Indonesian economic democracy turns into oligarchy


Three years before John Maynard Keynes published his Magnum Opus, “General theoryin 1933, two economists shared their views on the imperfections of competition in the free market. Coincidentally or not, Joan Robinson (an Englishwoman, wife of a professor who was never allowed to continue her studies in economics) and Edward Chamberlin (USA) have both published books in a similar tone this year -the. Economists call them the Cambridge duo. Joan of Cambridge University, a disciple of Keynes and Alfred Marshal, while Edward of Cambridge, Massachusetts, Harvard University. Joan published the book “Economics of imperfect competition» and Chamberlin published the book «Monopolistic competition theory.

The tone of the two books is the same, even if the approach is different. Both see the phenomenon of monopoly that occurs in a free market where large corporations try to produce almost all goods in one area, whether competition is healthy or monopolistic, such as the Cocacola Company which produces very many brands in the beverage or Unilever in the United States in the area of ​​basic necessities (durable goods).

Joan Robinson did not emphasize the use of a mathematical approach in the economics she applied, while Edward Chamberlin was the opposite. This is very understandable as both are geared towards two different characters. John Stuar Mill brought Adam Smith style economics to political economy, while William Stanley Jevon brought it to Newtonian economics (mathematics). The two figures distinguish the approaches of the two economists. Until now, these two approaches still exist (previously economics was called political economy, Alfred Marshal standardized it in economics)

Thus, before John Maynard Keynes had officially matured his flow, there had been several objections to the concept of perfect competition (Pareto Curve / Vilfredo Pareto) which started from the assumption of “natural freedom” of Adam Smith and John Locke’s “property right”. In America, Alexander Hamilton was an accomplished critic of Adam Smith’s concepts. He criticized the minimal role of government that was introduced by Adam Smith in the book “Wealth of the nationin 1776 and proposed the appropriate roles of government to take to help advance the economy. And the United States at the beginning of its birth were not “champions of globalization” and “free trade”, but rather were very protectionist, which was one of the causes of the civil war (Donald Gibson, 2011).

North America at this time was just beginning the process of industrialization where the manufacturing industry (which was still a vulnerable/infant industry) needed protection via the imposition of import duties on products from the United Kingdom, while South America was based on agriculture, the results of which were exported to England. South America refused to impose tariffs on imports, due to the risk that Britain would retaliate against the same tariffs on agricultural products from South America. And because it is based on agriculture, South America is also pro-slavery (slaves working in agriculture), which is another cause of the civil war.

Besides Alexander Hamilton, there are the economists John Rae, Friederick List and Hendry C Carey, who even renamed Adam Smith’s version of “free trade” as “the free trade of imrealism”. aka free trade is economic colonialism, proving British behavior during the era of mercantilism. Britain pressured Ireland and India not to manufacture products already made by Britain. The King of England forbade the sale of machinery abroad which would cause other countries to produce the same goods as England.

In short, even in a free market, competition is never perfect. Free market proponents such as Milton Friedman admit that the free market cannot fully reach the level of “full employment”. For this, Friedman introduced the term “natural unemployment” as justification. While supporters of John Maynard Keynes (Keynesian) argue that if the market can only absorb seven thousand workers out of the existing 10,000 workers, then there is nothing wrong with the government trying to find a way to that 3,000 (natural unemployment) can find a job, or at least 1,000-2,000 dispersed workforce. With this idea, the New Dealer (the initiator and proponent of New Deal policy) in the days of Franklin Delano Rosevel (FDR) started numerous public employment projects to absorb 25% of unemployment in the United States. United because of the Great Depression.

In Indonesia, like Russia, the lack of free competition in the economic sphere and the high costs of contestation have given rise to its own economic pathology, namely oligarchy. Indonesia’s post-New Order government, as Jeffrey Winter writes (Oligar, 2011), has indeed experienced a transition from the oligarchic model of “sultanic oligarch» that Suharto had managed to tame at the «ruling oligarcha model that wanders as it pleases in the system of national political economy. This transition actually endangers the process of democratization in Indonesia because, as Jefrey Winter wrote, it plunges Indonesia into a “criminal democracythat is, not a transition to democracy as it is understood in Western liberal-electoral democracies.

Jeffrey Winter wrote his views in the book “Oliarch” published in 2011, referring to the development of Indonesian political economy by Suharto, Gus Dur, Habibie, Megawati and SBY. However, in 2018 when John West published the book “Asian century on the razor’s edgehe actually saw the development of the oligarchy in Indonesia getting worse. Today, said John West, Indonesian democracy remains only “a democracy of the few, for some and by some, not of the people, for the people and by the people, as is the general complement of democracy .

On the one hand, leaders (or would-be leaders) increasingly need alternative sources of funding to win the increasingly costly democratic challenge. On the other hand, the dilemma is that political power over the dynamics of the economy is relatively constant, sometimes even decreasing, but on the other hand, economic actors (entrepreneurs, conglomerates, oligarchs) enter the political arena to propose alternative sources of financing to finance democratic contestations (political financing) which are increasingly expensive. It is in this type of symbiotic mutualist relationship that the concessions of barter and political economy are born (Stein Ringen, Journal of Democratization, vol.11, April 2004).

Moreover, in such an agenda, the agglomeration of capital will ultimately only be centered in the circle of a few economic elites (conglomerates/oligarchs) able to guarantee the availability of funds to cover the super expensive cost of democratic contestation. It is certain that such corrupt politico-economic relations will cause development to slow down and increase the disparity between the haves and the have-nots, ie the lack of equity. And now, in Jokowi’s second term, the oligarchs are no longer political fundraisers, but have invaded the political world by occupying many ministerial seats.

On the other side, the painful income disparity is certainly not a fiction. Increasingly, the list of the 50 richest people in Indonesia is competing to increase their wealth in order to pursue the highest ranking according to Forbes magazine, for example. The rate of increase in their wealth is greater than the increase in the wages of workers or the standard of living of ordinary people. It is as if they are competing for land after parcel of Indonesia’s national wealth in the name of prestige and pride, including conspicuous consumption (borrow a term from Thorstein Veblen) alongside the government, which is more and more inclined to position itself as the guardian of the growth of the wealth of the oligarchs for the proper financing of politics on the one hand and the contribution to state revenues on the other.

Even the government tends to have a ‘socialist’ character when the business tycoons begin to experience ‘market failure’, but at the same time it is very ‘liberal capitalist’ to the people, releasing protective valves in areas and products that should be protected in the name of the public interest. The BLBI scandal is an example of how the government is ‘socialist’ towards business leaders, or the state’s investment in state-owned enterprises from year to year whose nominal is almost always greater than the contribution direct public companies to state revenues, or the allocation of economic stimulus funds far greater for entrepreneurs (oligarchs) than for the people, allocating hundreds of trillions to the megalomaniacal ambitions of new capital rather than to take care of people’s stomachs, no more new laws (omnibus law) which tend to increase the confidence of business tycoons rather than the confidence of ordinary people.


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