Subsidies Destroy Nations

By Othman Ahmad

This book explains how Subsidies destroy nations by reducing their domestic output called Gross Domestic Product (GDP). It defines what subsidies are as partial payment for specific goods and services by the government. Full payment of 100% is not considered as subsidy but gifts.

Subsidies make government expenditures more biased towards the rich, encourages waste and discourages production which led to other evils such as brain drain and the reduction of the gross domestic product(GDP) of the nations, weakening the nation as a result.

Subsidies and their impact to the economy of the nations are explained using articles written in journals and webpages from world organisations, such as United Nations, World Bank, International Monetary Fund, World Trade Organisation and universities.

Both analysis using market forces and planned economy are considered. Most researchers are targeted towards poverty eradication but some impacts on GDP are pointed out from these research results.
Examples of successful removal of subsidies in Iran, Sri Lanka and Indonesia are examined based on data from researchers. They were successful in reducing GINI (Income Gap) if cash handouts are given, otherwise there would be strong rejections by the residents of the nations.

Singapore is analysed with respect to removal of subsidies. Compared to its neighbour, Malaysia, Singapore has high a GDP per capita without much subsidy but Malaysia still has low GDP per capita despite having immense natural resources but give out subsidies instead of cash handouts. Singapore used to be part of Malaysia and has similar GDP per capita which was in the poor category as well when it was part of Malaysia. Singapore also shows that without unemployment benefits, it has high GINI.

Singapore versus Malaysia comparison is also used to ponder quality of living instead of just standard of living. Quality of living is defined by more detailed analysis of the living critieria such as as houses, electronic devices and cars. Comparing just the number of cars per capita is not a fair comparison when the quality of cars in Singpore are much higher. It can be deduced that the quality of living in Singapore is higher in Malaysia despite its high cost of living, leading to more brain drain from Malaysia to Singapore.

Religion should also not favour subsidy because of its unfairness and this shows for some views of Christians and Buddhists. Islam does not condemn subsidies which shows in the adoption of huge subsidies among Muslim nations. However, Quran does not allow any subsidy, only cash handouts. This is proof that official Islam has deviated from the Quran.

• Language: English
• Publisher: Othman Ahmad
• Release date: Aug 6, 2022
• ISBN: 9781005414566

Othman Ahmad

Othman bin Ahmad is a professional engineer registered with the Malaysian Board of Engineers. He graduated with BSc First Class Honours in Electronic Engineering at City University, London in 1981 taking various modules which included Computer Engineering. Later in 1986, he completed his MSc in Information Technology where he finished various assignments which included two integrated circuit designs and a compiler. He worked as a Telecommunication Engineer at Telekom Malaysia Berhad, from 1981 to 2009 with breaks to complete his MSc and study leave at Nanyang Technological University from 1990 to 1993 where he also worked as a lecturer teaching Assembler and Loader. His main research as well as registered PhD topic was Computer Architecture. From 2009 he worked as a Senior Lecturer at University Malaysia Sabah for the Computer Engineering Department teaching Computer Architecture. Retiring from UMS in 2021 as an Associate Professor in the renamed Electronic Engineering(Computer) program.His was awarded the ASDK by the State Government of Sabah for contribution to Sabah. He had completed many Telecommunication projects which include solar powered rural communication, and transfered to all the various engineering departments. He had published conference papers and journals which include indexed publishers. He has self published only in eBooks at both Smashwords and Apple Books using research materials that include his own papers either published by other publishers or not.He has filed 6 patents at UKIPO, USPTO and MYIPO, with a few of them granted with titles such as Zero Energy Transportation System, Zero Aerodynamic Drag Vehicles, An Optimum Hybrid Vehicle, Optimum Collision Damage Reduction System, Imperfect Perpetual Motion Heat Engine and Simplest Word-size Scalable Processor. Despite their controversial topics Zero Aerodynamic Drag Vehicles and Imperfect Perpetual Motion Heat Engine were granted by UKIPO. None had been granted b USPTO but the reasons for rejection are just absurd so need to proceed to the Supreme Court of the USA to get approval.He is active in self publishing in eBooks such as Smashwords and Blogs. eBooks allow more structured and thorough reading but Blogs and discussion groups allow instant backup of articles and views on certain topics which had come handy for inclusion in the eBooks.The author may seem to cover a very wide topics but they were actually part of his expertise and hobby. Road Traffic enginneering is just an adaptation of Telecommunication Engineering and research results were actually published in conferences. Mechanical Engineering topics were just basic physics subjects that are part of the basic course in an Engineering Course and so are Management Courses, which should include an understanding of economics.

Book preview

Subsidies Destroy Nations

Othman bin Ahmad

Smashwords Edition

Copyright Othman bin Ahmad 2022

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Acknowledgements

The author acknowledges the materials provided by the following people and organisations:

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TABLE OF CONTENTS

PREFACE

TARGETED READERS

MAXIMISING THE USE OF THIS BOOK

CHAPTER 1: WHAT ARE SUBSIDIES?

CHAPTER 2: THE EVILS OF SUBSIDIES

CHAPTER 3: MARKET ECONOMY VS PLANNED ECONOMY

CHAPTER 4: GROSS DOMESTIC PRODUCT VERSUS QUALITY OF LIFE

CHAPTER 5: EFFECT OF REMOVING SUBSIDIES

CHAPTER 6: QURAN FORBIDS SUBSIDY

CHAPTER 7: SUMMARY

PROLOGUE

ABOUT THE AUTHOR

PREFACE

The objective of this book is to explain in details the facts which show that subsidies destroy nations and explain why the mechanisms in detail on why subsidies are destructive.

The arguments and facts are based on collection or articles and posts published mostly online and can be accessed via my website: https://ueconomy.blogspot.com/.

Some of the arguments and facts are forwarded to Fatwa councils to be considered because subsidies are not mentioned in the Quran and Hadith so should not be allowed even without considering the destructive effects of subsidies on the nation. The fact is that all developed nations have little subsidies while undeveloped nations have massive subsidies.

Sri Lanka in 2022 is considered bankrupt because there is not enough petrol for all users. This does not make sense because it is the users who buy petrol but not the government. The government may not have enough foreign currency to buy petrol at market prices, but nothing can stop citizens from purchasing petrol at market prices if they have foreign currencies.

The reason why there is not enough petrol for the ordinary people in Sri Lanka cannot buy petrol is because there is not enough petrol sold at subsidised prices. I have not found any reporter or economist point out this fact that subsidies create shortages in Sri Lanka simply because demand for petrol exceeds the supply of petrol at subsidised prices. Subsidies lower the prices of items so that demand for those items is high.

The government of Sri Lanka does not have enough foreign currency to subsidise all the petrol demanded by the residents in Sri Lanka which led to the shortage of petrol. Similarly for all the other subsidised items.

The demonstrators forced forced the President of Sri Lanka to resign because they blame the President for the collapse of the Sri Lankan economy so much that it cannot supply supply subsidised petrol and other items that are deemed as essentials. The fault lies on the demonstrators because they have voted the President into power on the promises of more subsidies and less taxes.

Subsidies create three evils. Subsidies favour the rich more than the poor because the rich can afford to consume more of the subsidised items. The poor who cannot afford to buy any car will use much less petrol and therefore get the least amount of assistance from the government. Subsidies create waste because people buy more that what they really need simply because they can afford to buy more. Subsidies also discourage production because it is cheaper to buy at subsidised prices than produce your own.

As a result, citizens suffer. One reason for encouraging subsidies is to increase exports and therefore foreign currencies. Subsidies reduce the salary of workers because the low cost living as well as other resources such as electricity and water, resulting in cheaper exports. These cheaper exports allow more exports in quantity but not necessarily in value. This also applies to tourists visiting the nation and enjoying the lower standard of living in the nation practising subsidies. The overall effect is the reduction in the value of the Gross Domestic Product (GDP) of