Writing this as the stock market shudders and the rupiah shuffles toward 10,000 to the greenback, I don’t believe that this is a repeat of 1998, when at one stage the local currency hit 17,000 to the greenback.
What I do realize, after a decade or two of market-watching, is that there is no such thing as stasis. Markets will only remain at a stable level for a few days, before some rumor or event on the other side of the world sparks gains or falls. After all, that’s what market players want – movement, and hopefully growth.
Growth, unfortunately, does not come without a cost. Inevitably, to create growth there is the need to dig up things or create billowing clouds of pollutants. That has been the Chinese model: build cities and factories and to hell with the environment. Growth has certainly been achieved, but at considerable cost.
Economy watchers in Indonesia shudder in fear at the thought that growth could drop back to, say, the 4.5% increase in gross domestic product that occurred in 2008, as global markets contracted. This time the contraction could be even larger, although most of the pundits believe Indonesia can maintain growth at around 6%. Critics complain this isn’t good enough: the country needs to reach 7% growth to be truly successful.
I beg to question the definition of ‘success.’ If Indonesia’s economic growth over the past decade is to be deemed a success, the next question must be who benefited from this success? The rich are one obvious beneficiary. The middle class is expanding so many smaller players have done well from the extended period of growth. The poor? The nearly poor? Well, maybe they were not so lucky.
I am reminded of another old adage: What goes up must come down. Before 1990, Japan was one of the strongest economies in the world before the bubble burst; currently it has a national debt of 229.77% of GDP, according to the International Monetary Fund. That makes Indonesia’s current debt level of 25.24% look insignificant. With an aging population and falling competitiveness, Japan has very little to look forward to. Indonesia, with its young population, has much to look forward to if it can get its act together, not least in education.
Yet all of the competition between nations to be top of the economic pie assumes one thing: that growth is good. Looking around Indonesia today, that principle needs to be modified to become “growth is good for some.”
The poor and nearly poor have won little from this past decade of growth, and are increasingly resentful of the middle class and up. That creates the potential for security disturbances that could tip the balance toward the negative and lead to a period of economic decline. Crime is up, and with it the level of violence.
Disputes over land – some deadly – occur with monotonous regularity as the poor struggle to defend their only asset, their land. Some companies ride roughshod over the aspirations of communities that are in the way of their growth plans. This unbalanced situation suggests the need to look for a new paradigm of growth.
Fortunately, the little kingdom of Bhutan got there well before anyone else, way back in the 1970s. Today it hosts a website, www.grossnationalhappiness.com, which states the following: “The concept implies that sustainable development should take a holistic approach towards notions of progress and give equal importance to non-economic aspects of wellbeing. The concept of GNH has often been explained by its four pillars: good governance, sustainable socio-economic development, cultural preservation, and environmental conservation.”
Since then the definition has been further defined but there’s no need to go into details. What would appear to be clear is that Indonesia – and many other countries with it, not least China – have preferred to ignore this concept and concentrate purely on figures.
In Indonesia the result is a handful of super rich, a middle class that is growing, rounded out by the bulk of the population, either poor or so close to it that it doesn’t really matter. Will more growth make a significant difference to this picture? Probably not. It is a very common comment on the street in Indonesia that “the rich get richer, the poor get poorer.”
This is, of course, just like the United States, where the concentration of wealth in the hands of the top 0.1% of the population – the oligarchs – has grown dramatically over the past decades. Given the current state of the US economy, that is not necessarily positive. It was only a few years ago that some American commentators were predicting class war.
As for our northern neighbor, China, a similar process has been under way, often accelerated by corruption. But there is some hope that China can stabilize its economy before a crisis is reached.
The Economist, in a recent special report on the country, recites the familiar belief that if the Chinese economy loses momentum, it will crash, taking with it the ruling elite that depends on continued growth to pacify the masses and encourage them to tolerate the excesses of the rich.
As China’s productivity grew, it took less than 20 people in 2008 to do the work that 100 did in 1990, meaning that “growth of between 8-10% was not a luxury but a necessity,” The Economist states. Yet, it concludes, the falling number of workers as a proportion of the total population and the end of a long period of demographic mobility means that China no longer needs to grow at such dramatic rates.
Does this mean that growth is not the ultimate goal of economic activity? Surely what is needed is a process of leveling that reduces the degree of inequality, cuts the degree of wealth of the super rich and boosts the welfare of the weakest actors in the economy.
Call it socialism or whatever you will, I really doubt that the individuals and families who featured in this magazine’s ‘rich list’ last month really know what to do with billions of dollars. Does anyone really need that much money? I can’t imagine so.
It is no secret that the Salim family, for instance, has preferred to live in Singapore rather than experience a repeat of the trauma of 1998 when the family home was burned down with the loss of a fabulous art collection. Does fear of living in the country where you were born represent a satisfactory solution to inequality? To me, that seems to represent a limitation on personal freedom.
What is a reasonable level of wealth? As noted before, it is physically impossible for every person in Java to own an SUV and a ranch-style house: they just wouldn’t fit. What governments need to do is concentrate on ways to balance the aspirations of the poor with the reasonable desires of the rich and the middle class, and develop systems that serve everyone in a comfortable, people-friendly way so that creativity can develop and contribute to the well-being of the nation as a whole. That to me sounds like more satisfying national growth than a mindless chase for profit in which only the titans of industry can play a part.