New feudalism emerges in RI economy

Ignas Kleden, The Center for East Indonesian Affairs (CEIA), Jakarta

Cultural patterns have never been a big issue in the discussions about the Indonesian economy. However, if we look at current government policies on price the increases, it becomes increasingly obvious that some old established cultural patterns are still at work even in supposedly technical matters such as the economy. One of those old cultural patterns is a feudalistic value system, which is usually assumed to have been overcome by national independence, and therefore tends to be ignored despite its ongoing prevalence in both politics and economics.

In its classical form feudalism is based on a unique social division of labor between gentry and peasantry. The gentry or nobility takes care of power and culture whereas the peasantry or commoners are responsible for carrying the day to day economy. This was apparently the case because people of the nobility were considered too refined to be involved in manual labor, to plow land, to plant seeds and to take part in the harvesting. Conversely, the commoners are seen as too unrefined to deal with the arts and culture. They are supposedly not learned enough to engage in politics and too provincial to concern themselves with state affairs. In that case they have to rely on the nobility for political protection and cultural finesse and they have to deliver agricultural produce and have to pay other tributes in return.

This is to say in old feudalistic society, the economy is never a mode of production but merely an attribute of social status. It is supposed to become a concomitant trait of a position one assumes in the social hierarchy. In the case of Indonesia the feudal system has never been seriously overcome because it was retained purposely by the colonial administrators as a means of indirect rule. In this indirect rule the local nobility was made an agent of colonial rule, using their traditional legitimacy to govern their own people, without, however, having the leadership over the governed. The strange dynamics of indirect rule created a situated wherein the local elite became the rulers and power-wielders without assuming true leadership, because the leaders in both politics and the economy were the Dutch colonial rulers who had the luxury of not having to trouble themselves with ruling over the local people directly.

In that system the loss of political and economic leadership was compensated for by a good life for the local nobility with all its social paraphernalia such as handsome salaries, big houses, a great number of house servants and military support from the colonial government to ensure the obedience of the peasantry. Besides that, the old exchange system between the gentry and the peasantry was maintained by letting the commoners keep paying tributes to their lords as had always been the case in times past. To make a long story short, in a feudalistic system it is the commoners who are responsible for the economy -- both their own economy and that of their lords.

Now that the students and other concerned citizens are gathering steam with their protests and demonstrations against the massive price hikes, it is time to closely examine our economic behavior, which has resulted in these price increases. In the first place, the commoners who have nothing to do with the cash shortage within the government, are now obliged to pay even more, whereas the "economic lords" who obviously are the ones at fault in this economic crisis -- because of their corruption and an inability to rectify things like non-performing loans-- are generously tolerated while enjoying a release from responsibility and not generally held to account for their errors.

Needless to say, what has been taking place in the first weeks of 2003 -- the divestment of Indosat to Singaporean STT as the best example -- showed clearly the government's effort to hunt for easy and quick cash. The argument by Minister Laksamana Sukardi is that there are only two choices, either Indonesia has to keep poorly-performing state-owned enterprises as mere liabilities or the government has to accept the lesser of two evils by selling those companies to foreigners in order to get some cash and have these companies work under efficient foreign management which is more professional and capable. This argument, it seems to me, does not hold for at least two reasons.

On the one hand, Indosat is known as one of the best performing state-owned companies, and cannot be attributed to the category of "mere liabilities". On the other hand, we should keep in mind that the state as such is not a trader by all criteria. One of the basic economic responsibilities of the state is to encourage economic institution-building. The economy is much more than a cash and carry transaction but the founding of productive institutions and the formation of productive behavior. If the government, for the time being, turns out to be unsuccessful in fulfilling this responsibility, something else should be undertaken to correct the failure. The failure in economic institution-building cannot become a rationale to get rid of this responsibility by means of selling off assets to foreigners.

In the second place, very little efforts have been made to stop the corruption and rot which continue to be a "black hole" which keeps sucking away state money illegally and, ironically with striking impunity. We need an independent study which can demonstrate the extent to which the ongoing corruption has drained away public money, a situation that will continue to worsen on a daily basis unless some serious action is taken to halt it immediately. At the same time without even the smallest hint of being considerate the price hikes have been decided upon, though this decision most adversely affects and puts the burden on the common people. A situation where the commoners are being required to pay for the losses as a result of the crimes of their "economic lords".

This becomes all the more obvious if we compare the increase of prices for premium gasoline (Rp 1,810 per liter) and for automotive diesel (Rp 1,890 per liter), whereas there is no price hike for regular gasoline, locally known as premix. This differential demonstrates one thing: people who ride buses and other public transportation as well as fishermen who use diesel for their boats are required to pay more than those who are already wealthy enough to afford to drive luxury cars. It would certainly be more sympathetic politically and more justified morally if it was the other way around. Why are those who can afford to buy expensive cars not obliged to share more of the burden of the price hikes in order to subsidize the commoners who have much less money?

The official argument that the price hike will produce more cash, which in turn will trickle down to the peasantry in the form of various sorts of compensation, does not hold water either. The ridiculous question is this: Why on earth should we marginalize people who are already marginalized economically by giving them extra burdens in order that later, we can appear generous by indirectly compensating the common folk with the money they have to pay now in the form of price hikes? The above official argument does not hold because there is no guarantee whatsoever that various sorts of compensation will in fact trickle down to the commoners. It is much more likely on the basis of many precedents that those forms of compensation will be treated as the tributes the commoners have to pay to their lords who usually enjoy the luxury of being entitled to more facilities and privileges without having more obligation and responsibility.