Lessons for coping with economic troubles

Demokratisasi Ekonomi dan Pertumbuhan Politik (Economic Democratization and Political Growth); By Prof. Dr. Loekman Soetrisno; Kanisius, Yogyakarta, 1997; 308 pp; Rp 20,000

YOGYAKARTA (JP): History apparently always repeats itself. The nation's economic crisis is not the first of its kind; there have been two others in the postcolonial era.

The first occurred in the 1950s and lasted until 1965. It was marked by a minimum of foreign exchange, while needs, especially of textiles, were very high. The second arose in the 1980s when the price of crude oil tumbled on the world market.

In the past six months, we have confronted the third.

The government is working hard to cope with the situation. Whatever steps it ends up taking, we are privileged to have Loekman Soetrisno's latest book as an additional resource.

He clearly explains the model of development implemented by the government in the past 30 years, and he offers another model of development -- what he terms "betting on the weak" -- as a model of the people's economy. He defends the latter as more democratic.

Loekman states the government opted for a model of development of "betting on the strong", which places hope on development by a handful of major national and foreign investors, in the past 30 years.

It was assumed this model, from the capital and entrepreneurial spirit of the investors, would be capable of accelerating economic growth through modern industrialization, and that equitable distribution would be automatically created.

To ensure the smooth business transactions of the investors, Loekman argues the government was compelled to act in an authoritarian way to safeguard political stability. In addition, the government granted facilities in the fields of investment, taxes and others.

Realities were at odds with assumptions. The model was not only unable to stimulate a solid economic growth but it created an economic crisis: scarcity of employment, monopoly, nepotism and the demise of various people's economic activities as a result of the asymmetrical competition by strong investors.

Moreover, Loekman claims the authoritarian stance revived by the government gave rise to fear in the community, which finally led to an arrogant mentality of some members of the government apparatus, collusion and corruption. In addition, the majority of citizens relinquished their creativity due to fear.

Loekman uses as an example the small batik industries which once flourished in Yogyakarta.

In 1958, 648 people's batik industries were registered. By 1990, only 5 percent of them remained.

Their demise was due to two factors, Loekman writes. First, the government had never given serious and continuous attention to these small industries. History shows that this sector was often only seen as a buffer when the country was in an economic crisis, mainly to overcome the scarcity of employment opportunities. The crisis over, Loekman says the government would direct its attention again to the "betting on the strong" model.

Second, as a consequence of that model, the monopoly of strong investors, both in raw material and in the market, could not be avoided. Apart from the capacity to lower prices of batik, stronger businesses also provided better quality and designs of textiles compared to the small industrialists. Inevitably, the small industries lost their market.

Betting on the weak

From the above case, it should be noted that the people's economic activities can really become a buffer for the scarcity of employment opportunities in a crisis.

A research conducted by the Center for the Research of Rural and Regional Development of Gadjah Mada University in 1985 in Yogyakarta, Central Java, and Madura, East Java, found that 51.8 percent of the workforce of both sexes were employed in the batik industry. It effectively absorbed those workers not employed in agriculture or industry.

Loekman's recommendation is that developing countries like Indonesia should focus on the "betting on the weak model".

The people's economy assumes that development must be based on the strength and potential inherent in the people's economy.

Compared to its converse model, the people's economy model is slower in reaching acceleration toward national economic growth. But the weakness is compensated by the strength of the model, its capacity to create equitable distribution of development and business opportunities in the community. It will enhance the people's creative and self-reliant capabilities to push economic growth.

Loekman writes that this model has been implemented by China (under the policy of "standing on two feet"), Taiwan, Korea and Japan, all of which pay significant attention to agriculture and rural industries. It is interesting that it has been able to solve economic problems and issues of equitable distribution in those countries.

Loekman Soetrisno's ideas may provide alternatives to the mainstream model of our development. At the very least, Loekman wants to remind us and let us learn from history, our own and the development of other Asian countries. His work should be read by involved government bureaucracies and those interested in the future of this nation's development.

-- Celes Reda

The reviewer is a student at the Institute of Agriculture in Yogyakarta.