What is a people-driven strategy?

By Dj. A. Simarmata

JAKARTA (JP): An article by colleague H.S. Dillon in this newspaper on April 10 was intriguing to me in that it shed some badly needed light on the protracted debate involving the recent crisis and the country's development.

There have been many seminars or discussions on the issues, but like the Great Depression of the 1930's, the case is never closed.

Dillon cited economist Professor Sumitro Djojohadikusumo's call to undertake a fundamental change in our development strategy based on careful study into the causes, effects and implications of the crisis.

Dillon responded by stating that the causes of the crisis were namely injustice and discrimination, along with the massive outflow of capital.

He proposed a people-driven strategy, agriculture development and agro-industrialization. But is a people-driven strategy compatible with agriculture development and agro- industrialization, and does it contradict market and technology- driven strategies?

To some extent, the effects and implications are easier to pinpoint, namely poverty, the spectacular rise of the government debt -- both domestically and internationally -- and so on. On the positive side, the crisis did lead to the ousting of Soeharto, something that was unimaginable before the crisis.

Literature about the crisis, however, lacks a systematic study of the causes and tends to generalize the problems the nation is currently faced with.

It is important to cite Joseph Stiglitz, who said that most economists in developing countries were only engaged in economic journalism, having no value for formulating sound economic policies.

Solid empirical research is needed. A reading of Alan Greenspan's biography reveals the many years he devoted to field studies before becoming a central banker.

A country like Indonesia is desperately short of good economic policies prepared by apt economists with solid and up-to-date knowledge and experience.

Citing the economist Sarbini Soemawinata, the country needs "a real solid picture" of the economy.

Statistics from 1995 show that more than 20 million people are landless laborers, and more than 30 million are small landholders, having less than half a hectare of land. Most of these people live on Java.

The question is whether agriculture is still appropriate for Java. If it is, should it be land-intensive or knowledge- intensive agriculture?

Neither is feasible, because land is scarce and people are lacking in education, as Dillon stated.

But land is abundant in Kalimantan, Papua (officially Irian Jaya), and Sumatera. Our most pressing problem for Java is to find the most appropriate means of absorbing the landless laborers and small landholders. Hence, the best strategy for Java is labor-intensive clean industries and not those which are water-intensive.

The agro-industry terminology itself raises some confusion. Is it an industry or an agriculture?

Industrial activities are conducted inside a building and protected from the elements. Because of this prices can be stabilized.

Agriculture, however, is conducted out in the open, climate dependent, and needs a comparatively large amount of land to yield a profit.

So where lies agro-industry? In short, agro-industry belongs to activities of an industrial nature. A people-driven strategy is not synonymous with agriculture. If agriculture is a dominant activity, a people-driven strategy is equivalent to agricultural development.

If the country is in the industrial stage, it is determined by industrial development in which principal activities provide income and jobs.

But what about market-driven development? In a true market system, both the products and processes are derived from people's legitimate needs.

The market is a place where they freely buy what they need, according to their tastes and incomes, and where they sell products, too. People in the market practice truly decentralized decision-making. This is a democratic way of living.

The true market system promotes and maintains the decentralized system. So let there be the market, and let there be freedom for everyone to choose what to buy and sell.

Every person has individual talents, leading to specialization and productivity, and this can become a source of welfare improvement for the country. A development strategy has to enable everyone to do what they are good at.

Nobody can provide all the things he needs in a specialized economy. Everyone has to be able to exchange his products with the products of others, and the market guarantees this process. Everyone will inevitably depend on the products of others, provoking an interdependent system.

Hence, the market is an institution enabling individual talents to flourish, while at the same time a means of securing social welfare. Instead of an adversary, the market becomes a friend.

Interchange of products between the islands is equal to domestic inter-islands trade. Promoting internal trade would lead to more solid national economic unity.

Intensive domestic trade entails domestic travel of persons, which supports nation building.

Domestic trade is the other side of regional specialization in international trade. Both regional and individual specialization also improve our national welfare. So the market is again a friend, not a foe, synchronizing its multiple objectives.

The writer is a lecturer, author of several books, and an economics consultant in Jakarta.