Economics is like politics, real big word and everyone claims to be an expert. For the most part of my work life one did try to savour the intricate grappling of the so called economic fundamentals and read numerous books on this subject that is understandable at least to a layman like me. Two names spring to mind when we spoke of economics ideas and philosophies..Maynard Keynes and Adam Smith.incidentally both are British(Mr Smith of course as all Scotsmen will say, a proud son of Edinburgh). Keynes theory is made famous by his deep foresight in understanding the great depression and postulate a theory of abundance of money supply within the system by" pump priming the economy",this generally means huge government expenditure to ensure sufficient liquidity within the system.This theory is generally popular with most developing countries or nations that is very obsessed with GDP growth as a main(as sometimes wrongly viewed as the only) barometer of country"s well being. This is made easy for countries that have huge export surplus from commodities trading (oil for one) and the excess monies from such "windfall' can be used for the government to splash and spend to keep the economies rolling as one says even if "white elephants" will be its final outcome from sch extravagance splash.However Keynes theory is more than just mindless pouring of monies to the system but was underpinned by a very fundamental view that money is only its worth if it is spent,and of course spending wisely must be the epitome of a responsible government agenda.Malaysia to a large extent has been propped up by its Keynesian approach towards its economic planning with the ritual 5 year Malaysia plan spelling out to an eager populace on how the Government will spend its treasury monies via mainly infrastructure development and improving of services. This was helped to a great extent by the surplus of our commodities export earnings of oil,palm oil to be more precise. A general antidote to a recession as most economists will agree is to follow to some extent the Keynesian approach IE by pump priming.The challenge for the Government now is that the earnings from our commodities export has dwindled due to low prices...hmmmm we await for the think thank to outline to all laymen like us what will be the plan for 2009.
Adam smith? he believes in the "invisible hand"..IE let the free market dictate the performance of the nation's economy. Competitive edge and an equilibrium on supply and demand will dictate the prosperity of the individual and hence the nation.Adam Smith 's theory spawned the modern day policies as the Thatcherite doctrine( named after Margaret Thatcher) or Reaganomics(Ronald Reagan the actor being accredited to such a policy).This model has somehow driven the world to a higher level of prosperity and well being that was never imagined after the second world war. Emerging countries all try to embrace this policy of free market and generally succeed(read China and India as examples) but the recent sub prime crisis though has also exposed serious flaws on a dictum that is primarily driven by human greed (Greed is good according to Smith) and selfishness. Even USA under Obama later on planned to pick a leaf out of Keynes teachings by promising some massive infrastructure spending to revive the ailing US economy. So? which one is right? Both are right and wrong, the onus in my view is the cultural aspects, these theories are just guiding beacons as leaders attempt to navigate their respective nations towards a prosperous society but any society that is not built and respect hard work,meritocracy, inventiveness and the enquiring mind will never able to leap itself to Mount Everest..the only think i know for sure inflation is the biggest enemy of the ordinary man, I still remembered 30 years ago i can have a meal of roti canai for 20 cents in KL but now it will cost you at least RM1.00 ie a massive 500% increase, has the wages of a worker has the same kind of scale of increase? I doubt it and it never will because it doesn't make economic sense(as experts will say)..Ha , the irony!!!
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