Chart Of The Year

I have always had the same chart, only instead of level of income, I had the level of development of each country. The less developed would see more corruption and so on. The chart below says the same thing but on matters that speaks clearer to us. You want to know how to get higher income per capital (i.e. the average annual income per person for that country)... yes, less corruption.

To be fair, there are a few discussion points to the above chart. Indonesia for example has an abnormally large number of islands and people living in secluded areas which may be difficult to reach or partake of the general business economic activity. They may be classified as self sustaining farmers at best, people really living off the land and sea. Hence when you average them out as well, Indonesia's real figure should be a lot higher. Same goes for China. 


To be fair, corruption exists in every country, its the level of pervasiveness and the relative amount of leakages. We know that Taiwan and Korea are not very clean as well, the ties between the triads and government officials in Taiwan is well known, the unusually cozy relationships between major corporate figures and the Korean government is also well documented.


We cannot be too optimistic that eradication of corruption can be done in 10 years or even 20. I mean HK took at least 20 years and Singapore needed a heavy handed treatment for a very long time. Hence even if we do effect a change in government in the next elections, safe to say its just baby steps, but at least we must move forward.

This makes Malaysia's position even more untenable. Except for HK, I believe Malaysia's per capita income was higher than Korea, Singapore, Taiwan some 35 years ago ... vellapan ... do we need to ask why, we all know why. That is why when I hear politicians championing how good Malaysia's growth had been  for the last 20 years ... we have actually been grossly underperforming.

Comments

clk said…
If one remembers in the 60s, Philippines and Malaysia were probably ahead of most if not all Asian countries.

Soon we'll both be together form the "sickmen of Asia".
hishamh said…
"You want to know how to get higher income per capital (i.e. the average annual income per person for that country)... yes, less corruption."

Sorry, you're confusing correlation with causation. The empirical research on this is ambiguous - it could just as easily be high income per capita results in lower corruption.

"Except for HK, I believe Malaysia's per capita income was higher than Korea, Singapore, Taiwan some 35 years ago "

On a PPP basis, as of 1975, all of those countries you mentioned had higher per capita income than Malaysia, though we were close behind Taiwan and Korea. HK and Singapore had income levels 2.5x higher.

We fell behind TW and KR from just one event - the 1986-1987 recession. Otherwise, plotting the income trajectories, the growth experience has been almost the same. Which suggests that corruption is not the most important, and definitely not the only, differentiating factor.
CK said…
Someone has made the theme of 'correlation with causation' to become a fine art!

None other than those number-crunchers who keep telling us that that M'sian inflation rate is of low 3% range yr-in-yr-out! More like high 10%, if u lives near the cities.

Physical comparison of the standard of well-being between those countries mentioned & M'sia, vis-a-vis 35yrs ago & now, could easily tell the big gap in the statistic mentioned.

Yet numbers r still being mentioned as holy grail!

Did someone say lies, damned lies & statistic?

I would venture that it could be more of a substance-induced illusion backed by too many an occasion to find excuses using numbers within a very selected parameters!

A mouthful? yes. Just like that write-up!
Mohammed said…
Corruption has dimensions other than statistical or observed prosperity. It destroys the soul of a nation (or at least its pretensions), and of both the giver and receiver.


Even if corruption does not correlate with prosperity, how does it look to the rakyat when condos are bought for cow rearing by NFC? How does it sound when stories of sand being stolen in Selangor are read all over the world?


Will politicians ever feel the shame in setting bad precedents and examples to the youth of this country still in their formative years?
zen cat said…
hard to progress when your best talents flood out the country to SG, TW, HK year after year. and these are the cream of the crop.

imagine a premier league team trying to win the league while losing its best players to better teams (or richer ones) every season....
clearwater said…
Sorry, can't buy the assertion that the 1986/7 recession by itself caused Malaysia to lag behind TW and KR, both natural resource poor economies. Malaysia screwed up bad despite being relatively resource rich. Imagine where we'll be without Petronas and oil, the savior of many a financial bungle by a certain ego maniacal political leader.
hishamh said…
@ck,

What does simple physical comparison tell you about growth rates? Not a whole lot. Singapore and HK started out in the 1960s with living standards double that of Malaysia. The lead is still approximately the same now. If all these countries (and us) are growing at the same rate, guess what, we're never going to catch up. But that's not the same thing as saying our development and growth record is bad.

And yes, the inflation rate is actually around 3%. It'll be substantially different for different income groups (generally higher inflation for lower income households and for urban households), but for Malaysia as a whole on average, the measure is fairly accurate.

It's actually not all that hard to calculate your "personal" inflation rate, if you're willing to track your expenses.

@Muhammad

Exactly right. Corruption is worth fighting against for its own sake.

@zen cat

Funny you should bring this up, I was just reading a research paper on this yesterday. Did you know the rate of brain drain from Singapore (14.5%) is actually higher than ours (10.5%)? The big difference isn't that people are leaving but that Singapore replaces their immigration with high skilled foreigners, while we get...you know.

@zen cat,

Ever heard of "Dutch disease"? Natural resource rich countries are actually handicapped in development. It's not an advantage.
CK said…
Ever heard of "Dutch disease"?

Ever heard of Norway miracle?

Both share the same resource rich tag, & yet both manage their wealth differently!

The only difference, that I can inferred, is people.

Dutch disease preceded the Norway miracle, so the Norwegian has a mirror to reflect on tweaking their resource management style. Reflect they do & manage well too.

So, how many other countries, r so gungho in accountability for their NATIONAL RESOURCES management? Blame the history lesson, for not been well learn?

PEOPLE, with social transparency & economic consciousness, couple with accountable responsibility to the future generation of the country, is the KEY.

The rest r just CRAP!
hishamh said…
@CK,

Ever hear or see Norwegian manufactured goods? That's the point with Dutch disease, where a concentration on natural resource extraction delays the development transition from primary to secondary sectors.

This isn't about managing your resources, it's about setting the conditions for long term economic growth, through moving into higher productivity sectors.

The Dutch disease effect has been empirically found across a whole slew of nations, not just Holland. With governance and good institutions though, it's really hard to disentangle the impact from growth itself. It's a chicken and egg problem, does growth and prosperity promote good governance, or the other way around? Same thing with becoming a civil society, and income and wealth inequality, and so on. Many economists take it on faith, because the empirical evidence just isn't there.

Corruption is worth fighting against for its own sake, without having to bring in specious, unproven arguments.
G said…
malaysian politicians are in a world of their own....a world where the rest of the countries are a figment of everybody's imagination.
hishamh said…
I've just had a look at the raw data. I can confirm (within the subset of the data I have on hand) that for the whole dataset the correlation exists across time as well - my data only covers 19 countries but it goes back to 1995.

However...

The Malaysian data shows a negative correlation, not a positive one, between the CPI score and real GDP per capita. It's not the only country to show that either.

In English: the higher the perceived corruption level, the higher the income level.

Malaysia boleh, right?

One big problem with using the CPI - it's an index of perceived corruption, and not actual corruption itself. There's a big possibility that it is not capturing the actual incidence of corruption, but rather society's (in)tolerance level of it.

I think I'll fill out the full dataset, this is worth digging into.
CK said…
hishamh,

‘Ever hear or see Netherland manufactured goods?’

Philips, Yes?

What’s yr point?

A chicken and egg problem? Rubbish!

The point SHOULD be learning from history, PERIOD. Anything else is just excuses excuses.

Knowing it’s empirical evidence, WHY still hold it up as holy grail?

Could that be WHY - history repeats itself? Or bcoz the people who r suppose to manage the resources throw everything out of the window, when the personal gain becomes the prime & only consideration?

Bottomline – people & that’s not a spurious (specious), unproven arguments!
hishamh said…
"The point SHOULD be learning from history, PERIOD. "

Yes? That's what I thought I was doing. The empirical, historical, evidence is that better governance does not necessarily translate into higher income per capita, in fact the other way around is just as likely (higher per capita income results in better governance).

And please note that I've found a negative correlation between the corruption and per capita income for Malaysia and a few other countries. And there's plenty of instances of rising per capita income with no change in the corruption score.

I'm not arguing that people don't matter, or that institutions don't matter - as I said, economists take it on faith that they do. But real, historical, statistically valid, evidence - it's just not there.

You can statistically test for the presence and direction of causality, and there's plenty of solid research papers on this very subject; not surprising given its importance. A few find results, many don't.
hishamh said…
"The point SHOULD be learning from history, PERIOD. "

Yes? That's what I thought I was doing. The empirical, historical, evidence is that better governance does not necessarily translate into higher income per capita, in fact the other way around is just as likely (higher per capita income results in better governance).

And please note that I've found a negative correlation between the corruption and per capita income for Malaysia and a few other countries. And there's plenty of instances of rising per capita income with no change in the corruption score.

I'm not arguing that people don't matter, or that institutions don't matter - as I said, economists take it on faith that they do. But real, historical, statistically valid, evidence - it's just not there.

You can statistically test for the presence and direction of causality, and there's plenty of solid research papers on this very subject; not surprising given its importance. A few find results; many don't.
hishamh said…
@dali

Sorry for the double post

@ck

"Spurious" actually has a specific technical meaning in statistics - it's a correlation without proven causality.
CK said…
hishamh,

Didn't someone, highly qualified in mathematics, said - lies, damned lies & statistic????

Indeed, in this case someone is trying his best to tweak his 'unfinished' artwork!

BTW, u wrote specious, I ONLY reword it back to spurious ;-)