Populism politics out of touch with reality

Trending from media headline these days must be Donald Trump and his series of executive orders in hardly within a month from his Presidential inauguration.

Trump recently fulfilled his election promise to ban Muslims from entering the US with the executive order to ban refugees from seven Muslim majority countries. It is America refusing to take responsibility to the refugee problem that was a result of US foreign policy failure in the Middle East.

The US intervened in the Middle East to protect Israel as they did a Goebbel-like repetition for war against terrorism since the 911 plane attack on the World Trade Center and Pentagon in 2001.

The decision by Trump will backfire on the US wrote a letter to editor in the NST. Trump is "sowing the seeds for terrorist attacks in the US and elsewhere."

Trump still has promises that will have implication on US military presence abroad, global trade, relationship with their southern neighbour, and American global leadership. Republican can no more give the excuse Trump do not mean what he said during campaign.

The root of the problem is populism politics. As Malaysia heads for its 14th general election, Malaysians should be wary of populism politics as it can have devastating impact on the nation.

Populism trend

NST columnist, Lokman Mansor wrote today:

Rise of populism worldwide

By Lokman Mansor - 6 February 2017 @ 10:16 AM

It’s not easy to make sense of a market collapse, let alone make it entertaining. In the 2015 Hollywood movie, The Big Short, cameos by Selena Gomez, Anthony Bourdain and Margot Robbie break the fourth wall to explain various financial terms and Wall Street lingo.

It was an ingenious move to use famous personalities, analogies and simple-speak to break down for the audience terms like “subprime”, “collateralised debt obligations” and those of other financial instruments leading to the 2008 financial crisis.

Looking at some of the reports coming out of the annual World Economic Forum that took place in Davos, Switzerland, last month, there was one key theme that may impact our lives significantly. The only problem is getting through some of the jargon before we can understand why we should be worried.

Populism is on the rise, globally. We saw it in the Brexit vote and the United States presidential election. Populism is “the quality of appealing to or being aimed at ordinary people”. Populism, which has also been described as the politics of anger, will have a huge impact on the global economy and markets, experts believe.

According to Huw van Steenis, global head of strategy at Schroders, a British multinational asset management company, populism is often inflationary, which means higher prices and less spending power. Combined with salaries not increasing fast enough to catch up with rising prices, and we have a recipe for disaster.

Populism can also lead to trade wars because when countries start making policies to please the demographic masses, it is at the expense of their trading partners, aka “outsiders”.

For example, after Brexit, where the United Kingdom will be out of the European Union (EU), many doubt that Britain could have strong trade links on its own, compared with when it was part of the EU. Its EU neighbours are already aggressively courting international banks away from London.

There’s more trouble ahead. At the same time that populism gains support, more people are having second thoughts about globalisation’s benefits. If that’s the case, what’s the alternative? Protectionism? Nationalism? Every country depending on its own resources and people?

Steenis believes that the “Balkanisation of banking markets” will grow as countries put up financial walls. Balkanisation, in this case, refers to the fragmentation of markets that can be hostile or uncooperative with one another. These financial walls can lead to slower growth.

Until Britain and the EU sort out their affairs in terms of policies and markets, there’s going to be too much uncertainty for investors to commit their funds and resources. The flow of capital in Europe is going to be restricted until further notice.

Experts can’t seem to agree on why populism is happening. My guess is, it’s because the masses feel that they have been neglected for too long. This has been years in the making.

What’s worse, though, is that there’s no consensus (can’t agree, again) on what the outcome will be. Is it possible to initiate plans without considering the future landscape? Will there be conflict and chaos? I think there are those who know where this is heading, but would rather not cause alarm.

A rise in global populism, experts say, will see markets transition towards an environment of reflation and a more expansive fiscal policy. That means, trying to stimulate the economy by increasing money supply and cutting taxes, and more government spending.

That covers both monetary policy (changing the interest rate and influencing money supply) and fiscal policy (tax rates and the level of government spending).

In 2014/2015, central banks in some countries experimented with negative interest rates to stimulate their economies, a move some economists say should not happen.

The theory goes that negative interest rates make saving and borrowing less attractive, which ought to boost the amount of money people spend into the economy. But, consumers could also withdraw money and not spend it — saving it, instead, in shoe boxes under their beds.

When there’s not enough money available to lend, though, panic could lead to a run on the banks and force interest rates back up. For the record, four countries still have negative interest rates today: Denmark, Sweden, Switzerland and Japan.

So, what can be done about populism?

For starters, the needs and concerns of ordinary people should be identified and addressed. Some can be resolved quickly. Others might need more time. The last thing to do is ignore or alienate them.

Lokman Mansor studied journalism at the University of Toledo, Ohio. He has been with the NSTP group for more than two decades, the majority of which at ‘Business Times’. He has a wide range of interests in movies and music, and plays golf and the drums

Understanding populism

The extract from a recent Forbes magazine article by Emeritus Prof Antonio Argandoña of IESE Business School here attempted to explain populism, below:

What is populism?

There is disagreement on this point, but we can define it in broad terms.

At the root of populist movements is a delineation between "normal folk" and "the elite." For example, "We" are the people and "they" are the ones who cheat, control and subjugate us, along with their supporters.

These concepts are impossible to define in clearer terms because they don't reflect objective realities. More than anything else, the divide is grounded on identity and emotion that stem from making a sharp distinction between friend and enemy.

Other key characteristics include:

• Politics are based on emotion to generate a feeling of affective identification.

• Intellectuals and experts are viewed with suspicion because of their ties with the elite. Their words are perceived as skewed and biased.

• The idea that the general will should prevail. Since representative democracies use intermediate structures, such as representatives and political parties, the will of the people should be abided. Liberal institutions (the separation of powers, the neutrality of state institutions, the defense of political and media pluralism) are no longer useful.

• Anyone who disagrees with the body politic should be spurned and, if necessary, intimidated. Those who try to stabilize political institutions will hinder the advancement of populism.

• Actions are channeled through provocation and protest. It is argued that dialogue no longer makes sense since it is controlled by the elite.

• Conflict reigns in populist strategies. The liberal democratic system has always tried to conceal conflict (either because of lack of interest, because they don't know how to tackle it or because it is not considered media-worthy). In populist movements, the reverse is true: now it is important to accentuate every conflict and wrap it up tightly in an emotionally charged bundle.

• Populism is normally, though not always, triggered by a charismatic leader who articulates the collective anxieties of the people.

• It is also important to note that while problems relating to ethnic minorities or immigrants are sometimes (but not always) relevant to populist movements, populism is not necessarily xenophobic.

What is behind its rise?

Economic downturns and the perception of crisis. Economic crises are characterized by inequality and unemployment rates, but also encompass other phenomena like globalization (the perception that foreigners are stealing our jobs), technology (which favors the wealthy and better educated pockets of population) and social welfare cuts, among others.

Collective frustration and anxiety. This angst may be summed up as follows: We did everything right, we went to school, worked hard and now we're unemployed. We won't be able to collect retirement benefits and our kids won't come close to doing as well as our generation.

Increased inequality: the rich get richer and the poor get poorer. The sentiment is that the super wealthy rig the system to make sure their children stay rich, which ruins any chance of upward mobility for the rest of us. This might not be entirely true, but it does not stop people believing it.

There are also deeper factors at play:

• Complexity in social constructs has increased and citizens feel unsettled.

• Public spending has become technocratic.

• Corruption, an overall lack of transparency, and the machinations used by political parties have caused government institutions to lose credibility and legitimacy.

• Campaign promises often bear little resemblance with the work that's done post-election. This might be because important decisions are made at higher levels (e.g. Brussels or Washington) or the result of a silent consensus among the controlling parties.

Populism politics

The descriptions in Forbes article are showing in Malaysian politics as pro-big business Tun Dr Mahathir begins to do U-turns to take advantage of the ignorance of his past wrongdoings, failures, and inconsistencies with the present among the more than half new voters of millennial generation.

Initially, his political attack was driven by revenge to blame for Dato Mukhriz's failure to rise in the UMNO hierarchy and the takeover of his crony (or some say proxy) IPP by 1MDB to Dato Najib to attack 1MDB but it failed to make any impact.

The trial for the US Department of Justice kleptocrasy case against Jho Loh, Rizal Aziz and two other Arab alleged accomplice has yet to place. There is speculation the case is technically weak and could be thrown out. The cases in Singapore and investigation by the Swiss have not uncovered any wrongdoings of Najib.

The political propaganda on RM2.6 billion into Najib's personal account is growing weaker. Receiving political donation from abroad is not an offense under local law. Allegation of swindling by Najib has yet to have any basis and will unlikely find its way into court.

After repeated failures, Mahathir and the opposition resorted to economic fear factor as campaign to seize on the global downturn and inflation. The fear factor is implimented in cooperation with foreign media and currency speculator attack on ringgit.

To claim Mahathir is embracing the peoples' agenda, it is over rated. He is principally opposed to BR1M or any "handout" to the people.

His left with the only GST as the effective political tool against Dato Najib. This is where he seized on the poor understanding of the general public on public policy.

Almost all countries in the world have a Value Added Tax (VAT) regime, including the recent introduction by oil rich Saudi Arabia.

Malaysia's 6% GST and thousands of exemption is still the most people friendly VAT. If not for wholesaler and retailers marking up additional 6% to cover for the rebate they are entitled to get back later, and the poor roll-out by Customs Department, GST should see lower prices for some products and services than under the previous SST system.

Not to mention, the problem of corruption and poor enforcement by civil servants [read previous posting here].

Without GST and subsidy rationalisation program by PEMANDU, the government's budget would have been untenable to operate. The lower oil revenue by RM30 billion need drastic corrective measure even how unpopular it is.

Expectedly, GST have been blamed for price increases. A dent in peoples' wallet will always riled up emotion and anti-government fervour.

The usual blame is the national leader and not the poor information dissemination, enforcement and administration by civil servants. GST had been long planned since PEMANDU came to the picture to highlight the danger level of subsidy in the government budget.

Nevertheless, according to the indicative Big Mac index, inflation in Malaysia is not out of the ordinary and in-sync with the other countries albeit relatively low.

In fact, the big noise by cybertroopers on the recent 20 sen increase in pump prices is childish and uncalled for. It is still cheaper than many other countries, including OPEC member, Indonesia.

Petrol price change is a monthly affair. The repricing is in sync with recent increase in crude oil prices. A rise in crude means a rise in oil revenue.

The economic fear factor based on populism politics is dangerous. Mahathir's about turn from his past pro-China and anti-US stance to become anti-China and pro-Soros could be a popular move but like Trump, it can be costly for the country.

The protectionist leaning against China investment was taken notice by China media and China public sentiment against Malaysia is still recovering from the disappearance of MH370.

Other than China, could Soros or maybe US filled up the void of China FDI that see Malaysia favourable and strategic?

Mahathir's fear factor campaign against Najib lack the credibility. His campaigners, which surprisingly include former journalists and writers, attack every other initiatives of government that it makes no sense.

Tan Sri Muhyiddin could not accept that sort of immature political campaign that he admitted government success in steering the country.  

Since Mahathir's initial political move to appeal to the liberals and left to gain opposition trust, he has returned back to the nationalism narrative of the past in his speech at the launch of PPBM recently. Unfortunately, it is the same old, same old arguments that has been debunked by the inconsistencies in its implementation and his personal actions.

As pointed out by Johor MB, Dato Khaled Nordin, Mahathir's nationalism gave Johor no equity in the two privatised Johor ports but yet make much noise over 48% local owned Forest City.

In a 2011 paper published by Political Research Associates, the model of populism politics described a group as elite parasite squeezing from above.

However, in Malaysia, there is the occurrence of opportunist elite parasites riding on populist views. No rocket science to guess the hand behind every leadership attack since Dato Onn Jaafar till the present Najib. Behind the political narrative is personal economic interest.

It is a sign Mahathir is out of touch with the thinking of supporters used to be close to him, and not in sync with the time and the thinking of the millennial voters.

If he win his last political war, and it is still an if, him and his out-dated ideas will be chugged aside by his opposition partners and liberal NGOs. By then, a sore UMNO may not want to take him back!