There has been much humming and hawing over the hike in fuel prices announced last week. Many in the public have denounced yet another price increase, while the government has weakly and ineffectively defended the price hike. What both sides are missing is the bigger picture of why certain goods and services should be subsidised, and others shouldn't.
In the first place, the government should never have so heavily subsidised fuel. This callous easygoing manner of subsidising what is essentially a consumer good would not benefit anyone in the long run. Now that the government is trying to undo its mistake, it is being forced to take fire from the public.
However, the public - as grave as their concerns may be - is not thinking about the long run. Economic theory has already proven that nearly any intervention in the price mechanism causes a "deadweight loss" where both consumers and suppliers lose a certain amount of profit or utility from the good. It can be argued that theory does not always correspond with reality but the simple truth is that with so large a subsidy, it is difficult to see how the present situation can be anything but comfortable for anyone's bottom line.
It is, of course, true that most consumers do not see it that way - lower prices are, after all, a boon for them. In the long run, however, can the wanton consumption of fossil fuels encouraged by government subsidies not harm us? Surely we would gain more were we to export the petroleum currently guzzled by our subsidised national cars, and get back the world market price instead of having to expend taxpayer money on subsidising fuel. To be frank, I believe the government is correct in its aim to eventually remove all petrol subsidies. The government - and hopefully by extension the rakyat - can earn more by selling our natural resources at the world market price than by actually raking in a loss by subsidising those same resources.
That is not to say all subsidies are bad. Many subsidies can be considered an investment in the long run. For instance, widely accessible and high-quality education or health care will benefit the nation as a whole far more than making the drive to work a little cheaper. Joey Chan cites the multiplier effect of the price hike, but surely investing in education will yield a multiplier effect as well - one more good teacher could train 10 more good teachers, who could in turn train more so on and so forth. Education and health care can be viewed as capital goods, those that will yield dividends for the nation in the long run, increasing our production capability. Petroleum is, by and large, a consumer good - nice to have, maybe even necessary but not high-yielding enough to demand backbreaking subsidies from the government.
I am, of course, not that naive to think that the government will spend our money wisely. The appropriate thing to do, if the government was to divert spending from subsidies to some other portion of the budget, would either be to give the public a tax break or make it absolutely crystal clear what the money would be spent on. At least the public knows what its taxes are being used for. The petrol subsidies may not benefit us entirely in the long run, but at least we - and not cronies or politicians - would be the ultimate beneficiaries, even if for only a while.
But the government has not made it clear how it plans to spend the money. Najib has mentioned something about "public transport". Well? Surely the government has a plan on how to allocate the money. And what about the rural majority? While the prices of their necessities increase, how will their loss in real income be offset? It is my frank opinion that the government will not do much to benefit the rakyat with its "earnings" from reducing the subsidies. One expects the money to be shoveled onto the gravy train, for someone's cronies to ride, or used to cover the losses of yet another harebrained scheme which used taxpayer money.
These unpleasant implications do not indict the lifting of the subsidies. I believe any leader who thinks the subsidies should have remained as they are is not looking far ahead into the future. A leader who will have my support is a leader who will use our money to invest in the education of our young, and the well-being of our citizens. Pak Lah, are you that leader? For the sake of Malaysia, I hope you are.