Gray area in business, power<\/p>\n
By Makmur Keliat<\/p>\n
SURABAYA (JP): There are two depressing facts that most
\nIndonesians are acquainted with. The first one relates to the
\npsychological anxiety of people living in urban areas,
\nparticularly those in big cities, such as Jakarta and Surabaya,
\nand whose dwellings are not located in the housing landscape
\ndetermined by the government nor built by real estate companies.<\/p>\n
Notwithstanding the longevity of their stay, the government
\ncould easily drive them away from their dwellings in the name of
\npublic interest. It is also common to see that various schemes
\nfor land management cooperation between farmers and private
\ncompanies, or between the government and farmers in rural areas,
\nend in sad stories. Why have such eyesores come into being? Are
\nthey a price Indonesia should pay for its impressive economic
\ngrowth?<\/p>\n
The second one relates to the way some Indonesian tycoons rise
\nto power, and there are only a few of them. In fact, most of them
\nstarted their business in the early period of the New Order
\nregime. It is also this regime that has played a facilitating
\nrole in building up their business empire. In the wake of this
\nparadox, Indonesian economic policy seems to have shifted
\ngradually, but steadily, towards a stronger market economy.<\/p>\n
It has been widely accepted that technological progress is one
\nof the determining factors behind the rapid expansion of the
\nmodern market economy all around the world. It is this remarkable
\ntechnological progress that has created a sophisticated and
\ncomplex specialization in the division of labor and produced a
\nmultitude of goods and services. It has also been recognized,
\nhowever, that technology itself has plunged the present modern
\nmarket economy into a situation that is very vulnerable to
\ndeceptive and unfair acts.<\/p>\n
Moreover, interaction between producers and consumers within a
\nmodern market economy is very impersonal in nature. In general,
\nboth of them do not know each other personally, to the point of
\n\"losing face\" if one party behaves dishonestly. It is this
\nattribute that mainly differentiates the basic concept of a
\nmodern market economy with that of a traditional one. In very
\nelementary terms, a traditional market economy is primarily a
\nmarket with a very modest division of labor and product
\nspecialization. The interaction between sellers and buyers in
\nsuch a market is personal. In consequence, the likelihood of
\nindulging in unfair and deceptive acts is relatively low. The
\nmost palpable and classic case of this situation can be easily
\nfound in an isolated village market in which marketers know each
\nother personally, since they all belong to the same village
\ncommunity.<\/p>\n
One significant distinction between modern and traditional
\nmarket economies is the cost of transactions. Since there is
\nlittle possibility of cheating, the cost of transactions in a
\ntraditional market economy are very low. There is no urgent need
\nto work out a budget for the signing of contracts, estimating the
\nselling and buying price of traded goods or launching
\ntechnological innovations. On the other hand, in a modern market
\neconomy, the cost of transactions are very high since various
\nefforts are made at all costs to prohibit and penalize
\ncounterfeiting, for instance, by introducing intellectual
\nproperty rights or producing special products by introducing
\nconcerted technological innovations.<\/p>\n
Douglas C. North calls the types of economic organizations
\ncoming out of the traditional market economy, personal exchange
\norganizations, and those from the modern market economy,
\nimpersonal exchange organizations \"with a third party
\nenforcement\" meaning that it is in a state of being considered a
\nthird party enforcement. In other words, a state of being
\nconceptualized as the sole institution, capable of minimizing
\ncounterfeiting by translating various regulations into a legal
\nfoundation.<\/p>\n
However, a transition from a traditional to a modern market
\neconomy, in most developing countries, does not take place
\nautomatically. What has been apparent, in most cases, is the so-
\ncalled \"impersonal exchange without third party enforcement\".
\nThis means that not only has it been incapable of providing legal
\ncertainty, but it has become an interested party in the creation
\nof weak legal enforcement and it unilaterally imposes a term of
\nexchange in favor of certain marketers as well.<\/p>\n
Under these circumstances, the cost of transactions have also
\nbecome higher, but it does not result from technological
\ninnovation. It is mainly due to various economic levies paid to
\nthe bureaucracy. Another end product has been that existing big
\nbusiness organizations take the shape of modern ones, but they
\nare, in essence, very similar to traditional ones with a very
\nlimited specialized division of labor.<\/p>\n
In the case of Indonesia, such a phenomenon is easy to spot.
\nThere are big companies running diversified businesses ranging
\nfrom agriculture to transportation, from real estate to road
\nconstruction, from banking to five-star hotels. They are very
\nmuch like traders in Dusun Gedang, an isolated village in the
\nJambi province in Sumatra. The traders in this village sell
\nvarious agricultural products and handicrafts in the village
\nmarket simultaneously. Of great significance is that they are
\nvery flexible in their occupation since they could work as
\nfarmers, handicraftsmen or carpenters if they deem it necessary.
\nThe only difference is that they run a business with little
\ncapital and a very limited access to the bureaucracy, while most
\nbig companies in Jakarta are the other way round, i.e. running
\nand building up businesses by relying on the protection given to
\nthem by the people in power.<\/p>\n
The overlapping scope of activities between those who are in
\nbusiness and those who have power, in turn, has obscured the role
\nplayed by entrepreneurs and the people in power. Those in power
\ncould become traders by marketing their powerful position in the
\nbureaucracy. Likewise, it is equally true to say the opposite,
\nthat is, big businesses could behave like those in power by
\nmisusing its monetary power and its proximity to the bureaucracy.
\nThere has been a vast gray area between those who are in business
\nand those who have power. It is against this background that land
\nproperty rights in Indonesia might have been frequently neglected
\nand violated. If this is the case, then the existing situation is
\ncertainly unfit for the principles of a modern market economy
\nsince it creates social envy, which could lead to a volatile
\npolitical instability and, in consequence, discourage foreign
\ninvestors from bringing business to Indonesia.<\/p>\n
How can we solve this discouraging situation? Can we merely
\nrely on the prescription that bureaucracy should behave
\nobjectively while, in reality, bureaucracy itself has become
\ninterested in creating such a social malady?<\/p>\n
Without playing down such a remedy, it also seems necessary to
\ninstitutionalize community-based organizations among economically
\ndisadvantaged groups in rural and urban areas. Though in
\nfinancial terms they have little capital, such organizations, in
\nthe long run, could become appropriate instruments in building
\ntrust and strong solidarity.<\/p>\n
In this way, the leading economic power and bureaucracy would
\nface difficulty in deceiving them. In short, mutual trust and
\nstrong solidarity could be transformed into \"large capital\", in
\nsocial terms, if Indonesia seriously intends to help
\ndisadvantaged groups in the wake of a modern market economy
\nlacking legal certainty.<\/p>\n
The writer is a lecturer at the Faculty of Social and
\nPolitical Sciences, Airlangga University, Surabaya and holds a
\nPhD degree from the School of International Studies, Jawaharlal
\nNehru University, New Delhi, India.<\/p>\n
Window A: The overlapping scope of activities between those who
\nare in business and those who have power, in turn, has obscured
\nthe role played by entrepreneurs and the people in power.<\/p>\n
Window B: How can we solve this discouraging situation? Can we
\nmerely rely on the prescription that bureaucracy should behave
\nobjectively while, in reality, bureaucracy itself has become
\ninterested in creating such a social malady?<\/p>",
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