Johor UMNO fails economics

Posted by admin on September 27th, 2006 filed in General

Apparently Johor UMNO is asking the Malaysian Federal Government :

to cancel all projects that wouldbenefit Singapore more than it would Malaysia, especially the proposedKuala Lumpur-Singapore Bullet Trainproject.

Ok, let us think about this. Imagine a scenario where there are 2 parties, and they have 2 options: they can choose to cooperate, or they can choose not to cooperate. If they choose to cooperate, both parties will benefit, although there is a possibility that one party will benefit more than the other. If they choose NOT to cooperate, then neither party will benefit.

When you look at the options available, the only rational option is to choose to cooperate. There are 2 very important concepts underlining this reasoning. The first is that improvements occur at the margin, and the second is that when different parties are good at doing different things, both can benefit by cooperating and trading with each other .

What do I mean when I say “improvements occur at the margin”? It is important to realise that economic growth, productivity gains, improvements in living standards, all take place in tiny little steps. As long as these tiny steps are happening, then the lives of people will improve. The crucial question is not whether someone else is better off than you are: the crucial question is are you better off than you were X amount of time ago.

So effectively, what Johor UMNO is saying, is that the whole of Malaysia should not cooperate with Singapore and sacrifice their own opportunities for growth, simply because they feel that Singapore is benefiting at a greater rate than they are. This is not only plainly stupid, it is also perpetrating a fraud onto the people of Malaysia.

We must wonder what would possess Johor UMNO to advocate such mutually detrimental policies. One very important thing that I have learnt from reading and listening to Milton Friedman: never judge a policy by its label, always look at its real-world effects, and look at those who support that policy.

We can see that Johor UMNO has consistently opposed any increase in direct transportation links between Singapore and KL. They have opposed increasing the number of flights and number of carriers that could fly between Singapore and KL, and now they oppose the bullet train project. Why? We can conclude that there is a pattern in their objections: they oppose any agreement between Singapore and KL that would allow people to travel between Singapore and KL directly, and bypass Johor.

This conclusion raises some important questions about Johor UMNO. They are willing to sacrifice the mutually beneficial interests of Singapore and Malaysia out of spite and jealousy. They are willing to sacrifice the interests of the people of Kuala Lumpur and Singapore because they wish to protect the business interests of their lobbies in Johor. And worst of all, they cloak their economic protectionism behind false nationalist rhetoric in order to distract the Malaysian people from realising how craven they actually are.

AsiaOne - Cancelling S’pore investments could send wrong signals : Najib
Comparative advantage - Wikipedia, the free encyclopedia