World Bank report helpful but misguided

By Paul Keys

JAKARTA (JP): The World Bank released a report last Monday disputing some of the most commonsense assumptions about the economic crisis. Much of the report may be valuable, even pathbreaking.

The poverty data, for instance, uses locally scaled standards rather than aggregate national indexes to appreciate the local effects of the crisis. And the study convincingly proposes that some rural areas, typically agricultural communities, are prospering from the higher market prices.

But, despite admitting deep urban poverty, the report muddies the point by suggesting it is the middle class -- not the poor -- which is most hurt by the crisis. More controversially, the report suggests that previous studies on poverty from the International Labor Organization, the United Nations and the Indonesian government finessed their data for dramatic effect.

To be sure, in the scarifying days of mid-1998, sensational speculation abounded. The normally tempered Emil Salim warned in early June that the country was lurching toward mass starvation amid withering domestic rice stocks and a fading rupiah.

Not to be left out, the World Bank stated in July 1998: "No country in recent history, let alone one the size of Indonesia, has ever suffered such a dramatic reversal of fortune."

The hyperboles of mid-1998 are forgivable and are readily explained by the terrifying and uncertain times. The old political certainties had collapsed, with Soeharto's resignation and Habibie appearing unsuited to manage the crisis. Mass chaos was glimpsed in the mid-May riots, raucous street protests became daily business and, amid the discord, it was assumed the flattened economy could only go flatter.

But the distortions of Monday's report are harder to appreciate. Crucially, the World Bank fails to comprehend the scale of hardship in our constituency, the beleaguered working class and jobless.

According to the bank, the hardest-hit victims of the crisis are the middle classes, whose jobs and incomes have been shredded.

Stating the drop in income for the middle class is proportionally greater than for the poor -- while statistically true -- is misleading because it disregards the vast disparity between the two groups from the outset. The middle class was better positioned to absorb the blows, even if they were greater, than was the working class.

The middle class, it should be remembered, enjoys some of the highest rates of savings in the world. High interest rates helped cushion the wallop from the crisis.

In contrast, few workers have any savings.

At the very bottom, child scavengers near the South Jakarta bus station pick through rubbish for Rp 1,000 a day, it they are lucky. Children hawking newspapers earn, maybe, Rp 2,500 daily and child porters plying the transit terminals can bring home Rp 4,000 after a hard day's work.

For them and for the millions cast aside by the crisis, the World Bank's brightened economic picture changes nothing. We urge the World Bank to remember its pledge to "help mitigate the worst impacts of the crisis".

The writer is communications officer at the Indonesian Prosperity Labor Union, international department, Jakarta.