I have always advocated the removal of subsidies (particularly petrol and diesel subsidies), the free floating of the ringgit, the deregulation of the financial markets and stopping the inflow of cheap foreign labour into the country as well as advocating for minimum wage and a safety net.
Lately, the government has taken the step to reduce costs associated with ballooning fuel subsidies cost with petrol and diesel price increases which will save the government approximately RM2.2 billion.
But with this savings for the government comes pain for the masses in the form of price increases in everything that needs transport. Lorry charges, taxi and bus fares as well as prices of food and vegetables will climb.
The government has been trying its best to talking down the prices with the prime minister calling on traders not to increase prices
But price controls defy economic logic. If a product (e.g. a kilo of sugar) cost RM1.30 to produce, how could a trader sell it for RM1.20? If forced to so, the trader will have to make his profit somewhere else, ie, he must sell something else that returns more than average profit to make up for the losses of the controlled product.
Ask any average Malaysian if he or she knows any good that is under a controlled price or subsidised to a certain extent. Almost every essential product including cooking oil, sugar, rice, chicken, beef to name a few, are under price controls.
Losses and lower than average profit in any sector of the economy signals to the operators in that sector to cut their losses and move their capital investment elsewhere. This is what will happen in some sectors of the economy which face government-imposed price controls.
I can suggest a better way for the government to help low-income earners, that is increase their income sufficiently to afford a decent living. Social welfare payments for those who are unable to earn a living and income top-ups directly from the government for low-income earners in the private sector would be more useful because they target directly the intended group.
A minimum wage law could also be enacted so that errant employers would not be able to exploit workers with impunity. The current system of subsidies, tariffs and price controls is flawed as subsidies benefit the rich more than the poor.
Tariffs make the prices of goods higher (and deliver fat profit to the protected industries) while price controls promote shortages and under-investment in the affected sectors. Let’s free the market.
No. 48, Jalan Kemuja, Bangsar Utama 59000 Kuala Lumpur, Malaysia.
Tel: 03-2284 3367 (Advertising/Tech/Subscription) | 03-2283 5567 (Editorial) Malaysiakini.com is not responsible for the content of external internet sites
