| It’s (not) the economy, stupid! Budi Akmal Djafar ; A Diplomat who lives in Jakarta |
JAKARTA POST, 20 September 2012
Every so often, we hear Indonesia cited as Asia’s new rising star ready to face the challenges and opportunities the world can offer. Its potential is massive and regionally influential; the country is ready for take off.
And for Indonesia, that hard-fought recognition is not confined strictly to commerce or market exchanges alone, but is reflected in how the country upholds the values of democracy amid its intricate tapestry of cultures. For many, Indonesia is a role model for success as it continues to prosper in the midst of global economic slowdown.
But one can’t help but wonder if these claims are justifiable today? Are we the ideal role model for economic growth and development among like-minded nations? The answer is both yes and no.
In the literature, the study of economics starts with a simple story. Think of a box (the economy) that produces all goods and services. And inside that box, there are multiple agents mobilizing the exchanges of goods and services. The point is to, then, figure out a way to enlarge or expand this imaginary box by way of maximizing utilities (happiness, in economic terms) for the greatest number of agents.
This illustration, although seemingly straightforward, is where the concept of growth and development diverges; many schools in economic thinking — ranging from orthodox to heterodox views — formulate growth and development through different sets of axioms (income, employment, etc.) where some variables are held constant, while others are heavily weighted.
But despite the differences, the pursuit for a better life in the context of economic growth and development should essentially do two things. First, it must be able to create and distribute wealth. And second, it should bring about changes or improvements to people’s livelihoods. Achieving one without the other is commendable but falls rather short for major breakthroughs; economic growth is just one aspect of the process of economic development.
Experts have indicated that Indonesia adopted a basketfull of policies to attract foreign investment and to pave the way to industrialization in the past few years. Among other positive indicators, we saw jobs created, incomes earned, and household expenditures at unprecedented highs. More than that, the government maintained a positive outlook by keeping inflation rates manageable while providing an adequate amount of credit for local enterprises.
Policymakers have also been prudent in dealing with markets; by minimizing exposure to toxic financial products, Indonesian banking and non-banking institutions were curbed from the effects of global uncertainties.
If we could imagine that same box for Indonesia, most of us would agree that the volume has been expanded; both exports (raw materials) and imports (input goods) rose in response to high aggregate demand. Indonesia’s economy reached landmark figures, gross domestic product (GDP) close to US$800 billion and, at the same time, remarkably, GDP growth was maintained above a 6 percent benchmark. And this interaction is critical in furthering the upward growth trend and the deepening of a developmental agenda. Hence, in a conventional economic interpretation, we are, in some ways, an example worthy of imitation.
Interestingly, though, there is more to growth and development than meets the eye. The discourse on economic growth and development are not simply about numbers per se but about how one can use these dynamics to create real changes. A good scorecard should be based on how one tranforms growth in advancing our daily lives. Increasing public expenditure on consumer goods (cars, motorcyles, property, etc) — as we see is the case today — is encouraging, but should only be viewed at face value.
For a developing nation like Indonesia, the purpose for high growth rates and development should be steered toward greater access, such as to jobs, information, space and, to a larger extent, clean soil, air and water. Put differently, there is something else beyond the notion of “building” when we speak of development, which should intrinsically be about “opening” people to new opportunities and knowledge at every social strata.
Amartya Sen, Nobel laureate in economics, once said that in judging economic development, it was not enough to look only at the growth of GDP/gross national product (GNP) or some other indicator of overall economic expansion. We have to look also at the impact of democracy and political freedoms on the lives and capabilities of the citizens. Therefore, higher growth and wider-scale development should in effect also promote peace and harmony among our people. And through the redistribution of wealth — both horizontally and vertically — we build trust and stability early on in the developmental stage.
Considering our recent successes, has growth contributed positively to our daily lives? Does growth translate to a betterment in our living conditions?
Consider the city of Jakarta. As the epicenter for business and politics by which the flow of resources is perpetually flowing in and out of the country, the city has among the poorest infrastructure and mass public transportation facilities. The high growth rate is , instead, epitomized by the city’s worsening traffic congestion, new shopping malls, and increasing amounts of environmentally unfriendly industrial waste. There is also a growing problem in creating more public spaces.
All these shortcomings within Jakarta’s city limits prove that the quality of life in the capital has, in fact, deteriorated. Not to mention the lack of progress in Indonesia’s more remote regions.
These factors become crucial when we address the significance of economic growth and development. Strictly measuring them based on these indicators alone while turning a blind eye to our surroundings misses the point entirely.
As the saying goes, “change doesn’t happen overnight”. But to ensure that economic growth can bring about a fruitful outcome, at its highest potential, it is important that we have a clear set of ideas on how we’d like to make use of our accomplishments. Developmental factors must be identified, then we must make way to realize these targets on a day-to-day basis.
Perhaps, we could go back to that imaginery box and ask ourselves what is it that we are really supposed to see or do? At a quick glance, expansion is probably in most of our minds. But take a closer look and we may see expansion differently; it does not necessarily mean growing outwards, it could simply mean growing inwards, by consolidating every single aspect that fills the entirety of the box.●
And for Indonesia, that hard-fought recognition is not confined strictly to commerce or market exchanges alone, but is reflected in how the country upholds the values of democracy amid its intricate tapestry of cultures. For many, Indonesia is a role model for success as it continues to prosper in the midst of global economic slowdown.
But one can’t help but wonder if these claims are justifiable today? Are we the ideal role model for economic growth and development among like-minded nations? The answer is both yes and no.
In the literature, the study of economics starts with a simple story. Think of a box (the economy) that produces all goods and services. And inside that box, there are multiple agents mobilizing the exchanges of goods and services. The point is to, then, figure out a way to enlarge or expand this imaginary box by way of maximizing utilities (happiness, in economic terms) for the greatest number of agents.
This illustration, although seemingly straightforward, is where the concept of growth and development diverges; many schools in economic thinking — ranging from orthodox to heterodox views — formulate growth and development through different sets of axioms (income, employment, etc.) where some variables are held constant, while others are heavily weighted.
But despite the differences, the pursuit for a better life in the context of economic growth and development should essentially do two things. First, it must be able to create and distribute wealth. And second, it should bring about changes or improvements to people’s livelihoods. Achieving one without the other is commendable but falls rather short for major breakthroughs; economic growth is just one aspect of the process of economic development.
Experts have indicated that Indonesia adopted a basketfull of policies to attract foreign investment and to pave the way to industrialization in the past few years. Among other positive indicators, we saw jobs created, incomes earned, and household expenditures at unprecedented highs. More than that, the government maintained a positive outlook by keeping inflation rates manageable while providing an adequate amount of credit for local enterprises.
Policymakers have also been prudent in dealing with markets; by minimizing exposure to toxic financial products, Indonesian banking and non-banking institutions were curbed from the effects of global uncertainties.
If we could imagine that same box for Indonesia, most of us would agree that the volume has been expanded; both exports (raw materials) and imports (input goods) rose in response to high aggregate demand. Indonesia’s economy reached landmark figures, gross domestic product (GDP) close to US$800 billion and, at the same time, remarkably, GDP growth was maintained above a 6 percent benchmark. And this interaction is critical in furthering the upward growth trend and the deepening of a developmental agenda. Hence, in a conventional economic interpretation, we are, in some ways, an example worthy of imitation.
Interestingly, though, there is more to growth and development than meets the eye. The discourse on economic growth and development are not simply about numbers per se but about how one can use these dynamics to create real changes. A good scorecard should be based on how one tranforms growth in advancing our daily lives. Increasing public expenditure on consumer goods (cars, motorcyles, property, etc) — as we see is the case today — is encouraging, but should only be viewed at face value.
For a developing nation like Indonesia, the purpose for high growth rates and development should be steered toward greater access, such as to jobs, information, space and, to a larger extent, clean soil, air and water. Put differently, there is something else beyond the notion of “building” when we speak of development, which should intrinsically be about “opening” people to new opportunities and knowledge at every social strata.
Amartya Sen, Nobel laureate in economics, once said that in judging economic development, it was not enough to look only at the growth of GDP/gross national product (GNP) or some other indicator of overall economic expansion. We have to look also at the impact of democracy and political freedoms on the lives and capabilities of the citizens. Therefore, higher growth and wider-scale development should in effect also promote peace and harmony among our people. And through the redistribution of wealth — both horizontally and vertically — we build trust and stability early on in the developmental stage.
Considering our recent successes, has growth contributed positively to our daily lives? Does growth translate to a betterment in our living conditions?
Consider the city of Jakarta. As the epicenter for business and politics by which the flow of resources is perpetually flowing in and out of the country, the city has among the poorest infrastructure and mass public transportation facilities. The high growth rate is , instead, epitomized by the city’s worsening traffic congestion, new shopping malls, and increasing amounts of environmentally unfriendly industrial waste. There is also a growing problem in creating more public spaces.
All these shortcomings within Jakarta’s city limits prove that the quality of life in the capital has, in fact, deteriorated. Not to mention the lack of progress in Indonesia’s more remote regions.
These factors become crucial when we address the significance of economic growth and development. Strictly measuring them based on these indicators alone while turning a blind eye to our surroundings misses the point entirely.
As the saying goes, “change doesn’t happen overnight”. But to ensure that economic growth can bring about a fruitful outcome, at its highest potential, it is important that we have a clear set of ideas on how we’d like to make use of our accomplishments. Developmental factors must be identified, then we must make way to realize these targets on a day-to-day basis.
Perhaps, we could go back to that imaginery box and ask ourselves what is it that we are really supposed to see or do? At a quick glance, expansion is probably in most of our minds. But take a closer look and we may see expansion differently; it does not necessarily mean growing outwards, it could simply mean growing inwards, by consolidating every single aspect that fills the entirety of the box.●