Economy to feature large in general election

THERE is near-universal agreement among Pakatan Harapan supporters that the system is not working. We don’t need a sage to tell us that a majority of the people are dissatisfied with the way things are going in the country.

Why have the last two governments had so much trouble getting the economic policies right?

With the a general election expected to be held soon, it is projected that the government will try to pump up the economy as economic conditions have a powerful impact on voters.

So-called political business cycles create ebbs and flows of economic activity around elections and it is proven that the perceived state of the economy influences voting decisions.

Malaysians will witness the emergence of new parties that are noticeably different in their ideological positions and populist discourses.

Voters will be looking the national economic situation and their own financial positions.

It appears that the next GE will be fought through the prism of a struggling economy. And economic trends are likely to drive the shape of the PH, Barisan Nasional and Perikatan Nasional coalitions.

The people are likely to support a combination of budget cuts and tax increases – but only on the wealthy.

In short, they want the economy fixed but are unwilling to make the required sacrifices for that to happen.

In its maiden tenure in 2018, the PH administration had cut down on federal spending which had scared away some voters.

It didn’t help that Umno spun the austerity drive as efforts by the multiracial coalition to wrest away the rights of the majority race in the country.

Struggling between economic decision-making and political reality, PH was unceremoniously dumped by one of its partners leading to the coalition being ousted.

For the country to safely navigate itself out from its current predicament, whoever governs the country next will have to introduce a “fiscal cliff” of tax hikes and spending cuts, both of which will, understandably, crash the already frail economy.

As the incumbent, it is obvious the PM and Umno/BN will be able to articulate more specific economic plans, if only because Ismail Sabri Yaakob must present next year’s budget to parliament in October.

As a challenger, PH’s proposals are likely to be less specific. 

Given the precarious nature of the country’s finances, it is highly likely that PH’s approach to government spending is likely to be driven by belief in the economic efficacy of public outlays as a means of pump priming the economy.

As has been apparent for a couple of years now, the world is changing — and the changes aren’t going to stop when the pandemic is finally over. 

Political tensions in other parts of the world will affect us directly, more than ever. Politics is no longer local.

Governments, under pressure from their people, diverted resources away from other countries, banned the export of food and drugs, and hoarded essential supplies. Each of these measures costs other countries.

Take, for example, supply chain disruptions caused by the war in Ukraine. Many experts are predicting they will abate by the end of the year, and that may be true in the short term. 

But in reality, supply chains are only the beginning of a long-term, fundamental change.

The push for higher environmental, social and governance standards means a profound change in how businesses in the country operate, now and in the near future.

In the face of these, better education and competition policy will determine whether the country will be able to overcome its current obstacles and the anticipated headwinds coming our way.

And PH was clearly aware during its two years in Putrajaya, there is always strong public resistance to cuts in government-funded entitlement programmes and that maintaining benefits is more important than deficit reduction.

If PH were to take heed of the lessons learnt, it would focus solely streamlining the government without controlling federal spending if it is re-elected.

Policies should be structured with political realities in mind. 

Explain to the voters that if PH succeeds, other countries in Asean will face a rejuvenated competitor.

If fails, the resultant slower growth and growing debt burden could hobble the country’s economic recovery for years to come.

The swing voters might switch loyalties in response to the policies of an incumbent or the promises of a challenger. 

Where are these swing voters? The youth who will be voting for the first time? And the disenfranchised supporters of the other side? – August 4, 2022.

* FLK reads the Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.

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