Government spending
August 11th 1999 11:02
I lived in Hong Kong for 16 years until 2007. In 1998 and 1999 I wrote a series of political and social commentaries for a quirky institutional newsletter - quirky in that it was intended to be as much contentious, offbeat and humorous as it was informative. I was working as an editor, and I wrote the articles under the pseudonym Red Inque. I post them here for anyone interested in a look at life in Asia at the time, and in Hong Kong just after its return to Chinese sovereignty.
A bureacrat and his money
If someone could explain the economic principles behind Malaysian government spending at the moment, please call me.
According to axioms expounded at the London School of Economics, a pub next to which I frequented for many years, the way out of a recession is to spend money. Governments need to lead the way by allocating more funding for highways, technology parks and public toilet blocks.
So far so good, because that in fact is just what the Malaysian government has done, ladelling sacks-full of capital into the coffers of all government departments and telling them to throw it about quick smart.
Which is exactly what they are not doing.
Official figures show that the government spent just 5.3% of its development expenditure allocation in 1Q99. Put another way, all levels of government have been given RM16bn to play with in 1999. In the first three months, they spent just RM900m of it.
Some may point to the first quarter traditionally being a slow one for spending, but 1Q99 spending was 25.6% less than 1Q98 spending. Meanwhile, the economy contracted 1.3% in the quarter.
This is not new news, of course. We first wrote about it in these columns in mid-May. In case you missed it, Prime Minister Mahathir was reportedly ‘upset’ with the bureaucrats. He even called them tight-fisted. As far as an excuse for the crazy situation, he blamed ‘red tape’.
He didn’t mention that much of the government spending that did actually occur in the first quarter was ‘emoluments’ – a series of one-off cash payments to public servants and other groups which of course have nothing to do with the forthcoming national election.
We expect GNP growth of 2.7% in 2Q99, followed by 6.1% and 5.8% in the third and fourth quarters, giving 3.3% for the full year. It’s a rosy scenario far removed from the gloom of 12 months ago. And it will be achieved despite, rather than because of, goverment spending.
If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid! -- John Maynard Keynes
If someone could explain the economic principles behind Malaysian government spending at the moment, please call me.
According to axioms expounded at the London School of Economics, a pub next to which I frequented for many years, the way out of a recession is to spend money. Governments need to lead the way by allocating more funding for highways, technology parks and public toilet blocks.
So far so good, because that in fact is just what the Malaysian government has done, ladelling sacks-full of capital into the coffers of all government departments and telling them to throw it about quick smart.
Which is exactly what they are not doing.
Official figures show that the government spent just 5.3% of its development expenditure allocation in 1Q99. Put another way, all levels of government have been given RM16bn to play with in 1999. In the first three months, they spent just RM900m of it.
Some may point to the first quarter traditionally being a slow one for spending, but 1Q99 spending was 25.6% less than 1Q98 spending. Meanwhile, the economy contracted 1.3% in the quarter.
This is not new news, of course. We first wrote about it in these columns in mid-May. In case you missed it, Prime Minister Mahathir was reportedly ‘upset’ with the bureaucrats. He even called them tight-fisted. As far as an excuse for the crazy situation, he blamed ‘red tape’.
He didn’t mention that much of the government spending that did actually occur in the first quarter was ‘emoluments’ – a series of one-off cash payments to public servants and other groups which of course have nothing to do with the forthcoming national election.
We expect GNP growth of 2.7% in 2Q99, followed by 6.1% and 5.8% in the third and fourth quarters, giving 3.3% for the full year. It’s a rosy scenario far removed from the gloom of 12 months ago. And it will be achieved despite, rather than because of, goverment spending.
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