Economists' dispute over wording 'should be cleared'

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)