MAY 10 — Change of government, or Cabinet Changes as it is called, is an essential indicator of political instability. It is the number of times in a year in which a new premier is named and/or 50 per cent or more of the Cabinet posts are occupied by new ministers.
It has been found to be associated with lower economic growth. Greater political instability leads to greater uncertainty concerning future economic policies and, consequently, to lower economic growth. (See Jong-a-Pin, “On the measurement of political instability and its impact on economic growth” European Journal of Political Economy 2009)
Studies have since provided clear empirical support for the hypothesis that political instability adversely affects economic growth, with Cabinet Changes always statistically significant. (See Ari Aisen and Francisco Jose Veiga, “How Does Political Instability Affect Economic Growth?”, IMF Working Paper 2011)
Ari Aisen and Francisco Jose Veiga wrote in their Working Paper for the International Monetary Fund (IMF):
“Political instability is likely to shorten policymakers’ horizons leading to suboptimal short term macroeconomic policies. It may also lead to a more frequent switch of policies, creating volatility and thus, negatively affecting macroeconomic performance.”
On their empirical study to determine the effects of political instability on economic growth, they said:
“Our results are strikingly conclusive: in line with results previously documented, political instability reduces GDP growth rates significantly. An additional cabinet change (a new premier is named and/or 50 per cent of cabinet posts are occupied by new ministers) reduces the annual real GDP per capita growth rate by 2.39 percentage points. This reduction is mainly due to the negative effects of political instability on total factor productivity growth, which account for more than half of the effects on GDP growth.
The message is clear: political instability is harmful to economic growth.
It is not surprising that the Sultan of Johor, Sultan Ibrahim Sultan Iskandar should voice his concern over rumours concerning the stability of the government, although six months have passed since the 15th General Election.
“Enough is enough. How long more must the 30 over million people of our country endure this situation?” he said in a Facebook posting.
Remember the three rights of a king — the right to be consulted, the right to encourage, the right to warn.
The country must take heed when the King exercises the last right.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
