published @ The Jakarta Post
A few weeks ago, a debate occurred on social media. A supporter of former president Susilo Bambang Yudhoyono blamed President Joko “Jokowi” Widodo for Indonesia’s weakening economy. Brimming with confidence, the SBY supporter said that the economy had grown handsomely during his two-term presidency.
Is it true that SBY’s economic performance was better than Jokowi’s?
First of all, one can succeed by sheer luck. Luck means that external factors mostly determine success. It is just about being in the right time at the right place regardless of efforts or ability.
In terms of the economy, SBY took office at the right time. It was at a time when China’s economic rise reached its peak. China voraciously gobbled up commodities, including coal and crude palm oil (CPO), benefitting Indonesia as the world’s biggest exporter of the two products. This commodities export-led economy created a trickle-down effect, resulting in significant economic growth. Hence, SBY was lucky to get external key economic drivers without creating genuine initiatives.
The dependence of Indonesia’s economy on coal and CPO exports and China’s economy backfired at the end of SBY’s second term. When Indonesia’s economy was stuttering because of China’s slowdown, a lucky SBY completed his term and left the unfortunate situation to Jokowi.
So, SBY was definitely not better than Jokowi; he was just lucky. SBY was not alone. Former presidents Sukarno and Soeharto were lucky as well at certain periods during their long reigns.
Under Sukarno, Indonesia enjoyed an economic boom from skyrocketing rubber and tin exports that followed the Korean War in 1950. The country was able to begin development with the founding of shipping company PT Pelni and airline Garuda Indonesia to name a few.
Later, Sukarno fell from grace amid economic and political crises. History repeated itself under Soeharto. The oil boom that followed the Arab-Israel War in 1973 earned Indonesia windfall profits from oil exports, which Soeharto used to realize rice sufficiency and industrialization. When oil prices fell in 1998, Soeharto stepped down.
The lesson learned is the price of commodities — the external factor — have heavily influenced the performance of the Indonesian presidency. It can boost the economy, but the success is fragile and unsustainable. I hope Jokowi takes a different path.
It would be better he created key economic drivers through the internal aspect that he commands. Developing much-needed infrastructure, the agricultural and livestock industries to substitute imports, fishery and forestry-based industries, tourism, etc. is an opportunity that Jokowi has in hand.
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published @TheJakartaPost
We are entering a new economy that will change the way we work, buy things and utilize our assets. Put it in a thumbnail sketch, the new economy will be: the return of on-demand/gig economy and the rise of sharing economy.
Long ago people did business directly through bartering. Later, the barter system was replaced by money. Due to increasing demand and consumers in the market, production became more complicated. A producer had to recruit more workers and orchestrate production in a more systematic way.
The Internet era has ushered in the new economy, digitally connecting people worldwide. The information barrier between producers and consumers has disappeared. Now it is easy for producers to connect directly with consumers through a single click.
Replacing the travel agent, airline tickets can be easily booked online. The Internet enables us to buy and compare ticket prices easily. As a result, conventional travel agents have lost their relevance in the new economy.
Mushrooming online stores offer a far wider range of products than agents or brick-and-wall stores. This advantage is not only enjoyed by consumers but by producers as well. Renting a shop to sell things is not necessary anymore, because everything, ranging from offering, selecting, paying, can be undertaken online, causing conventional shops to lose their relevancy in the new economy as well.
Working environments have also changed. In the job market, outsourcing is easily undertaken. Part-time jobs have become the new normal; people change jobs all the time. More people work on a specific project rather than working permanently for a firm.
The firms are still around, but redefined. Firms will have two functions: pure producer of goods and services and platform provider for a meeting point between producers and consumers.
We are inadvertently reverting to the on-demand/gig economy of the past, but now on a global scale.
Another feature of the new economy is the rise of sharing economy. The longstanding under-utilized assets such as cars, spare rooms, etc. are easily exposed and shared with others who need them. Again, all communication and transactions are undertaken via the Internet. These dormant assets are now being managed professionally and become new threats to conventional businesses such as taxi operators and hotels.
The Internet-based economy poses challenges to consumers, government and conventional firms.
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published @ The Jakarta Post
Tragedy is surrounding Greece. Since the economic crisis in the eurozone in 2008, Greece has never recovered. The economy is shrinking and unemployment soaring. To fix the economy, Greece borrows money from the International Monetary Fund (IMF). As usual, the IMF’s recipe for handling economic crisis is focused on austerity.
In contrast with Keynesian economics — where governments spend to move an economy in recession — austerity measures involve government budgets tightening up and letting the economy grow by itself. This recipe is frequently wrong, and it has turned out to be wrong in Greece. The Greeks has suffered for years with austerity measures that don’t work. It is unsurprising that in the referendum recently held over approval of more austerity measures, the Greek people rejected them. Why does tragedy continue to happen in Greece? There are two reasons: the eurozone and the Greek welfare state.
The European Union was established to avoid wars among European nations. After two devastating world wars, the Europeans wanted unity of all countries, politically and economically, to strengthen peace in Europe. Of the EU’s members, some have adopted a single currency, the euro, which was introduced in 1999. The group of countries using the euro is called the eurozone.
Many, including EU members, had doubts about the idea of a single European currency. That’s why England has not adopted the euro. A single currency means a single interest rate for all countries involved. It is a flawed theory. Every country has a different economic performance and different economic problems. Germany is very competitive.
It failed in theory, and now it has failed in practice.
Make no mistakes, the other problem lies in Greece itself. Welfare-state policies introduced by the much revered Andreas Papandreou, a socialist, are to blame. He served two terms in office – 1981 to 1989 and 1993 to 1996.
His legacy has unintentionally contributed to Greece’s bankruptcy. For instance, the Greek pension system is “better” than that of Germany. In Germany, 40 years of service allows a civil servant to get a pension equivalent to 70 percent of their final basic salary. In Greece, however, after only 35 years, if you are 58 or older, you receive 80 percent of your previous salary.
The Greek tragedy of economic disaster is currently being written.
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