This article first appeared in Forum, The Edge Malaysia Weekly on August 30, 2021 - September 5, 2021
As parents, we worry for our children’s future in a world where the level of uncertainty will be even greater due to the pace of change and events considered grey rhinos or black swans. We among the more fortunate, like it or not, have to accept that those writing and reading this article are of privilege and their children sheltered from the worst effects of a more uncertain future — not least being technology and new ways of delivering goods and services displacing employment.
If we have concerns in this respect for our children, then what more for those at the weakest end of the spectrum of Malaysian society. Therefore, it is incumbent upon us to ask how we can reduce the anxiety that so many of our young and the rest of society are facing in respect of uncertain futures only made painfully clear by the pandemic and the economic crisis it induced.
Much of the work on Rethinking Economics (a network of students and academic scholars in several countries that promotes pluralism in economics) has required us to have a fresh perspective on economic issues. It is in times of crisis that there is fresh thinking on economic issues and new ideas are tried when the conventional approaches cannot solve the problems of the day.
Malaysia did so during the Asian financial crisis, referring to the unorthodox approach, and during the global financial crisis, we witnessed a novel approach by central banks in respect of quantitative easing. There is a considerable number of articles written about universal basic income (UBI) and which reference the way to pay for it using Modern Monetary Theory (MMT), but an article on the topic that captures the imagination is “Modern Monetary Theory Reboot: It is Time to Throw Money at this Problem”, written by a chief investment officer who manages billions and calls it as he sees it. In the article, he articulates, “Once on the periphery of the nation’s political and economic discourse, MMT and UBI continue to move into the mainstream.”
MMT was the subject of the discourse of Rethinking Economics published by The Edge on Aug 31, 2020. In the article, the risks of out-of-control inflation and deficits leading to severe currency depreciation, which can be considered an indirect debt default by the sovereign even if the debt is in a local currency, were fully reflected upon.
One of the critical lessons that were learnt from the high inflation periods of the 1970s is that politicians cannot be given open cheques where there is no need to tax and spend. Therefore, when MMT is used to fund UBI, the budget process must be cognisant of managing inflation, achieving mission-critical goals and full employment with an independent central bank to ensure checks and balances. Not for one moment is there any suggestion of federal government spending without any regard for the consequences of deficits, which rails against common sense.
The pro and cons of UBI in addressing poverty, inequality and insecurity, and issues of objections, affordability, implication for work and labour as well as proven pilots have been the subject of extensive research. Accordingly, there is considerable literature on the matter and thus anyone interested in the topic can easily find out more through a search on the internet. However, we believe this article can add a new dimension to the discourse by considering the potential benefits of UBI in a Malaysian context.
The distribution of aid and assistance to those deserving of help has been subject to a system where the distribution is done through political party apparatus, which undermines the democratic principles the country subscribes to. Once UBI is distributed to all citizens, without subjective assessments of everyone in society, people will be free to choose representatives to parliament and state legislatures — exercising their rights as citizens without the shackles of politicians who control the aid.
The post-GE-14 era is a golden opportunity for a new political landscape to develop and more so if consensus can be built during a time when there is a thirst for change. Certainly, genuine politicians with the people’s interests at heart have little fear from this change.
Removing discretion from the distribution of cash to those entitled is one of the best ways of reducing corrupt practices and abuse. This was one of the ways identified in eliminating corruption in areas such as the issuance of documents like passports, licences to operate businesses or certificates — by removing discretion and having key performance indicators fixed to time taken to obtain approvals and issuance of documents.
There continues to be a large number of women in the country who are trapped in abusive environments because of the limitations of the court system. There is a need for a better system to provide assistance to women in need of protection so that they do not remain reliant on the male breadwinner who may be abusing them.
The freedom to make decisions on their own should not be constrained by cost, lengthy court processes, fear, stretched welfare services and other factors. The benefit to women is a merit of UBI and it would certainly go a long way in reducing the suffering faced by women and children who are the subject of abusive family environments.
In Malaysia, the issue of low wages and declining wages has hampered Malaysians from retraining and upskilling and, worse, forced them into competition with foreign workers living in squalid conditions and willing to work for very low wages in terrible working conditions. This can only get worse with robots and automation.
However, it is impossible to improve oneself once one is caught in a vicious cycle of low wages and long hours made worse by no employment benefits in this country. With UBI, even if one takes a job as a dispatch rider, there is less need to take incredible risks by going through red lights, going against traffic, and riding on pavements and being a danger to themselves and others because basic income is covered by UBI, and being a dispatch rider is considered additional income and not income for survival.
We continue to have huge numbers of people that are underemployed, be it in the civil service or the wider economy, including government-linked companies that have difficulty restructuring and increasing productivity because there is simply no safety net to enable workplace reorganisation of labour. At the very least, with UBI, there will be no pressure to recruit unnecessarily, leading to underemployment, and serious efforts can be made to tackle productivity and drive the implementation of digitalisation and IR4.0 with fewer constraints. Further, the use of subsidies will lead to wastage. Instead, with UBI, subsidies can be eliminated, which would mean that people will be more mindful of water usage, electricity and petrol, all of which are important to how we manage the environment.
In respect of retirement, there continues to be a large portion of the population who have insufficient funds to see them through retirement. Sixty-seven per cent of Employees Provident Fund contributors do not have RM240,000, which translates to RM1,000 per month for 20 years. The previous Asian model of a safety net during old age — children caring for their aged parents — will become more difficult when adult children themselves face a more uncertain future. This is compounded by the ever-increasing cost of modern medicine for an ageing population. While no concrete solutions have been put forward for the problem of insufficient retirement income, UBI may yet be a viable option.
Perhaps the greatest benefit to Malaysia is UBI can be a great step forward towards unity and building a nation along the concept of shared prosperity. Inherent in UBI is the fact that it is provided to all without any test other than the fact that you are a rightful resident of the country. The critical goal of the New Economic Policy to eradicate poverty without reference to race will be achieved because UBI, by its very nature, makes no distinction of race and religion as a criterion. It also provides an opportunity for Malaysia to showcase its approach to reshaping society and leapfrog other nations by benefiting from UBI without the need for a huge welfare and social system tied to unemployment or retirement benefits.
While one could argue that the government has more pressing matters to resolve in respect of the pandemic and economic crisis, and UBI is an unnecessary distraction, we beg to differ. It is precisely during times of crisis that there is a will and desire to make substantial changes that hitherto were not possible. Certainly, there is merit to consider a green paper on the issue that has input from all political parties, critical non-government organisations and academia.
Finally, on this matter of UBI, we should be guided by a quote by our second prime minister Tun Abdul Razak: “As we move along the road of nationhood, we will have to make adjustments and readjustments in order that our people of various races should have a rightful place in our society.” We say a rightful place in society must surely include the right to a decent life guaranteed by UBI, indeed a worthy adjustment in our journey along the road of nationhood.
Ravindran Navaratnam is a partner and executive director of Sage 3, a boutique corporate finance advisory firm advising major corporations in Malaysia and Singapore
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