Political and Economic Success

By webadmin on 03:25 pm Apr 15, 2011
Category Archive

Wijayanto

Last
year, Indonesia’s economy grew by 6.13%, beyond the forecasts of
economists and even higher than the government’s projections.
Economists meanwhile believe that the Indonesian economy has the
potential to grow faster, if we can overcome various handicaps
including terrible infrastructure, unreliable energy supply,
prevalent corruption and inefficient bureaucracy.

The
next question, of course, is how high the economy could grow and why
such handicaps exist.

Many
studies have been conducted in the area of political economics to
understand why some economies experience sustainable high growth and
others don’t. To make a long story short, researchers conclude that
there are three factors affecting long-term economic growth en route
to prosperity. They are economic potential, demographics and
politics. Without the existence of these three factors a nation will
not be able to realize its potential.

Political
freedom, stability and policy certainty

Yi
Feng, in his book Democracy,
Governance and Economic Performance,

highlights the importance of these political factors – political
freedom, political stability and policy certainty – in economic
performance.

His
cross-country analysis finds that among those three components,
policy certainty plays the most significant role, followed by
political stability and then political freedom.

Relevant
to Yi Feng’s findings, history shows that some economies can grow
quickly without political freedom, as long as they have political
stability and policy certainty. Malaysia, China, Singapore, and South
Korea in 1970–1980 might fall into this category.  

However,
economic growth without freedom of expression might be unsustainable.
People tend to be dissatisfied with economic success only, and sooner
or later will demand political freedom. Unfortunately, many political
reforms are chaotic, creating prolonged political disorder,
undermining the economic improvement accumulated over decades, such
as in the Philippines and Indonesia.

South
Korea is rather fortunate. The political reform that ended the period
of authoritarian regimes, symbolized by the fall of Park Chung-hee in
late 1979, created a relatively short period of political turmoil and
the economy returned to its previous pace in 1981 and beyond.
Nowadays, in addition to political freedom, South Korea also has a
high level of policy certainty and political stability, paving the
way for very long-term high economic growth.
In
contrast, some countries have a high level of political freedom but
fail to convert it into economic success. Many democracies fail to
deliver their promise due to the political instability they generate
as well as the lack of policy certainty.

Instability
and uncertainty are the enemies of economic progress, raising
business risk. People in general are risk-averse, including
investors. Instead of investing their money in the country, investors
will put it somewhere else, waiting for the situation to improve.
Pakistan might be among countries which need to work harder to
promote political stability and policy certainty. 

Indonesia’s
context

How
about Indonesia? There is no doubt that Indonesians have the freedom
to express their political ideas. People have the freedom to elect as
well as to be elected in national and in regional elections. Press
freedom gives the public the opportunity to criticize the government
and to express their thoughts freely.

Following
the political transformation in 1998, Indonesia’s political life
has been very dynamic but relatively stable. Prior to 1998, Indonesia
had one president who led the country for 32 years. Within six years
of political reform, it had four presidents.

Fortunately,
this change of power occurred in accordance with the constitution.
The recent intensifying political debate on various issues is more
noise rather than a sign of political instability, a situation normal
in any democratic country.

Problems
exist when policy certainty is considered. It is common in Indonesia
that a change in leadership will be followed by a change in major
policies. This happens both at the national as well the regional
level. Combined with a lack of effective intergovernmental
communication and clear lines of authority, policy disharmony exists
across functions and levels of government, creating a heart-breaking
paradox.

Indonesia
has large reserves of oil but we are a net oil importer. Some major
energy-producing (oil, gas and coal) provinces lack electricity
supply, even in their capital cities. We have the longest tropical
coastline but we import 70% of the salt we consume.

Indonesia
has huge fertile lands and friendly seasons, but we are one of the
largest net importers of food, including corn, soybeans and rice. We
have large and rich seas but our fishermen are extremely poor. These
are only a part of a long list of paradoxes. 

This
situation has dampened the economic engine from running at its
maximum capacity. As a result, despite its great economic potential
and demographic profile, Indonesia’s economy hasn’t been able to
reach the pace of China, India and South Korea, or even the pace of
Indonesia’s economy in the past, when it was able to grow at 8% or
9%.
It
is clear that political transformation in Indonesia should continue
beyond political freedom and political stability. We should be able
to create policy certainty; we need to bring policy into local as
well as national political life. Otherwise we will have democracy not
for the sake of people’s prosperity, but for the sake of democracy
itself.
Wijayanto is
a vice rector at Paramadina University. He is also the co-founder and
managing director of Paramadina Public Policy Institute. He can be
reached at
 wijayanto@paramadina.ac.id