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How did we dig ourselves into this bottomless pit?

August 9, 2017

The government’s profligate and senseless spending is to blame, which raises the question whether we are paying too much to the government to govern us.

COMMENT

malaysia-economy-ringgit-malaysia-1By TK Chua

The other day, I came across a few interesting quotes which prompted me to ponder over the state of affairs of this country.

“I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle” ~Winston Churchill.

“A government which robs Peter to pay Paul can always depend on the support of Paul” ~ George Bernard Shaw.

“Giving money and power to government is like giving whiskey and car keys to teenage boys” ~ P.J. O’Rourke.

“Just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you” ~ Pericles.

Looking back, I think the government of Malaysia exemplifies many of these sayings.

We keep arguing about where we will get the extra RM41 billion to meet our expenditure needs, especially after the fall of oil-related revenues, if we hadn’t imposed the goods and services tax.

We have never asked how Malaysia dug such a big hole to begin with. When oil prices were good, our argument was we were lucky to have plenty of oil and gas revenue to support our wayward ways.

Now that oil prices have plummeted, our argument is we have the GST. But we have never looked at the genesis of our problem – the government’s profligate and senseless spending. It is a bottomless pit we can never fill.

A little knowledge of Keynesian economics is a dangerous thing. We can’t always spend our way to prosperity. I think this is what Malaysia is getting into – spending unproductively and senselessly just to keep the growth rate buoyant to satisfy short term objectives.

Many of us detest politics and wish to have nothing to do with it. But politics and government will eventually affect all of us – at least on the amount of taxes we have to pay and the quality and type of services we are expected to receive from the government.

The government is always short of money to “do more”. But where exactly does the money go when we are constantly asked to pay more taxes, but get less in terms of essential services such as education, scholarships, healthcare, infrastructure, and subsidies?

I think it is time for us to divide the national budget into two major categories – government spending for the people and government spending on itself. I get the feeling that we are paying too much to the government to govern us.

The government claims it has done many great things – fostering a high income economy, nurturing respectable gross domestic product growth rates, achieving high competitive rankings and becoming a favourite destination of foreign direct investment.

But ultimately what did we get – a high income economy or a high cost of living economy? If our economic performance is sterling, why did the ringgit tank and public debts escalate?

Just look around us, is anyone, including recipients of BR1M and other government largesse, not reeling from the effects of the high cost of living? I reckon it is no longer a supply-chain or a profiteering problem. It is the knock-on effect of poor macroeconomic management plus GST which we shall ignore at our own peril.

Put simply, price escalation is no longer a problem of the Ministry of Domestic Trade, Co-operatives and Consumerism. It is now the big problem of the Treasury and Bank Negara Malaysia.

The Ministry of Domestic Trade, Co-operatives and Consumerism should not punch above its weight. The Treasury and BNM should not pretend the problem does not lie with them.

TK Chua is an FMT reader.

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