Economists' dispute over wording 'should be cleared'

Should the basic principles of the economy be changed to allow a larger role for the state in improving people's welfare? This has been one of the issues being discussed in connection with a proposal to change the economic principles set out in Chapter 33 of the 1945 Constitution. The Jakarta Post talked to Pande Raja Silalahi, a senior economics researcher at the Centre for Strategic and International Studies in Jakarta.

Question: Senior economists Mubyarto and Dawam Rahardjo have quit the Team of Experts appointed by the People's Consultative Assembly (MPR)'s Ad Hoc Committee because they could not accept a proposal by their colleagues to amend the basis of economic development from being "familial" to one based on "humanity and justice". Why did the other economists, including Sjahrir, Sri Mulyani Indarwati, Didik J. Rachbini and Sri Adiningsih, prefer the latter formulation as the basis for economic development?

Pande: It would seem that the interpretation of the word "familial" under Chapter 33, article 1 of the Constitution ("The economy is composed of mutually complimentary enterprises on a familial basis (asas kekeluargaan)") has never been clarified up to now.

Because we, Indonesians, consist of various ethnic groups with different cultural backgrounds, we may interpret the word differently. The other economists, therefore, apparently wanted the article to use the words "humanity and justice", which would be easier to understand and to implement.

Q: Is the amendment necessary?

P: We should not be too rigid with the wording. The most important thing is to formulate the article using clearer wording that is easy to interpret and to implement. Furthermore, the meaning of the word "familial" may also be accommodated in the words "humanity and justice", which are not mutually exclusive. The meaning of "justice", even though its implementation can be dynamic, is clearer than "familial".

Q: But the senior economists must have felt there was a big difference...

P: I do not know exactly what took place in their discussions ...

Reading their books and articles, and listening to their speeches in various forums, we can conclude that both the senior and junior economists were sensitive to the interests of low- income people but they may have had different ideas about how to help them.

Q: Some economists think that the use of the words "humanity and justice" in the Constitution could lead the country to adopt neoliberalism in its economic development. Do you agree?

P: I do not see that as being the case. Anyway, if there is any doubt, we could add the clause "in accordance with Indonesia's national interests" after the word "humanity".

Q: Isn't neoliberalism suitable for Indonesia?

P: First ... the term neoliberalism is never unanimously defined by economists. We, therefore, would be better off saying "liberal economy without any control" rather than using the term neoliberalism.

Practically speaking, there is no single country in the world that leaves its economy completely free of government control.

In the case of Indonesia, we should not necessarily be afraid of globalization as long as we prioritize our national interests.

Q: Will amending the clause to include the words "humanity and justice" lead to a setback for cooperatives which have so far been promoted by the government based on the disputed chapter of the Constitution?

P: No. The word "familial" in Article 33 has so far been applied literally to cooperatives but their development is not supported by any system. The operations of the cooperatives have done more harm than good.

Various parties pretending to promote cooperatives want the provision of loans for cooperatives to support low-income earners, but this has been abused. We have therefore spent a lot of money and energy on cooperatives but we do not see any significant improvement in the added value produced by their members. Their contribution to gross domestic product is also very small.

Instead, we should translate the wording (of the article) into the spirit of cooperation. Given such a spirit, producers, for instance, could cooperate with each other to jointly improve their economic positions.

Q: How about equality in wealth distribution?

P: Equality can only be promoted at a certain point of achievement. Companies, for example, should give bonuses to their employees and provide social security benefits for them if they are profitable. So far, many companies have not done this because they regard their employees merely as one of the factors of production, not as resources that need to be developed productively.

Q: What's your suggestion for resolving the dispute in question?

P: They should look for a compromise by formulating a wording that can accommodate all their ideas. The use of the word "familial", for example, should not make it difficult for us to formulate policies, while the use of the words "humanity and justice" should not lead to so-called neoliberalism.

Q: What form of economic development is suitable for Indonesia?

P: In line with globalization, we need to adopt a market-oriented economy but we must prioritize our national interests.

It is true that in all countries developing a market-oriented economy, there is, at the initial stage, economic growth without equality in the distribution of its results. That is why there is usually social turbulence at that stage.

But as soon as their per capita income reaches US$1,000 a year, they can start using their fiscal policies to redistribute wealth by, for example, instituting more progressive taxation and putting a social security system in place. It is difficult to introduce such policies at the early stage of market-oriented economic development.

Indonesia's per capita income actually went slightly above $1,000 per annum in 1996 but, unfortunately, the country started to experience a serious economic crisis in 1997. (Rikza Abdullah)