That mixed feeling on country’s growth

IT is quite common these days to hear that the economy is improving. Malaysia’s exports have been expanding at double-digit pace with the latest figure showing a 10 per cent growth in June.

In addition, vehicle sales were up by 3.3 per cent in the first six months of this year, while consumer sentiment saw an uptick by 4.1 points in the second quarter albeit still below the 100point benchmark. But for the commoners, the issue is that prices are still high and the value of money has gone down. So, it is almost paradoxical how these statistics could supposedly be “deceiving” and “misguided”.

At the same time, public grievances on the state of economy warrants for careful attention as they are the ones having the first-hand experience. So are we missing the point here?

To be sure, the economy itself is quite complex in its form and substance as it comprises various agents with each of them having different sets of characteristic and behaviours. For instance, the consumers — the main engine of growth — are varied in backgrounds, culture, preferences and levels of education, etc. And yet, the typical consumption function in the mainstream economics would normally take into account the income as a factor that can affect the way people spend their money (No offence to Keynes). Fair enough, we need cash to buy stuff after all.

However, the intricacies are actually beyond dollar and cents. Humans are very multifaceted in nature and the interaction with other human beings is also a force that should not be underestimated. So people do buy stuff even though they may not need them.

Therein lies a gap. On one hand, a barrage of economic statistics tend to look at things in a bigger picture. Whenever we see growth in the economy, it means more activities are happening. And by extension, more labour and capital are required in the process, with the help of technological advancement to improve on how we do things.

So the labourers get paid in exchange for their services to the firms. Later, their hard-earned money can be used to purchase goods and services. As for businesses, growth would mean they can sell more products, and along the way, they would earn the profit subject to their input costs. The businesses would also need to think whether to reinvest their profits in order to improve their economies of scale or to reward their shareholders via dividend. So the stories jived thus far.

But as the famous quote says, the devil lies in the detail. We need to ask the right question in order to have a good grasp on the subject. In the case of consumers, have they been spending beyond their means? What about savings, do they save? Do they consider making an investment?

Again, it is by no means simple to answer the entire question, given the heterogeneous nature on decision making. Some are shaped by their own experience and their belief systems or principles. And some could just follow the crowd in order to feel accepted within their social circle. Anecdotally, we hear of people wasting their food and some going broke after the festive seasons. It is clear then that consumers do make bad decisions.

Granted the government needs to double up the effort in order to grow the economy to be more equitable and inclusive. The provision of affordable houses is also vital to ensure a better quality of life. Additionally, investment in education is the utmost priority for social mobility to occur. Not to mention the institutional quality parameters such as the fight against corruption is paramount to ensure limited resources are optimally used and not being abused. And the list goes on and on. But more importantly, as an individual, have we done enough to better our self? Have we considered all possible options and opportunities which can harness our own potential? Or do we live in a “cocoon” so we remain in our own comfort zone?

These are relevant questions to ponder as we do not live in a poor country. Certainly, Malaysian citizens are well-educated, the people are generally warm at heart and they like to spend which is good for businesses. Surely there is a way for us to make a good living with honest hard work and the right attitude.

It is undoubtedly convenient to pin point at weaknesses. The gross domestic product growth went up by 5.6 per cent in the first three months, but we do not feel anything... at least that is what we always hear. Chatter is good for check and balance, as it will allow policymakers to have a relook at their growth strategy. Whether it only benefits certain quarters or if there’s any skill gap in the industries, and perhaps reluctance among businesses to automate, and instead rely on cheap foreign labour. However, if the complaints are overly done, we may end up being whining citizens, which can be a liability to the nation.

The economy itself is quite complex in its form and substance as it comprises various agents with each of them having different sets of characteristic and behaviours.