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’ĂȘtre 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.


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.”
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

Sunday, October 26, 2008

The poverty of riches and the riches of poverty

The poverty of riches and the riches of poverty By Farish A. Noor

DHAKA, Oct 25 — As an aside to the academic work I normally do, last week I was given the opportunity to meet Datuk Nik Aziz Nik Mat, the spiritual leader (Murshidul Am) of Pas at his office in Kelantan. Despite the frail health of the man and his taxing schedule, we managed to pack in close to two hours worth of interview on tape.

One thing struck me somewhere during the second half of our meeting. I remarked to him that his home was suprisingly similar to that of Ho Chi Minh's in Hanoi, Vietnam, and that both he and the revered “Uncle Ho” chose to give up their stately government mansions to live in humble wooden houses. I also said that he was using the same cheap, plastic BIC ballpoint pen that I had seen him use when we first met in 1999. This occasioned a laugh and a smile from him, but it struck us both that these observations were far from pedestrian. The truth is that for both revolutionary Islamic and Communist movements alike the world over, the democratic impetus and the drive for revolutionary politics were accompanied by a strong sense of disdain for worldliness, and a respect for a Spartan way of life. Whatever you may say about Ho Chi Minh, one thing you could never accuse him of was corruption and the easy life. The same applies to Nik Aziz as the spiritual leader of Pas.

The same, however, cannot be said of the secular modernising elites of so many post-colonial societies that rather quickly got used to the comfy life of the former colonial masters they condemned and demonised, so what gives?

As someone who studies the various modes of religio-political behaviour in the Muslim, Christian, Hindu and Buddhist worlds, respectively, I am left with the rather simple conclusion that the “moral economy of the peasant” that was talked about in the 1970s is as relevant now as it was then. With the global economy in a tailspin and many an Asian economy precariously hanging in the balance, we already see the repeat of the mistakes of the past. The list of errors and complains sound surprisingly (or perhaps not surprisingly) similar to those that came to the fore during the Asian crisis of 1998: indiscriminate credit expansion, contracts given to government contractors or those close to power, etc.

Time will tell whether this imminent global recession will see political heads roll as it did in 1998, when public protests brought down the governments of Thailand, South Korea and Indonesia, and rocked the political foundations of Malaysia, too. Then, it was apparent that the economic crisis was as much a political one as it was financial, due to the murky dealings of political fixers and the unfettered role of political parties and elites in so many Asian countries. If this were to happen though, the credibility of religio-political leaders like Nik Aziz will remain intact, for the man himself has nothing to lose in the first place. Nik Aziz, above all, understands the meaning of the poverty of riches and the riches of poverty. His wealth lies in his cultural capital as a pious man whose hands are clean. And in any case he has no luxury items to give up: After all, he still uses the same plastic BIC pen today that he used 10 years ago! — The New Nation, Bangladesh

Rethinking the political paradigm

Rethinking the political paradigm by Suflan Shamsuddin

OCT 25 — In my book “RESET: Rethinking the Malaysian Political Paradigm”, I consider whether or not the political problems and uncertainties that we face today stems from 50 years of ethnic-based politics, its policies and its leadership; or the prevalence of a disharmonious and dysfunctional imbalance in the way democratic choice is exercised (since choice is exercised between a) an inclusive coalition behind which lurks a Malay hegemony; and b) non-inclusive parties (that each appeal to one community but not the other who hide behind a secular or religious ideology)).
I explain that it is the latter; in that this imbalance facilitates volatility in society for which the use of prerogatives and patronage becomes justified in the minds of the Establishment so as to maintain a state of equilibrium. This exacerbates a conflict in the role of leadership, between the duty to protect society from inter and intra communal instability (because of the impact of non-inclusivity), and the desire to maintain its ideological dominance for the sake of protecting the status quo. The use of the ISA, the incidence of institutionalised chauvinism, issues around the independence of the judiciary, money politics, nepotism and cronyism, a lack of transparency in government, are all symptoms of this malignant condition.
I conclude that the core nation-building principles (which include justice, character building, common values, democracy and equity) are compromised because of this imbalance and conflict. And unless they are addressed at source, we are doomed to fail as a nation, no matter who is at its helm, or the fact that Pakatan Rakyat might be able to form an alternative government to the Barisan Nasional (because the contradiction in ideology between its member parties, and their respective non-inclusiveness (at least for Pas and DAP), renders a rupture inevitable. As such the "imbalance" in the democratic framework that I spoke of will prevail).
If we were honest with ourselves, we would admit that the underlying problem is the war of ideologies between three stakeholder communities in Malaysia, i.e.:

a. Malays, who would like to maintain the hegemony under the guise of a multiracial joint venture;
b. Non-Malays, who would like to get rid of this hegemony forever, by dismantling race-based politics; and
c. Muslims, who want to put in place a theocracy.
Of course, there are a growing number of Malays who support b), as there are a number of non-Malays who support a) and/or c), but in reality each of these numbers are a minority and insignificant. And the key protagonists in each community will jealously guard their position and keep such dissenting alternative voices small and unheard, by ensuring that the flock remains loyal to its cause. That is what apparatchiks are there for!

The impact that prerogatives and patronage have on the country will always be interpreted and profiled in a manner so as to support each warring side's ideological position. It is all about spin, and yet such spin can have dastardly effect. Each side claims to have moral authority, and has its own group of extremists, as they do their own moderate voices to do their worst bidding. Today b) and c) are allies. But the permanence of that allegiance is as secure as the permanence of spring. Unity talks are already afoot between Pas and Umno to shift the balance of power yet again.
But it is a zero-sum game. There will be no winners in the long run, nor is there a basis upon which any side can claim moral superiority. We will ALL be losers. If we do not manoeuvre out of this conundrum soon, a dangerous situation will soon develop, especially if our economy goes into free fall.
We have no choice. We must find a compromise that creates a ying-yang-like harmony and balance, before it is too late. What I advocate in the book is a multi-party system that is predicated on inclusiveness (i.e. by ensuring that both sides of the House equally represent the interest of all major communities in Malaysia) in form and in substance. For this to work, we have to accept that political participation must require the proof of multi-ethnic membership and complementary power sharing between stakeholder representatives. If a balanced structure can be achieved, there will be hope for the country.
Some readers have come up to me and expressed concerns about how my proposal might affect fundamental rights of freedom of association, and that in itself is an infringement of democratic rights. I cannot dispute that this suggestion does places such a restriction, albeit limited. But we must look at the bigger picture. What is the use of such freedom (to allow the formation of non-inclusive political parties that appeal only to one race but not the other) if as a result there is much greater loss to the nation by way of economic peril, impinged civil rights, the continuance of non-transparent and non-inclusive government, and the failure of key nation-building principles, if the structural imbalance and consequent conflict continues unabated. In fact, it is only when we have such a balanced system in place that we will finally be in a position to have true and meaningful democratic reforms that we have for so long coveted.
Some readers have suggested that my proposal entrenches ethnic boundaries as opposed to dismantling them. I would disagree. The proposal recognises social cleavages along communal lines as they currently exist, and acknowledges the need to manage sectarianism responsibly in the best interests of all Malaysians. However, it leaves open the door for the removal of the distrust between communities, to make way for the emergence of a Bangsa Malaysia who are united behind a political manifesto without any deference to ethnicity.
Good things come to those who wait. We must be patient, and take this first step if we want to get to achieve true unity in due course. In any event, inclusive multi-party systems will encourage centrist and moderate policy-making on both sides of the political divide, given each side's equal dependence on the support of BOTH the Bumiputera and non-Bumiputera communities.
Are Malaysians and political parties willing to consider such a proposal? I deal with this in the chapter called “The Value and Price To Reset”. It is tempting to ignore what I am proposing, given its difficulty in implementation, particularly when each protagonist (rightly or wrongly) believes that their victory is at hand, or would rather maintain the chaos of the status quo than to give any ground to its rival protagonist (a perverse and destructive “lose-lose” logic).
The non-Malays fighting for an end to race-based politics (who might wrongly think that Pakatan Rakyat is its saviour) might not support the proposal, just like the Malays fighting for the maintenance of the hegemony, and who wrongly think that Umno will survive the latest onslaught and forever be the only relevant representative of the Malays, might similarly do likewise. The theocrats arguably have the most to lose by supporting an inclusive political model!
But the more Umno/BN and its supporters appreciate its political mortality, and the more Pakatan Rakyat realises how unlikely it is for the coalition to work in the long run, and the more this imbalance and conflict that I speak of is understood, and the more that we accept the notion of a “win-win” solution, then the more likely will a proposal such as what I have outlined become an acceptable alternative for all sides.
We need to all speak with the voice of moderation and realise the dangers of this ideological war and recognise that there will not be any winners, if we each cannot compromise. We must realise that the imbalance in democratic choice adds fuel to the fire by supplying fodder to each warring faction's cause without being able to kill off the enemy and to let true peace reign. And all of this is leading us to a point of self-destruction. Let's step back from the “self-destruct” button and look to reset our bearings as a nation, instead.

Saturday, October 25, 2008

Speak softly love - The Godfather

One of my favourite movie is The Godfather. Enjoy the theme song from the movie - speak softly love.



Pepsi Advertisement

This is one of my favorite TV commercials.

Friday, October 24, 2008

A picture says a thousand words

...a proof of global warming?...a proof of inflation?

Assumptions and Usefulness of a Model

Milton Friedman, a Nobel Laureate in Economics, argues that if a model is successful in its prediction, then the model is useful, even if the simplifying assumptions are not strictly true.

Thursday, October 23, 2008

Economic crisis and the politics of bailout

Below is an interesting view of the current financial crisis by Tom Sowell....."It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts."


Thomas Sowell: Politicians, not markets, created the economic crisis
By THOMAS SOWELL

Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis.

Among the congressional 'leaders' invited to the White House to devise a bailout 'solution' are the very people who have for years created the risks that have now come home to roost. Five years ago, Barney Frank vouched for the 'soundness' of Fannie Mae and Freddie Mac, and said 'I do not see' any 'possibility of serious financial losses to the treasury.'

Moreover, he said that the federal government has 'probably done too little rather than too much to push them to meet the goals of affordable housing.'

Earlier this year, Sen. Christopher Dodd praised Fannie Mae and Freddie Mac for 'riding to the rescue' when other financial institutions were cutting back on mortgage loans. He, too, said that they 'need to do more' to help subprime borrowers get better loans.

In other words, Rep. Frank and Sen. Dodd wanted the government to push financial institutions to lend to people they would not lend to otherwise because of the risk of default.

The idea that politicians can assess risks better than people who have spent their whole careers assessing risks should have been so obviously absurd that no one would take it seriously. But the magic words 'affordable housing' and the ugly word 'red lining' led to politicians directing where loans and investments should go, with such things as the Community Reinvestment Act and various other coercions and threats.

The roots of this problem go back many years, but since the crisis to which all this led happened on President George W. Bush's watch, that is enough for those who think in terms of talking points, without wanting to be confused by the facts. In reality, President Bush tried unsuccessfully, years ago, to get Congress to create some regulatory agency to oversee Fannie Mae and Freddie Mac.

N. Gregory Mankiw, his chairman of the Council of Economic Advisers, warned in February 2004 that expecting a government bailout if things go wrong 'creates an incentive for a company to take on risk and enjoy the associated increase in return.'

Since risky investments usually pay more than safer investments, the incentive is for a government-supported enterprise to take bigger risks, since they get more profit if the risks pay off, and the taxpayers get stuck with the losses if not.

The government does not guarantee Fannie Mae or Freddie Mac, but the widespread assumption has been that the government would step in with a bailout to prevent chaos in financial markets.

Alan Greenspan, then head of the Federal Reserve System, made the same point in testifying before Congress in February 2004. He said: 'The Federal Reserve is concerned' that Fannie Mae and Freddie Mac were using this implicit reliance on a government bailout in a crisis to take more risks, in order to 'multiply the profitability of subsidized debt.'

Chairman Greenspan added his voice to those urging Congress to create a 'regulator with authority on a par with that of banking regulators' to reduce the riskiness of Fannie Mae and Freddie Mac, a riskiness ultimately borne by the taxpayers.

Fannie Mae and Freddie Mac do not deserve to be bailed out, but neither do workers, families and businesses deserve to be put through the economic wringer by a collapse of credit markets, such as occurred during the Great Depression of the 1930s.

Neither do the voters deserve to be deceived on the eve of an election by the notion that this is a failure of free markets that should be replaced by political micro-managing.

If Fannie Mae and Freddie Mac were free market institutions, they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.

It would be better if no such government-supported enterprises had been created in the first place, and mortgages were, in fact, left to the free market. This bailout creates the expectation of future bailouts.

Phasing out Fannie Mae and Freddie Mac would make much more sense than letting politicians play politics with them again, with the risk and expense being again loaded onto the taxpayers.

Thomas Sowell is the Rose and Milton Friedman senior fellow at the Hoover Institution at Stanford University.

Source: http://www.unionleader.com/article.aspx?articleId=e46b2920-4038-4dc2-a5ef-2b8d8c45e4b6&headline=Thomas+Sowell%3A+Politicians%2C+not+markets%2C+created+the+economic+crisis

Monday, October 20, 2008

Adegan yang ingin kita lihat di Malaysia

Alangkah baiknya kalau ahli politik di Malaysia boleh berbahas dan berhujjah seperti Obama dan McCain dalam dalam video ini. Berhujjah, berbahas dan boleh saja tidak bersetuju antara satu dengan lain, tetapi penuh bergaya dan profesional..... ada kelas!

Part 1


Part 2


Part 3


Part 4

Saturday, October 18, 2008

Nationalisation is safest bet now?

Hate it, but nationalisation is safest bet now
By : HARDEV KAUR

NATIONALISATION used to be a bad word. Not any more! Developed countries such as Britain, France, Italy, Spain and even the United States have announced bailout plans for banks, including governments directly buying shares and taking stakes in these institutions.
In a word, these institutions have been nationalised.The "unprecedented" move of nationalising banks and financial institutions in these rich countries shifts the power from the markets to governments. In the US, it has moved from Wall Street to Washington. Kenneth Rogoff, a Harvard professor of Economics, described the move as making Washington the ultimate guarantor for banking in the US.It is not too different in Britain, where the move to nationalise the Royal Bank of Scotland, HBOS and Lloyds, according to analysts, makes the government Britain's biggest banker.
Government guarantee, or "nationalisation" as it was labelled by the developed nations, is something that developing countries repeatedly stressed is important to ensure that credit is channelled to the deserving and the poor.For decades, developing countries and the least developed countries have come under pressure from the rich nations and from the multilateral institutions controlled by them -- the World Bank and International Monetary Fund, among others -- and told to privatise and allow free market forces to prevail.But what have the unchecked free market forces of Wall Street led the world into? The very same voices that championed and insisted on free markets and lectured the poor and helpless are now ignoring their own advice and pushing for nationalisation, protection and government control."Government owning a stake in any private US company is objectionable to most Americans -- me included," US Treasury Secretary Henry Paulson said. "Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable."Nancy Koehn, of Harvard Business School, said: "The goal is to get the engine of capitalism going as productively as possible. Ideology is a luxury good in times of crisis."The bailout of institutions that once were household names and considered "too big to fail" have now been nationalised. This comes in the wake of the market meltdown around the globe and turmoil in recent weeks that wiped out trillions of US dollars in just a matter of days.No matter how much nationalisation may have been despised by the White House, Paulson, in unveiling the plan, described it as "extensive, powerful and transformative". It is the same "extensive, powerful and transformative" approach that developing nations have repeatedly pointed out is necessary for their fragile and underdeveloped econo-mies.It has now been acknowledged by the US and other developed nations that nationalisation is necessary and effective "to restore confidence and avoid a collapse of the financial system".The move may have been described as being "unprecedented in cost and scale", but it is not the first time the US has nationalised companies. During World War 2, Washington took control of dozens of companies, including railroads, coal mines and, briefly, the Montgomery Ward department store chain.In 1952, then President Harry Truman seized 88 steel mills nationwide, asserting that unyielding owners were determined to provoke an industry-wide strike that would cripple the Korean War effort.In banking, the government took an 80 per cent stake in the Continental Illinois Bank and Trust in 1984. Continental Illinois failed in part because of bad oil-patch loans in Oklahoma and Texas. As the nation's seventh-largest bank, Continental Illinois was deemed "too big to fail" by federal regulators, who feared wider turmoil in the financial markets. In the end, the government lost an estimated US$1 billion on the bad loans it bought as part of the takeover of Continental, which eventually became part of Bank of America.Governments are scrambling to find solutions and restore some semblance of normalcy, but confidence cannot be legislated. Nor can it be regulated. Unorthodox measures are needed to facilitate the flow of credit. "The alternative of leaving businesses and consumers without access to financing is totally unacceptable," Paulson said."When financing isn't available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing shop." That's something developing countries have been saying for a very long time, but which those in the developed world did not hear -- if they even wanted to listen.The loss of confidence and the meltdown of markets last week threatens to dip the world into recession. The problem that began in the US housing market and emerged last August has been described by some as "financial terrorism". Markets lost confidence and they were not going to be taken in by more promises and platitudes -- not even from the seven most industrialised nations.The nationalisation plan was "not one that we wanted to take, but one that we must take", according to Paulson. He sees nine big banks -- Citigroup, JPMorgan Chase, Bank of America, Wachovia Corporation, Goldman Sachs, Morgan Stanley and Bank of New York -- agreeing to take investments totalling about US$125 billion (RM400 billion). Another US$125 billion is allocated for thousands of small and medium-sized banks which will be eligible for government investments reflecting a similar proportion of their assets.In return, the government will receive preferred shares and warrants for common stock. Paulson thinks a reasonable return can be expected. In addition, "institutions that sell shares to the government will accept restrictions on executive compensation, including a clawback provision and a ban on golden parachutes during the period that Treasury holds equity issued through this programme"."The needs of our economy require that our financial institutions not take this new capital to hoard it but to deploy it," Paulson said, meaning that they will use the money to bolster lending to each other and to their customers. This will only happen if investors and markets are confident the measures will work. The alternative is not a pretty picture.
Source: http://www.nst.com.my/Current_News/NST/Friday/Columns/2376892/Article/index_html

Friday, October 17, 2008

Pertumbuhan ekonomi tahun depan 3.4% - MIER

KUALA LUMPUR 16 Okt. - Institut Kajian Ekonomi Malaysia (MIER) menyemak semula unjuran pertumbuhan ekonomi tahun depan kepada 3.4 peratus berbanding unjuran awal lima peratus sambil menyifatkannya angka terbaru itu sebagai lebih realistik.
Bagi tahun ini, unjurannya juga disemak semula kepada 5.3 peratus berbanding unjuran awal pada 4.6 peratus .
Pengarah Eksekutifnya, Profesor Emeritus Datuk Mohamed Ariff berkata, unjuran itu bersesuaian dengan keadaan semasa berikutan negara turut menerima impak daripada krisis kewangan global.
''Sekiranya situasi (krisis kewangan) di Amerika Syarikat dan Eropah semakin serius daripada apa yang diramalkan sebelum ini maka kami mungkin menyemaknya semula tetapi buat masa sekarang, kami fikir ia adalah angka yang realistik,'' katanya pada sidang akhbar mengenai perkembangan ekonomi negara, di sini hari ini.
Semalam, Gabenor Bank Negara Malaysia (BNM) Tan Sri Dr. Zeti Akhtar Aziz berkata, pertumbuhan ekonomi negara pada tahun ini dijangka berada antara lima hingga 5.5 peratus, unjuran yang lebih rendah berbanding 5.7 peratus sebelum ini, manakala tahun depan pula disasarkan berkembang pada angka yang lebih kecil iaitu sebanyak empat peratus.
Mengulas lanjut, Mohamed Ariff menjelaskan, unjuran KDNK lebih rendah pada tahun depan dibuat berdasarkan kepada pendapatan kerajaan yang diramalkan terjejas secara serius kerana penurunan harga minyak di pasaran global.
Beliau menjelaskan 40 peratus daripada pendapatan kerajaan disumbangkan oleh minyak mentah, bahkan Bajet 2009 yang dibentangkan oleh kerajaan baru-baru ini adalah berdasarkan kepada harga minyak global yang ketika itu berada pada paras AS$100 (RM351) hingga AS$125 (RM438.75) setong.
''Kini harga minyak telah turun, oleh itu, pendapatan kerajaan akan turut terjejas,'' katanya.
Beliau berkata, negara secara teknikal diramalkan menghadapi kemelesetan ekonomi menjelang suku kedua dan suku ketiga tahun depan maka kerajaan perlu mengambil langkah untuk meningkatkan ekonomi bagi mengelakkan situasi menjadi lebih buruk.
Sehubungan itu, Mohamed Ariff berkata, kerajaan perlu melaksanakan pakej rangsangan ekonomi atau pelan-pelan pemulihan lain yang akan melibatkan belanja yang besar sedangkan pendapatan berkurangan.
''Oleh itu, bajet defisit negara menjadi semakin besar,'' kata beliau yang mengunjurkan bajet defisit lebih lima peratus tahun ini dan empat peratus tahun depan berbanding unjuran kerajaan sebanyak 3.1 peratus pada 2009.
Mohamed Ariff juga berkata, negara tidak perlu meminta bantuan luar seperti Dana Kewangan Antarabangsa (IMF) kerana impak kemelut kewangan itu tidaklah ketara berbanding apa yang bakal dialami oleh negara-negara jiran seperti Indonesia, Thailand dan Filipina di rantau ini.
''Kita berada dalam kedudukan yang baik untuk menghadapi cabaran ini (ekonomi masih kukuh, sektor kewangan stabil, rizab antarabangsa dan imbangan perdagangan yang kukuh) tetapi kita tidak boleh mengambil mudah dalam melalui situasi ini,'' kata beliau.
Selain itu, Mohamed Ariff menjelaskan bahawa, ekonomi negara akan pulih dan kembali pada landasan yang asal menjelang tahun 2011.
Katanya, krisis kewangan semasa ini tidak sama seperti mana kemelut kewangan mata wang Asia pada tahun 1997 dan 1998 memandangkan masa yang agak lama diperlukan untuk kembali pulih.

Sumber: http://www.utusan.com.my/utusan/info.asp?y=2008&dt=1017&pub=Utusan_Malaysia&sec=Ekonomi&pg=ek_01.htm

Monday, October 13, 2008

Winner of 2008 Nobel economics prize - Paul Krugman


STOCKHOLM, Oct. 13 (Xinhua) -- U.S. economist Paul Krugman Monday won the 2008 Nobel Prize in Economics "for his analysis of trade patterns and location of economic activity."
Krugman was born on February 28, 1953, in Long Island, New Yorkstate, the United States.
He earned a Ph.D. at the Massachusetts Institute of Technology (MIT) in 1997 and has been professor of economics and international affairs at Princeton University since 2000.
He has also taught at Yale University, the London School of Economics, Stanford, and MIT.
Krugman, 55, is well known in academia for his work in trade theory and his textbook explanations of currency crises and New Trade Theory.
"Paul Krugman has formulated a new theory to answer a series of questions, such as what the effects of free trade and globalization are and what the driving forces behind worldwide urbanization are," the Royal Swedish Academy of Sciences said in a statement.
Krugman's work has thereby integrated the previously disparate research fields of international trade and economic geography, the statement said.
He is an ardent critic of the administration of U.S. President George W. Bush and its domestic and foreign policies.
He has also written 20 books and more than 200 papers in professional journals.
Editor: An

Source:http://news.xinhuanet.com/english/2008-10/13/content_10189415.htm

Sunday, October 12, 2008

Government Equity in Private Companies

This is what Gary S. Becker says on government equity in private companies .....it's a bad idea.



Government Equity in Private Companies: A Bad Idea-Becker

The Federal government of the United States has seldom taken an equity interest in private companies, although this has been proposed sometimes, especially as a way to get higher returns on social security assets. However, the new financial bailout bill provides not only for the government to buy assets from banks, but that it also take an equity stake in the banks being helped. The purpose is to protect the government from paying too much for the many difficult to value assets that are acquired. The thinking is that if they overpay for some assets, they can make that back through a rise in the value of the stock or other equity interest that they would have.
However, the main purpose of the buyout is to increase the liquidity of the banking system and thereby reduce the banking system’s retreat from riskier investments. Yet the government's actions regarding an equity interest seem to be based on a fear that it will be outsmarted in the prices it pays for assets that are very difficult to value because they have no market. Whether the government will lose after the fact is not clear since it can afford to hold the assets to maturity. Moreover, taking an equity interest is also unnecessary in order to protect taxpayers from overpaying. Modern auction theory offers various ways to induce sellers (or buyers) of assets and other objects to "tell the truth"; that is, to bid their best estimate of an asset's worth. In using auction to buy bank assets it would be helpful if the government did not automatically take all assets offered by banks, so that banks have to compete against each other. Competition can also be increased by spreading the auctions out over time (I am indebted to my colleague Phil Reny for useful comments on optimal auction design). To be sure, the seller's estimates of the worth of their assets may turn out to be wrong, so the government would bear some risk. However, with an optimal auction mechanism design, the government need not fear grossly overpaying ex ante for the assets they acquire.
Even if the government were to lose money on this buyout, it is a bad precedent for it to take an equity interest in private companies. Inevitably, this leads to government involvement in business decisions and corporate governance. Experience shows that political rather than economic criteria tend to dominate in the pressures exerted by government shareholders on corporate decisions. This is already reflected in the bailout bill since it limits compensation for executives, including "golden parachutes" for executives of the companies helped. One can hardly have a high opinion of the executives who led such venerable institutions as Merrill Lynch and Lehman Brothers, and many other banks, into investment portfolios with such poor capacity to withstand a financial disturbance. Still, many of these executives have lost most of their very considerable fortunes since they usually owned or had options on many shares of their companies, and these shares have plummeted in price. It is appropriate that top executives suffer major losses when their companies collapse.
There is no good reason, however, for the government to interfere and impose limits on salaries and severance pay. Controls over wages and salaries have never worked well, and only encourage myriad ways to get around them, including generous housing allowances, vacation homes, easy access to private planes, large pensions, and other fringe benefits. There develops a war between the government's closing of loopholes, and the ingenuity of accountants and lawyers in finding new ones.
Governmental ownership of shares, with or without voting rights, opens up possibilities for much greater mischief than controlling executive salaries. For example, a bank or other company may want to reduce its employment in order to regain greater profitability. The government owners of these shares will be under pressure from congressman and senators who represent districts where employment would be affected to try to rescind or modify these cuts. Even without government ownership, congressmen protest corporate efforts to shift various activities overseas because labor and other resources are cheaper there. Such objections will be magnified when governments have direct equity stakes.
There are many illustrations of the bad influence on corporate governance exerted by the governments of France, Italy, Russia, and many other countries that own shares in private companies. One current appalling example is the situation of Alitalia Airlines, where the government owns almost half the stock. This has been a very inefficiently run airline that is hostage among others to powerful unions. Strikes have been common, flights frequently takeoff and arrive quite late, and baggage losses are high- experienced travelers try hard to avoid using Alitalia. Since Alitalia's command of routes into and out of Italy has market value, stronger European Airlines, such as Air France and Lufthansa, have wanted to take this airline over. However, the Italian government has resisted these efforts and continues to finance the sizeable monthly deficits of the airline. It fears the power of the unions who realize that many airline jobs at Alitalia will be lost if a more efficient airline takes charge.
This and other examples of harmful government interference in the running of companies where they have an equity interest provides a very good lesson for the United States. Avoid taking any equity interest in private companies when buying assets of banks under the bailout bill, or when investing other government revenues.

Source:http://www.becker-posner-blog.com/

Monday, October 6, 2008

Globalisation and Social Protection




Pada November 3-4 2003 saya telah membentangkan satu kertas kerja bertajuk "Globalisation and Social Protection In Malaysia" dalam International Conference on “Institutional and Policy Diversity - Its Role in Economic Development”, di Debrecen, Hungary. Seminar ini dianjurkan oleh Faculty of Economics and Business Administration, University of Debrecen, Hungary.


Berikut ialah ulasan/pandangan penganjur mengenai kertas yang dibentangkan itu:


A. H. Roslan from School of Economics, Universiti Utara Malaysia concentrated on the social side of transition from traditional to modern society with his co-author M. Mustafa: the transformation of such a society causes the social protection provided by the society to cease functioning. This raises the possibility of government intervention to provide social protection. But we have to interpret social protection in a broader sense than economic politicians often do. It is not just remunerative aid, but a state intervention to raise the capabilities of a person. The authors analyzed in depth the performance of the fast developing Malaysian economy, the average speed of growth has been more than six percent for the past forty years, and evaluated the efficiency of the social protection of the state as it tried to take over the role of the traditional family. One can draw the conclusion that the trends of social change of the Malaysian economy and society (an aging population, the transformation of social norms, a rapidly changing external environment, and the bigger possibility of shocks coming from outside, but also the growing political pressure for changes) make the current social protection system inadequate. Because of the fall of the traditional-informal social protection system, the state has to play a key role in constructing a modern one.



Artikel ini juga telah diterbitkan dalam Malaysian Management Journal. Lihat Roslan, A.H. and M. Mustaffa (2006). “Globalisation, Unemployment and Poverty: The Need for a New Perspective on Social Protection in Malaysia”. MALAYSIAN MANAGEMENT JOURNAL, Vol. 10, No. 1 & 2 (December).