Election Economics

With Malaysia's economy doing so well right now, even Pak Lah could have won the recent by-elections - as BN have done so under Najib's leadership. 

If the numbers I got from the Economist are right, our inflation rate (CPI =+2.4%), and unemployment rate are both low (3.2%) - as compared to, say, Egypt's high inflation rate (CPI =10.8%) and high unemployment rate (8.9%). In fact, our economy grew 7.4% last year.

Forget about all the other issues in the media like HINDRAF, Anwar's sodomy trial, etc. The only thing that preoccupies people's mind at the voting booth is their own wellbeing. 

Am I happy? Yes, of course. I got a job, a car, a house and my family is all well. Why bother changing the government if everything is doing well.

Am I being too cynical? Maybe. But if you think about it, what I'm getting at here makes sense. The country's economy is a good indicator of our government's overall competence - taking into account all other factors like the global economy - although it's a gross oversimplification. Even when it's down to pure luck, the bottom line is all that matters.

In good times, the incumbent government would get almost all the credits for a healthy economy - whether they deserve it or not - and get elected again easily. On the flip side, in bad times, as in the 2008 'political tsunami' in Malaysia (with petrol price increase), people would always punish the government in power (BN lost the 2/3rd majority).

In reality when people vote, they care less about the real causes of a financial crisis (when there is one), or a poor local economy. When a lot of people cannot find job; when petrol and food prices are intolerably high; they would protest with their votes - although a poor economy is not always the result of poor governance. Look at the list below: 

Year     %vote (BN)  Leadership

1995       65.2            Mahathir

1998       56.5            Mahathir

2004      63.9            Pak Lah

2008      52.2            Pak Lah

(source: Wikipedia)

It's not so obvious now that Pak Lah's weak leadership could alone help explain why BN lost the 2/3rd majority in 2008, as Mahathir also suffered badly in 1998 from the 1997/98 Asian financial crisis. The better explanation - perhaps a more cynical one - would be that it's all about the money.

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Of course, this is not a new insight. This paper written in 2004 has found that the economy does indeed influence the outcome of elections (although it may be as likely that there is just an association, instead of causation). More interestingly, the author also found that voters in richer and better educated countries are better able to distinguish 'competence' of the incumbent government (World GDP growth - National GDP growth), from luck (World GDP growth alone).