Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Spreading the Wealth in Malaysia

Written by johnleemk on 2:07:13 pm Apr 26, 2007.
Categories: ,

Having considered ways to grow the economic pie, we now turn to the question of how to divvy up this pie. Who should get which slice, and how do we go about deciding who will get what?

Generally, I believe in the strengths of the market system. The market is not perfect, but it is generally adequate for the purpose of rewarding those who make wealth.

After all, to get the pie big enough in the first place, there ought to be incentives for people to work and contribute to the pie. Allowing those who contribute greatly to benefit greatly is not wrong at all.

The more interesting question is what we do with those who don't contribute much to society. In a market system, these people would get virtually nothing. Is this fair?

The typical right-winger would say yes, but his arguments aren't really credible. Nor would they hold much weight in Malaysian politics, since I think everyone is for some sort of welfare system; strong libertarians or economic liberals (in the classical sense) are virtually extinct (if they were ever around) in this country.

The question then is how much should we take from the rich and give to the poor. There's no real way to escape this fact; it is a natural consequence of any welfare programme.

Some would say that we ought to guarantee a minimum standard of life to all Malaysians. I agree, insofar that this minimum standard is sufficient to avoid the poverty trap, whereby the offspring of the poor have no social mobility, regardless of their actual merit.

To this end, any welfare policies should have only one end in mind: real social mobility. We should be providing the resources for the poor to learn how to fish, not fishing for them. They should not be given artificial social mobility, relying on government handouts to get them out of poverty.

Making capital available to the poor to encourage small enterprises is one good idea, but overall I think the most important focus must be on the basic human needs.

Some people argue that we must guarantee everyone a job, but last time I checked, gainful employment wasn't necessary to lead a decent life. The important thing is that we must provide a certain amount of income to ensure nobody is starving in our streets, and guarantee a proper education to every child so that everyone has a chance to realise their full potential as a citizen.

To guarantee that minimum amount of income without developing the excessive bureaucracy and statism that characterises so many socialist economies, a brilliant idea would be to implement the negative income tax. This scheme basically divides everyone into several tax brackets, and pays a certain amount of money to every citizen depending on which bracket they are in. After a certain level, then and only then does the government start actually taxing and collecting revenue.

Some people support a minimum wage, but I find this to be a terrible idea. I used to be ambivalent about it, but after reflecting on its economic impact, I've realised it's nothing more than an indirect tax on labour, thus suffering from all the problems with indirect taxes. It's not fair to charge the same tax to a multinational corporation and a small grocery store, nor is it fair to guarantee the same wage to a single high school drop-out and to a single mother of two.

Money takes care of the basic needs for food and shelter. What of education? Here, I am a fan of school vouchers. Issuing a school voucher to every citizen (with the amount indexed to tax bracket, meaning that the rich must still pay for their education), and allowing them to send their children to whichever school they prefer would have all the benefits of a market system.

I think healthcare is also a basic must. An unhealthy citizen cannot look for a job, nor can an unhealthy citizen study and improve his or her skills. The question then is what sort of healthcare system to have.

Our present healthcare system suffers from all the inadequacies of a bureaucratised socialist public monopoly. If we could always be assured of an efficient government and civil service, as Singapore has, we could model our healthcare system after Singapore's, which has been very successful.

If we want to innovate, though, I'm curious about whether healthcare vouchers would also be a viable idea. Again, the competition would eliminate inefficiency, while the poor would not have to worry about scraping the necessary money for treatment.

Obviously my ideas are not the best out there, nor may they be practical. But they're a start, and (if I may indulge my idle fantasies), I think they're more than anything that most of our political parties have come up with. It's time to stop talking and start acting. We can't afford to continue our laggard economic policies for much longer.

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