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NEWS ALERT:     Federal Court rules Zambry is rightful MB of Perak, dismisses Nizar's appeal              NEWS ALERT:    Anwar sodomy trial postponed to tomorrow; defence to file a response to prosecution's affidavit-in-reply to Anwar's recusal application                        NEWS ALERT:      Najib: All quarters should accept Federal Court decision and stop politicising issue; concentrate on working for the people of Perak

Wed, 10 Feb 2010
EXTRA! :: Comment & Analysis
Invisible hands that pushed too far
by Siti Khayriyyah Mohd Hanafiah

THE challenge for governments and policymakers of developing countries today is this: they must learn from the pitfalls of too much meddling and control of society and economics, as well as the danger of having too much confidence in unregulated market forces.

The trends of global economy implies that a country’s economic development is not dependent on available natural resources, but the ability of a small group of individuals to manipulate and innovate resources to propel healthy consumerism. Countries like Belgium with limited land are able to produce enough food to sustain their population, and penetrate the market as a key exporter. Israel, essentially a desert land, is food secure and sustained by its own agricultural production. While Saudi Arabia, and some Asian and African countries bursting with oil and natural resources rely heavily on the economies of the former two.

Arguably, the developed countries mentioned here only reached such status because of select individuals that made themselves worthy of the Forbes Fortune 500 list. And, arguably, these countries were only able to prime and crop these brilliant individuals that became the CEOs of multinationals because of their capitalistic policies – policies that didn’t impede a person’s individual aspiration and effort, unlike the policies in communist societies. In communist societies, while everyone was given "equal" ration, not everyone felt they deserved as much as everyone else. A counter-productiveness settles, as people have no motivation to improve their wealth and status.

But let’s not toot the horn of capitalism. What was a boon in the capitalistic industrial revolution, a more organised and efficient way of doing things by "fitting people into different parts of production like cogs in a watch", is also a bane in that it created the two layers of society: a thin upper layer, and a big fat crumbling layer supporting it held apart by two divides. And these divides grow wider by time.

The first divide, the fiscal divide, appeared consequently from the creation of disparity in economy. Once you have a group of people who suddenly had more money than everyone else, they will need somewhere to spend that money lest it loses its value as an intermediate – which by nature, is only worth as much as it can be traded for. Take for example bread. If at the time of this sudden rise of suprawealthy individuals, bread cost 10 cents and they had instead a dollar to spare for bread, it would not make sense that they bought 10 loaves of bread. What would make sense is the introduction of bread that costs a dollar, packaged in a way that made it seem worth a dollar. Logically, this would work out fine for everyone. People who can spend 10 cents for bread will buy 10 cent bread, while people who can spare a dollar for bread would buy a dollar bread.

Unfortunately, human nature defies logic. Everyone wants the more expensive bread. But not everyone can afford it. And because of this sudden division in purchasing power, this creation of a new layer of market and consumers, there exists as well two parallel layers of lifestyles. The lower layer wanting to break into the upper layer, ever conscious of the disparity, while the upper layer creates more and more divides to enable their ignorance of the lower layer. This is worsened then, by an implicit paranoia that exists in the upper layer, fuelled by the fear that if more from the lower layer break into the upper layer, the normal distribution of wealth would shift – meaning less resources to go around.

So tacitly, barriers are placed to prevent too many people moving up the layer. This constitutes the second divide, the social divide.

Fortunately, it must have occurred on some level of consciousness of the top layer, that if the poor are kept poor, they would no longer have enough people with the ability to buy and sustain their businesses. And probably, conscience and empathy for society may have crept in for others – and a demand for change and more opportunities for everyone was heard. Encouraging attainment of education, selling it as a ticket to climb into the upper layer, the elites inadvertently created a new type of industry, the higher education industry.

While the idea of opportunity for self-improvement now exists, protection of the upper layer is not extinguished. It’s still not fully about what you know, more than it is about who you know. So what happens to the poor folk who got education, but didn’t quite penetrate into the upper crust? They became the middle class. The ideal layer that is rich enough to buy a dollar bread sometimes, enough to sustain the economy, but certainly not rich enough to travel the world.

Unfortunately, the middle class usually is not as protected as the upper. Market forces can easily send the middle class man back into the lower class. This year’s fiasco in the US that began with sub-prime lending and credit crunch catapulted into a global economic collapse – and fingers immediately pointed to capitalism and the free market. So great was the fiasco, even giants of the car industry had to bow down and beg for a government bail-out. But CEOs often can close shop and retire in comfort. It’s the middle class worker who loses his income, house, and contemplates suicide.

Our problem here stems from too much trust on the market to regulate itself, forgetting that the market is pushed not by an invisible hand as Adam Smith believed, but the combined hands of consumers. Just as much as humans need law, so does this extension of their purchasing power. However, proposing that the market simply needs regulation to make things right again, to avoid economic depression again, is oversimplification. Inappropriate and untimely regulation of the market, is at best unnecessary, at worst suffocating.

The challenge does not fall on governments and policymakers alone. Recall what pushed the first domino of the recession: sub-prime lending and the credit crunch. We should not hope on governments or businesses to debate and figure out whether or not, and how much, the free market should be made less free – the crux of their debate will essentially be on how to protect their own layers. Recognise that the market is an extension of who we are, and how we spend, and of our own worldviews. Realise that we are the regulators of the market through our purchases. Self behaviour modification is no easy task, but the pooled results in society are always monumental. Distinguish between need and want, extravagance and sufficiency. Be an informed consumer, make each purchase, a conscious artful purchase.

Siti Khayriyyah Mohd Hanafiah is pursuing a Masters Degree at Johns Hopkins University (Bloomberg School of Public Health). Comments: letters@thesundaily.com


Updated: 10:37AM Fri, 20 Nov 2009
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