Social Policies are Lagging Way Behind our Changing Lives

Amazing scientific progress sees jobs changing, people living longer… Society needs to adjust its thinking

Sonia Sodha

The Guardian/The Observer

Sunday, 28th December 2014

Old people are living longer – but perhaps the quality of 

life is not as good as it should be. 

Photograph: Michaela Rehle/Reuters

At the heart of Atul Gawande’s last Reith lecture was an image upon which many of us would prefer not to dwell: institutionalised older people living out the ends of their lives in residential homes all over the world, ranging from the luxurious to the Dickensian. Be they for the rich or poor, Gawande argued that too often they are places where physical needs are catered for with little consideration for the fulfilment, flourishing and wellbeing of the people who live within their walls; a consequence of medicine, with its focus on how to stretch lifespans ever further, running far ahead of social policy.

This insight touches on a bigger theme: the capacity of public policy to keep pace with the accelerating rate of scientific progress. For centuries, the human quest for knowledge and enlightenment has delivered transformational new technologies, from the wheel to the steam engine, inventions that have changed the course of human history for the better. In recent history, however, the pattern of progress has evolved: no longer characterised by one-off, disruptive innovations, but the exponential growth of computer power, doubling every two years.

How prepared are we for the profound societal changes that may be unleashed as a result?

Global Financial Integrity Report: New Study: Crime, Corruption, Tax Evasion Drained a Record US$991.2bn in Illicit Financial Flows from Developing Economies in 2012

December 15, 2014

Global Financial Integrity, Clark Gascoigne

Illicit Flows from Developing & Emerging Countries Growing at 9.4% per Year

US$6.6 Trillion Stolen from Developing World from 2003-2012; Trade Misinvoicing Responsible for 77.8% of Illicit Outflows

China, Russia, Mexico, India, Malaysia—in Declining Order—Are Biggest Exporters of Illicit Capital over Decade; Sub-Saharan Africa Still Suffers Biggest Illicit Outflows as % of GDP

Study Calls for UN Sustainable Development Goals to Halve Annual Trade-Related Illicit Flows by 2030; Recommends Public Registries of Beneficial Ownership; Urges Public Country-by-Country Reporting for Multinationals

WASHINGTON, DC – A record US$991.2 billion in illicit capital flowed out of developing and emerging economies in 2012—facilitating crime, corruption, and tax evasion—according to the latest study released Tuesday by Global Financial Integrity (GFI), a Washington, DC-based research and advisory organization. The study is the first GFI analysis to include estimates of illicit financial flows for 2012.

You can Download the
FULL REPORT Here

The report—GFI’s 2014 annual global update on illicit financial flows—pegs cumulative illicit outflows from developing economies at US$6.6 trillion between 2003 and 2012, the latest year for which data is available.  Titled “Illicit Financial Flows from Developing Countries: 2003-2012,” the report finds that illicit outflows are growing at an inflation-adjusted 9.4 percent per year—roughly double global GDP growth over the same period.

“As this report demonstrates, illicit financial flows are the most damaging economic problem plaguing the world’s developing and emerging economies,” said GFI President Raymond Baker, a longtime authority on financial crime. “These outflows—already greater than the combined sum of all FDI and ODA flowing into these countries—are sapping roughly a trillion dollars per year from the world’s poor and middle-income economies.”

“Most troubling, however, is the fact that these outflows are growing at an alarming rate of 9.4 percent per year—twice as fast as global GDP,”

The Episodes Chapter 1 Episode 3 is Now Out!

Continuing the story of my early life.

Crossing the Canal Read it here

Malaysia Economic Monitor June 2014 - Boosting Trade Competitiveness

Kamal Salih world bank report malaysia economic monitor 2014
World Bank

RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK

Malaysia’s economy overcame a weak start to the year and GDP grew by 4.7 percent in 2013. The economy expanded vigorously in the last three quarters of the year after a soft patch early on. This better-than-expected performance was mainly due to a recovery in exports: after contracting in 2012 and the first half of 2013 (-1.8 and -3.9 percent), exports expanded by 5.2 percent in the second half. This offset weaker domestic demand. As the Government implemented fiscal and credit tightening measures, domestic demand growth decelerated from 7.3 percent in the first half to 5.5 percent in the second half of 2013.

Better export performance led to a higher current account surplus. The recovery in exports was broadbased, including the long-ailing electrical and electronics (E&E) sector. The current account surplus hit a 15-year low of 0.8 percent of GDP in mid-2013, before improving to 7.9 percent in early 2014. This partly offset negative flows of 14.9 percent of GDP in the financial account in the first quarter. Global portfolio reallocation led to outflows in the financial account for the three quarters through March 2014.

Growth slowed in early 2014, but the outlook remains favorable given the positive external backdrop. Due to base effects, GDP is expected to grow by 5.4 percent and 4.6 percent in 2014 and 2015, respectively. The outlook for 2014 and 2015 will benefit from better conditions in advanced economies. Domestic demand faces headwinds: (1) subsidy cuts, tax hikes and public wage restraint in pursuit of fiscal consolidation; (2) likely higher interest rates as global monetary conditions normalize; and (3) the resulting pressures on household budgets. With foreign demand absorbing more than half of domestic value-added, a better external outlook outweighs domestic headwinds. 

Majority in Malaysia Aspire for Middle-Class Status, reports World Bank

Kamal Salih world bank report middle class

The Malaysian Insider, Jennifer Gomez

Published: 17 December 2014

More than 50% of Malaysians are aspiring to get into the middle-class bracket, and as such, policies should be targetted at promoting shared prosperity as the country moves towards achieving its high-income nation status, said World Bank country director for Malaysia Ulrich Zachau.

He added that while Malaysia's income inequality has declined compared with the 1970s, it remained high compared with high income economies.

In his opening remarks at the release of the Malaysia Economic Monitor December 2014 Edition in Putrajaya today, Zachau said that while there was a large group of Malaysians who were no longer poor or vulnerable, they were not yet comfortable.

"If you ask them if they are happy, whether they have what they want, they will say no, they will say they want to be like the middle-class.

Notes On Oil - by Nurhisham Hussein

Posted on Monday, December 8, 2014.  12.00pm

I came up with some talking points for a presentation last week, and since so many people have been asking for a comment on the drop in oil prices, I thought I might as well publish them.

Why is the price of oil dropping?

Essentially, its a demand and supply imbalance. On the one hand, China has been slowing down while Europe has backslid and Japan went into technical recession after implementing a sharp increase in its consumption tax. The only two real bright spots of growth in the developed world is the US and UK, and the US has rapidly developed its domestic oil supply in the last five years. To compound this, the energy intensity of growth (how much energy is required to support a higher standard of living) has been declining for decades.

Which brings up the supply side – shale oil has almost made the US energy independent, producing about 4 million barrels per day (bpd) with another 1 million bpd expected to be added to supply in 2015. That wasn’t quite enough to upend the market though. The bigger factors are the recovery of Libyan production and Russian (and to a lesser extent, Iranian) desperation. These two explanations cover about 80% of the current 2 million bpd overhang in the oil market. Global growth is slow enough that it won’t be able to work through the increase in supply for at least 2-3 years. OPEC (which met on Nov 27) is taking a wait and see approach, which means they’re not taking supply off the market either, at least until the next meeting.

The other factor that should be mentioned is that the drop in oil prices isn’t an isolated market occurrence – prices of nearly all commodities have dropped more or less in concordance. Or to be more precise, the US dollar is strengthening against everything, goods and currencies all. So this isn’t just about oil, or about Malaysia alone.

What is the impact on Malaysia’s fiscal policy?

The Episodes Chapter 1 Episode 2 is Now Out!

Continuing the story of my early life.

The Book House Read it here

I don’t know if Umno is capable of reforming itself, says Ku Li

The Malaysian Insider, 12th December 2014

Tan Sri Tengku Razaleigh Hamzah, Malaysia’s longest-serving Member of Parliament, is decidedly despondent about his country.

“I cannot recall an experience when Malaysia, after independence, was trapped in a situation similar to that we face now,” he said in a wide-ranging interview with The Edge Review.

Malaysia’s troubled political landscape, where the sensitive issues of race and religion are dominating headlines and public discourse, is being weighed down by the serious deterioration in the country’s economic performance where mounting debt in the public sector and households is leaving the country very vulnerable to external shocks.

“We have never been in this spot before,” says the urbane 77-year-old politician, who is fondly known as Ku Li.

Tengku Razaleigh, a prince from the northeastern Kelantan state, ought to know.

Since the mid-1960s, Tengku Razaleigh has played key roles in several of the country’s ambitious economic initiatives and held crucial ministerial positions to emerge as a strong contender for the premiership of Malaysia.

In 1965, he became the first executive director of state-owned Bank Bumiputra, which today, after several transformations, is the regional financial powerhouse CIMB Group.

In 1974, he was appointed as the chairman and chief executive of the newly minted national oil corporation Petroliam Nasional Bhd, or Petronas, a position that the premier at the time, Tun Abdul Razak Hussein, described as “equivalent of a Cabinet Minister”.

RISING EXTREME POVERTY IN M'SIA: 90% of rural & 86% of urban have ZERO savings to deal with emergencies.

Kamal Salih MHDR 2013 Rash Behari Battacherjee Malaysia Human Development Report poverty wealth inclusive growth Zeti
The Malaysian Insider, Published: 6 December 2014

Rash Behari Battacharjee

A fortnight ago, the ground effectively shifted from beneath our development planners when the official narrative about the socio-economic status of the population was challenged by the Malaysia Human Development Report 2013.

Among the shocking findings of the report are that 90% of rural households and 86% of urban households have zero savings to deal with immediate income shocks or emergencies.

In an immediate denial of this worrisome scenario, Bank Negara governor Tan Sri Zeti Akhtar Aziz described the findings as misleading, arguing that the report did not consider data from other sources like non-bank financial institutions.

Responding to Zeti’s claim, the report’s editors – Tan Sri Dr Kamal Salih, an adjunct professor of Economics and Development Studies at Universiti Malaya, Dr Lee Hwok Aun, from the UM Department of Development Studies and Dr Muhammad Khalid of Khazanah Research Institute, who were commissioned by the United Nations Development Programme – pointed out that they had made the discovery after looking into the Household Income Survey, which was provided by the Department of Statistics and the Economic Planning Unit, under the Prime Minister’s Department.

Malaysia Human Development
Report 2013

The Household Income Survey data, they said, captures reported interest and dividends from commercial entities, cooperatives and other savings institutions, across both formal and informal sectors.

The issue of primary relevance here is less about research methodology and more about the vulnerability of a large majority of the population to income shocks. Keeping the focus on this tenuous financial position is important in order that the right questions are asked and the correct solutions applied to solve the problem.

Undoubtedly, the circumstances underlying the “zero savings” status of the vulnerable cohort of Malaysians would be complex and interrelated, requiring a clear, holistic analysis before a sound diagnosis can be made. Yet, in light of the report’s startling finding, it would be tempting to question the outcomes of the government policy thrust that has been the backbone of the country’s development strategy.

Inequality Hurts Economic Growth, finds OECD research

OECD, Paris, 09/12/2014
Kamal Salih inequality economy economic growth wage differential poverty OECD poor household middle class policy

Reducing income inequality would boost economic growth, according to new OECD analysis. This work finds that countries where income inequality is decreasing grow faster than those with rising inequality.

The single biggest impact on growth is the widening gap between the lower middle class and poor households compared to the rest of society. Education is the key: a lack of investment in education by the poor is the main factor behind inequality hurting growth.

OEDC - Income Inequality and Economic Growth

“This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate,” said OECD Secretary-General Angel Gurría. “Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand over the past two decades up to the Great Recession. In Italy, the United Kingdom and the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened, but also in Sweden, Finland and Norway, although from low levels. On the other hand, greater equality helped increase GDP per capita in Spain, France and Ireland prior to the crisis.

Kamal Salih inequality economy economic growth wage differential poverty OECD poor household middle class policy

The paper finds new evidence that the main mechanism through which inequality affects growth is by undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development. 

People whose parents have low levels of education see their educational outcomes deteriorate as income inequality rises. By contrast, there is little or no effect on people with middle or high levels of parental educational background.

The impact of inequality on growth stems from the gap between the bottom 40 percent with the rest of society, not just the poorest 10 percent. Anti-poverty programmes will not be enough, says the OECD. Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.

The paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented.

The working paper, Trends in income inequality and its impact on economic growth, is part of the OECD’s New Approaches to Economic Challenges Initiative, an Organisation-wide reflection on the roots and lessons to be learned from the global economic crisis, as well as an exercise to review and update its analytical frameworks.

Original article here.

A four-page summary is available at www.oecd.org/social/inequality-and-poverty.htm

More information about OECD work on inequality: www.oecd.org/inequality.htm 

Kamal Salih inequality economy economic growth wage differential poverty OECD poor household middle class policy

Episodes: My Story

“Episodes” sets out my entries that will hopefully lead to a full autobiography I am writing to be called Edge of Centre: Memoire of a Life in Policy.

Kamal Salih: Monash University Graduation

The chapters and episodes will be released on a timely basis.  Check them often.

Check it here.

Kamal Salih
7th December 2014

Kamal Salih - Ninth Ishak Shari Memorial Lecture - IKMAS, Universiti Kebangsaan Malaysia

Kamal Salih MHDR 2013 Development and Inequality Poverty new economic paradigm Ishak Shari poverty income wealth purchasing power household income ethnic wages
This lecture was given on the 23rd November 2013 at Universiti Kebangsaan Malaysia.

The theme was on the subject of the crisis of development thinking and practice associated with the neo-liberal development thesis and the alternative schools of thought in the so called post-development search for a new economic paradigm.  The lecture examined the Malaysian case study as reported in the recently launched Malaysia Human Development Report in order to derive a new economic paradigm based along islamic economic principles and the social solidarity economy as a means to achieve economic growth with social justice.

“Development and Inequalities:In Search of a New Economic Paradigm using the Malaysian Case.”

By Kamal Salih

Abstract

Development thinking is in the throes of a crisis in search of a new economic paradigm to deal with the so-called post-development issues in the world economy. The Lecture will focus on the relationship between income growth, inequalities and poverty reduction as the core problematique of development.  Using data from the Malaysian experience of the last forty years since the introduction of the New Economic Policy in 1970, the author seeks to elaborate on a New Economic Paradigm to explain the impact of economic growth on poverty reduction and its distribution effects and vice versa.  At issue is the need to incorporate assets (and credit) as a crucial factor in determining development (encompassing economic growth) and inequalities (income and the social reproduction of class). It concludes with the assertion that the “paradox of development” is rooted in the system, and foreshadows a new discourse on the Islamic Economic Model as a way to resolve the impasse in development studies.

Kamal Salih - Capturing the Essence of the NEP

New Straits Times Online, by Kamal Salih, 21 September 2014, 8.08am

IN development thinking and practice, no policy has captured the imagination nor created more controversy in its implementation among scholars, politicians and the public alike than the New Economic Policy, introduced some 45 years ago. A generation had debated, lived and benefited from the NEP, until its formal ending in 1990.

Or so it seems in hindsight. The policy debate and the concerns surrounding the policy never really ended, for the issues of inequality along class and ethnic lines in our multiracial country remained stubbornly intransigent, even after its success (a controversial notion in itself) and new incarnations of the NEP in subsequent years.

Emotions, politics and myth-making continue to track the development debate even when statistics were adduced to support its successes (read economic growth, poverty eradication, rising middle class, interethnic distribution).

Now a new post-NEP generation has taken over. Dr Muhammed Abdul Khalid is a member of this second generation of scholars and policymakers. His book is an important scholarly contribution to development economics in Malaysia, in particular, to clarifying the controversies surrounding the NEP.

Employing a historico-statistical narrative, his book, The Colour of Inequality, rightly addresses the core of the NEP debate. This latest entry into the development policy debate, now clothed in the notion of inclusive growth, deals dead-on with the central issue of development in this millennium: inequality in all its dimensions.
Kamal Salih Colour of Inequality Muhammed Abdul Khalid

Kamal at the launch of Muhammed's book
The Colour of Inequality by Tun Daim Zainuddin

Most importantly, as the Latin American economist de Soto had shown two decades ago, that asset ownership and wealth are crucial to success and livelihood in the capitalististic economy, and later reinforced by Piketty the French economist's thesis on wealth and inequality. In my view, Muhammed, at some risk of being politically incorrect, has bravely succeeded, by using the latest data at his disposal, to cut through to the core issues of economic inclusion and inequality through the prism of ethnicity and class.

The NEP reincarnations, in particular, the Bumiputera agenda, slowly lost steam towards the end of the Mahathir era, was regenerated under the Abdullah Badawi administration through the Ninth Malaysia Plan and diluted further the distributive mission in the Malaysia Plans through the introduction of the New Economic Model.

In many ways, Tun Abdul Razak Hussein, our second Prime Minister and the main author of the NEP, had launched the first transformation in Malaysia’s development experience. The New Economic Model and the ETP/GTP, introduced by Datuk Seri Najib Razak, a generation after his father, is the second transformation.

For those wanting to understand the history of development policy over the last 45 years, to know what had been achieved, what has failed and what’s next in our drive towards developed status and social justice, Muhammed’s book is indispensible reading.

This is his contribution to the next generation of politicians, policy advisors and implementors, as well as the new millenials. Kamal Salih Colour of Inequality Muhammed Abdul Khalid

In Defense of Zeti

Kamal Salih MHDR 2013 Zeti
It must have been some miscommunication with her staff that led Tan Sri Zeti Aziz, the Bank Negara Governor, to make that remark last week about bank accounts reflecting Malaysian household savings.  When we set out the clarification on how we treated and measured households' precautionary savings and differentiated them from investments in the Malaysian Human Development Report 2013, readers' response to her were what I thought, on reading through them, somewhat misplaced.
Kamal Salih MHDR 2013 Zeti
I thought the remarks did an injustice to the measure of her qualifications and quality;  she has after all won widespread respect, including mine, and awarded many accolades for her performance as a central banker.  She is highly trained as a monetary economist out of the renowned Wharton School of the University of Pennsylvania, the same graduate school I went to, only she was three years behind me.  Zeti is a gentle soul like her late mother, and possesses a calm and determined personality that masks her high degree of professionalism.  I would love to have her on my team anytime.  And I so admire her father, Royal Professor Ungku Aziz, here photographed last month by Dr. Muhammed Khalid when the latter presented Pak Ungku at his house with a personal copy of his book, The Colour of Inequality.  So, what then is a small slip to spoil such a reputation and pedigree?

Kamal Salih, 4th  December 2014. Kamal Salih MHDR 2013 Zeti

MHDR 2013 in 2 and a half Minutes

Kamal Salih MHDR 2013

Kamal Salih MHDR 2013
"It is essential that Malaysia continues to prioritise inclusive growth and social cohesion, and moves forward with the second generation policies that are needed to support this." - Frances Stewart
Find out more at www.mhdr.my

The Malaysia Human Development Report 2013 (MHDR) is the country’s first nationally-owned, independent report of its kind, with a focus on inclusive growth. Themed "Redesigning an Inclusive Future", the report is an analysis of the country’s development since the New Economic Policy (NEP) was implemented in 1971.Kamal Salih MHDR 2013

The launch of the report presents an opportunity for all Malaysians to be part of a national dialogue on past progress, current challenges, and steps forward as we move into the 11th Malaysia Plan (2016 – 2020) and towards attaining Vision 2020.

The FULL MHDR2013 report can be downloaded here:

Link 1

Link 2

Link 3

Kamal Salih MHDR 2013