Tuesday, December 9, 2008

Keynesian Irrelevance III: Economic Growth

Keynes never wrote about charting our own future. He was clever in inserting money into the economic system and described its volatility - but not growth.

But Keynes does demonstrate one thing - that the economy grows as fast as the new expenditure in the economy. If income Y is consumed to the amount of C, then the remainder is saved (Y-C) which if not invested (spent) will lead to a fall in income. But if the investment is only (Y-C), you have no growth - you have stagnation. So, there must be new investment.

New investment comes from optimism which is derived from confidence - the willingness to stake one's future in the soil under one's feet. After all, if you have to invest more you have saved, you have to borrow and you are basically relying on the stream of future incomes.

It takes a lot to try to pay back loans. You can ask all those poor people who have to run away from the loan sharks. I did loan recovery once; and I can tell you that I was merciless.

To pay back loans, you must believe in the system in which you live. You must really love it in order not to run away when unpaid loans. You want to pay back because you want to the system works, you want your society to be vibrant, to be happy to contribute and pay back.

The Malaysian system has a way of mistreating its people and turn perfectly good citizens into migrants.

How do we build our own future?

1. Educate our people well. If they cannot find jobs at home, they can find jobs abroad. This is OK; we just have to learn to calculate GNP - not GDP.

2. Let us be creative. We should first learn to say exactly the opposite what the authorities are telling us, so that when we all cool down, we can come to a compromise - which we hope will be the middle path.

3. Let us build our own future. Our future is not the one that is being imprinted in our minds by the media. Our future is the one that we feel most happy being. I think all Malaysians love to be truly Malaysians. You can't find Malaysians in Malaysia - you find them abroad in strange places, when we are all out of our own comfort zone. Which really means that Malaysians are really at home in their own homes, during which we just choose to be difficult and idiosyncratic. Malaysians may just be more eccentric than the English.

4. Let us find a way of weaving our various cultural elements into a colourful fabric. I disagree in pushing our economy too fast, as what we have done in the past two decades - creating friction in the process. We should take our own pace - because our social fabric is delicate. We should take time to understand what we are doing. If we are trying to build something new, I do not think we have the experts in our midst - because if really new, no one really has that experience or knowledge before. We only have our own instincts to go by. Once we feel it is right, we have found our home - in our own soil.

5. Let us not look for that clever person to solve all our problems - we do not want a Hitler, Stalin or Mao. We should look to ourselves and our neighbours and our neighbourhoods for ideas and inspirations and grow indigeneous ideas. We should build stable and secure localised networks.

6. Why should we fear when we have resources. We should work to preserve our natural endowments and increase our own satisfactions.

I was once asked by my professor in university abroad: " Why is it that most of knowledge is created in the northern hemisphere and so little in the tropics?"

Answer: "I do not know about knowledge, but I agree there is a lot of mental activity. It is so dark and cold here, whereas in the tropics, there is constant sunshine and fair weather that one is often inclined to just relax and enjoy life."

I think that remark still rings true.

In other words - as my mother would say - grow, my child, but not too fast.


de minimis said...

I'm in full concurrence. Malaysia's economic development must be at a reasonable pace to avoid the friction that seems to have become more rampant in the past 2 decades.

I like the point about us being in the tropics. We are sedentary but not sedate. We are slower but not unwise. Why should we discard who we are for the sake of breakneck economic progress.

You may have put your finger on the social problems confronting us such as "lepak", "rempit", substance abuse and "bohsia". Breakneck economic development causes too much social and economic displacement. The price may be becoming too high.

Your message is becoming clearer, Guru :D but there is still much sticky mud in my brains. More please.

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