When ideas transform economies

The Jakarta Post, Jakarta

It is easy to recognize the force of ideas when we see them in action.

But how do we identify the influence of an idea when looking back at history?

Economic liberalism has been taboo for much of Indonesia's recent past -- including the period when the country first began opening its markets.

But in his new book Tearing down Indonesia's centralized economy: 1986-1992, author Rizal Mallarangeng argues the concept of liberalism played a crucial role in Indonesia's early experiments with deregulation.

Despite the official disapproval of any form of liberalism, a group of idealists within and outside the government believed it was possible to crack the economy open.

Academics, bureaucrats, journalists and politicians were all involved - but Rizal believes the most powerful push towards liberalization came from the Indonesian people.

Without dismissing the influence of politicians and interest groups in opposing government policies, Rizal argues the broader community's belief in the benefits of an open market helped direct Indonesia towards a freer system.

At the book's launch on Thursday, economists M. Chatib Basri and M. Sadli debated the history of liberalization with senior journalist and literary figure Goenawan Mohamad.

The book, Chatib said, raised two important questions: how far can ideas shape economic policies, and what role did ideas play during Indonesia's liberalization process?

Rizal suggests the push toward liberalization was born in the "epistemic (learned) liberal community".

This group included everyone who shared a belief in liberalism and who was able to influence decision-makers in one way or another.

Its members were activists, economists, politicians, newspaper columnists and many other figures who had a say in government policy-making.

Liberalization was strictly taboo under Soeharto, Sadli argued, so it had to be disguised as something else before Indonesia could even take baby steps towards openness.

"So the word was not to liberalize but to deregulate," he said.

While Sadli did not dismiss the role of ideas in the liberalization process, he said it was the tough economic climate of the early 1980s which eventually forced a change in policy.

"It forced the government to do something ... they were not thinking of ideas."

The first deregulations helped turn the economy around, he said, to an average growth rate of seven percent in the early 1990s.

But as the economy boomed, the government hardened its resistance to further deregulation.

Goenawan said although Rizal's book implied that the state was unwelcome in business, it was too early to dismiss the interventionist government as an old-fashioned idea.

He pointed to the return of a big brother government in the U.S., where the country's widespread downturn after Sept. 11 saw the state step up its role in the economy.