Rising Crime Rate and Economic Growth (A Malaysian Perspective)

1. What is economic growth?

There are two ways we can look at this. First, growth is achieved whenever there is an increase in the real GDP. Put it simple, as long as your monthly income has increased, you have more money to go shopping on a frequent basis and more output/ goods and services are produced for you, then there is growth (GDP is measurement of income, expenditure and output)

Another one is a little bit hard to measure but its fundamental is easy to be understood. It measures how much a country can produce if all the productive resources are employed in the most efficient way which means rise in productivity of workers due to training, less wastage during a production process, firms replace old equipments with a new one of better durability and technology and so forth. As such, it is known a rise in the potential capacity of an economy

2. Malaysian economy expands every quarter, so does that indicate that all of us are better off?

This is true to some extent. Money talks! With greater income, everyone can afford more goods and services of better quality. Parents can provide best education for their children, protect their family from unforeseen events with life and medical insurance, buy the latest gadgets, play golf everyday and this list can go indefinitely 

However, GDP is quite a flawed measurement of our standards of living over the time:

a) It fails to consider how income is distributed within the country. Just because the real GDP per capita (per person) has increased it does not mean that everyone within the country is equally better off and in fact it is nothing more than a simple average. In fact a country can have few super rich individuals (Robert Kuok, Ananda Krishnan, Syed Mokhtar etc) with the rest being in low-middle income range and yet the GDP is artificially high. Those with high income can distort the accuracy of the GDP

b) Most adults in fact work more beyond than the normal office hours. While it is true that their income level has increased but this comes at the expense of lesser leisure hours. Less quality time is spent for families and friends. So, how can the well-being increase?

c) When the income increases, there will be greater aggregate demand (total demand/ AD) for goods and services to be produced for households. This means, factories may operate longer than usual and also there will be more cars on the road leading to air pollution, water pollution and congestion. These are known as negative externalities that GDP fails to account for

d) It also does not consider the composition of output that is produced. A rise in government's budget for police and armed forces also contributes to the GDP simply because it is one of the components of spending. Again, income level increases but then this is because of soaring crime rate like robberies in restaurants, snatch thefts in the broad daylights and others. Recently a restaurant in Ara Damansara has employed security guards as a crime prevention measure. WHAT IS ECONOMIC SUCCESS WHEN WE EAT IN FEAR?