Fuel prices hike: Desperado in limbo

B Herry-Priyono, Researcher, Alumnus, London School of Economics, Jakarta, herryprb@lse.ac.uk

These are the days when public policy in this country walks again in limbo. And the way it walks in limbo is pathetic. It was triggered by a political-economic game to raise fuel prices, then the basic prices of electricity and telephone (Following public pressure the government on Tuesday cut fuel prices). All this took place after the Indosat divestment and a "free dinner" in the form of Release and Discharge (R&D) given to indebted bankers.

Insofar as we see all these simply as a series of events, nothing will strike our chords. Once we go up to the broader political-economic horizon, however, things start to stink. What is taking place is a desperado move taken by the leadership of the Republic. Price hike is not unusual in the market economy, but some hikes are more unusual than others.

As we know, the present government is deeply beset by a revenue imperative, in that it desperately needs revenues for financing its administration. The problem is, the same government has for sometime been hostage to the dictate of the financial oligarchs and to the orgy of corruption, collusion and nepotism. The timidity and failure to overcome its subservience to them plunge the Republic into the present predicament.

Observe the following statistics of colossal looting. In Kwik Kian Gie's calculation (www.munindo.bre.de), the loss of revenue from taxes alone amounts to US$24 billion, subsidies for the defunct banks $4 billion, losses from illegal logging and fishery $9 billion, leakage from the state budget amounts to $7.4 billion; in total, about $44.4. To this has not been added billions of evaporated money from Bank Indonesia Liquidity Support (BLBI) funds grabbed by several financial oligarchs.

Equally startling is the fact that, while there is $9 billion in the 2003 state budget allocated for bank subsidy, only $6.5 billion is for development. No thoughtful person can simply shrug it off as "natural". It calls for explanation, or, rather, the fact explains many things of our current predicament.

It is true that in 2002 subsidies for basic necessities amounted to $4.2 billion, but subsidy for banks totaled $5.9. In 2003, the latter has surpassed the first by $3 billion. The bad news is, this pattern is considered as a big achievement by the Economic Team. This is economic neo-liberalism in its naked face. It is the model of economics pursuing not the market, let alone the common welfare, but, in the words of former World Bank chief economist Joseph Stiglitz, "pursuing the interests of the financial community".

So, there is something gravely fallacious about the claim that fuel price hike is justifiable because the implementation of fuel subsidy has failed. Using the standard of the 2001 state budget, owners of Mercedes Benz, BMW and the like who travel 20 kilometers a day grabbed 425,000 Indonesian rupiah of fuel subsidy per month, whereas those traveling by cars like Kijang obtained Rp 24,000. The poor? They received a meager subsidy of Rp 8.150 per month, Kompas reporter.

There is something wrong in this pattern, which may be due to its flawed design that led to a fiasco at the level of implementation. The intellectual bankruptcy comes in the form of the most brainless and ruthless twist of logic.

The failure in the "implementation of fuel subsidy" is used as the basis to abolish the "raison of fuel subsidy". What a horrendous twist of logic, even from the most elementary standard of philosophy! Instead of correcting the implementation mechanism, public policy targets the scrapping of the basic reason of subsidy. This is certainly not to say that all subsidy is good. What it says is that these days there is an unenlightened way of viewing subsidy in the public policy.

The idea that Departments of Economics and Public Policy should be teaching philosophy may be laughable. Actually, if we are to have any hope of a long-term future, it is essential.

Indeed, economics is the study of how to manage unlimited wants with limited means. Nevertheless, looking at the statistics above, we ought to ask: Whose wants? Advancing the insatiable needs of financial oligarchs by concealing them in the abstract term "unlimited wants" is an unscrupulous neo-liberal game of ruthless power that brings havoc to our shared life.

Again, it surely takes money to suppress prices at certain levels. But why target only subsidy money for basic necessities?

Why the silence about much higher subsidies for banks? This is what Stiglitz has unmistakably called the economic model that approaches "the problems from the perspectives and ideology of financial community".

A form of warning may be aired as a rhetorical question, "Is our desire for cheap fuel so strong that it is worth risking a banking panic?" This is a scare being posed by some financial brokers to justify subsidies for banks but undo that for basic necessities.

A sermon on "trade-off or sacrifice" is convenient, but sacrificing the lives of ordinary citizens at the orgy table of financial oligarchs is another matter. It is called 'brutality'.

In the financial world, this warning may not be without basis.

But, beware, the occurrence of a banking panic is usually used and abused as proof that scrapping subsidies for basic necessities, instead of that for banks, is the most logical choice. What a ruthless manipulation of logic, again!

A banking panic, if any, is no proof that scrapping subsidies for basic necessities, and maintaining that for banks, is the correct choice. Equally, the non-occurrence of banking panic after the scrapping of fuel subsidy is no criterion of success for public policy. It simply means a neo-liberal victory. As we know, the victory has more to do with being power hungry than with validity.

In the end, the rise in fuel prices can only be acceptable by ordinary citizens if, and only if, the looted amounts as portrayed above have been pursued vigorously. Seek the looted money first, and the price hike should come later.