Thursday, April 30, 2009

The Distribution Of Wealth III: Welfare

While the distribution of wealth reflects the structure of the economy, the distribution of wealth does affect the overall welfare of the society and if the net effect is adverse, then there is a case for the structure of the economy to be modified to improve overall welfare.

Social welfare is affected by the distribution of wealth as follows:

1. Extreme Wealth, Extreme Poverty

This is not an uncommon condition of human society.

The very rich are very very rich, and the very poor are very very poor.

In this extreme case, everybody is unhappy.

The very rich has reached their diminishing marginal returns on their wealth and have to resort to other non-wealth means to derive happiness and, if not, then satisfaction, however momentarily.

The very rich become the very power and bullies everybody else.

The very rich then enter into long rhetoric - self-righteousness to justify their lack of compassion.

The very poor are subject to the daily chore of scrounging for scraps of food and having to live with whatever illness that may befall them.

The only consolation I can imagine from such an appalling condition is that an individual may actually be above to rise above the abject condition and have a good laugh - and out of his mouth comes words of so far out and far reaching that they become words of enlightenment.

From the mud comes a beautiful flower.

But, otherwise, life everywhere is a misery.

2. Equal Distribution Of Wealth

This has actually been imagined to be an achievable ideal - that everybody can have the same - and this can actually create great unhappiness.

Different people enjoy different things - one man's meat is another man's poison.

Even of the same thing, different people have different capacity to enjoy that same thing.

Some people may be burdened by too much wealth - and then are very happy to constantly unload their wealth on their friends and neighbours.

Some people may have an insatiable desire for wealth - so matter how much they have, they would rather not consume and keep saving.

Some people may enjoy more of ideas rather than of things; some more of things than ideas.

To insist on sameness on the whole society may actually create unhappiness - unless we are dealing with a society of sufi or monks or zen masters - but even then they compete on the level of their enlightenment.

The tendency for people to search for their own identity and lengthen their lives is but an unfortunate consequence of the sameness and mortality of humanity.

Equality of Opportunity & Freedom of Choice

It is therefore the role of an enlightenment government and policymakers to design policies that ensure that there is equality of opportunity for everyone - that everybody has an equal chance to climb up the economic ladder and to get out of the economic hole that they have found themselves in.

It is the availability of this upward economic mobility that makes for a dynamic society, when every dog can have his day if he works hard enough.

For this to happen, there must be the freedom of choice - to do the things that make one happy without preventing others from pursuing the same.

We have to emerge from the Darkness of Intellectual Oppression and stand in the Light of Clarity and Understanding, from which will emergy Creativity and Innovation - with the courage to be different, if I may add, pleasantly different - ain't we all waiting to be pleasantly surprised?!

Flexibility & Dynamism

We should not fear the unknown. At the frontier, we are necessarily staring at a blankness which is the canvass for a new vision.

Imagine the dynamism in society that will emerge from everyone from all corners of the nation busily engaging creating their own sense of identity only to discover their inherent similarity which must inevitably be their inert humanness. How wonderful that will be.

Giving Back To Society & Social Safety Net

I always want to qualify my enthusiasm for the dynamism of the mainstream with the need to provide for the less fortunate who through no fault of their own design are somehow left out by the design of the game of economic competition that which the best players find so exciting to play.

Help them to have a fighting chance by teaching them well and giving them confidence.

3. Jealousy

I leave the consideration of this unfortunate quality of human beings to the last.

Jealousy is a very easy ill-feeling to trigger - by a sense of unfairness or injustice.

One may be blissfully ignorant until someone comes along to suggest an unfairness or injustice - and that thought is sufficient to upset one's otherwise happy equilibrium.

To be cast into disequilibrium is a curse - for one then will have to continue to search and to fight until one either has lost one's physical strength or one's will.

I will always suggest trying to find happiness in whatever situation one finds oneself in, while working consistently on improving oneself - so that one can be happy with even less.

The Distribution Of Wealth II: Opportunities

In an ideal world, there is no need for wealth because Mother Nature provides for all humanity.

But, even in this ideal world, wealth will be distributed according to the natural terrain and the natural environment.

There is, therefore, an implicit distribution of wealth depending on where we are born - in the tropics or in the extreme poles or anywhere in between.

In organised societies, the distribution of wealth is determined by the extra advantages that one can obtained from factors other than one's bodily well-being and strength.

The first that comes along is physical infrastructure - houses, transportation, tools, money.

Next comes human capital - knowledge, technology.

Nowadays, it is fashionable to talk about social capital - there is a dividend in peace.

Implicit in the existence of capital is ownership and hence property rights - physical or intellectual.

The opportunities for the accumulation of wealth therefore come from confidence over the right of ownership of the fruits of one's labour - and that labour invariably comes from the effort of abstence in the midst of plenty and being resolved to work hard, despite being rich, at improving one's effectiveness and efficiency in the production of goods and services for which there is a great need by humanity.

The opportunities for the distribution of wealth therefore come from a change of habit - of inculcating habits that are amiable to the accumulation of wealth within the context of the economic structure that we already have.

This personal change is a tricky one - for individuals are infinitely intelligent and each acts and reacts rationally to the signals of the external environment.

If manna falls from heaven, we all just wait. If nothing comes without effort, we would have to exert effort to try to achieve something. We learn our role in the economic system we currently are in.

The structure of the economic system is therefore critical in defining the opportunities to the creation of wealth, its accumulation and its distribution.

The best economic structure should be one that promotes efficiency - for this saves time and effort and allow people to spend their extra time pursuing their interests.

But such an economic system will favour a particular set of people - people who are quick and nimble.

The implication is that, given the economic system, children and even adults may need to be trained and be equipped with the right set of skills in order to increase their chances of doing well in the system.

The alternative solution is to tweak the economic system so that it is easy for most of the people. This means:

(1) The economic system is set below optimal to achieve a lower output; there is no stress on any thing that the adjustment is in the national effort.

(2) There is no benchmarking for any of the components of national economic survival and therefore there is no policy direction except to maintain the prevailing system which "seems to be working fine."

(3) For the tweaked economic system to survive, it may have to isolate itself from the international economic system. This will work so long as the government has no budgetary constraint.


In capitalism, the means to the accumulation of capital is capital itself which is the ingenious use of one's savings. The game in town is to provide for one's future so that one can live comfortably for the rest of one's life. Children should therefore be taught to know how to earn an income, how to spend properly, and how to save safely and productively. Underlying this effort of creating and accumulating wealth is the implicit existence of proerty rights. But capitalism punishes those who are out of the mainstream, and therefore there should be a social safety net to train and retrain people so that they can also have a meaningful existence within the context of the great force forward in the world.

Tuesday, April 28, 2009

The Distribution Of Wealth I: Sources

Income is a flow and wealth is a stock - so they are two entirely different entities.

Income is what you earn per month. Wealth is what you have accumulated over many years.

It is obvious that the accumulation of income gives rise to wealth.

Wealth is therefore the cumulation of that part of income that is not spent or consumed but is kept or saved or invested.

Wealth is the culmination of a sustained effort of not consuming and abstaining over a long period of time.

Wealth does not come from consumption.

Wealth comes from investment.

It is stupid policy to ask people to consume in order to keep the economy alive. By consuming beyond their income, people get into debt and ruin their lives.

The theory says to increase domestic demand - which is different from increasing domestic consumption.

The economy can get into trouble because businesses invest in the production of consumption goods - and this could be a mistake - and that mistake must be paid for by the collapse of the whole chain of businesses that target consumption.

The solution should not be to throw good money after bad, but to get new businesses to invest in the production of investment goods - R&D, new technologies, new machines, new ideas.

The wealth of a nation is measured by the variety of avenues for investment, for containing wealth.

Bank deposits
Intellectual property
National unity
Social harmony

The wealth of a nation will be reflected in the following aspects of the lives of the citizens:

Confidence in the future - savings
Social infrastructure - close families
Physical infrastructure - good public transport
Leisure/hobbies - people's options to pursue interests outside work
Self-confidence - people in control of their own lives
Environment - upkeep of surrounding nature

It is of course a fine balance between consumption and wealth.

Many wisecracks have been made about the stupidity of not consuming and saving.

It is a fine balance to consume enough and be healthy and happy.

It is an entirely different to consume as an act of class or a demonstration of one's wealth or status.

At the end of the day, if you take stock of the wealth of the nation - the tangible wealth - you will find that wealth accrues to those who work hard to earn income and control their consumption in order to save.

The discipline of abstenance and of saving is a habit that is inculcated from young - to have an inherent respect and possibly fear of money - so that money is treated with the greatest care.

The ability to smell of sweat (of one's parents) in the money one spends.

The ability to realise the real value of money.

Whole nations have risen from ashes with the people working hard and cosuming little.

Whole nations have collapsed under debt with the people having consumed way beyond their capacity to produce.

To live a full live, one must have the ability to earn, the ability to consume and the ability to save.

Sunday, April 26, 2009

The Distribution Of Income II: Opportunities

Income is derived from six major economic factors:
(a) Labour - Brawn
(b) Capital - Technology emnbodied in Machines
(c) Entrepreneurship - Mobilisation and Market Information
(d) Technical Skills - Technology embodied in People
(e) Property - Physical Assets
(f) Financial Assets.

They can be reduced to something very simple:
(i) Labour
(ii) Skills - Entrepreneurship, Technical Skills
(iii) Capital - Machines, Physical Assets, Finance Assets.

If you have a good physique but is not prepared to study or observe how money is made, then you are going to end up as a labourer or worker - and what you are going to get paid is a wage.

The wage rate is probably the lowest rate of return to any effort by human beings - because this is the residual of the human race - those who do not go to school or do not spend the standard number of years in school.

There is a disadvantage in not having sufficient Knowledge to participate in the mainstream of the economy - understanding of the rules of the market, ability to communicate with other participants in the market, the ability to handle finance without getting one's fingers burnt.

There is an optimal number of years in school that is required in order to be in the mainstream of the economy. Nowadays, it is found that getting the first degree is necessary - but not sufficient - there may just be too many competitors. Getting a second degree is desirable - because it provides added skill and puts you above the first degree holders. Getting a PhD may give you diminishing returns - for you have become too specialised and perceived to be too narrow in your interest.

But, apart from the above academic qualifications, there is another segment that is vital for industrial growth - and that is the vocational schools - the technical skills training centres.

People are taught to be skilled workers as wielders or precision-tool operators - people who know how to make machines work. These are prized workers in an industrial expansion. In some countries, these skilled workers are considered more important than the academic graduates of the universities.

As you can see, skilled workers are required to operate expensive and sophisticated machinery and therefore are paid better than the labour of illiterate unknowledgeable workers.

Entrepreneurship is a skill that is not easily taught in schools - the most successful entrepreneurs are apprenticed in a dynamic environment where several social qualities are inculcated - alertness (of what is going on by one's own observation), dexterity (the ability to do almost everything by oneself), integrity (the ability to carry out the words one has spoken), honesty (the ability to handle other people's money without running away from it), mobilisation (the ability to bring all the different factors together to work as a team), etc.

Ordinary hardworking people have become successful entrepreneurs because other people can trust them with their scarce resources in order to generate some positive return from the enterprise.

The return to entrepreneurship is called profit - which is subject to the vagaries of the economy, if it is dynamic.

The underlying factor for growth of the modern economy is capital - that part of income that is saved and transformed through research and innovation into means of production of better goods and services which will advance the welfare of the people.

By saving and accumulating capital, it is possible for a person to have many sources of income - in addition to his salary.

If he has saved enough to buy property or financial assets, he may have enough capital to get returns which would be sufficient for him to feed his family, without him having to work for a wage.

Access to economic opportunities must be one of the intrinic human rights of all citizens of a nation.

Economic opportunities encourage its citizens to be frugal and innovative.

The distribution of income reflects the effort that each of its citizens put into the economic process.

Friday, April 24, 2009

The Distribution Of Income I: Sources

The income in an economy is distributed among the individuals in the society according to the role they play in the economic relationships that have been established and according to the sectors and industries that they operate in.

What is income?

Income, in economics, is profit, wage, interest, rent, and any others which, typically, the Income Tax Department would want to take a share of.

If you are a worker or an employee, you get a wage.

If you set up your own business, if it is successfully run, you get, at the end of the day, a profit. This profit from your business is accrued to the capital you put into the business - on top of the salary which you might pay for yourself if you are a working director actively managing the business.

You may have a partner in your business whose "capital resource" is, shall we say, in the field of "business development" - the ability to get deals or contracts. This could be an important part of your business, especially when the government has a lot of money to spend - particularly in developing economies where development is often associated with urbanisation.

In an urban environment, location becomes an important element in the pricing of a property. An urban centre is nothing but an artificial construct. In old towns or cities, the urban centre grew as a result of the need for commerce. In new urban centres, the environment is always created out of the mind of an architect or a group of architects.

The payment for use of the position is called rent.

Rent, in economics, is generally used to denote a charge for having a monopoly of a strategic position.

Corruption is a form of rent - a payment in return for improved effectiveness and efficiency in an environment where none exist, that is, for making a decision in favour of you regardless of other considerations.

If you are in a position of power and authority and you insist that you will be paid, outside your normal salary and remuneration, in cash or kind, then you are a rent-seekers or, in simple English, you are corrupt.

Sitting there doing nothing but still insisting on being paid or else you will create trouble - this is rent-seeking - the business of gangsters.

Licensing can becoming rent-seeking when it is restrictive. Licensing, as by the local authorities, is a good way to collect some rent to pay councillors so that they can organise and regulate businesses. But when the whole society is being prevented from going into a type of business except for a handful, then that restriction in the form of such things as Approved Permits creates rent to the AP holders.

Interest is a concept invented by a rich man for lending money to a business in order to take the first cut after a certain period regardless of how the business is doing. This is true when money is scarce.

In the Islamic world, interest is not encouraged for it is not compassionate especially when the business is not doing well. The concept of sharing the profit and the loss arises, and it is akin to venture capital or equity financing.

You will see that the people in an urban economy - the banker, the landlord, the businessman, the worker, the politician, the civil servant, the gangster - have a relationship with each other and their incomes are determined by the roles they play.

In the rural environment, there is only nature to determine the income of the farmer and his skill in farming. That skill is important. If his skill is restricted to the traditional method, then he is likely to stay where he is or where his ancestors had been. If the farmer wishes to improve his income, then he will have to use a better method of farming and using a larger tract of land in order to enjoy the economies of scale.

As farming is a slow and steady activity which needs close cooperation from nature, the rural economy is often likely to lag behind the urban environment where, in modern times, the monetary authorities with a switch of the tap drown the urbanites happily with monetary liquidity.

In other words, if income is to be measured in money terms, it is far better to be in the city than in the village if one wants to have a higher income - as a result of the very nature of the economic structure and organisation.

If one were to compare the relative incomes of all the people in the society, you will find that the incomes of the society will be distributed more to the people in town than to the people in the rural economy.

The distribution of income is skewed towards the urban centres.

Within the urban environment, you will find the relative incomes of the different operators to fluctuate according to the state of the economy -between those on a fixed rate return and those with a more flexible renumeration.

In a slow economy, the banker and the landlord and the worker (if he can find a job) will be happy while the businessman will struggle.

In a fast economy, the businessman will be the happiest as things are going his way, while the fixed-rate workers will be complaining of the high cost of living.

In the rural economy, the farmer loses out to the plantations - because of technology and scale and the level of organisation.

But the farmer likes to be a farmer probably because of a more wholesome way of life and because he can identify with his ancestors and his roots and has a better sense of belonging.

The urbanites, however, may be richer but with a suicidal bend.

Income in society, therefore, is distributed according to the way of life of individuals.

Thursday, April 23, 2009

The Role Of The Economy

The role of the economy is to establish formal relationships among people as their daily business of living.

The economy is as good as the relationships that people have with each other in society on a daily basis. They are optimistic and are keen to interact with each other and work hard to be creative and innovative in order to improve things.

The economy is bad when people become pessimistic and feel demotivated to put in effort because they feel that there is danger out there or that there is grave injustice in society.

The underlying motivating force of society therefore has an important impact on the future of the economy.

National Psyche

The national psyche of Malaysia started from the unification of the various states by a common master or enemy. The fight for independence or self-determination was the rallying force that brought people of different races to forge a common identity.

With self-determination and the disappearance of the common enemy, civil disorder entered the national fabric in the name of justice or, its obverse, injustice.

The disintegration of unity into duality creates a myriad of problems for the economy.

Normal established relationships were destroyed and replaced with parochial paranoia which distorted the national economic balance.

The loss of economic balance, in turn, threatens political stability.

The return to normacy in the shape of world standards of investment and trade for the sake of economic prosperity today in Malaysia is one big circle of experience and maturation of the Malaysian economy and, hopefully, the Malaysian society.

National Economy

In bringing in international standards to the local economy, there is a glimpse of certainty in the rules of the game of doing investing and making a profit in the local and global market places.

It will help the nation to focus on the essential - the need to create or remould activities, the need to mobilise capital, the need to sink things to the ground for roots to take place, the need to wait for things to grow, the need to give time for things to grow, the need to be able for one to harvest the fruit of one's effort, the need to put in effort to contribute to society rather than stealing from it, the need to be open and generous and be confident of life and its future.

Markets & Enlightenment

The mechanism of market exchange is but one way for people to interact - this is not necessarily the only way nor the best way. The market is the way that is found to be most suitable in a society where people have relationships that are expressed in terms of tokens that can last through time.

In more enlightened societies, people interact on the basis of the goodwill they generate with each other, exchanging cordiality and charity whenever they can, and give without the need for the simulataneous need to take. Such is a society where there is no debt nor financial crisis.

The worst social construct is when the primary motivation is to take from others because it leads to self-destruction. This model has not proven to work successfully for the whole of society in any part or any history of the world as we know it.


The economy is nothing more than a playing field where people are fully engaged in their daily lives in activities which they find amiable, if not pleasant, while they grow gracefully old towards their own mortal demise - the most pleasurable being the relationships they have with fellow human beings.

Tuesday, April 21, 2009

The Role Of The Civil Service

The role of the Civil Service is to serve the civil society so that ordinary men and women can enjoy the benefits of living in an organised environment.

The services provided by the Civil Service are largely public goods - defence and security, law and order, education, healthcare, physical infrastructure, transport, telecommunications, etc.

Some of these services may be privatised.

The Civil Service will reduce in size and concentrate on their "core" business: defence and security, law and order, basic physical infrastructure, public transport, public education, public healthcare.

With privatisation, the role of the Civil Service will shift from the provision of public services to the regulation of the private sector for the provision of public services.

The shift to regulation will lift the requirements for expertise in the country - the private sector will compete using specialists and the Civil Service will regulate using specialists.

If the Civil Service fails to catch up with the use of specialists, it will find that most of the privatisation contracts will be lopsided in favour of the private sector - and the public in general will lose out as they will have to guarantee the commercial success of basic services on a long-term basis.

The failure of the Civil Service to recruit and retain experts is due to several factors:

(1) The Civil Service is structured based on the number of pre-designated posts by which the future of all civil servants are defined. There are only so many posts for a certain position which defines the salary.

There is therefore intense competition for the limited positions.

The positions may be filled in not by people with the necessary skills; they are likely to be filled by people with the necessary office political skills to survive in a closed environment.

The need for those office political skills means that a civil servant will abandon all else in order to serve and impress the immediate supervisor (who is usually affectionately called "boss.")

As a corollary, the organisation structure will also be inward-looking to the internal politics rather than be outward-looking and be concerned with the plight of the general public that the Civil Service is supposed to serve.

This is why I am very much in favour of improving the operating system of the Civil Service so that the performance of the system can be measured - rather than the system being too dependent on the whim and fancy as well as the capacity of the individual civil servants.

(2) Multi-Varied Issues. To be fair, the job of the civil servant is not an easy one.

Apart from the basis counter service, the issues that the civil servant have to deal with are multi-varied and can arise from all angles.

The uninitiated civil servant may be overwhelmed by the tasks, and therefore tend to sweep them under the carpet.

The experienced civil servant may have learned the ways of deflecting the issues so that no action is required to be taken.

The only way such a system is going to adjust is when the people get absolutely fed-up and boot out the government - but the civil servants will continue to stay.

(3) Special Projects. At the top level, each of the issues to be dealt with is a special project which requires critical thinking and quick insights to resolve nicely.

If not, half-baked ideas and policies will be supplemented by more half-baked ideas and policies.

In the end, the nation will end up with a patch-work of half-baked ideas and policies that inhibits the progress of the nation.

At this level, the Civil Service really needs far-sighted and wise people to define and frame policies.

Unfortunately, the politically-savvy civil servants will make sure that the far-sighted and wise civil servants will work to define and frame policies - but the former will take credit for the work and climb up.

(4) The Incompetence Keeping Out the Competence. If an Incompetent is in charge, it is unlikely that the Incompetent will hire a Competent to compete with him, unless he can somehow control the Competent.

Often, a person is competent because he is broad-minded and has the ability to understand and absorb new ideas regardless of whether he agrees with the ideas or not. The Competent is likely to be technically skilled and logical, and hopefully objective.

A person is incompetent by virtue of his mindset which is closed to all new ideas and has a strong bias against seemingly alien concepts, so that decisions are made based on personal opinions.

One can almost be certain that once the system has been infiltrated by the Incompetent, there is no way that Competent has a chance to enter it without being severely oppressed - which no Competent will entertain.


The Civil Service has to deal with with many different kinds of issues everyday.

The Civil Service therefore cannot be structured rigidly without the risk of some of the issues that need to be dealt with falling outside the structure.

The role of the Civil Service has progressed to regulation and re-regulation as the economy changes. The way the Civil Service is structured should also be changed - to deal with the changing environment outside the closet so that its evolving regulatory framework will keep the economy enthusiastic and vibrant all the times.

Without this external focus, the Civil Service would be doing a disservice to civil society.

Friday, April 17, 2009

The Role of Government

What is the role of the government?

In the most idealistic situation, there should be no need for government - the people simply go about their daily routines and live their lives, worrying only about death and the hereafter for those who choose to do so.

The first real need for government is defence - when marauding tribes roam the earth attacking others in search of economic security (land, crops, animals) and luxury (slaves to do work for them).

The people wish to defend their way of life and they vote a strong and clever leader to fight off intruders.

This is the first element of a social contract where the people agree to listen to the leader when the time comes for defence for the sake of effectiveness - along with it comes the concept of statehood and loyalty to the state.

The initial arrangement is for the leader to work on a volunteer basis. He works his farm but spends his leisure exercising his muscles and strategising to fight off external aggression to the state.

The leader is reluctant to work as chief defender on a long-term basis. He will hold the position for a term, and then willingly resigns from the leadership and handles it to the next most capable person as deemed by the community.

When the stake increases, the leader is requested to focus on the job of defence while the people agree to pay him a stipend to sustain himself and his family. When the stipend is institutionalised, it is called tax. There is no other moral justification for tax except to provide public goods.

When the person creates a dynasty out of his initial appointment as the leader, the concept of royalty is formed.

Like any other family fortune or business, if the inheritance cannot last three generations, then the dynasty will likewise deteriorate and the throne challenged by a new pretender, as can be seen from Chinese history.

In modern politics, the dynasty is not the father-son baton, but the party.

It is very interesting to see how the role of government very quickly turns into politics.

Today, the people of course want defence from external aggression and external intrusion. The issues are security and immigration.

There is the other normal concern over law and order at home - mostly crimes and quarrels. In some countries, this sphere has expanded to punishing people for voicing out their disatisfaction with the leadership.

In the economic climate of today, the leadership should worry about unemployment.

Keynes' idea is that, if the private investment has failed, then the government should invest. This is for short-term stabilisation.

If the problem persists, i.e., if the private has lost its will to invest, then the government should improve the environment for private investment.

The key to private investment is confidence - confidence of the people in the control of their own destiny within the context of the statehood.

This is when the government places itself below the people - and not the people below the government.

The government should know best - and the only sign that it knows best is when the system it has created is running so well that the government can keep to its core functions - rather than crowding out the private sector.

Where the government should not know best is doing business - because that is the purview of the private sector.

Thursday, April 16, 2009

Implementation & Efficiency

A lack of vision is not a bad thing if the system is good.

A vision, no matter how good, is worthless if it cannot be implemented properly because of bad formulation or a bad system.

Visions, if too many, may be conflicting which may then render them worthless because of their ineffectiveness, not matter how efficient the implementation.

In Malaysia, we suffer from too many visions and one bad system.

1. Bad System

A system is bad when it cannot cope with the issues of the normal situation, either in terms of the volume of work, or in terms of the quality or appropriateness of its response.

A bad system may be the result of poor design, poor hardware, poor software.

In a third world country, the first problem is often poor design - because of the inability to see beyond the immediate. The system gets stuck in its rudiments. Incompetence or lack of hardware then hampers its evolution to a higher order. The system becomes anachronistic and under-resourced - under-resourced because of the anachronism.

Throwing more resources at a bad system without overhauling the system merely continues a bad system.

Old workers who know best "the system" are usually the culprits at arresting system change. Fresh and keen minds are needed, but only after they have studied and understood the nature of the job.

The only way the Old and the Young can be made to focus on the system change is to focus on the efficiency of the system.

2. Too Many Visions

This may be quite a unique situation in Malaysia - because there are just too many cooks.

A bad system, by itself, throws out many problems. The many problems are the signs of a bad system.

Trying to solve the many problems one by one will be an endless task - as well as a thankless task.

The many visions of Malaysia is a sign that we are trying to remove the symptoms and not trying to identify the root cause.

The many visions or directions given to government agencies are, in themselves, a sign of a bad system as well as an additional problem to a bad system. This traffic jam of directions could be a major reason for the stalemate in the delivery of the public sector.

The only way out of this traffic jam of directions is for the Department Head to deliver to the Big Chief personally by diverting existing resources from other functions (which usually affect those without a voice).

It is no wonder that people in senior positions heap awards on each other.

While those who do all the work in the middle and bottom of the service are generally forgotten - tied to those posts, as it were, by the invisible leash of the pension.

3. Speed & Quality

When there are too many ideas and there is an addiction to speed of implementation, in a bad system, the only adjustment factors are the cost and quality of the implementation. High cost, bad job.

Performance then becomes an arbitrary term to describe the job that is required.

Performance - quantity or quality.

Mediocrity is the general path because it may be the most cost-efficient way out. But as the quality requirements increase, costs will rise accordingly.

High costs, good job can only be accomplished by trained and experienced workers, with proper tools and resources.

4. Last Word

But building a good system requires a vision.

Leadership & Effectiveness

A leader deals with effectiveness - doing the "right" thing.

What is the right thing to do for the country?

1. 1Malaysia. This is a very tricky one.

(a) That Malaysia is one nation of one people? If this is the case, then we should just take it to be as such and proceed with policies and action plans that implicitly that 1Malaysia as the underlying factor.

(b) That Malaysia is one nation of many different races? If this is the viewpoint, then the implied policies and actions are to define the racial differences and find ways and means to build the bridge towards racial unity.

This is one aspect of the tricky part - because you are going to be spend a lot of time trying to do something that could easily have been assumed and taken for granted, as explained in 1(a) above.

The other aspect of the tricky bit is this - that racial unity, though important for national harmony, is, by itself, something that the people cannot eat. Racial unity is a necessary but not a sufficient condition for nation prosperity. Prosperity is something that policy can dictate.

2. Prosperity. This is another tricky one. What is prosperity?

(a) Prosperity, to those who have been awakened to the negative feeling of jealousy, is about the "signs" of prosperity - big concrete houses, big metal cars, expensively tailored clothes, and all the things that you find on TV about the rich and famous. With this misconception, jealousy is transformed into greed. Greed becomes important because, in the modern economy, money is needed to pay for these things. So, the focus of policy is on how to make money - quick and easy. The policies of the last two or three decadees demonstrate the danger of such a misconception of the idea of prosperity - and how it can damage an entire generation.

(b) Prosperity is about satisfaction, contentment, and happiness. Malaysia was a prosperous nation in this sense, a state of equilibrium, of peace and harmony in the truest sense of the words. Then, we became jealous of foreign direct investors - we chased them off and we poured money to buy back what they had invested in our country - only to discover that we did not know how to handle those businesses profitably, because we forgot about business risks. We ventured outside our area of competence. Politicians tried to become businessmen. We went into a deep recession. We called in foreign direct investors to pull us out of the pit. Then, we tried to be clever again. We thought of schemes of spending without spending, thinking that the private sector and the foreigners could pay for the schemes. Reality showed up. We ended up having to dig deep into the treasury and the public paid dearly for misguided schemes. Now the coffers are empty. But we still dream of spending as the path to prosperity.

(c) Prosperity is the feeling we get when we, as individuals, are in full control of each of our own situation and, we would all like to think, destiny. Why? Because the reality is harsh and, whether we like it or not, we will have to put in effort, and even suffer, as we live our lives. Mistakes and errors will be made - old tricks, new circumstances; new tricks, old circumstances. By trying to take control of our own situation, or even having the impression that we are taking control of our own situation, we know what has happened, what is happening and, perhaps, what is going to happen to us. We know where we are and we know what we are going to do. There is purpose and direction. There is motivation. There will be effort. We rather suffer our own mistakes, and not the stupid ideas of others.

(d) Prosperity is NOT about an individual or a bunch of individuals, trying to take full control of the situation for everyone else. This will presume great power. This will be conspiratorial - things will go badly and the culprits will not own up and people will think they have a hidden agenda - and they may have not an agenda but lack of competence. Instead, the individual, or the bunch, should focus on building systems - clear systems that everybody can follow and play the game well. The economy is nothing but a system, and the economy is made up simply of rules of the game. The people play the economic game, and they will accept their own successes and failures - and put in extra effort to do better next time.

3. Clear System. What is a system? What is clarity?

(a) A clear system is one that everybody in the country can understand and follow and play well - or at least, the chance to play well. A clear system necessarily means that it is simple - that there are rules but not too many rules. We should do things, not wading through rules. We should not put in rules "just in case." We should think very hard before we create new rules, or exceptions to rules.

(b) Clear Economic System. We need to be clear about what an economy is all about. The economic system is basically an urban-based societal game where the chips used are called money. The tricky bit is to realise this: Economics is a game played by able-bodied educated individuals who constitute the economic mainstream. The internal game is how to join the mainstream. The external game is how to build a mainstream that can compete with the rest of the world; then, we will have a fighting chance to stand tall in the world. In the process, either the internal or external game, there will be people who are outside the mainstream. The role of the Social Safety Net is to provide assistance to people outside the mainstream. Sub-streams can be created - the economy can multi-layered. It is a mistake to destroy the mainstream and take the sub-streams to be the mainstream with no social safety net for the underpriviliged or undercapacitated.

4. Social Safety Net. Every modern society should have a good social safety net. What is the social safety net?

(a) The social safety net is the net that is placed under the high-flying mainstream of the economy in order to capture those who didn't make it to the tight rope or those who fall down from the tight rope. We want all our able-bodied and well-trained young people to climb to the top. This is important because with their advancement they will make the society a better place to live. The more productive the mainstream is, the more there is to spare to create the social safety net. By developing properly both the mainstream economy and the social safety net, the nation will have a system that can be conducive for peace and harmony and happiness.

(b) Without the social safety net, individuals will be petrified of the unknown future and their instinctive response will be to make lots of money and accumulate lots of assets in the hope of securing their future but in the process destroying the present for everyone.

(c) One of the arguments against the social safety net is that it will make people work less hard. I think it is about time that this is encouraged. I think Malaysians worry too much and work too hard for nothing. We should work less, create more by doing the things each of us really want to do. There is already too much economic progress through industrialisation and there should be greater emphasis placed on services.

(d) There could be less crime as a result.

Wednesday, April 15, 2009

Effectiveness vs Efficiency

The distinction between effectiveness and efficiency is patently obvious to those who have understood it. But for those who have not, it may be worth a recap.

Many people are confused between effectiveness and efficiency. A sign of the confusion is that they tend to use the two terms together - as in: "for greater effectiveness and efficiency."

But which is which.

Leaders should be concerned with effectiveness - doing the "right" thing.

Subordinates should be concerned with efficiency - doing the thing "right."

The leader's concern is direction. He points a finger and says: "Go there."

The subordinate's job is not to worry about the "correctness" of the direction - but simply to "go there" as quickly as possible - as efficiently as possible. For if subordinates start arguing about the correctness of the direction, then the team will get nowhere.

What if the whole project fails?

If the failure is the result of inefficiency of the execution, then the subordinates should be punished.

If the failure is the result of wrong direction, then the leader should be punished and not the subordinates.

There is much confusion in the apportioning of blame of policy in Malaysia.

The civil servants seem to be getting the short end - for most of the blame is on the efficiency of the "delivery system."

But the national chaos that we get now is not the result of the slowness of execution - but the speediness by which bad policies get executed so that the whole economic system of incentives and rewards and effort is all upside down.

The civil servants seem to be causing the mess when in fact they may not be the culprits.

The politicians may be calling all the wrong shots.

If the people cry out because of the error in policy, it is tempting to shut them up in order that the culprits do not be made to appear stupid.

But the people have a voice in a democracy - not matter how faint.

Tuesday, April 14, 2009

The Essence of Leadership

The essence of leadership is the ability to inspire.

By inspiration means that the very name or the very image or the very concept or the very idea energises in one a desire to act or a desire to do good or an heigthened state of being or even a happy state of well-being.

The inspiration may have come from observation or perception of their past words or past actions, or the words or actions of their parents or ancestors. It is entirely evidenced based, although some may argue that some of the evidence may be judgmental.

This is where many everyday images or symbols or icons help to inspire ordinary men and women to live happily in their quiet humble little ways.

When we think of leadership, we are thinking of something that is good - something on the side of light and not of darkness.


Because ordinary people are good and therefore the world in general is good.

This is why the world is abhor at the very thought of having to endure a leadership that is perceived to be not-good.

That abhorance may not be warranted, if the truth be known, but in a world of imperfect knowledge or understanding, we have to live with the informational handicap - which then is the reality that we have to be content with.

In other words, leadership is something that is intangible but visible from the effects it has on others. By the reaction of the surrounding, we know whether that leadership is inspiring or not inspiring - good or not-good.

Inspiration is something money cannot buy. Stimulation, yes!

Monday, April 13, 2009

2Malaysia: People Second, Performance Later


2Malaysia is a slogan that is much more original than the original one because the original one sounds more like 1Utama or 1Borneo - and both are commercial shopping complexes - are we up for sale?

2Malaysia is a slogan that is also much closer to the truth - that there are two Malaysias (2Malaysias?!) - (1) My Malaysia and (2) Your Malaysia.

My Malaysia is my Malaysia and it is mine.

As in - Your Malaysia is your Malaysia and it is not yours.

People Second

Me first.

This motto is that of a selfish person or society.

The big brother bullies the small brother. The big brother joining the big brother to bully the small brothers.

In a recession, the electee of the people and the servant of the people are kings. People are an irritation like mosquitoes around the ankles. We kick and kick, and kick ourselves.

What is there to be gained by being charitable - others first, me second? There is too much of this all around - the boss taking credit for every piece of rubbish you put out, and thinks he's clever. Maybe, he is!

Performance later.

But promises now. Yess, yess, yes, sir!

Talk big, walk and talk, do nothing.

What is the reason for a person to perform now and not tomorrow - because if he does not perform now, he would be dead. Ask the Loan Shark victim. Ask the unemployed. Ask the diabled. But ask a potential pensioner who can never be sacked!

"Performance now" is something you tell others now.

"Performance later" is something you do yourself.

1Malaysia vs Flatened World

"1Malaysia: People First, Performance Now" is a good slogan.

First, it says there is one Malaysia - which is a very good starting point.

Second, it says put the people first - which means that the government and that includes the politicians and the Civil Service must put all the people first - which is certainly a noble point.

But to put it into action means dispensing with case by case consideration (apart for exceptional cases) and go for a rule-based system - a rule that applies to all.

Third, it says act now - which is good - but only if the government, including politicians and the Civil Service, are competent, if not experts in their jobs.

If not, instant action without competence will bring the society and economy to ruin - and this is where we could be as a result of past policy actions.

So far, we are only dealing with self-correction - in other words, for the government to get back to doing its job properly.

But what are those proper jobs. (The KPI Minister may have something to say on this.)

The most important task of the government today is to position the economy properly in the new international economic order.

Do we continue to squabble over history and tear down our own house - or do try to expand and strengthen our economic boundaries and compete in the world arena - or do we simply allow some low-ranking civil servants to let in the enemies through the back door while the top dogs play office politics?

The priority for the government is as follows:

1. Build confidence among the citizenry on the basis that this country wants and treasures them all. National peace and harmony and goodwill.
2. Encourage all citizens to invest in the future of this country - children's education, businesses.
3. Encourage all citizens to re-invest in the future of this country - bring back top students, build more businesses.
4. Provide technical assistance to all economically-disadvantaged citizens to help them participate fruitfully in the economic mainstream. Avoid political corruption of the economic system. There will be jobs for people to teach methods and systems to others.
5. Bring the best of the human capital to the top - regardless of race - so that the nation can compete with the best in the global economic arena. Chop off the link between the political elite and the business elite.
6. Ensure that politicians do not amass wealth while in office - yes, they have sworn to serve and survive on their official salaries - and their families too.
7. Provide a good social safety net for all citizens (not just politicians and civil servants) when they grow old or are incapacitated. This is the real "People First." If we don't, the whole nation is poorer by it.
8. Develop world-class universities and technical colleges in the country. Measure performances with peer-review researches, linkages to industry and success of students in getting jobs or finding useful occupations in society.
9. Institute the highest moral standards for all politicians and civil servants and other leaders. Integrity, diligence, charity.
10. Make sure existing infrastructure and mechanisms work smoothly.