Monday, October 13, 2014

Democracy and Poverty Reduction in Indonesia

For the last ten years Indonesia's poor have had the right and the opportunity to vote for the country's president, as well as their local leaders.  Apparently, not everyone is pleased with that development.

At first, democracy didn't appear that threatening.  The first presidential election in Indonesia was held in 2004.  Susilo Bambang Yudhoyono (SBY) was elected president by nationwide popular vote, which had never before taken place in Indonesia.  Then, he was re-elected in 2009, when national elections were held the second time.  So far, so good.  After all, SBY was a former general and part of the political elite.

But recently, Indonesia elected Joko Widodo (Jokowi) in the third nationwide election for president.  Importantly, Jokowi had himself grown up in the slums of Central Java, demonstrating that under democracy anyone could become president.  Apparently, democracy had gained momentum to such an extent that it emboldened those outside the political elite to embrace expanded aspirations of leadership. Perhaps the political elite should feel a bit threatened.

But what about the rest of the 30 million people who are not electable?  Do they have a better future under democracy?  As democratic institutions have developed, the incidence of poverty has noticeably diminished, demonstrating that the country is much better off under democracy.


Percent of Population with Income Below the National Poverty Line.

"Not so fast", say the detractors, "Let's take a look at how poverty diminished before all of these expensive, contentious elections."

Prior to democratic reforms, presidents were determined in a very streamlined fashion by the national congress, which consisted of members who were determined by regional congresses, which consisted of members who were determined by local elections.  During the 80's and 90's government employees, and especially the military, were expected and often required to vote for candidates who represented a political party called Golkar.  Under that system Golkar's presidential candidate, Suharto, remained in office for decades, establishing himself as the longest serving leader of a Southeast Asian country.

Casual inspection of Suharto's poverty alleviation accomplishments leads one to the conclusion that indeed the incidence of poverty dropped dramatically from 1976 to 1996.  These were the years of "guided democracy", during which the population who lived under the poverty line diminished from 40% to 17% (after the measurement adjustment).

From "Indonesia: Poverty Reduction Program" by Nona Iriana, Ahmad Avenzora and Jainal Abidin
http://www.adbi.org/files/2012.10.23.cpp.sess2.4.indonesia.poverty.reduction.prog.pdf

Some in Indonesia would have you believe that the years of dictatorship saw more social improvement than the current years of democratic reforms.  In fact, those voices are even now trying to roll back democratic reforms by reverting to the practice of electing local leaders by those in a governing body, rather than by popular vote.  They seem to be saying, "Those of us who are the political elite know how to improve the country and we certainly don't need elections!"

While it is true that poverty diminished dramatically over the course of two decades during the Suharto era, few people have drawn attention to the toll that was taken on the government budget.  Specifically, when Suharto left office in 1998 government debt had reached $171 billion, which was nearly twice the level of Indonesia's GDP in 1998.  Yes, poverty dropped, along with the country's economic prospects.

Under the democratic reforms of the last ten years, the incidence of poverty continued a downward trend.  Notably, in 2012 government debt had reached about $200 billion, amounting to approximately  27% of Indonesia's GDP in 2012.  Yes, poverty dropped, along with the burden of debt.

So, let's connect the dots.  Democracy in Indonesia has birthed SUSTAINABLE poverty reduction, not the kind that cultivates dependency.

Do you think that those 30 million people under the poverty line should have an opportunity to vote for their leaders?






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