This Personal Statement was part of Sukhdev’s successful application to the LSE, UCL, the University of Warwick and the University of Manchester to read Economics.
Growing up in the capital of a developing nation, I have observed rapid change around me. Despite significant government funding, there has been an alarming increase in the nation’s relative poverty rates, according to the United Nations Development Programme. Excess welfare handouts are generally criticised for being politically motivated as Household Debt to GDP ratio increased worryingly from 60% to 88% in the past 7 years. An also consistent rise in National Debt to GDP ratio exhibit similar trends to Greece prior to their debt crisis, but to a lesser extent. As I seek answers to policy problems in my nation, I am convinced that economics will provide some.
The use of handouts by the Malaysian government convinced me that Malaysian policies were largely Keynesian as I learnt that they affect Consumer Expenditure and Aggregate Demand. Paul Krugman also emphasised on such policies in his book “End This Depression Now!” but what I found to be highly interesting was his reference to Fisher’s Debt Deflation Theory where the more people repay debts in their economy, the more their debt grows due to a deflationary effect as a result from reduced expenditure. Not only did Malaysian household debt grow as a result, exacerbated by a property market bubble, but GDP growth also slowed down with the recent Goods & Services Tax. Krugman used this theory to explain the slow recovery to America’s 2008 economic depression when austerity was thought to be the solution.
Nevertheless, as household debt continues to approach unsustainable levels despite handouts, I inferred that there was a larger structural problem at hand. This led me to Thomas Piketty’s “Capital in the 21st Century”. His theory on how income inequality is fuelled by the use of capital is supported by his “r greater than g” theory. This resonates with the long-time Malaysian dilemma of the Chinese consistently dominating the housing markets and businesses despite affirmative action and special socioeconomic privileges given to the Malays. Stark differences in racially polarised ownership of capital such as land estates and means of production since the colonial era generated grave wealth inequality. Piketty’s solution to enforce taxes on capital rather than income may actually eradicate inequality in Malaysia given that there is a tangible difference between income and returns from capital.
Piketty’s constant use of calculus made me realise that Economics is very mathematical. While the formulation of the Gini Coefficient in statistically proving income inequality is impressive, I am sceptical of the overreliance on it as the predictions are conditional on numerous assumptions. Miscalculations on returns for secondary derivatives which became one of the factors to the Minsky moment in the 2008 financial crisis is a testament to my worries.
Last summer, I interned with the Business Development Team of Maybank, the largest banking conglomerate in Malaysia. One significant thing I learnt here is that financial services are targeted differently at specific income groups. I hypothesised that this is because there is severe inequality which might stem from a faulty economic structure, or perhaps some services are simply better suited for different income groups. If it is the former, I perceive that banks play a vital role in mitigating this effect. As a Maybank Scholar, I believe that I can make an impact on these issues.
While studying, I also took up British Parliamentary Debating, consistently debating at national-level and varsity tournaments where I learnt to critically analyse economic issues. Debates ranging from the use of Quantitative Easing during a recession, to the relevance of an extractive economy in developed nations have taught me more about Economics in ways which books cannot.
I look forward to the challenges that University has to offer and I hope that a UK degree in Economics will aid me in my future endeavours to contribute back to the global community.
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