1. Hilman -- PRIME MINISTER JOHN HOWARD' S VISIT TO INDONESIA

1. Hilman -- PRIME MINISTER JOHN HOWARD' S VISIT TO INDONESIA 2 x 20 48 pt

Australia, RI still need to overcome distrust

Hilman Adil Research Professor Indonesian Institute of Sciences (LIPI) Jakarta

In an apparent effort to improve the troubled relationship between Indonesia and Australia, the visit of Australia's Prime Minister next month should be assessed in the wider context of the global situation, and the Asia-Pacific region in particular.

In the space of several months after the crisis in East Timor in 1999, Indonesian-Australian relations plunged to the lowest point in its history. As Indonesia canceled official visits by president B.J. Habibie and other officials and attacks on Australia became common in the Indonesian media, the Australian government came face-to-face with the consequences of soured relations with its neighbor.

The business community raised concerns over the future of bilateral trade. Some academics in Australia questioned the government's commitment to the Southeast Asian region. Decision- makers in Canberra pondered the added difficulties that an openly- hostile Indonesia would add to Australia's already- delicate regional diplomacy. Countries in Southeast Asia questioned whether the worsening of Australia's relations with Indonesia represented a shift in its regional policy.

The Foreign and Trade Policy White Paper, released in September 1997,listed Indonesia as one of Australia's foremost bilateral relationships, alongside the United States, China, and Japan. Among officials, the media, and academics in both countries, there have been many in both countries who have sought to improve what has been a troubled relationship.

But despite these efforts, Australian attitudes towards Indonesia are influenced by the fear of a foreign invasion that has been consistent throughout the nation's history. The historian Werner Levi once wrote: "In all Australian debates on foreign relations there has always been an undertone of fear which breaks out at the slightest provocation. Fear is the leitmotif of Australian thinking on foreign policy and Australians never lack a potential aggressor".

Descriptions of Indonesia's 200 million plus population, its low levels of political and economic development and its status as the world's largest Muslim nation especially after the attack on the World Trade Center on Sept. 11 last year, all play deeply on the Australian people fears of Asia.

The images and metaphors used to describe Indonesian society and assumptions about differences in national character reflect a persistent negative view of Indonesia. Or as Desmond Ball put it, but not necessarily in a negative sense: "Although geography has placed us next door to each other, we are in many significant respects strangers". Prime Minister John Howard, asserted more extremely that Australia is "a European, Western civilization with strong links to North America", Australians no longer have to fret about whether they are part of Asia.

They can participate in regional affairs on their own terms. He concluded that a more muscular Australia, confident of its values and identity and willing to fulfill the responsibility to defending these values in the Southeast Asia region, has already proved its bona fides through the East Timor intervention.

This view which forms the core of the "Howard Doctrine" and was reflected in the 1999 white paper on defense. In an interview published by The Bulletin on Sept. 20, 1999, he sees Australia acting in a short of "deputy" capacity to the global policeman role of the United States.

It was a time when Australia was in a self-congratulatory and self-satisfied mode in the context of its East Timor peacekeeping operations. On the issue whether Australia should see itself as an Asia-Pacific country, the coalition government under Howard differed in its orientation with previous Labor policy which allegedly distance itself from its traditional allies, particularly the United States.

The Howard government seems more inclined to agree with Samuel Huntington who went so far as to suggest that Labor's policy was in danger of turning Australia into a "torn country". According to Huntington, Australia was disengaging from its Western orientation and was moving into the Asian sphere.

From the perspective of his "clash of civilizations" thesis, this meant that Australia was attempting to straddle the civilization divide and such an approach was bound to bring significant tensions and conflict.

It is not clear what Prime Minister Howard is trying to accomplish during his visit, apart from an effort to improve the troubled relationship between the two countries by removing some misunderstandings in the past where the politics of identity played an important role. The question is whether differences in social-culture which is regarded as a problem could be overcome by increasing high-level contacts and in deepening the relationship, or in Gareth Evans' words, putting ballast in the relationship.

The idea that understanding is related to the dissemination of information to skeptical circles in both countries and regular contacts between the political elites, ignores the emotional and irrational aspects of the politics of identity. It also ignores the ways in which domestic politics can dissipate the goodwill built up in the bilateral relationship if situations prescribe that political capital can be gained by attacking it or manipulating it.

For example, if political parties or social organizations are resorting to "patriotic" assertions of national identity.

The Prime Minister in his visit should therefore underline a relationship which is based on shared interests and mutual respect. These principles will provide the basis for a realistic framework for the relationship between Indonesia and Australia, and offer the best prospects to maximize shared economic interests, advance both countries' political and strategic interests, and manage differences in a sensible and practical way.

These policies and actions is to show Indonesia that the strategic outcomes the Howard government will pursue are consistent with Indonesia developing a key role in regional, economic, and security issues commensurate with its strategic location in the region.

The foreign policy objective of any Indonesian government so far has been the need to become a unified and internally stable country, politically as well as economically which can produce a more productive, realistic, and sustainable relationship between the two countries.

There is, however, some cluster of opinion in Australia which believes that an obstacle for Indonesia to achieve such a status will be the serious internal problems it is facing, i.e corruption, unemployment, and political instability. They also argue that unless Indonesia can overcome these problems it is difficult to expect a bright future for the country.

This cluster of opinion which would like to see a prosperous and internally stable Indonesia argues that in pursuit of these goals it will also alter the nature of its society and the regional order.

They point to the growing interdependence and the continued economic dynamism of the Asia-Pacific region, despite the Asian monetary crisis, as the most direct route to attaining prosperity and power. The incentives for Indonesia to foster these interdependent links are through regimes promoting trade liberalization, regional stability, and greater understanding. Asia-Pacific institutions, like APEC, the ASEAN Regional Forum and others, provided that no other crisis will occur, might all gain in strength and effectiveness.

These interdependencies and the regimes that advance them are judged to be more important than the sporadic tensions and conflicts that flare up in the region.

2. Hilman -- How not to help the poor 1x 32 36 pt

A lesson in how not to help the poor

Larry Elliott Guardian News Service London

Everybody knows that the world isn't fair. Inequality is part of the human condition. Always has been, always will be. What has never really been clear is just how unequal life is. Now, thanks to an economist at the World Bank, we do. The richest 50 million people, huddled in Europe and North America, have the same income as 2.7 billion poor people. The slice of the cake taken by one percent is the same size as that handed to more than half of the world's people.

These are mind boggling numbers. Well might Branko Milanovic, the economist responsible for the study in the January 2002 Economic Journal, wonder whether this state of affairs is sustainable. It's a rhetorical question, of course. For a while, the rich may retreat into their fortresses but in the end an army stuck in a fortress is weak not strong, vulnerable rather than safe. There is scant comfort to be drawn from the fact that the rich are becoming spectacularly richer rather than the poor becoming poorer in absolute terms, although this is true for a sizeable minority, especially in sub-Saharan Africa. In a world that has shrunk as a result of technology and the spread of the mass media, it is relative poverty that is the danger. As Mr Milanovic puts it, there must be serious doubt about how long such huge inequalities can last when the poor can see the rich flaunting their lifestyles on TV and in the movies.

The danger is that we assume that inequality on this scale is a natural phenomenon, rather like a monsoon or a blizzard, and that there is therefore nothing that we can or should do about it. Policy choices have been made to organise the world in the way that it is because that is deemed the way to maximise utility.

The intellectual basis (such as it is) for trickle down economics is that you might need to make societies more unequal (but only in the short-term, you understand) in order to foster the dynamism and flexibility that will eventually enrich us all. Germany's problem, according to this view, is that it has tried to be too equal, which is why a truckload of trickle down advice is heading its way right now. Extreme caution is needed here. Shock treatment didn't work in Russia; it shortened male life expectancy by six years within a decade. Shock treatment didn't work in Argentina; the country is effectively bankrupt. Shock treatment works well in the theoretical models of free-market ideologues but nowhere else. You don't believe me? In that case, let's look at a real life example. For our case study we need to head off to the Pacific and go back in time to 1984. New Zealand was the perfect field trial for extreme structural reform. It was small and geographically separate, it has a single-house parliament dominated by the executive and it was dosed up to the eyeballs with all the toxins that the reformers said were poisoning capitalism. Import controls, capital controls, strong trade unions, a redistributive welfare state, a large state sector; New Zealand was hooked on all the bad drugs. Starting in 1984, the country's Labour government said that this all had to change. It started by deregulating interest rates, removing international capital restrictions, floating the currency and removing agricultural subsidies. Having got the taste for change, it then scrapped regulations on business, abolished import quotas, enshrined price stability in law as the sole object of monetary policy, forced workers into individual contracts, announced that budget deficits would eventually be banned, cut income taxes and slashed welfare benefits. This was not a detox regime: it was cold turkey. As a consequence of these reforms, inequality in New Zealand grew more rapidly than in any other country. The government created an underclass where none had existed before. But purged of its addiction, it was hailed as the country that the rest of the west should emulate, the role model that had dared to do what even Mrs Thatcher would not, and was all the better for it. There was only one problem with this argument. It was called Australia. Although Australia is not quite as close to New Zealand as the rest of the world thinks, it is relatively close and has strong cultural and economic similarities. Australia has by no means turned its back on economic reform in the past two decades, but it has been more selective and a lot more gradualist in its approach. The latest edition of Political Economy (Volume 14 number 1) contains a fascinating comparison of the track records of the two Australasian nations by Paul Dalziel, a New Zealand academic. His first conclusion is that New Zealand's living standards have suffered badly when compared with those in Australia.

Up until 1987, the two countries had a broadly similar growth pattern, but the upshot of New Zealand's spell as an economics laboratory mouse is that it has expanded much more slowly than its neighbour, with significant effects on personal incomes. Dalziel says that had output in New Zealand matched that in Australia, annual per capita incomes in New Zealand would have been almost NZ dollars 5,000 (US dollars 2,500) higher by 1998 than they actually were. The cumulative loss to each individual was NZ dollars 30,000 (US dollars 15,000) and the cost to the country was a chunky NZ dollars 114 billion (US dollars 57 billion).

Higher unemployment has always seen by the free-market fundamentalists as a price worth paying for necessary structural reforms, so Dalziel's second conclusion -- that New Zealand's record on joblessness has worsened relative to Australia -- is hardly a surprise. At the end of the 1970s, New Zealand had an unemployment rate of 1.5 percent, only a quarter of that in Australia. The gap closed by the end of the 1980s, and although the jobless rate in New Zealand was lower than in Australia for much of the 1990s, by 1998 both countries had similar levels of unemployment -- 8 percent. More surprising, perhaps, is that New Zealand's record on labour productivity has been so rotten, despite the shake-out in the labour market and the attack on trade unions. The notion that slash and burn tactics allow managers to "clear out the dead wood" and force through changes to improve efficiency is hard to substantiate in the light of the fact that in the 1990s -- after the deregulation of the labour market -- New Zealand's productivity increased by 5.2 percentage points, while Australia's rose by 21.9 percentage points. In terms of inequality, New Zealand was in a class of its own. As was true across the west, the rich were the real beneficiaries of structural reform, with the top 10 percent of the income distribution enjoying a 26.5 percent increase in real incomes between 1983-4 and 1995-6. What was different about New Zealand was that the poorest half of the population had less real purchasing power at the end of this period, and the poorest groups suffered the most. This was not what the reformers in New Zealand had expected or desired. The aim, set out in 1984, had been to tackle "an unacceptable level of poverty". Dalziel concludes that the shock treatment of the 1980s and 1990s did not achieve that core objective, a view that is shared by New Zealand's current prime minister, Helen Clark. She has raised the top rate of income tax, increased pensions, reregulated the labour market and cut student fees. In a brutal sense, the New Zealand experiment was worthwhile. It highlighted the ineffectiveness and risks of policies that deliberately foster inequality. New Zealand has shown the world how not to do it.