Tuesday, February 7, 2012

Big Spender -thrifts gone with the wind.




Must we become a big spender before becoming a high income nation? Can thrift be thrown to the wind when you want to become a high income nation? Are we not spending more than our current productivity allows us? Are we not living beyond our means like some western countries and heading for a financial crisis?

I asked those questions to a friend who had just abandoned his thrifty way of life and joined the big spenders' league. He made the change after getting a hefty contract from the government.
"Who cares about being thrifty when money abounds," he replied with a huge smile. "i used to spend peanuts and got monkeys. Now I splash out and the big fishes came into my net."
"Where do you get the money to splash around?"
"Our banks are flush with money. You must know the right people to back you up and there's no limit to the loan you can get. Big names earn big money. But of course you must give them a big share. That's how wealth is created."
" I thought wealth is created through productivity and shrewd investment.."
" Yes, shrewd investment in the right people..."
" Doesn't productivity count?"
" How do you measure productivity in the provision of services? It's not like running a factory or doing construction work where physical output can be measured or counted. In providing services if the power that be is happy with what they get, you're good. Since the services are essential, if you run into financial problem the government will come to rescue you. So what's the problem?"

The NKRA people all say that our national productivity level is good and increasing. The planners say that our GDP is growing at a healthy rate and those who say that the country will go backrupt by 2019 or 2020 are talking through their rear end. But Che Det is his latest blog entry sounds a cold warning that our productivity is not increasing to support a high income nation style of life. We could be living beyond our means and may end up like the wealthy nations with debts running into trillions. The US and UK resorted to printing more money to pay for the loans but if we do that people will say we are bankrupt.

So, what say our big operators in the service sector, especially the government linked companies (GLCs) where productivity is not easily measured and the costs of operations are not strictly controlled by the government or fund providers. Is thrift just a matter of keeping the share of the fund providers at a happy level and the old principles of being thrifty can be thrown to the wind? Is big spending the only way to get big returns. To whom? The public or the operators and the fund managers who seem to be doing very very well and who can laugh all the way to the banks?

10 comments:

abdulhalimshah said...

Akhi Norzah,
When I was in primary school,I had to fill a card with stamps until all the box spaces for the stamps were full and then we go to the Post Office to open an account. That was how thrift was taught very early in life. But today our children would laugh at such a practice. How the world has changed. Thrift is a bad word. It is the sign of the pending Doomsday.

norzah said...

That's exactly the issue I want to highlight, Akhi. Do we have any concept of thrift at all nowadays? Are the children being taught to be thrifty and what the word means and how your finances can be affected by the word.

We have now gone overboard to indulge in conspicuous consumption, the pace being set, I'm afraid, by government itself. Jus today I read in the NST our PM saying that that our GDP is RM250 bil but revenue is RM22 bil and annual subsidy paid out is RM24 bil. I don't know whether that's correct but it doesn't look good to me.

Please update my figures if you have the info.

abdulhalimshah said...

Akhi Norzah,
According to the latest Economic Report published by the Govt., total revenue for 2011 is RM 183,375 million whereas subsidies accounted for RM 32,798 million. But the worrying part is the National Debt which is RM 241,689 million.
If the national debt reaches the level which Greece did which is 160% of the GDP, then we shall go bankrupt.

Al-Manar said...

I dare not indulge myself in this economic staff.It is out of my depth. I know what is happening at the grass root level. I have been hearing cheers for the 100 and 500 ringgit durian runtuh. The sad part I have been hearing is about the recipients many of who are drug addicts. They are having real good time - going high. And the children are getting deeper into social problems. That is my economics as far as my understanding of the kind of economics.

norzah said...

I just could not reconcile the figures, Akhi Halim. Will certainly check further. But as you pointed out the national debt of almost 250 billion is certainly worrying - reaching almost 50% of GDP (unchecked figures). If you've any productivity figures pls send them to me. The big question is: has the national productivity increased to justify the icrease in expenditure?
Let's see what will happen after government throws so much money to help the so-called poor ( family income below Rm3000).

norzah said...

Akhi Pakcik Al-Manar, you've already answered some of the fears relating to the giving of the "durian runtuh" to the rakyat. It's widely believed that the money could be misused or given to the wrong people. However nobody could prove anything yet. Meanwhile there is more and more dissatisfaction from those who didn't get the gift. They are even allowed to appeal now.

I guess we can only wait and see.

abdulhalimshah said...

Akhi Norzah,
According to Statistics Dept., our productivity growth in 2010 is 5.78% as compared to our GDP growth of 7.16% for the same year. But compared to productivity groth of Thailand 5.9%,China 10% and S'pore 11.8%.It seemed that our productivity growth is better than more matured economies of Europe.

norzah said...

Thanks for the stats, Akhi. It's clear our prdctvt growth is lagging behind even Thialand and about half of Cina and Singapore. Not quite good. GDP growth seems ok but in absolute terms 1% growth in Cina could be more than4% growth in Malaysia. In any case rate of inflation could be catching up on us. Rm50 seem like rm10 in the 70s.

norzah said...
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norzah said...
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