave talks in 2005 at both the Office of the Comptroller of the Currency and at the Federal Deposit Insurance Corporation, in which I argued that we were in the middle of a dangerous housing bubble. I urged these mortgage regulators to impose suitability requirements on mortgage lenders, to assure that the loans were appropriate for the people taking them.
The reaction to this suggestion was roughly this: yes, some staff members had expressed such concerns, and yes, officials knew about the possibility that there was a bubble, but they weren’t taking any of us seriously.
I BASED my predictions largely on the recently developed field of behavioral economics, which posits that psychology matters for economic events. Behavioral economists are still regarded as a fringe group by many mainstream economists. Support from fellow behavioral economists was important in my daring to talk about speculative bubbles.
Speculative bubbles are caused by contagious excitement about investment prospects. I find that in casual conversation, many of my mainstream economist friends tell me that they are aware of such excitement, too. But very few will talk about it professionally.
Why do professional economists always seem to find that concerns with bubbles are overblown or unsubstantiated? I have wondered about this for years, and still do not quite have an answer. It must have something to do with the tool kit given to economists (as opposed to psychologists) and perhaps even with the self-selection of those attracted to the technical, mathematical field of economics. Economists aren’t generally trained in psychology, and so want to divert the subject of discussion to things they understand well. They pride themselves on being rational. The notion that people are making huge errors in judgment is not appealing.
In addition, it seems that concerns about professional stature may blind us to the possibility that we are witnessing a market bubble. We all want to associate ourselves with dignified people and dignified ideas. Speculative bubbles, and those who study them, have been deemed undignified.
In short, Mr. Janis’s insights seem right on the mark. People compete for stature, and the ideas often just tag along. Presidential campaigns are no different. Candidates cannot try interesting and controversial new ideas during a campaign whose main purpose is to establish that the candidate has the stature to be president. Unless Mr. Greenspan was exceptionally insightful about social psychology, he may not have perceived that experts around him could have been subject to the same traps.
Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC.
Source:http://www.nytimes.com/2008/11/02/business/02view.html?pagewanted=1&partner=permalink&exprod=permalink
Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC.
Source:http://www.nytimes.com/2008/11/02/business/02view.html?pagewanted=1&partner=permalink&exprod=permalink
An Interview with James K. Galbraith
Below is an interview with James K. Galbraith, an economic professor at University of Texas, USA. What I find interesting is his answer to this question:
What does that say about the field of economics, which claims to be a science? It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.
Do you find it odd that so few economists foresaw the current credit disaster? Some did. The person with the most serious claim for seeing it coming is Dean Baker, the Washington economist. I saw it coming in general terms.
But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis? Ten or 12 would be closer than two or three.
But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis? Ten or 12 would be closer than two or three.
What does that say about the field of economics, which claims to be a science? It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.
You’re referring to the Washington-based conservative philosophy that rejects government regulation in favor of free-market worship? Reagan’s economists worshiped the market, but Bush didn’t worship the market. Bush simply turned over regulatory authority to his friends. It enabled all the shady operators and card sharks in the system to come to dominate how we finance.
So you claim in your recent book, “The Predator State,” but will President Bush actually be leaving Washington a richer man? Presidents don’t make money in office; they do so afterward. In his case, I hope he won’t. Maybe his friends will abandon him.
What do you think the future holds for Vice President Cheney? I suspect that Cheney will spend much of his life fending off legal challenges, but that is a different area. I’m quite sure that the human rights issues will follow him for the rest of his life.
Any thoughts on Treasury Secretary Henry Paulson, who engineered the bailout? He is clearly not a superman. This is the guy who had the financial crisis on his plate for a year, and when it finally became so pervasive that he couldn’t handle it on a case-by-case basis, the best he could do was send Congress a bill that was three pages long.
What’s wrong with that? Maybe he’s pithy. It shows he wasn’t adequately prepared. The bill did not contain protections for the public that Congress had to put in.
Regulation is the new mantra, and even Alan Greenspan in his mea culpa before Congress seemed to regret he hadn’t used more of it. I would say a day late and a dollar short. Greenspan blotted his copybook disastrously with his support of deregulated finance. This is a follower of Ayn Rand, an old Objectivist. His belief was you can’t really regulate and discipline the market and you shouldn’t try. I think Greenspan bears a high, high degree of responsibility for what has happened.
As a longtime professor at the University of Texas, where you hold a chair in the LBJ School of Public Affairs, what do you do with your own money? As little as possible. I am in the happy position of not having too much.
That sounds vaguely communistic. Well, maybe academic life has a touch of that, but it’s comfortable compared with the real thing.
Over the years, you’ve stayed loyal to the liberal ideas of your celebrated father, John Kenneth Galbraith. That’s right.
Did you go through any kind of Oedipal crisis when you were younger? No, I went through the non-Oedipal crisis of having a father who was always one step ahead.
Now that the economy has tanked, do you think that progressive economists will come to enjoy a new glamour? I personally never suffered a deficit of public attention.
That sounds a little smug. That’s true. Let’s add that a great many other progressive economists have basically suffered a deficit of attention, and these events should raise their profile enormously.
INTERVIEW CONDUCTED, CONDENSED AND EDITED BY DEBORAH SOLOMON
Beyond their means...
Click the picture for larger image.
Source:http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=8717275&story_id=12532624subjectid=8717275&story_id=12532624
Friday, October 31, 2008
Ketuanan Melayu, Democracy and Economic Prosperity
31-10-2008: Zaid's speech at LawAsia 2008
The following is the speech by Senator Datuk Zaid Ibrahim delivered at LawAsia 2008 on Oct 31, 2008.
Malaysia — A Lost Democracy?
1. Let me start by inviting you back into history. Imagine that it is the morning of the 31st of August 1957. At midnight, an independent nation calling itself the Federation of Malaya is to be unveiled. Conceived as a cutting edge model of multiracial and multi-religious coexistence and cooperation, it is poised to stand out as an example of what can be achieved through diplomacy and a respect for the spirit of democracy. It is of great historical significance that the transition from colony to independent nation, so often achieved only at the great price that turmoil and unrest exacts, has been achieved peacefully. Though this is a process that may have been made more difficult without the skill and fortitude with which negotiations to that end have been carried out, they do not define it. That honour goes to the aspirations of all those who call Malaya home. The quest for self-determination has not been one that recognised race. It has been, simply put, a Malayan one.
2. I would like to think that as midnight approached, one of the elements that gave confidence to the Alliance leaders and, in fact, all Malayans was the knowledge that a constitutional arrangement that accorded full respect and dignity for each and every Malayan, entrenched the Rule of Law and established a democratic framework for government had been put in place. The Federal Constitution was a masterful document. Inspired by history and shaped lovingly to local circumstance, it was handcrafted by a team of brilliant jurists who appreciated that they could not discharge their burden without first having understood the hearts of minds of those who would call this nation their home and whose children would call it their motherland. Hundreds of hours of meetings with representatives of all quarters resulted in a unique written constitution that cemented a compact between nine sultanates and former crown territories. This compact honoured their Highnesses the Malay Rulers, Islam and the special status of the Malays even as it seamlessly allowed for constitutional government and created an environment for the harmonious and equal coexistence of all communities through the guarantee of freedoms and the establishment of the institutions that would allow for the protection and promotion of these guarantees. If at all there was a social contract, it was the guarantee of equality and the promise of the Rule of Law.
3. I would say that as at 31st August 1957, the Federation of Malaya was set to become a shining example of a working democracy. Though special provisions had been included in the constitution to allow for protective affirmative action measures where the Malays were concerned, and later the natives of Sabah and Sarawak when these states merged into the renamed Federation of Malaysia, and for declarations of Emergency and the enacting of exceptional laws against subversion, these provisions were not anti-democratic nor were they undermining of the Rule of Law. Conversely, if used as contemplated by the founders of the constitution, they were aimed at protecting democracy from grave uncertainties that could undermine the very foundations of the nation.
4. If I sound nostalgic, it is because in some ways it could very sadly be said that democracy and the Rule of Law, as they were understood at the time this nation achieved its independence, at a time when I was much younger, have been consigned to the past. Events that followed in history undermined and stifled their growth. To understand how this came about and the state of things as they are, one however must have an understanding of the politics of the country. I seek your indulgence as I attempt a brief summary of key historical events.
5. After the euphoria of 1957, race-relations took a turn for the worst in 1969. The race riots of that year have marked us since. As a response, adjustments were made and measures introduced to keep what was now perceived to be a fragile balance in place. The Rukun Negara was pushed through as a basis of national unity and the New Economic Policy (NEP) was unveiled by which the government was mandated to address the disparity in wealth between the Malays and the other communities, in particular the Chinese, that had been identified as the root cause of the resentment that had exploded into violence. These measures, in my view, were on the whole positive. They were agreed to by all the political parties making up the government, in part due to an understanding that the NEP was a temporary measure aimed at assisting the Malays that would not disadvantage the other communities. The late Tun Dr. Ismail talked about giving the Malays an opportunity to survive in the modern competitive world. It was readily appreciated that unless society as a whole addressed and rectified certain historical imbalances and inequities, they would flounder. In my view, these measures were easily reconciled with democracy and the Rule of Law.
6. The 1980s presented a different scenario altogether. We saw a unilateral restructuring of the so-called Social Contract by a certain segment of the BN leadership that allowed for developments that have resulted in our current state of affairs. The non-Malay BN component parties were perceived by Umno to be weak and in no position to exert influence. Bandied about by Umno ideologues, the Social Contract took on a different, more racialist tone. The essence of its reconstructed meaning was this: that Malaya is primarily the home of the Malays, and that the non-Malays should acknowledge that primacy by showing deference to the Malays and Malay issues. Also, Malay interest and consent must be allowed to set the terms for the definition and exercise of non-Malay citizenship and political rights. This marked the advent of Ketuanan Melayu or, in English, Malay Supremacy. Affirmative action and special status became a matter of privilege by reference to race rather than of need and questioning of this new status quo was not to be tolerated.
7. As Ketuanan Melayu evolved and entrenched itself, Islam became political capital due to the close links between Malays and the religion. The constitution itself defines a ‘Malay’, for purposes of affirmative action, as someone who amongst other things professes the religion of Islam. This over the years led to a politically driven articulation of Malaysia as an Islamic State. Again, no questions were tolerated. Majoritarianism had become the governing paradigm of governance as the character and nature of rights were defined by Malay interests and defined by them.
8. This new political philosophy in which the primacy of Malay interests was for all purposes and intents the raison d’être of government naturally led to interference with key institutions. I say naturally as it was, and still is, impossible to reconcile the principles of equality and civil rights of the people of this country with the primacy of one group over all others. Needless to say, a new social order in which some are made to defer to the primacy of others is not going to be easily accepted. As such, in order to enforce compliance and to encourage acceptance, harsh measures would have to be taken to quash protest or disagreement. Policy doctrine or diktat not supported by consensus will almost certainly be a subject of contention. It is for this reason that in the 1980s already harsh anti-democratic laws that allowed for the suppression of legitimate dissent such as the Internal Security Act, the Official Secrets Act, the Police Act, the Printing Presses and Publications Act and the Sedition Act were tightened further. Where possible, reliance on them was made immune from judicial scrutiny a feat achieved only through a constitutional amendment that suborned the judiciary to parliament. It got to a stage where when more than five friends got together, one wondered whether it was wiser to obtain a police permit. Such was the state of the law, such was the state of democracy.
9. Mukhriz Mahathir will probably be the new Umno youth leader. In saying as he did recently that there is no need for law and judicial reforms as it will not benefit the Malays, he typifies what is perceived as the kind of Umno leader who appeals to the right-wing of Malay polity. That he may be right is sad as it leads to the ossification of values that will only work against the interests of the party and the nation. This type of thinking may pave the way to a suggestion in the future that we may as well do away with general elections altogether as they may not be good for the Malays for if the justice that a revitalised Rule of Law would allow for is not to the benefit of the Malays, what is? More inefficiency, more corruption and a more authoritarian style of government perhaps. We are a deeply divided nation, adrift for our having abandoned democratic traditions and the Rule of Law in favour of a political ideology that serves no one save those who rule.
10. How else can we describe the state of affairs in Malaysia? In a country where the Rule of Law is respected and permitted to flourish, just laws are applied even-handedly and fairly. I can point to numerous instances where that has not been our experience. Let me point a few out to you. A gathering of one group constitutes an illegal assembly but not that of another. A speech or publication is seditious or constitutes a serious threat to the security of the nation such as to warrant detention without trial under the ISA if published by one person but not another. This cannot be right even if it were to be to the benefit of the majority, which is not the case. My belief in constitutional democracy and the Rules of Law is founded on an acceptance of their functional qualities and the prospect of sustainable and inclusive development that they offer. It is of no concern to me whether Fukuyama was right when he declared that in view of the success of liberal democracies all over theworld and the collapse of communism, mankind had achieved the pinnacle of success and history was dead.
11. There are less esoteric reasons but as, if not more, compelling ones. Indonesia’s transition to democracy since the end of military rule in 1998 showcases these. The majority of Indonesians have embraced democracy, religious tolerance and religious pluralism. In addition, a vibrant civil society has initiated public discussions on the nature of democracy, the separation of religion and state, women’s rights and human rights more generally. These developments have contributed to a gradual improvement in conditions for human rights, including religious freedom, over the past few years. Since 2003, Indonesia has also overtaken Malaysia on the Reporters sans Fronteres Press Freedom Index, moving up from 110th place to 100th out of 169 countries covered. Malaysia on the other hand has dropped from 104th place to 124th place in the same period. I am not surprised. In 1999, Indonesia passed a new Press Law that, in repealing two previous Suharto administration laws, guaranteed free press through the introduction of crucial measures. This new law allows journalists to freely join associations, guarantees the right of journalists to protect their sources, eliminates prior censorship of print or broadcast news and makes the subverting of the independence of the press a criminal offence. It also establishes an independent body to mediate between the press, the public and government institutions, uphold a code of ethics and adjudicates disputes. Progress has not stopped there. On 3 April this year, Indonesia passed its Freedom of Information Act. This latest law allows Indonesia’s bureaucracy to be open to public scrutiny and compels government bodies to disclose information. To enforce disclosures and to adjudicate disputes, a new body has been created under the new law, independent of government and the judiciary. While there remains some debate about the penal sanctions for misuse of the law, the passing of the Act clearly is a step in the right direction.
12. The lessons of the African and the Caribbean states are there for all to see. Do we emulate Zimbabwe or do we take Botswana as our political and economic model? How is it that Haiti is far behind the Dominican Republic in economic terms when they both achieved their independence at about the same time, and have the same resources? Singapore’s success is mainly attributed to its commitment to good governance and rule of law, even though political dissent is not tolerated. Democracy, a system of government based on fair and transparent rules and laws, and the respect people have for institutions of government – these make the difference. Economic prosperity drives democracy but stifle true democracy and the inevitable outcome is economic ruin. It is useful to remember that freedom is vital for economic development.
13. The critical feature of a constitutional democracy to me is the test of constitutionality itself. Does the government allow its own legitimacy to be questioned? Does it permit executive decisions to be challenged? Written constitutions normally provide the standard by which the legitimacy of government action is judged. In the United States, the practice of judicial review of congressional legislation ensures that the power of government to legislate is kept under check. Bipartisan debate and votes of conscience are not only encouraged but also expected of Congressmen and Representatives. More recently the Basic law of Germany and Italy provided explicitly for judicial review of parliamentary legislation. We have the opposite situation here. The jurisdiction of the High Court can be, and has been, ousted when it comes to challenges of executive decisions even if such decisions impact on fundamental liberties and other rights under the Constitution. For instance, where government compulsorily acquires land for a public purpose, the courts are prevented from questioning the bona fides of the acquisition. Where a discretion is exercised by the Minister of Home Affairs under the Internal Security Act, the court is barred from examining the exercise of the discretion except so far as to ensure that the procedural requirements have been followed. Such detention without trial would be considered repugnant in any system predicated on the Rule of Law.
14. Nation building is not a simple process. It is not achieved through tinkering with political ideologies or injudicious use of the coercive powers of state. These do not promote the lasting peace and stability that we crave for. We have failed miserably in dealing with complex issues of society by resorting to a political culture of promoting fear and division amongst the people. The Ketuanan Melayu model has failed. It has resulted in waste of crucial resources, energy and time and has distracted from the real issues confronting the country. Tan Sri Muhyiddin, the DPM-in-waiting it would seem, suggested that there is a need for a closed door forum for leaders of the BN to develop a common stand; a renewed national consensus grounded on the Social Contract. This is a positive step but it should include all political leaders and be premised on the Social Contract that was the foundation of independence. The results of March 8th clearly show that the BN no longer exclusively speaks for the rakyat. Promoting discourse and dialogue is essential, as we must learn to talk and to listen to one another again. The pronouncement by the Malay Rulers underscores the urgency with which we need to look at rebuilding the politics of consensus. Communication and trust amongst the people must be reestablished.
15. The founders envisaged a government for all Malaysians. Even Tun Dr Mahathir spoke about it. One of the elements of Vision 2020 as envisaged by Tun Dr. Mahathir Mohamed was the creation of a united Bangsa Malaysia. How can such a vision be achieved if the government is not willing to listen to the grievances of a substantial segment of Malaysians? Tun Dr Mahathir Mohamad introduced the idea of Bangsa Malaysia in a speech entitled The Way Forward. This is one of nine central and strategic challenges of Vision 2020. Although he only mentioned Bangsa Malaysia once, its use had sparked enthusiastic debates. The creation of Bangsa Malaysia is the challenge of establishing a united Malaysian nation with a sense of a common and shared destiny. This must be a nation at peace with itself, territorially and ethnically integrated, living in harmony and full and fair partnership, made up of one Bangsa Malaysia with political loyalty to the nation.
16. Different meanings have been given to that term Bangsa Malaysia. Many believe that it was intended to bolster the non-Malays through the envisioning of a united country where their cultural and religious uniqueness would not be threatened; Tun Dr. Mahathir in fact explicitly mentioned this. On the other hand, some believe that Bangsa Malaysia was just a neat reference to a Malaysia united under Malay or, more appropriately, Umno hegemony. Whatever the case, I would like to believe that whilst the government of BN has done little other than pay lip service to the concept, principally by issuing pandering slogans, since Dr Mahathir left, the country will nevertheless in the future move towards a more pluralistic society. The integration of different ethnic groups would occur naturally through the expansion of economic life and through the unintended effects of globalisation so much so that ethnicity will be depoliticised. We nonetheless need to actively promote efforts at an institutional level if we want this notion of Bangsa Malaysia to materialise. The political parties making up government may not want to do so for their own short-term interests but as a whole, the people will call for it. This brings us again to the democracy and the Rule of Law. We will not succeed in promoting, a united country and allow for the evolution of Bangsa Malaysia if we do not subscribe to the Rule of Law. We need the openness, freedom and social justice that will be possible only with it in place. and democracy. How do we bring unity to the people if we are not prepared to respect their dignity?
17. To achieve the aspirations of the New Economic Policy, bumiputeras need to be given thinking tools to participate in the global economy. At present their attention is kept focused, almost on a daily basis, on race related issues even though there are serious issues such as the economy and the lack of trust in the institutions of government to deal with. The obsession with the Ketuanan Melayu Doctrine has in fact destroyed something precious in us. It makes us lose our sense of balance and fairness. When a certain Chinese lady was appointed head of a State Development Cooperation, having served in that cooperation for 33 years, there were protests from Malay groups because she is Chinese. A new economic vision is necessary, one that is more forward looking in outlook and guided by positive values that would serve to enhance cooperation amongst the races. This will encourage change for the better; to develop new forms of behaviour and shifts of attitudes; to believe that only economic growth will serve social equity; to aspire to a higher standard of living for all regardless of race. We need to meaningfully acknowledge that wealth is based on insight, sophisticated human capital and attitude change. A new dynamics focused on cooperation and competition will spur innovation and creativity.
18. Some might say that this is a fantasy. I disagree. How do we go about transforming the culture and values of the bumiputeras so that their ability to create new economic wealth can be sustained? By changing our political and legal landscapes with freedom and democracy. Dr Mahathir was right to ask that Malays embrace modernity. He fell short of what we needed by focusing on the physical aspects of modernity. He was mistaken to think all that was needed to change the Malay mindset was science and technology. He should have also promoted the values of freedom, human rights and the respect of the law. If affirmative action is truly benchmarked on the equitable sharing of wealth that is sustainable, then we must confront the truth and change our political paradigm; 40 years of discrimination and subsidy have not brought us closer. There is a huge economic dimension to the Rule of Law and democracy that this government must learn to appreciate.
19. Relations between Islam, the state, law and politics in Malaysia are complex. How do we manage legal pluralism in Malaysia? Can a cohesive united Bangsa Malaysia be built on a bifurcated foundation of syariah and secular principles? Will non-Muslims have a say on the operation of Islamic law when it affects the general character and experience of the nation? This is a difficult challenge and the solution has to be found. Leading Muslim legal scholar Abdullah Ahmad an- Na’im is hopeful. He believes that the way forward is to make a distinction between state and politics. He believes that Islam can be the mediating instrument between state and politics through the principles and institutions of constitutionalism and the protection of equal human rights of all citizens. Whatever the formula, we can only devise a system that rejects absolutism and tyranny and allows for freedom and plurality if we are able to first agree that discourse and dialogue is vital. Democracy and respect for the rights and dignity of all Malaysians is the prerequisite to this approach.
20. A compelling argument for a constitutional democracy in Malaysia is that only through such a system will we be able to preserve and protect the traditions and values of Islam and the position of the Malay Rulers. For a peaceful transition to true democracy of this country, one of key issue that requires care is the position of Islam and its role in the political system of the country. In fact I regard this to be of paramount consideration. Although the expression Islamic state is heard from time to time, and whilst it is true that Abim, PAS and lately Umno had the concept a key part of their agenda, the areas of emphasis differ and are subject to the contemporary political climate. For reasons too lengthy to discuss now, I would say that the 'synthesis of reformist Islam, democracy, social welfare justice and equity' would be sufficient to appease the majority of Muslims in so far as the role of Islam in public life is concerned. This state of affairs could be achieved peacefully and without tearing the constitution apart. The progressive elements in PAS, inspired by Dr Burhanuddin Helmi in 1956, are still alive. PAS leaders of today who have carried that torch also make reference to a more accommodating vision of Islam that puts a premium on substantive justice and the welfare of the people as major policy initiatives.
21. Umno’s approach (or more accurately Dr Mahathir’s approach) to Islamic content in public policies was articulated in the early 1990s. This however achieved little in changing the political system. His 'progressive Islam' was more nationalistic than PAS, and designed to usher new elements of modernity into Islam. Science and technology were touted as the means to defend Islam and the faith. The approach taken was short on the ideas of human rights and social justice, and the Rule of Law and designed more to convince the rakyat of Islam’s compatibility with elements of modernity like science and technology. Anwar Ibrahim, the present opposition leader, articulated a brand of reformist Islam that was more individual centred and liberal. Drawing its humanist thought from the great Muslim scholar, Muhammad Iqbal, Islam Madani gave emphasis on human rights and freedoms. Islam Hadhari came on to the scene just before the 2004 general elections as another form of progressive Islam, possibly inspired by the thinking of another noted scholar, Ibn Khaldun. Unfortunately, nothing much came out of this effort.
22. Whichever model or line of thought that will find permanence in our political landscape, Islamic aspirations and ideals will certainly become an important component in the realm of public policy. To prevent conflicts and ensure that various beliefs are absorbed and accepted into the political system, it is imperative that no force or compulsion is used. This is where the merit of a government adopting democracy and Rule of Law becomes apparent. The discussions and deliberations of even sensitive and delicate issues will make the participants aware of the value of ideas and the value of peaceful dialogues. Managing disputes through a determined, rules-based process will allow for a peaceful resolution of problems. The tolerance shown by the protagonists in Indonesia over delicate religious issues bodes well for that country and serves as as a useful illustration of what could be. Approached this way, Islam in the context of Malaysian politics will be prevented from being as divisive and as threatening as race politics.
23. In this, the issue of conflicts of jurisdiction still requires resolution. Our civil courts are denuded of jurisdiction to deal with matters that fall within the jurisdiction of the syariah courts. No court has been given the jurisdiction and power to resolve issues that may arise in both the syariah courts and the civil courts. The present separation of jurisdictions presupposes that matters will fall nicely into one jurisdiction or the other. However, human affairs are never that neat. What happens to the children of a marriage where one party converts to Islam and the other party seeks recourse in the civil court? Or when the syariah court pronounces that a deceased person was a Muslim despite his family contesting the conversion? Or where the receiver of a company is restrained from dealing with a property by a syariah court order arising out of a family dispute? Where do the aggrieved parties go? I had suggested the establishment of the Constitutional Court, but that plea has fallen on deaf ears.
24. There is marked increase in the use of harsh draconian measures in dealing with political and social issues. Some people say that groups such as Hindraf advocate violence and therefore justifies the use of such measures. They may have overlooked the fact that violence begets violence. Was not the detention of Hindraf leaders under the Internal Security Act (ISA) itself an act of aggression, especially to people who consider themselves marginalised and without recourse? It is time that the people running this country realise that we will not be able to resolve conflicts and differences peacefully if we ourselves do not value peaceful means in dealing with problems. The situation has been aggravated by the absence an even-handed approach in dealing with organisations like Hindraf. While I applaud the prime minister for calling upon the Indian community to reject extremism, should not a similar call be made on the Malay community and Utusan Malaysia? I call on the prime minister, both the outgoing and the incoming, to deal with such issues fairly. Start by releasing the Hindraf leaders detained under the ISA. The release would create a window for constructive dialogue on underlying causes of resentment. I also appeal for the release of Raja Petra from his ISA detention. He is a champion of free speech. His writings, no matter how offensive they may be to some, cannot by any stretch of the imagination be seen as a threat to the national security of this country.
25. The Malays are now a clear majority in numbers. The fear of their being outnumbered is baseless; they are not under seige. The institutions of government are such that the Malays are effectively represented, and the there is no way the interest of the Malays can be taken away other than through their own weakness and folly. The BN government must abandon its reworked concept of the Social Contract and embrace a fresh perspective borne out of discussions and agreements made in good faith with all the communities in this country. It is time for us all to practice a more transparent and egalitarian form of democracy and to recognise and respect the rights and dignity of all the citizens of this country.
26. At the end of the day, we must ask ourselves what it is that will allow us to protect all Malaysians, including the Malays? Good governance is about good leadership; and good leadership is all about integrity. We must have leaders of integrity in whom people can place their trust. If there is no integrity in leadership, the form of government is immaterial — it will fail. Integrity in leadership is the starting point to creating a just and fair society. Integrity of leadership does not lie only with the prime minister or his cabinet. It needs to permeate through all the organs of government. A key organ of government, the one tasked to protect the rights of the common man against the excesses of government, is the court. The Rule of Law in a constitutional democracy demands that the judiciary be protective of the nation’s subjects be they, I would say especially, the poor, the marginalised and the minorities. The courts must act with courage to protect the constitutionally guaranteed rights of all citizens, even if to do so were to invoke the wrath of the government of the day. Even though not all Judges will rise to be Chief Justice, in they own spheres they must show courage. For example, in PP vs Koh Wah Kuan (2007), a majority bench of the Federal Court chose to discard the doctrine of separation of powers as underlying the Federal Constitution apparently because the doctrine is not expressly provided for in the constitution. This conclusion is mystifying as surely the court recognises that power corrupts absolutely and can thus be abused. If the courts are not about to intervene against such excesses who is? Checks and balances are what the separation of powers is about. Surely the apex court is not saying that the courts do not play a vital role in that regard?
27. The reluctance of the court to intervene in matters involving the Executive is worrying. In Kerajaan Malaysia & Ors v Nasharuddin Nasir, the Federal Court ruled that an ouster clause was constitutional and was effective in ousting the review jurisdiction of the court if that was the clear intention of parliament. The apex court so readily embraced the supremacy of parliament even though the constitution declares itself supreme. There is nothing in the Federal Constitution that explicitly sets out the ability of parliament to limit the court’s review jurisdiction. The court could have just as easily held that as the constitution was the supreme law, in the absence of express provisions in the constitution, the court’s review jurisdiction remained intact. Is it not possible that in vesting the judicial authority of the Federation in the High Courts the framers of the constitution intended the review powers of the Courts to be preserved from encroachment by the Executive and Legislature? In India, the Supreme Court has held on tenaciously to a doctrine of ‘basic structure’ that has allowed it to ensure the integrity of the democratic process and the Rule of Law. Any attempt to denude the courts of the power to review by amendment of the constitution has been struck down.
28. The Rule of Law has no meaning if judges, especially apex court judges, are not prepared to enter the fray in the struggle for the preservation of human rights and the fundamental liberties. Supreme Court judges in other jurisdictions have done so time and time again. Though it is far less difficult to accommodate the will of the government, that must be resisted at all costs, particularly where justice so demands. Only then can we say that Malaysia is grounded on the Rule of Law. To all our judges I say discard your political leanings and philosophy. Stick to justice in accordance with the law. As Lord Denning reminded us: Justice is inside all of us, not a product of intellect but of the spirit. Your oath is to the constitution; shield yourself behind it. Without your conviction, democracy is but a concept.
29. I would like to say more about law, democracy and about our beloved country. But time does not permit. In any event, I have to be careful. The more we say, the more vulnerable we become. But my parting message is this: The people of goodwill must continue to strive to bring about change, so that we can rebuild the trust of all Malaysians. From that trust, we can rebuild the country where we do not live in fear, but in freedom; that the rights of all Malaysians are acknowledged, respected and protected by the system of law that is just and fair. There is no quest more honourable and a struggle more worthy of sacrifice.
Thursday, October 30, 2008
Inclusive development through empowerment
KUALA LUMPUR, Oct 30 - The Raja Muda of Perak Raja Nazrin Shah said today that governments should not set down discriminatory laws or policies but must ensure inclusive development through empowerment.
"No segment of society must be disrespected, discredited and disenfranchised," he said in his address at the 21st LawAsia Conference here.He said that no single group in any country should feel their contributions are unrecognized or unwanted.
While the Perak Raja Muda did not specify what laws or which countries he was referring to, his remarks comes amid a roiling debate over the country's "social contract" and the government's pro-Bumiputera affirmative action policies.His advice also comes on the heels of the recent statement by the Rulers Council calling on all parties to stop questioning the social contract between Malays and non-Malays as it would cause unease.
In his speech today, Raja Nazrin called for the abandonment of what he called "the silo mentality where we only look up at what is happening and not beside us at what others are experiencing."He made a case instead for policies which empower through inclusiveness.
"Only with inclusive development through empowerment can societies become strong," he said.The lack of empowerment, he said, would lead to a sense of alienation and hostility that could result in "rash acts of violence." "We cannot morally turn our backs on the fundamental responsibility of ensuring that all stakeholders in our society, no matter how small or seemingly insignificant, have a place under the sun."
Among the prerequisites cited by Raja Nazrin for empowerment was for governments to strengthen the rule of law and to ensure greater political participation for citizens as stakeholders.
"It is only when citizens are also stakeholders will there be the widest sense of ownership of problems and challenges," he said.
I Have a Dream - Dr. Martin Luther King Jr
I have a dream speech - Martin Luther King.
[The "I have a dream" speech by Martin Luther King is recognised as perhaps one of the best speeches ever given].
Five score years ago, a great American, in whose symbolic shadow we stand signed the Emancipation Proclamation. This momentous decree came as a great beacon light of hope to millions of Negro slaves who had been seared in the flames of withering injustice. It came as a joyous daybreak to end the long night of captivity. But one hundred years later, we must face the tragic fact that the Negro is still not free.
One hundred years later, the life of the Negro is still sadly crippled by the manacles of segregation and the chains of discrimination. One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. One hundred years later, the Negro is still languishing in the corners of American society and finds himself an exile in his own land.
So we have come here today to dramatize an appalling condition. In a sense we have come to our nation's capital to cash a check. When the architects of our republic wrote the magnificent words of the Constitution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir.
This note was a promise that all men would be guaranteed the inalienable rights of life, liberty, and the pursuit of happiness. It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned.
Instead of honoring this sacred obligation, America has given the Negro people a bad check which has come back marked "insufficient funds." But we refuse to believe that the bank of justice is bankrupt. We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation.
So we have come to cash this check - a check that will give us upon demand the riches of freedom and the security of justice. We have also come to this hallowed spot to remind America of the fierce urgency of now. This is no time to engage in the luxury of cooling off or to take the tranquilizing drug of gradualism. Now is the time to rise from the dark and desolate valley of segregation to the sunlit path of racial justice. Now is the time to open the doors of opportunity to all of God's children. Now is the time to lift our nation from the quicksands of racial injustice to the solid rock of brotherhood.
It would be fatal for the nation to overlook the urgency of the moment and to underestimate the determination of the Negro. This sweltering summer of the Negro's legitimate discontent will not pass until there is an invigorating autumn of freedom and equality. Nineteen sixty-three is not an end, but a beginning. Those who hope that the Negro needed to blow off steam and will now be content will have a rude awakening if the nation returns to business as usual. There will be neither rest nor tranquility in America until the Negro is granted his citizenship rights.
The whirlwinds of revolt will continue to shake the foundations of our nation until the bright day of justice emerges. But there is something that I must say to my people who stand on the warm threshold which leads into the palace of justice. In the process of gaining our rightful place we must not be guilty of wrongful deeds. Let us not seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred.
We must forever conduct our struggle on the high plane of dignity and discipline. we must not allow our creative protest to degenerate into physical violence. Again and again we must rise to the majestic heights of meeting physical force with soul force. The marvelous new militancy which has engulfed the Negro community must not lead us to distrust of all white people, for many of our white brothers, as evidenced by their presence here today, have come to realize that their destiny is tied up with our destiny and their freedom is inextricably bound to our freedom.
We cannot walk alone. And as we walk, we must make the pledge that we shall march ahead. We cannot turn back. There are those who are asking the devotees of civil rights, "When will you be satisfied?" we can never be satisfied as long as our bodies, heavy with the fatigue of travel, cannot gain lodging in the motels of the highways and the hotels of the cities. We cannot be satisfied as long as the Negro's basic mobility is from a smaller ghetto to a larger one. We can never be satisfied as long as a Negro in Mississippi cannot vote and a Negro in New York believes he has nothing for which to vote. No, no, we are not satisfied, and we will not be satisfied until justice rolls down like waters and righteousness like a mighty stream.
I am not unmindful that some of you have come here out of great trials and tribulations. Some of you have come fresh from narrow cells. Some of you have come from areas where your quest for freedom left you battered by the storms of persecution and staggered by the winds of police brutality. You have been the veterans of creative suffering. Continue to work with the faith that unearned suffering is redemptive.
Go back to Mississippi, go back to Alabama, go back to Georgia, go back to Louisiana, go back to the slums and ghettos of our northern cities, knowing that somehow this situation can and will be changed. Let us not wallow in the valley of despair. I say to you today, my friends, that in spite of the difficulties and frustrations of the moment, I still have a dream. It is a dream deeply rooted in the American dream.
I have a dream that one day this nation will rise up and live out the true meaning of its creed: "We hold these truths to be self-evident: that all men are created equal." I have a dream that one day on the red hills of Georgia the sons of former slaves and the sons of former slaveowners will be able to sit down together at a table of brotherhood. I have a dream that one day even the state of Mississippi, a desert state, sweltering with the heat of injustice and oppression, will be transformed into an oasis of freedom and justice. I have a dream that my four children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character. I have a dream today.
I have a dream that one day the state of Alabama, whose governor's lips are presently dripping with the words of interposition and nullification, will be transformed into a situation where little black boys and black girls will be able to join hands with little white boys and white girls and walk together as sisters and brothers. I have a dream today. I have a dream that one day every valley shall be exalted, every hill and mountain shall be made low, the rough places will be made plain, and the crooked places will be made straight, and the glory of the Lord shall be revealed, and all flesh shall see it together. This is our hope. This is the faith with which I return to the South. With this faith we will be able to hew out of the mountain of despair a stone of hope. With this faith we will be able to transform the jangling discords of our nation into a beautiful symphony of brotherhood. With this faith we will be able to work together, to pray together, to struggle together, to go to jail together, to stand up for freedom together, knowing that we will be free one day.
This will be the day when all of God's children will be able to sing with a new meaning, "My country, 'tis of thee, sweet land of liberty, of thee I sing. Land where my fathers died, land of the pilgrim's pride, from every mountainside, let freedom ring." And if America is to be a great nation, this must become true. So let freedom ring from the prodigious hilltops of New Hampshire. Let freedom ring from the mighty mountains of New York. Let freedom ring from the heightening Alleghenies of Pennsylvania! Let freedom ring from the snowcapped Rockies of Colorado! Let freedom ring from the curvaceous peaks of California! But not only that; let freedom ring from Stone Mountain of Georgia! Let freedom ring from Lookout Mountain of Tennessee! Let freedom ring from every hill and every molehill of Mississippi. From every mountainside, let freedom ring.
When we let freedom ring, when we let it ring from every village and every hamlet, from every state and every city, we will be able to speed up that day when all of God's children, black men and white men, Jews and Gentiles, Protestants and Catholics, will be able to join hands and sing in the words of the old Negro spiritual, "Free at last! free at last! thank God Almighty, we are free at last!"
Source:http://www.presentationhelper.co.uk/martin_luther_king_speech.htm
Dear Economist: Why did a neighbour get my car clamped?
Dear Economist: Why did a neighbour get my car clamped?
At the apartment block where I used to I live, I once parked in another tenant’s car bay for a brief period. The tenant called the wheel clampers and landed me with a $120 (£69) fine, despite the fact he doesn’t have a car and there were 30 spare car bays, and despite knowing that the car belonged to me. Up to that point I had had no run-ins with this person.
The tenant gained nothing from this except my bad opinion, and I was $120 worse off. Why did he not either ignore my car, or come up and knock on my door and say: “Look, I’ve got these people on the phone who will clamp your wheels unless you persuade me otherwise.” He could have had a few bottles of beer out of it. But he didn’t. So what was the rational reason behind his action?
Jeremy Cook
Dear Jeremy,
You are right to be puzzled. Clearly, this neighbour did not maximise the value of his bargaining position in the narrow situation you describe. Still, I think there is a certain logic to what happened.
Game theory is the economist’s tool of choice to analyse what happens when two or more people have to negotiate, co-operate, compete or otherwise engage with each other. The essence of game theory is that each side would expect the other side to anticipate and respond to his likely actions.
Game theory shows that there are times when irrationality (real or feigned) is a highly effective strategy. Someone who seems impervious to logic is someone who also gets his own way a lot. Consider, for example, toddlers, terrorists, bosses, dogs and the late Charles de Gaulle.
Your neighbour may have calculated that by demonstrating a willingness to punish you for no immediate personal gain, he will gain in the long term anyway. Irrational perhaps, but rationally irrational.
Your neighbour may have calculated that by demonstrating a willingness to punish you for no immediate personal gain, he will gain in the long term anyway. Irrational perhaps, but rationally irrational.
Market, Government and the Poor
Poverty in Africa and elsewhere
By Shanta Devarajan, the Chief Economist of the Africa Region at the World Bank.
Poor people are poor because markets fail them and governments fail them. That markets fail them is well-known. Failures in capital markets mean that young people cannot get loans to finance their education; imperfect or nonexistent insurance markets mean that poor people will not get decent health care if left to unfettered markets; economies of scale as well as the simple fact that basic services such as water are necessities mean that markets will not ensure that poor people will get the services they need to survive. As Roy Radner, a former professor of mine once put it, “When you allocate resources by market prices, you discriminate against poor people.”
By Shanta Devarajan, the Chief Economist of the Africa Region at the World Bank.
Poor people are poor because markets fail them and governments fail them. That markets fail them is well-known. Failures in capital markets mean that young people cannot get loans to finance their education; imperfect or nonexistent insurance markets mean that poor people will not get decent health care if left to unfettered markets; economies of scale as well as the simple fact that basic services such as water are necessities mean that markets will not ensure that poor people will get the services they need to survive. As Roy Radner, a former professor of mine once put it, “When you allocate resources by market prices, you discriminate against poor people.”
To overcome these failures—that is, to protect the poor—governments step in. They finance and provide primary education and basic health care; they subsidize water and electricity so poor people can afford these services. Unfortunately, these well-intentioned government interventions lead to failures of their own. In Ugandan public schools, teachers are absent 27 percent of the time; health workers in primary health centers are absent 37 percent of the time. Only one percent of the money allocated to non-salary spending in Chad reached the health clinics. These “government failures” are sometimes as pernicious as the market failures they were intended to correct. They are also difficult to overcome because various interest groups who benefit from the status quo may resist reform.
One way to overcome them may be to create a debate around these failures, to amplify the voices of the poor, so that political leaders will listen to them. Today is Blog Action Day 2008, and the topic that bloggers worldwide are writing about is “Poverty.” Let us hope this global movement, that is based on information-sharing, debate and discussion, will eventually help overcome both market and government failures so that poor people around the world can escape poverty.
What is an Economic Bail Out and What Does It Mean?
What is an Economic Bail Out and What Does It Mean?
by Jo Oliver, Sep 25, 2008
Unless you live under a rock, you know that the U.S government is in the throws of a “bail out” related to recent stock market woes and mortgage companies that are in crisis. I would like to give a little context to this for those that just hear the headlines, but don’t know what they mean.
First, what is a bailout? An economic bailoutis when a bankrupt or nearly bankrupt party (like Lehman Brothers) is helped by another party (like the US government) giving them assets, that can be easily converted to cash. This infusion of liquid assets frees up the troubled party to meet it's short term obligations. In return, the helping party will often receive controlling interest.
So, when you hear that AIG has 1 trillion dollars worth of assets, you may wonder why they need a bailout and ask :“Why don't they just sell their own assets?” The key word when you are talking about assets is, liquid. The companies in crisis have illiquid assets. An illiquid asset is not readily saleable due to uncertainty about it's value or it lacks a market in which it can be traded. In other words, no one is going to buy mortgage company assets because the value is uncertain and there are not buyers for the troubled loans.
When a large company is on the verge of a failure that will have vast long term effects, the government views this as “too big to fail.” They will step in for a bailout in order to stop wide spread economic repercussions and panic that result in depressions. What the U.S government is proposing to do in the mortgage bailout will be the largest since the Great Depression. Some may view this government intervention as too far reaching. Others may see it as preservation of the economy. Either way it is happening and the best thing American citizens can do is arm themselves with knowledge.
Right now, President Bush has a 700 billion dollar bailout plan laid out for Congress to approve. Ironically, the plan is on three pieces of paper. The specific details are not being released, but Republicans and Democrats alike are ripping the plan apart. Mainly they are criticizing the plan for it's heavy emphasis on private sector intervention, the tremendous dollar amount, and the lack of check and balance system r/t who is getting this money and where it is going.
Democrats are concerned about the home owners behind these bad loans and are insisting that the plan help more borrowers stay in their homes. They also want a condition to the bailout that will put limits on executive compensation. Where as, Republicans seem more concerned with who, what, when, and where all this money will go. Some Senators are pushing for a committee to oversee where all this money goes, instead of giving the Secretary of Treasury full responsibility of 700 billion dollars. Regardless of the specific disagreements, one thing is agreed upon…..something has to be done now to prevent economic collapse. But, words are only as valuable as the action behind them. Each side is holding out for their specific interests, despite admitting the essentialness of expediency. What both parties seem to be forgetting is that a bailout's purpose is not to help the specific companies and especially not the customers of the companies. It is simply to prevent the specific parties from effecting the entire economy.
Lastly, I will give you my brief opinion on what I think should happen. The bail out is necessary to prevent worldwide economic turmoil. Normally, I say the government should not intervene when a business is in trouble. However, the wide spread results of what will happen if these businesses fail is a matter of national security. It should be regulated by a committee, not just one man. Allowing one man to dole out billions, is asking for disaster. It should be passed now, without any of the added bonuses that each party wants to stick into it. The bill should not include individual home owners. 95% of homeowners are paying their notes on time. Most of the 5% that are in trouble, are in a bind because they bought something that they couldn't pay for. I sympathize with their plight. Still, it is unfair to take tax dollars from the people who didn't buy what they needed or wanted, but rather what they could afford, to bail out people who bought beyond what they could afford. Personal responsibility is part of life. If someone bought a big screen TV, but then couldn't afford to buy food, would you buy them food….. or tell them to sell their big screen? So, if you can not afford a 500,000 dollar house, sell it and buy or rent what you can afford.
Source: http://www.newsflavor.com/Politics/US-Politics/What-is-an-Economic-Bail-Out-and-What-Does-It-Mean.272409
by Jo Oliver, Sep 25, 2008
Unless you live under a rock, you know that the U.S government is in the throws of a “bail out” related to recent stock market woes and mortgage companies that are in crisis. I would like to give a little context to this for those that just hear the headlines, but don’t know what they mean.
First, what is a bailout? An economic bailoutis when a bankrupt or nearly bankrupt party (like Lehman Brothers) is helped by another party (like the US government) giving them assets, that can be easily converted to cash. This infusion of liquid assets frees up the troubled party to meet it's short term obligations. In return, the helping party will often receive controlling interest.
So, when you hear that AIG has 1 trillion dollars worth of assets, you may wonder why they need a bailout and ask :“Why don't they just sell their own assets?” The key word when you are talking about assets is, liquid. The companies in crisis have illiquid assets. An illiquid asset is not readily saleable due to uncertainty about it's value or it lacks a market in which it can be traded. In other words, no one is going to buy mortgage company assets because the value is uncertain and there are not buyers for the troubled loans.
When a large company is on the verge of a failure that will have vast long term effects, the government views this as “too big to fail.” They will step in for a bailout in order to stop wide spread economic repercussions and panic that result in depressions. What the U.S government is proposing to do in the mortgage bailout will be the largest since the Great Depression. Some may view this government intervention as too far reaching. Others may see it as preservation of the economy. Either way it is happening and the best thing American citizens can do is arm themselves with knowledge.
Right now, President Bush has a 700 billion dollar bailout plan laid out for Congress to approve. Ironically, the plan is on three pieces of paper. The specific details are not being released, but Republicans and Democrats alike are ripping the plan apart. Mainly they are criticizing the plan for it's heavy emphasis on private sector intervention, the tremendous dollar amount, and the lack of check and balance system r/t who is getting this money and where it is going.
Democrats are concerned about the home owners behind these bad loans and are insisting that the plan help more borrowers stay in their homes. They also want a condition to the bailout that will put limits on executive compensation. Where as, Republicans seem more concerned with who, what, when, and where all this money will go. Some Senators are pushing for a committee to oversee where all this money goes, instead of giving the Secretary of Treasury full responsibility of 700 billion dollars. Regardless of the specific disagreements, one thing is agreed upon…..something has to be done now to prevent economic collapse. But, words are only as valuable as the action behind them. Each side is holding out for their specific interests, despite admitting the essentialness of expediency. What both parties seem to be forgetting is that a bailout's purpose is not to help the specific companies and especially not the customers of the companies. It is simply to prevent the specific parties from effecting the entire economy.
Lastly, I will give you my brief opinion on what I think should happen. The bail out is necessary to prevent worldwide economic turmoil. Normally, I say the government should not intervene when a business is in trouble. However, the wide spread results of what will happen if these businesses fail is a matter of national security. It should be regulated by a committee, not just one man. Allowing one man to dole out billions, is asking for disaster. It should be passed now, without any of the added bonuses that each party wants to stick into it. The bill should not include individual home owners. 95% of homeowners are paying their notes on time. Most of the 5% that are in trouble, are in a bind because they bought something that they couldn't pay for. I sympathize with their plight. Still, it is unfair to take tax dollars from the people who didn't buy what they needed or wanted, but rather what they could afford, to bail out people who bought beyond what they could afford. Personal responsibility is part of life. If someone bought a big screen TV, but then couldn't afford to buy food, would you buy them food….. or tell them to sell their big screen? So, if you can not afford a 500,000 dollar house, sell it and buy or rent what you can afford.
Source: http://www.newsflavor.com/Politics/US-Politics/What-is-an-Economic-Bail-Out-and-What-Does-It-Mean.272409
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