What Well-Managed Economy?

A while back, I read a news story that for me simply made the idea that the Malaysian government runs the economy well completely absurd. The headline ran: "AirAsia 'gets Cabinet nod for flights to S'pore'", and the basic gist was:

The move could take effect late this year or by the end of the first quarter of next year and would liberalise lucrative routes dominated for decades by Malaysia Airlines (MAS) and Singapore Airlines (SIA).

There's simply no better summary of how ill-managed our economy actually is. What free market, what free enterprise system do we have when entrepreneurs still need government permission to start a business?

When you need Cabinet-level approval to transport paying customers, something is very wrong. The fact that the Singaporean government has to consent as well only makes their claims to running a free market weaker.

If we want an economy that is actually managed well, the key is to limit government intervention in markets. Indirect taxes and barriers to trade and enterprise should hardly exist in a well-oiled economy. The fact that the government controls prices of simple, basic commodities and threatens entrepreneurs who set their own prices makes it difficult to believe that this is at all a well-administrated economy.

Of course, all this is justified on the basis that it helps the poor. Now, it is debatable whether "social justice" — the idea that the poor deserve government assistance — is well-founded, though I think that to some extent it makes sense, if only to nurture equality of opportunity.

But even if we take it for granted that social justice is a goal to pursue, the most efficient means to this end is not interference in markets. It is not subsidising certain things which the government think people want or need. It is not "protecting" us from cheaper cars, electronics, or air transport.

The most efficient means to this end is simply giving people money to spend on what they desire most. For all we know, people would actually prefer to eat a little less during the festive season if they could spend the money lost due to price controls on something else, such as school uniforms or setting up a small business. If we want to help the poor, economic theory dictates that hand-outs and not subsidies or "protection" work best.

The primary effect of our government's economic policies has been to assist economic juggernauts who by right should be able to survive by themselves — firms like Proton and MAS, billionaires like Lim Goh Tong and Ananda Krishnan. Sure, we have a lot of rich individuals and lot of wealthy firms, but how is this an effective barometer of our economic performance when these are all propped up by government intervention in the market?

The true test of economic strength comes when we are exposed to market forces. The market is by no means perfect, but like democracy, it is the worst of all possible systems, except those others that have been tried from time to time. The market is a mechanism for choice — it gives consumers the right to choose between different providers of goods and services. Government intervention in the market hampers this right to choose, and props up those who should not need propping up.

The Malaysian economy is ill-managed. We deserve a government that is better than this. We deserve a government with economic policies that will benefit the many, not the few, and protect our right to choose who should serve us.