Article by Dato’ Steven Wong which appeared in New Straits Times, August 28, 2018
FOR the past 100 days, Malaysians have talked a lot about money. We have been shocked by how much has gone missing, how much we owe and how little we now have.
We have seen plastic-wrapped mountains of the stuff being carted away by police, along with ultrahigh-end handbags, watches, diamonds and the odd luxury yacht. Surreal stuff.
Like children, we have squabbled about who should control it and who should get it. We have debated endlessly whether one tax is better than another, although both raise much-needed government revenue.
Money today seems to be the one solution to all society’s ills. If we only had enough, all our problems would go away. After all, does not money, as in the popular 1970s song, make the world go around?
Not really, no. The Malaysian ringgit, like every other modern fiat currency, has no intrinsic value. Money is only a reality in our heads. It is only as good as the faith and confidence that backs it. If the citizens of a country do not believe that the money in their wallets, bank accounts and investment portfolios will maintain its value, they will do their utmost to switch to currencies of countries that they do believe in. The operative word here is believe.
Unfortunately, the global currency of choice is by far the United States dollar, the world’s most highly indebted and, lately, politically erratic, country. The US cannot default on its debts so long as the world wants the dollar. It is a necessity.
If you have any doubt, ask a Venezuelan today. Until last Monday, a chicken cost 14.6 million Bolivar (then a whopping US$58 [RM237.80]). IMF economists were predicting inflation in 2018 would reach one million per cent.
Last week, another new currency was introduced that removes five zeros from the old one and links it to a petroleum crypto-currency. But with millions of Venezuelans fleeing the country, it is doubtful that this will do any good. If the government is determined to hard peg its money supply, the economy is likely to contract even more than it has. Without changes in government policies and institutions, trust and confidence are unlikely to return.
Turkey has fared nowhere as badly, but its lira has still depreciated by about 60 per cent to the US dollar since the start of the year. Inflation is expected to reach 14-15 per cent by year’s end. There are many reasons for Turkey’s woes but a fundamental questioning of the values and integrity behind its
political, administrative and legal systems is chief among them. Granted this is perception, but so is the money illusion.
Every economic and financial crisis is man-made. Often, they result from decisions taken to protect the privileged and avoid painful realities of the need for adjustment. Sometimes, it is due to psychology-driven market madness.
As Malaysia struggles to regain its financial footing after the 14th General Election earlier this year, we should remember that it is our collective faith and confidence in money that gives money its value.
After the wild spending binges of the past five years, there is a need for fiscal consolidation to balance the books. This may not have positive short-term effects and pain can be expected. Is this justified?
Amidst claims of witch-hunts and personal vendettas, the country’s rogues’ gallery is growing, with increasing numbers being hauled up for investigation and (hopefully) prosecution. Is this necessary?
By the same token, there is continued political dithering over our education system and race rather than needs based affirmative action policies. Are these excusable?
Leaders within the ruling coalition are literally at each other’s throats, even within their own parties. New projects and costly populist measures have been mooted. Just politicians being politicians?
In every one of these instances, and the feckless reactions to them, the question that must be asked is whether these actions enrich or erode faith, trust, belief and confidence in the governing system.
Enrich or erode? Pile on enough actions that affect integrity and morality and the price will be paid by everyone holding the money of the country concerned in the form of skyrocketing inflation and severe currency devaluation.
Where we go as a country depends more on intangibles than we think or know. Credit expansion, investment, jobs and income growth and social wellbeing hinge on good governance qualities. If everyone does his or her bit to build up rather than destroy, the faster we will get to a better and safer place.
Selamat Hari Merdeka ke-61, everyone.
The writer is deputy chief executive of the Institute of Strategic and International Studies (ISIS) Malaysia.