About Nick: i am an economist based in malaysia. I write about development economics, while sneaking in a pop culture reference or two.

Empathy and Policymaking

Published in The Edge Malaysia, 10 - 16 October 2016.

Ahead of the upcoming 2017 Budget, the Bantuan Rakyat 1Malaysia (“BR1M”) has been all over the news once again. This is unsurprising – after all, there is a sizeable group of people who see BR1M as a political tool; an attempt to buy the votes of those individuals or households who receive the cash transfer. This is especially salient given the government’s move to suspend Public Service Department (“JPA”) scholarships for degree courses and the Education Ministry’s bursary for pre-university programmes.

While it is likely true, at least partially, that BR1M is meant as a political tool – all policies are, in fairness, one way or another – it is also true that there are many merits to it. The latest State of Households Report by the Khazanah Research Institute showed that incomes of the Bottom 40% (“B40”) group has grown the fastest, relative to the Middle 40% (“M40”) and the Top 20% (“T20”), from 1979 to 2014. Inclusive growth may be part of the reason, but cash transfers such as BR1M are also surely part of the equation.

Looking internationally, empirically, there are also studies that provide evidence of the success of unconditional cash transfers (“UCT”) such as the BR1M. A randomized control trial study conducted in Uganda found that youths who were given an unconditional year’s worth of average income ended up 65% more likely to practice a skilled trade and acquired much larger stocks of business capital and thus earn more money relative to those who did not get the cash (the control group). In another study, which directly compared a conditional cash transfer (“CCT”) versus a UCT in Malawi, the researchers find that while the CCT scheme, conditioned on school attendance, increased enrolment rates and improved regular attendance for those in school, teenage pregnancy and marriage rates, on the other hand, were substantially lower in the UCT scheme.

Thus, despite the clear merits to BR1M, why is it still such a hot button political issue? Surely, an argument can be put forward that its positives outweigh its negatives. However, when money is tight, as it is for the government today, government spending is going to be especially scrutinised. Similarly, on the part of the policymakers, how government spending is allocated becomes an even more difficult decision. A moderating economy also means lower income and corporate taxes, lower consumption taxes from GST, and so on. Thus, opportunity costs become more evident, and continuing BR1M at the expense of something like scholarships becomes contentious.

Yet, at the recent Khazanah Megatrends Forum (“KMF”), the Minister of Finance II, Datuk Johari Ghani made a very powerful point on how he, as a key policymaker in the government, views the allocation of resources such as government spending. In his Closing Address, he presents two tenets of Stewardship (the theme of the KMF this year) which are finding the right balance between long-term and short-term goals, and the need to ensure that all stakeholders are taken care of. The latter is basically inclusivity while the former is slightly more nuanced – it is sustainability but with a twist.

Sustainability is typically viewed as the long-term. We create sustainable development because we do not want to wreck the environment for future generations. The United Nations’ Sustainable Development Goals are long-term goals, meant to take place over the period 2016 to 2030. However, the Minister introduces an interesting insight – sustainability as a long-term view is incomplete; sustainability needs to be a balance between the short-term and the longterm. Datuk Johari cautions that too much attention on the long-term risks endangering livelihoods in the short-term, potentially to the point where long-term goals could be “rendered futile.” He suggests that while it is reckless to forgo long-term considerations, it is also just as reckless to ignore what is happening in the present.

The Minister is right. To illustrate this with a thought experiment, if you had a sum of RM100,000 to be distributed, would you give it to one student in the form of a scholarship such that she may one day come back to contribute to her family and her nation, or would you give it to about 900 families such that they can afford basic shelter and food? The former leans towards the longer-term, while the latter leans towards the short-term. Neither answers are wrong, of course but where the Minister’s argument is so relevant is to say that picking one option without due consideration to the other is not sustainable. Thus, Datuk Johari’s point on sustainability is essentially a point on empathy. Viewing short-term tradeoffs versus long-term tradeoffs requires empathy. That empathy must be present not just among individuals, but policymakers as well. Indeed, a lack of empathy can be devastating for those in authority. The classic case is the story of Marie Antoinette’s, “Let them eat cake.” When we fail to consider the needs of others, such as those who may need the BR1M cash transfers, we run the risk of employing a “Let them eat cake” mentality.

To best illustrate how a lack of empathy can go so wrong, consider the Lord of the Rings, as written by J.R.R. Tolkien. If you have read the books or watched the movies, you will know that the Dark Lord Sauron could only be destroyed if his Ring of Power was destroyed in Mount Doom, within his fortress. Yet, he did not guard Mount Doom at all. According to Gandalf, the White Wizard, here is why – “Let folly be our cloak, a veil before the eyes of the Enemy! For he is very wise, and weighs all things to a nicety in the scales of his malice. But the only measure that he knows is desire, desire for power; and so he judges all hearts. Into his heart the thought will not enter that any will refuse it, that having the Ring we may seek to destroy it. If we seek this, we shall put him out of reckoning.” Hence, the war was won because Gandalf put himself in the shoes of Sauron, while Sauron failed to understand anything aside from ‘desire.’

Turning back to Malaysia, Ahmad Izham Omar, CEO of Primeworks Studio, once showed that three million Malaysians watch TV3 every day, according to the Nielsen Ratings. The same measure shows that only about 880 Malaysians watch CNN in a given day. Those who read this newspaper and those who typically argue against BR1M, must remember that their view or perspective may be a minority. That is all well and good; we should make no apologies what we believe. However, if we fail to understand and empathise with those who do not see things the way we do, especially if they are the majority, we create a society that is not sustainable. As Ahmad Izham Omar says, “Just remember that we do not represent all of Malaysia.”

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