Hardest part of democracy: Creating beneficent state

Peter Milne, Jakarta

Few can doubt the historic importance of the peaceful and democratic passing of executive power to Indonesia's first ever directly elected president later this month -- with the former general-turned-democrat, Susilo Bambang Yudhoyono as the winner.

Indonesia and its citizens deserve a standing international round of applause for this achievement in just six years since former president Soeharto stepped down in disgrace in May 1998. Not only is this transition towards political democracy of immense significance for the future of Indonesia and its people, but it also sets a major precedent for the rest of the Muslim world, if not most of the developing world.

However, before we allow ourselves to be carried away on a wave of euphoria similar to that witnessed after the country's first free-and-fair general election in 1999, it is worth reflecting on what still remains to be done on the journey towards fuller liberal democracy.

If the long-term goal of democracy in Indonesia is prosperity and personal freedom, then increasing political democracy through direct presidential elections is only one, albeit important, small step. Only a deeper liberal democracy, complete with a wealth-creating liberal market, can nurture prosperity and personal freedom. Liberal democracy is only half-baked where personal freedom exists in the absence of a liberal market.

One of the hardest steps for Indonesia in moving towards a deeper democracy in the next few years is likely to be in accepting and embracing a truly liberal market economy. But while many may beg to differ, it is this democratic relationship between politics and the market that will create full democracy in the sense of prosperity, equality and the best use of the state's resources -- not to mention the protection of the very democratic processes that this transformation rests upon.

For so long, Indonesians have been imprisoned by the idea that somehow their indigenous wealth was being taken from them -- either by devious foreigners or by each other. This mindset is the antithesis of a democratic and liberal quest for creativity and opportunity. What Indonesians need to focus on now is not fighting over how much of the cake they can each lay claim to; after all, this is a zero-sum game in which what one person takes another must forfeit.

Instead, if a culture of liberal democracy (and the creation of a liberal market) is channeled into making the cake bigger, then all Indonesians stand to benefit. This is just as much an indispensable component of liberal democracy as directly electing a new leader.

So, what are the main characteristics of this beneficent liberal democratic state liberal democratic state that can both create wealth and ensure that it is distributed more fairly?

Using three qualities suggested by Martin Wolf, associate editor of the Financial Times suggests three in his recent book Why Globalization Works,let's look at the Indonesian situation.

First, Indonesia needs to develop a new morality as it moves away from the predatory state of the past, typified by the latter Soeharto years, on its journey towards a successful advanced liberal democracy. This requires the establishment of the rule of law, administered by honest judges and, most crucially, a state in which the military finally accepts to work under civilian leaders.

There are three components to this new morality. Indonesia has already largely achieved the first component, namely providing a government elected by popular consent. The second component is that some of the state's prosperity must be used to pay the military adequately. In return the military must, over time, accept either to bring all its off-budget finance on-budget, or to return those sources to state control. Third, a symbiosis needs to be achieved between two cultures that are innate to the state: a commercial culture and a guardian culture.

The commercial culture depends on the sanctity of contracts, honesty in business, innovation, openness towards foreigners and the assets that they can bring, and the acceptance of dissent. Conversely, those who uphold the guardian culture of the state must eschew the world of business and instead focus on issues of discipline, honor and professionalism in protecting the state's institutions and integrity.

The second component of a secure liberal democracy is a fully constitutional system that entrenches individual freedoms and establishes representative parliaments. But while the relatively free-and-fair electoral process in Indonesia is a huge step forward, it is worth noting that only the 128- member of the Regional Representatives Council (DPD) was directly elected.

Furthermore, the new parliamentary rules of "recall" give inordinate power to political party bosses, who can replace members of the House of Representatives (in their party) on a whim. This prevents legislators from voicing their own opinions, far less the concerns of their constituents.

One further attribute of a constitutional democracy is that there should be constraints placed upon the power of the executive through a system of checks and balances, together with oversight and the monitoring of legislature. Only through such a system can the rule of law be ensured and abuses avoided.

Furthermore, for democracy to remain secure, and to protect the sanctity of contracts and private property, there must be limits on the extent of inequality in society. Failing this, the specter of populism arises, whereby poor majorities are tempted to seize wealth from rich minorities.

Therefore, governments must be sincere in addressing the concerns of the majority, while also explaining the realities. The third component of a beneficent state is allowing regulatory competition, something that many in the Indonesian elite have a strong aversion to. Regulatory competition is just as important in allowing the market to function optimally in searching out opportunities, measuring risk and creating wealth.

Susilo has been elected by a truly democratic process. This is a crucial first step, but only that. Far harder hurdles will follow in seizing the moment and maintaining the momentum by pushing for the implementation of a fuller expression of liberal democracy in Indonesia.

The author is freelance writer on Indonesian politics.