29
Jun
15

Inevitable end of 1MDB and crony capitalism

Crony capitalism is about a company which use coercive powers of government to gain money, market and resources that would not otherwise be achievable in a free market.

1Malaysia Development Berhad (1MDB) is the most troubled crony capitalist company by far.

According to its website, Prime Minister Datuk Seri Najib Razak is the chairman of board of advisers who has been given enormous power but it is impossible for any one person, no matter how wise he is, to anticipate the consequences of 1MDB’s business policies.

Austrian economist Friedrich Hayek once said: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design”.

1MDB has been going on for several years and the consequences finally come as the total worth of so-called assets of RM51.4 billion crony capitalist will gradually come to an end, hopefully.

1MDB is now come under fire mainly because of its profitability, accumulating mountain of debts, controversial business transactions which eventually will become a financial burden to us.

Last week, Moody’s Investors Service analyst Christian de Guzman said there was a worry that Malaysia’s fiscal consolidation may be derailed should the government be forced to assist 1MDB financially.

“We know that support is possibly forthcoming, in fact support has already come in the form of a line of credit to 1MDB earlier this year. The question we’re asking ourselves is if the magnitude of support will eventually derail the trend of fiscal consolidation and that may cause us to re-look outlook” he said.

I think it is fair to say that this is the price we must pay for making huge mistakes by letting our government grow without bounds, extending its tentacles into every aspect of our economy.

And we have allowed crony capitalism like 1MDB to grow along with it.

Ironically, politicians and civil society groups, including the prime minister himself, suggest we need to increase government powers and oversight via Cabinet, Public Accounts Committee (PAC) hearings in Parliament, auditor-general, police and Malaysian Anti-Corruption Commission to investigate the scandal.

Why are we repeating the same mistake again? Why did we not think that the government is the very thing causing the scandal? Too much technical details are being studied until we forget the most fundamental aspect that governments are inherently poor at running a business.

…more
Inevitable end of 1MDB and crony capitalism – Medecci Lineil
2 June 2015 – TMI

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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?

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