Over those years, majority of the people live in
Malaysia have been frequently complaining bitterly
about how expensive things are and how the
stuffs used to be cheap.
Ironically, we always
expect the stuffs to be cheaper as the production is more efficient instead
otherwise. The consequence is people keep on complaining how expensive things
are and the implication is majority of the people cannot afford most of the
things. Not surprisingly, this is common phenomena in our society.
In an attempt to
put out the fire but if it is not efficiently and
professionally done, worst still, the
impulsive action were politically exploited; it could have like pouring water
onto the fire which caused more damage than what originally triggered the anger
of the people. The consequence is
the
"paradox of tolerance" could
not have existed as the ability to be tolerance eventually is destroyed by
the "intolerances".
The economy of Malaysia recorded a
sterling growth of 5.7 % in the 1st quarter of 2017 and the World
Bank revised upwards the GDP forecast from 4.9 % to 5.2 % for the year of 2018.
The
2018 Federal Government Budget in its latest economic report, the Treasury
discovered that 42.6 % of the government revenue came from income tax while
22.8 % came from the GST indirect tax.
Over those years, the
people have been frequently blamed directly at the government of the day and
the implementation of the policies for discriminating against and provided little protection to maintain the standard living of the
households especially the standard of living of people on low and middle
incomes groups. It caused many families and individuals from lower and middle
income households are worst off.
The authority has also failed to take into account different
housing costs of different households, the higher cost experienced by house
living in city and remote areas and the different levels of spending on health
care across households.
The underestimated the effects of the soaring prices greatly affected
the low and middle income households. It is near impossible for working class
groups to purchase houses, it seem to be an impossible dream.
They have to cope with higher cost of living with expenses on essentials rising,
and frequently resulted in a lack of the ability
to purchase.
In addition, underestimated the average effects overall that
households are not made worse off which caused the dissatisfaction toward the
authority. In fact, the people living standards of many low and middle incomes
household are reduced and worse off.
Ironically, the social action taken by the authority for social
compensation is not socially justified, as well as the disappointment of the redistribute effect frustrating to justified
expectation.
It’s undoubtedly true that the government of the
day and its policies were blamed to hold responsibility for the failure to take
into account the different spending and saving patterns of the middle and low
income households. Moreover, the “price watchdog” is not function effectively
to protect the middle and low income expenditure which causes the deteriorated
of the living standards.
According to the Organization for Economic Co-operation and Development (OECD), an effective tax policy is the one that collect revenue to finance public expenditure on transfer, health and education that favour the low income households as well as on growth enabling infrastructure that can increase social society.
The soaring prices that cause cost of living keep on rising is due to inflation - that is persistent increase in the average price level. Undeniably, modern economies inflation is a common phenomenon to activate the economy growth. Ironically, most responsible Central Bank deliberately targeted a low rate of inflation of 2 % in consistent with sustain economic growth.
On the other hand, a zero inflation economy could cause problems to the economy as a whole as the economy is stagnant. The secular stagnation means that the economy has stopped growing. For instant, consumers and companies are saving more that the economy needed.
The ultimate target economist insisted seems to be incomes rising faster than prices and cost of living. If the cost of living increase 2 % but the average incomes are rising at 5 % a year, than the real income is increase by 3 %, despite the increased of cost of living, the consumers are better off. However, if prices are increase but incomes remain the same, then the real income is falling, and consumers are effectively worst off as they can not off to buy as many goods. This is the situation frequently complaining bitterly by the majority of the people.
As we know, cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time are often operational in a cost of living index. Differences in cost of living between areas often used to measure in terms of purchasing power parity rates. It also used to compare the cost of maintaining a certain standard of living in different geographic areas.
Prices increase is the product of the dynamic
economy. Globally prices have been increasing; therefore price increase itself
is not a local phenomenon and political issue but unduly
soaring prices caused, almost invariably on both a local and a national level
with direct effect on living conditions.
The index for Food and
Non-Alcoholic Beverages spiked 4.7 % in Kuala Lumpur and 4.5% in Selangor. The
persistent increase in the average price level caused the low and middle income
groups feel the pinch as the monthly basket of goods sharpest spikes in prices which resulted
that they must pay higher prices for the same goods and services. They can’t
afford to buy as many goods used to buy before. The items that saw sharpest
spikes in prices are non-other than transport and food which is the essentials
and major goods and services for the groups concern.
It is relevant also to note that another fueling price soar
is the high petrol price. As usual, unscrupulous businessmen will jump on
bandwagon and raise prices by a large quantum than actual cost increase. Lax enforcement by the relevant authorities encourages
them to do so. In addition, the higher price of rice globally and the
depreciated value of the ringgit also contributed to a price hike.
Theoretically, under free market competition, no one has the power to
influence or set price. The demand and supply determines the price of a product
and the price determines what to produce and who can afford to consume. The
supply and demand mechanism besides being the natural consequences of economic
forces provides the most efficient economic outcomes possible.
When the price of the items that is normally purchased
increases or decreases, the consumer tends to buy less or more of it. This is
because an increase in price makes the consumer poorer and requires a larger
portion of income to purchase the same amount that buy at the lower price. Price
increases decrease real income and vice versa, this
is referred as income effect.
As the price
of a good falls, the good becomes relatively cheaper and consumer often substitutes
the good for other goods that are relatively expensive. This is substitution
effect.
More often than not, the governments
of the day have been setting maximum or minimum prices since ancient times. Conjunctionally, the Old Testament prohibited interest on loans; medieval
governments fixed the maximum price of bread. In recent years, the government in the USA has fixed the gasoline
price, the rent on apartments in New York City and the minimum wage.
At times governments of the day go beyond fixing specific prices
and try to control the general level of prices, as was done in the USA during
both world wars, the Korean War and by the Nixon administration from 1971 to
1973.
Even though price control fails to protect many consumers and
might hurt others party of interest, but it hold out the promise of protecting
group that are particularly hard pressed to meet price increases. Politically,
to get their votes, the maximum price for bread is to protect the poor who
depended on bread to survive, rent controls are to protect those who were
renting when the demand for apartments exceeded the supply and landlords were
preparing to “gouge” their tenants.
Unfortunately, the negative side effect of the
price control is unwelcome by economist as it worsens
the economy growth particularly it can distort the allocation of resources. If the government imposed the measure of price ceiling, it
can cause shortages; on the other hand, price floors which prohibited prices
fall below a certain minimum can cause surpluses.
Under
present circumstances, although the Ministry of Domestic
Trade, Co-operatives and Consumerism is responsible towards the consumer
protection affairs but the special team are mainly check on cases of extreme
profiteering especially by middlemen.
There was an obvious disparity between
production costs and retail prices as middlemen are taking advantage by
charging more than they should. The
enforcement of the Ministry was blamed because too long the ministry has been
lax in the enforcement causing prices to soar due to profiteering. The middle and low income groups have
been particularly affected by poor economy performance.
Undeniably, the economy system inevitably
fails,
taking entire corrupt system down with them and often leading to immense
suffering. Inevitability, one way to try and
prevent the tragedy is through exploiting the highly
trained economic experts. Famous
economists or the successful businessmen are by far
the best personnel to
play a vital role in formulating economic policy and managing the economy of
the country. Politicking has no business in the economy.
As Abraham
Lincoln once said
that, you can fool all the people some of the time, and some of the people all
the time, but you cannot fool all the people all the time.”
The famous quote by
Abraham Lincoln pertaining good government is “Government of the people, by the people, for the people, shall not perish from the Earth."
