An economic system must address four fundamental economic issues, namely the kind and quantities of goods to be produced, when they are to be produced, and their method of production and distribution.
The economic model is encapsulated within a political system, which determines these fundamental issues, as well as the control, ownership, and wealth distribution of the country.
For example, communism dictates every aspect of these issues, with the elites enjoying the most, monopolising the wealth of the country, while the people lead a frugal basic life.
On the other hand, a capitalist market economy offers opportunities for the ownership and acquisition of wealth. But those with capital have a greater opportunity of accumulating more capital, as compared to those without capital.
The common man is better off than his communist counterpart. Nevertheless, the capitalist system breeds inequality of income and wealth distribution.
In general, most democracies are based on mixed economies that combine elements of capitalism, socialism, and free-market planned structure that allow governments to undertake production, nurture business enterprises, generate employment, and collect revenue through various forms of taxation that would in turn, be used for infrastructure development, and providing services and subsidies for the benefit of the people.
But the revenue generated through these activities do not all end up in the national coffers. A significant portion is sequestered into a non-government/clandestine repository.
This is the consequence of the various levels of the economic state within the economy. The prominence of each state is dependent on the nature of the political structure that controls and dictates economic activity and the creation of wealth.
In Malaysia – a capitalist-planned mixed economy –there are three economic states currently operating in the country.
One is the visible – characterised by bona fide traders, businessmen, entrepreneurs, agricultural producers, fishermen, and service providers. They include genuine big corporations, small, and medium-sized enterprises, petty traders, and hawkers, which carry out honest, legal, and ethical business operations, that pay taxes, which forms the revenue base for the government. The workers in these enterprises also pay personal income tax.
Second, is the political economy that involves proxies and enterprises with illicit facades, in which kickbacks and other illicit gains through bribery and corruption are channelled to well-connected individuals.
Political parties have used their authority to siphon monies to serve their political, as well as personal agendas. An example is the 1Malaysia Development Berhad heist, where billions were siphoned off for personal gain and to serve the political agendas of certain quarters.
Others get kickbacks in the form of commissions through the award of government contracts to cronies and those connected with political elites.
The current investigation into the Jana Wibawa project is a case in point. The project, costing RM5.7 billion ringgit, was supposed to kick-start the economic recovery after the Covid-19 pandemic, but has now been suspended, pending a review to determine if the projects had followed Treasury procedures.
The third economic state is the ‘black’, undocumented illicit, operations that reap colossal amounts of money for underworld entrepreneurs. This economy, that evades taxation and scrutiny by government enforcement agencies, thrive because of connivance by various types and levels of government officers who are paid handsomely for allegedly facilitating such illegal activities.
The dark economy involves the smuggling of liquors, beers, tobacco, human, and drug trafficking, basic necessities, and other contraband goods by organised syndicates.
A case in point is the sale of firecrackers. Despite having been declared illegal previously, they are easily available, especially during the Chinese New Year celebrations, and with little or no enforcement.
Only a token number of traders are fined a paltry sum for selling firecrackers, while the major syndicates get away, scot free. The government is fighting a losing battle because its own officers are complicit. This was probably what led to the government to legalise the sale of fireworks and firecrackers, effective April.
There is a sinister kind of synergy between these three types of economic states within the Malaysian economy that has become entrenched in the Malaysian social, economic, and political fabric.
They have resisted attempts to remove this, in an effort to sustain an open, transparent, and accountable economy.
Previous and current governments’ efforts towards achieving this have been futile, and have only scratched the surface because of the lack of honest politicians, the proliferation of unethical businessmen, and the collusion of some black sheep, upper-echelon civil servants.
Greed for power and financial gains has stifled attempts at establishing an honest, accountable, and transparent government, managed by God-fearing and honest people.
As such, these three economic states will persist, aided by a corrupt socio-political system that promotes avarice through patronage.
They are like cancer cells that have taken over the host, which advertently or inadvertently, aids in their malignancy.
The prognosis for the economy is bleak.
This is the personal opinion of the writer and does not necessarily represent the views of Twentytwo13.
