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Books, essays and others Economics Politics & government Science & technology

[3027] The enshittification of the internet and the rise of technofeudalism

The internet was supposed to be a wonderfully liberating medium. A force for good that equalized power by circumventing gatekeepers of all kinds: information wanted to be free. Almost all internet-based companies was a social crusader out to right some wrong when it all started back in the day. Google’s motto was ‘Don’t be evil’. That was the promise of the late 1990s and the early 2000s when the internet was still new in its anarchic stage where almost everybody competed to do good. Nobody online had market power.

But anarchy is always a transient state. By the mid-2010s, it is clear many had placed too much hope on what is a tool that could either improve or hurt society. And that tool increasingly has been used to drag society towards worse equilibria.

For some time now, the internet is a shitty place to be in. We cannot live without it but we are miserable with it. More than anything, the internet collectively has inverted its promise. The cyberspace is now a surveillance tool masquerading as a crack designed to advertize and sell everything.

Enshittification by Cory Doctorow is a 2025 book that attempts to explain how we got here. The term enshittification as Doctorow defines it is a process of internet platform decay from the perspective of its users.

The concept itself could be used to describe other services off the internet although these days the internet has proliferated everywhere that it is not helpful to make the online/offline distinction anymore, as much as it is unhelpful to call any company a tech company. If Grab a tech company, or just a transport company? Is Stashaway a tech company, or just a financial service provider company? Is Amazon an internet and tech company, or just a retail platform?

The enshittification process

Enshittification is a 3-stage process.

It starts with platform operators (Twitter/X, Facebook, Amazon or Google etc), being good to everybody and that means generating massive consumer surplus to individual users. This is stage 1 (the so-called be good to users stage).

Once the number of users hits critical mass, stage 2 (the abuse users for businesses stage) begins with the platform treating individual users badly in order to attract business users. The bad treatment generally include targeted and intrusive advertisements utilizing personal and private data tracked by within the platform and elsewhere too. Here, the platform operators are draining consumer surplus and redirecting it to sellers. As a result, businesses flock to the platforms. Individual users feel and understand the abuse but most of them could not leave the platform because their social network is already entrenched on the platform. Only the determined would exit and seek social interactions via other means.

Stage 3 (the stage of abuse businesses for the platform) is when there is enough business users around with the platform becoming the essential marketplace where all the businesses’ customers are. To exit the platform is to lose a chuck of customers and revenue. Platform operators then proceed to treat businesses badly by draining producer surplus towards themselves. This is done via various platform fees and advertisement requirement (pay to be seen or we place your product on page 999 instead of page 1). At times, the platform itself competes with its business client by cloning the business and placing its products above the clients (similar to the cheatings that happened in various stock exchanges as told in Michael Lewis’s The Flash Boys). There are various details in the book showing that much of the advertisement is fraudulent (paying for ads that do not really exist or ads with no noticeable effects on earnings) but businesses could find no way to hold the platform accountable. And the fees are pure rentseeking and structured in a way that prevent businesses from selling elsewhere (and if businesses do sell outside, they are forced make it more expensive).

The end result is that everybody except the platform operators gets stuck in a shitty environment where most producer and consumer surpluses get channeled to the platforms.

For all the technological advancement we have seen in the past 2 or 3 decades, in the end, the whole internet gets boiled down to an age-old phenomenon: the middle men abusing their (dominant) position.

Generalizing an old competition problem

In many ways, enshittification appears to be the new term to describe an old problem reappearing in the digital world. It is an old-known problem in competition or anti-trust where the dominant player abuses his or her position to extract surpluses from consumers. It is what a monopolist/oligopolist does.

First, you dump into the market to kill off all competitors and once monopoly power is established, you engage in predatory pricing. In Malaysia, we have witnessed this with Grab that now charges exorbitant fares after all its effective competitors have been driven off the road due to aggressive discounts in the early days of the service.

When Doctorow offers a way out, the solutions he gives are more competition in the market along with more rigorous anti-trust actions by the state and greater labor power through unionization.

These are the typical suggestions against monopolistic power but of course, the difference between textbook solutions and the problems outlined by Doctorow is that the technological, political and regulatory challenges in the real world are many times more complex than what discussed in a competition university classes. Internet monopolists are more technologically competent than the regulators, which makes running anti-trust policy more difficult to execute when compared to more traditional sectors like aviation or steelmaking. Many times too, regulators do get captured by the monopolists.

An old condition in a new world: technofeudalism

All those platform fees are simply rent with another name.

The rise of rentseeking as a major source of revenue from internet giants causes Doctorow to digress and borrow Yanis Varoufakis’s concept of technofeudalism, explained in his 2023 book Technofeudalism.

It is a neologism describing a condition where an increasing portion of revenue gets derived from rent (revenue arising from just controlling some assets/resources) instead of profits (revenue arising from productive activities minus the cost of running those activites). Varoufakis insists this represents a new kind of economic condition more akin to feudalism where long ago, landlords exacted rents from the working peasants who largely had no other choice but to work as farmers on someone’s else land. The peasants had to pay rent in various form to the landlords, regardless of profitability/harvest. Varoufakis further insists that this is a post-capitalism age, as capitalism is less about rent and more about profits.

A major component of enshittification of the internet fits Varoufakis’s framework well. Varoufakis is of course famous for this:

He is also the former finance minister of Greece during the European debt crisis, the former economist for Valve, the owner of the gaming platform Steam and all around leftwing economist.

Gamers should recognize these technofeudal trends quickly, where instead of buying and owning the games, they have to pay for subscription to play. There are also microtransactions (the worst of it, pay-to-win), which I would take as a subset of this trend.

But internet platforms are not the only guilty parties. Subscription-based model is proliferating in other sectors. In Malaysia, Perodua is selling its electric vehicles but with the battery must be rented from the manufacturers. Battery-as-a-service, as it is called. And then there is the more established term: software-as-a-service. SaaS is the ultimate example of technofeudalism; SaaS is a fancy term for rent-based businesses.

Electronic locks and anti-circumvention law

Central to much of the rentier tech economy (tech is a very loose term here) is the cover provided by a defective but mainstream intellectual property law.

Instead of copyrighting a new way of doing things productively, companies are copyrighting electronic locks to various machines (computers, printers, cars, etc) that should be open in the first place. Since the lock is copyrighted, hacking or breaking the them amounts to a crime while using the machines itself in whatever way mostly is not.

For example, a printer should be able to use third-party ink cartridges but the printer manufacturing prevents so by introducing an electronic lock. The lock allows only the use of the manufacturer’s own cartridges. Without the electronic lock, any ink with the right configuration would work with the printer. In fact, the use of any ink for the printer you own is not illegal. But the lock itself is copyrighted and breaking the lock is a crime. The protection for the electronic locks is the anti-circumvention law.

Because of this, the manufacturer, upon selling a printer, gets to enjoy repeat business through future ink purchases. And this is a rent and the law protects rents while stifling innovation instead of protecting intellectual property in order to encourage innovation.

Printers and cartridges are simple and maybe petty examples. But if you start to think about your smartphones and the restrictions its manufacturers impose on the users (famously, this is Apple), then the whole thing starts to become a more serious matter.

And one of the solution Doctorow proposes to fight technofeudalism, and rentiers in general, is to reform intellectual property law so that it returns to its original purpose: encouraging innovation.

No longer a curiosity: first degree price discrimination

Finally, I want to visit a section of the book that discusses the ability to track customers through all the private and personal data collected and sold by internet platforms through apps and in general, cookies everywhere, along with the ability to change prices dynamically/instantaneously based on those data due to the availability of electronic price display connected to the clouds.

Imagine two persons visiting an aisle just minutes apart. The first person would see a set of price different from the second person, because the retailers now have the technology to know a specific person’s preference (the tracking is so precise that you would think the apps are listening to you) and change prices based on that preference. By the way, this is already happening online where changing any price is a technological a trivial thing.

This is first degree price discrimination, where the seller is able to discriminate individual customers so effectively and completely that all consumer surplus gets extracted.

The concept itself is not at all new but 20 years ago when I was an economics undergraduate, such a thing was taken a did-you-know theory but with impossible application in the real world. It was a curiosity much like how the demand curve could slope upward. Today, it is not just a possibility. First degree price discrimination is becoming common and in all likelihood, the standard way of pricing if no regulation is forthcoming.

Perhaps this is the point of overly long book review: rapid technological advancement in the past 10 or 20 years is forcing a rethink of what we know of the world.

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Books, essays and others Travels

[3026] Elizabeth Pisani’s Indonesia Etc is a window to a more optimistic country

It is natural to make a list of countries one has visited before. Sometimes, that list comes in the form of emoji of flags. Sometimes, it comes in the form of map with the countries visited highlighted.

But is the list truly accurate? Have you really been to Russia if all you have visited was Moscow? The United States but just New York? India but just New Delhi? Japan but just Tokyo? Indonesia but just Jakarta? Malaysia but just the Twin Towers? Singapore but just… (okay maybe not all countries).

Indonesia is a massive country and I can say I have been to more than just Jakarta. Yet most places I have been are on the island of Java. There are Batam, Bintan, Bali and others but these places could not tell you about Indonesia in totality. To truly understand a place, one has to read its literature, history, newspapers and maybe, travelogues.

It is in that spirit that I picked up Elizabeth Pisani’s Indonesia Etc. Having worked in the country and travelled extensively still all over the places, she reveals just how diverse the Indonesia is. So much so that one of several threads running through the 400-odd pages is the idea how Jakarta or Java could feel like a foreign country to many living outside of the Javanese sphere, especially in the outer islands such as the Lesser Sunda Islands or places like Maluku.

I suppose any capital of a sufficiently-sized country can feel like a foreign country to those who do not live in the city. It is true even for Kuala Lumpur with its modern cosmopolitan outlook that contrasts sharply with life on the peninsular East Coast or the interior of Sabah. But Indonesia is truly big that the definition of foreignness gets on to another level.

Just as Jakarta is foreign to the outer islands, so too the outer islands to Jakarta and more so to foreigners like me. Here is where place-description pulls me into the book. Indonesia is just such a place where place-writing can go on and on and you would never get bored out of it.

But the breadth of the travels comes at cost: the book can feel disjointed and sometimes, superficial. As I progressed farther along the book, I had the feeling that it was written for white tourists, or maybe for white expatriates. As a person with deep roots in the region, by the time I finished reading the book, I found myself dissatisfied. I found myself wanting more details on localized history, politics and society.

To explore this argument further, the depth is uneven as the author attempts to cover as many places as possible. But when there is depth, it is great. I love the details of Sumba’s gifting culture and Pisani’s own thoughts on how it is a form of social insurance and how it has evolved into more of a debt system than gifting. Or how the way people enjoy wayang kulit has changed as the puppet masters shifted from flickering candlelight or flame to much brighter electric bulbs.

The unevenness of the depth is no fault of the author however. Indonesia is a big country and to write with all the breadth and depth, it would probably take a lifetime or at the very least, thicker than the tomb that is David Van Reybrouck’s Revolusi (which is an excellent read). 

Revolusi inspects Indonesia’s turbulent independence period of the 1940s. Pasani’s meanwhile is a travelogue, a window to a specific period of history: a post-reformasi era during rapid decentralization and perhaps, a more optimistic country 10 or 15 years ago.

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ASEAN Economics

[3025] Malaysia inches closer to high income status (but it is not the 2025 star…)

Yesterday, the World Bank updated its database to include the new 2025 datapoints. The updates also redefined the institution’s income classifications.

The data shows what is expected: Malaysia has indeed made further progress towards attaining high income status. In fact, Malaysia is now the closest it has been to being reclassified upward. In 2025, Malaysia’s GNI per capita (Atlas method) was recorded at 86.1% of high income threshold, which represents 2.5-percentage point improvement from 2024 (83.6%). The last peak was in 2019 when the ratio was 85.8%.

Judging by events this year so far, despite challenges, I am willing to bet that the upward momentum will continue in 2026. Still, there is some ways to go and the more interesting question is, when would Malaysia graduate up?

The easiest—but not the most realistic—way to estimate that is to assume a straight line trajectory: at 2.5-percentage point ratio increase per year means Malaysia would need about 6 years to get there, i.e. 2031.

Yet, that straight line assumption unlikely to hold. Recent strong growth rates, wide inflation differentials between Malaysia and the world as well as an ever strengthening ringgit would not be easy to replicate over that period.

So, it would likely take longer than 6 years. If I were to give a target, the earliest is by the middle of the next decade. The latest, 2040.

Racing against others

Malaysia is not the only one moving up in the world. Several economies have overtaken Malaysia over the past decade or so and this could be understood by looking at Malaysia’s ranking. In 2025, Malaysia was the 88th richest economy based on GNI per capita (Atlas) calculation. In 2010, Malaysia was the 80th richest (out of 200+ economies). Eight economies have shot past Malaysia within that timeframe.

None of these economies is more impressive than China. If Malaysia is on the cusp of reclassification into high income category, then China’s fate feels inevitable with its ratio at 99% in 2025. China surpassed Malaysia’s GNI per capita in 2020 during the the heights of Covid-19 pandemic and the Malaysian political crisis. Malaysia has been playing catch-up ever since and has recently got its act together.

More progress in the neighborhood

But in the latest data release, Malaysia and China are not the stars of the year.

The stars are the Philippines and Vietnam. In 2025, both for the first time have been reclassified upward from lower-middle income to upper-middle income.

With the graduation of the two, that means there are only Cambodia, East Timor, Laos and Myanmar left in the lower-middle income group. Of these four, Cambodia is the next candidate for graduation. Myanmar, of course, is at war with itself.

That said, Indonesia could lose its status as an upper-middle income economy if the trouble there persists. The steep fall of the rupiah is something to watch out. Even so, the country’s 2025 ratio increased, which shows a kind of resilience the financial markets tend to ignore.

The crazy actually rich Asians

On the other side, Singapore and Brunei are obviously up there.

But Brunei is another economy to look out for. For some years now, the economy has been struggling. In my mind, its excessive reliance on petroleum production (which is declining), limited progress on economic diversification and the pegging of the Brunei dollar to the Singaporean dollar are the primary sources of their economic pain.

 

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Economics

[3024] Is Malaysia a developed economy now?

Malaysia has dreamed of joining a class of rich industrialized economies since the 1990s. Initially, it was an aspirational goal with nebulous metrics in the form of Wawasan 2020 but by the late 2000s and early 2010s, the World Bank’s definition of high-income economy was adopted as something concrete. During the 2010-2014 period, it felt like Malaysia was on the cusp of being reclassified as such. By 2014, Malaysia’s income was 85% of the high-income threshold and some in the government believed it was reasonable to expect Malaysia to become a high-income economy by the end of the decade.

But it as turned out, attaining that label is not that easy. Growth in the real world is never so linear. After making rapid progress for much of history, since 2014, the ratio of Malaysia’s gross national income (Atlas method) to the World Bank’s upper-income definition has stagnated within the 80%-85% range as shown in the chart below.

The weakness of the ringgit against the dollar was the reason the stable ratio (forex rate is a proxy to other troubles in the real economy, domestic or otherwise, which I will not touch here). So much so that some would think Malaysia was suffering from the middle-income trap, a phenomenon that describes an economy that appears to have lost steam after successfully joining the middle-income ranks.

Now a decade later, the same optimistic conversation has returned  as Malaysia’s prospects of graduating is brightening up yet again. Economic growth has been going strong (Malaysia is a clear winner in the ongoing trade war between China and the US), inflation is low relative to other places (subsidies and price controls) and the currency is doing rather well in 2025 and 2026 (thanks to Trump’s chaotic administration). These three are exactly the things that determine whether Malaysia passes as a high-income economy, as far as the Atlas method is concerned.

We cannot see progress of 2025 yet because the data is not ready but optimism and progress could be seen through a slightly different lens. When Malaysia’s GNI per capita is compared to OECD’s median (OECD is mostly a class of rich economies where the 2024 GNI per capita median was roughly $41,000 versus the World Bank’s high-income lower limit of approximately $14,000), we can observe the improvement since 2022. For 2025, the ratio would likely be higher than 2024.

Whether Malaysia makes it soon or not (…the ringgit may yet weaken), I have always taken the position that crossing the line is an act of arbitrariness while the usefulness of the Atlas method itself can be quite narrow. It is unclear what changes materially when a country crosses the line (the classification itself is used by the Bank for inform its lending policy but for awhile now, the whole exercise has taken a life of its own). There is really no medal to be won, except a pat on the back, some glowing praising articles in the global press (and investment banks’ notes) and talking points for some roadshows abroad. Crossing the line arises from an act so marginal that if you ask the typical persons walking the Malaysian streets, it would be hard to convince them that they are collectively rich this year, but was just a middle-classer the previous year.

Additionally, as far as the World Bank classification is concerned, Malaysia sits at the margin, snugging between upper middle-income and high-income classifications. This can make the discussion whether Malaysia is high-income economy more the difficult than it should. There are convincing arguments to be made for and against.

Reversed boiling frog syndrome

When we are too close to the ground and our reference point is too close to the present, any improvement from the day before would feel marginal. We would not feel it unless there is a drastic change and drastic change usually comes in the form of crisis. Rarely would it involve improvement: it is much easier to destroy than to build.

I was thinking of the reversed boiling frog syndrome lately because I have been observing a trend where foreigners on social media rave about Malaysia. In the Indonesian side of the cyberspace, there appears to be a kind of Malaysia-envy where many seem to be convinced that Malaysia is a developed economy after experiencing Kuala Lumpur or even George Town. I have seen Filipinos expressing the same sentiment.

For them, perhaps, Malaysia could feel and look like an advanced economy. Again, Malaysia is snugged between upper middle-income and high-income classes. This makes Malaysia quite different from most other upper middle-income economies. For citizens of those countries, Malaysia could feel like a high-income economy after all, despite sharing Malaysia’s income category.

Yet, there are other foreigners that seem to think so too. When Trump was in Kuala Lumpur for the Asean Summit last year, more than a few Americans who were amazed at infrastructure Malaysia has and these facilities that Malaysians take for granted and would more often than not dismiss them as a marker of progress.

Convergence, in a way

Those feelings expressed by foreigners who live farther away from the ground with time reference more distant from the present do suggest some useful dimension in thinking whether Malaysia is a developed economy.

All measurements are imperfect but all of them do say something in their own way. When we shift away from GNI Atlas method and turn to GDP PPP that attempt to control differences in living costs, there is a convergence happening. In the chart below, it compares Malaysia’s GDP per capita against OECD’s median and from it, there is a stronger case of convergence, which is to say Malaysia is getting there.

But of course, as somebody once told me, you cannot eat your PPP (you cannot eat Atlas method too but it is more edible: a Malaysian that travels abroad would likely be concerned with the foreign exchange than PPP calculation).

Categories
Economics Politics & government

[3023] Addressing the supply crisis requires a renewed democratic mandate

I am a proponent of an early general election for Malaysia.

A distracted ruling class with a damaged reputation is working in a lame duck period

There are several reasons why I am so. The factor that I would like to highlight today is that we are entering a lame duck period as those in power and everybody else are already having an eye on the next election. With the Johor assembly dissolved recently and with several state elections to follow in the matter of months if not weeks, it is only natural for the political class to worry what comes next and shift to electioneering mode instead of the tasks of governing. That means the crisis is not getting the full attention it deserves. The crisis mostly is an FYI instead of an FYA as apparent from policymaking and the behavior of the general public.

More than that, those in power are quickly losing influence over everybody else that includes the business community, foreign governments, individual Malaysians and even members of the civil service. Even members of the ruling side with its complex multi-coalitional equation might take the government’s words and actions with a pinch of salt. Why should they not? They question and second-guess what would come next. Would this initiative be taken up by the next government? Do we still need to engage the current government or wait? Would he still be the Prime Minister after the election? Who would head this or that ministry? Would I want to associate with the ruling side now? More often than not, the safest course of action for most is to wait until the dust gets settled

The distraction and loss of influence are compounded by the government’s fear of voters’ backlash. As I have opined earlier, there is a lack of political capital to address the crisis as that capital has been used for various unhelpful episodes damaging the PH brand. Addressing the supply crisis would involve some economic pain (specifically higher prices and general living costs, and possibly some rationing too). We need to lengthen the availability of supply as long as possible that that means saving some resources instead of enjoying it all now. Nobody likes pain, but that pain is necessary in order to avoid greater complications that would definitely come if Malaysia is to take on business-as-usual path (which is what happening at the moment). Addressing the crisis comprehensively would intensify the backlash, even if compensating policy like greater cash transfers is put in place. With all these things in mind, the ruling coalitions are frozen to death about what this would mean at the ballot box. So, instead doing the right thing, the government has instead decided to coddle the voters policy-wise from what is to come.

Policymaking and execution are in stasis at a time when we need courage with all hands on deck.

There is not one, but two imminent economic crises

But what are the crises?

The first is well-known by now even as most Malaysians act as nothing is happening due to the very mild supply policy we have at the moment. It is the energy supply crisis centered around the Persian Gulf that is directly caused by the Israel-US aggression against Iran. The disrupted petroleum supply is sending ripple effects to various sectors in Malaysia (and around the world), as can be observed through the input-output model. The government has been communicating this very well to the public. Sadly, that communication runs at odds with actual policy, especially when it comes to petrol and diesel subsidies (and also… tourism).

The second is the very possible return of a strong El Nino that would hurt, among others, water supply, which in turn affecting agricultural and food production adversely. Already, fertilizer supply is a concern. El Nino would exacerbate the problem and raise market prices.

The first crisis is not being handled properly despite warning from the government’s own economists. The second crisis is largely going under the radar and would exacerbate the effects of the first crisis.

Renewed mandate is the way to go

It seems to me that in order to address the two crises effectively, the democratic mandate must be refreshed. Here, the general election is the way to shorten the lame duck and do-nothing policy period. Having the election as soon as possible could return us to the state of serious policymaking as quickly as possible democratically. There are other ways to do this, but democratically is the operating word here.

We have seen how prolonged policy inaction affected our lives before. The late February 2020 Sheraton Move caused Malaysia to lose weeks if not months’ worth of reaction policy time during the Covid-19 pandemic. That led to unnecessary deaths, overly deep economic downturn and the deepest of pain for everybody. We should heed the lesson of recent history. We need to move quickly and proactively.

No doubt, there is a risk that the election would also lead to a do-nothing period due to the need for power sharing negotiation immediately after election. The outcome of the next election would likely require multiple coalitions to work together yet again. The uncertainty involves the way the puzzle would fit together. Yet on the balance, even that government (whether PH would be in it or not) would have greater political capital than the current one, due to renewed mandate.

We must put the country first, party second.

Electoral messaging: the truth will set you free

To reiterate, Pakatan Harapan is so petrified of elections that in response to the ruling Johor Umno and Barisan Nasional dissolving the state assembly, PH-friendly social media accounts and some PH personalities have only one coherent argument: it is irresponsible to have an election during a crisis. But that argument would only work if the ruling side has the political capital to handle the crisis, which it does not. It is even more irresponsible to sit on it in fear.

Pakatan Harapan should take a different tack instead. Take the bull by the horns. They (or any coalition with national ambition) should be truthful of what lies ahead to the public going into the general election. Say it up front: the current government setup is untenable and fraying and that is preventing more effective solutions from being taken. They will be pain but it we will do the necessary to mitigate it. Tell the voters that Malaysia needs to come out of the crisis stronger and based on that, request a new mandate to take the necessary actions for the greater good.

That would be the manifesto: how would we deal with the crisis and how would we mitigate the pain. This would immediately avoid the kitchen sink manifesto that had caused Pakatan Harapan trouble in the past.

Pakatan Harapan can do this. The current government has a great record navigating global trends. Use this as a testimonial of competence. Tell voters Pakatan Harapan has the necessary plan to address the crisis but insufficient mandate to carry on. We have have the way forward and we would like you to approve the plan.

Further, doing this would allow Pakatan Harapan to regain the initiative instead of forever being reactive to its rivals. To carry on reactive as Pakatan Harapan is now would erode further the reputation of all parties in the coalition.