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Jakarta post

by Jennie S. Bev

The year 2012 is here. Is it a time to celebrate or to get ready for another calamity? The United States started this economic implosion in 2008; next was Europe; now India and China have been showing signs of declining growth. 

Obama has failed Americans with his inability to uplift the economy and increase jobs by over-expanding the government, over-spending and under-performing. 2011 presented a gloomy picture for the western part of the world. 

Whether 2012 will be a better year for the global economy, no one knows for sure. Most notable economists like Paul Krugman, Robert Reich, Michael Spence, Joseph Stiglitz and Nouriel Roubini agreed that 2012 would offer a 50-50 chance of global and US recession. So, at this point, whether you’re an optimist or a pessimist, you have an equal standing. 

The good news is, it is more likely Asian countries, including Indonesia, will do better than the US and Europe. 

With a rosy World Bank forecast on Indonesia’s growth at 6.2 percent and Nouriel Roubini’s affirmation on Indonesia’s continued growth, we can take a quick break from worrying. 

But Indonesia’s growth is sustained and limited by cheap labor (70 US cents to US$1 per hour minimum wage) and the accelerated depletion of non-renewable resources imposing extremely high social costs.

Thus, Asia could be the backbone of the world economy, right? Not that fast, according to Paul Krugman, quoted in an interview with Bloomberg. China’s economy isn’t big enough to be the backbone of the world’s economy as it’s only a little larger than Japan’s. 

Whether Indonesia can ever replace China, it’s also too early to tell, even though some optimistic economists see a good opportunity for Indonesia to replace India in the BRIC (Brazil, Russia, India and China) grouping. 

During the first days of 2012, should we be happy with Indonesia’s economic outlook this year? Absolutely. 

We can see growth over the next five, or even 10 years, as long as many things remain more or less the same (ceteris paribus), because many things, literally, can be physically improved in Indonesia. 

Indonesia’s maritime and other renewable tourism opportunities haven’t been properly explored, for example. Other intangible areas can be developed as well.

My article titled “Developed Indonesia and Third World America” published on Oct. 17, 2010 in The Jakarta Post hypothesized the possibility for Indonesia to switch places with the US in 20 years’ time. 

This may well be proved true, if Indonesia can learn from economic cycles and train its human resources with proper skills. (Please keep this article, so we can compare notes in 2031).

The thing is there are some correlations to be cautious about. 

First, the lower an awareness about human rights the lower the wages. This means when Indonesia’s human rights are better respected, wages are expected to increase as well. 

For instance, Electrolux closed its manufacturing plant in Michigan due to high wages of $15 to $18 per hour. They shipped out production jobs to Mexico, where the hourly wage is a mere $1.50. 

The governor of Michigan’s offer in significant tax breaks wasn’t significant enough to keep the jobs at home. Human rights are much respected in the US, where wages are 10 to 20 times those of similar jobs elsewhere.

Second, low wages and low raw material prices likely have an inverse correlation with social costs. This means the lower the final product cost, the higher the long-term social costs that the producing and the consuming societies are likely to bear. 

This explains that a mass-produced piece of clothing may only be priced $8 retail in a department store, but the detrimental effects of low wages and the exploitation of the environment for quick profits on long-term health, quality of life and resources depletion are likely to be tenfold or more.

While thinking about what could happen two decades ahead may sound too far-fetched, we should understand that whatever we do today creates an impact later. 

It’s just the law of nature that everything goes in cycles, which we should respect and be aware of. It would be impossible to keep exploiting nature without experiencing the consequences. 

Global warming, for instance, is a clear consequence of ignoring the greenhouse effect, prior to causing a massive destruction of nature.

Political will will make a huge difference on whether Indonesia and the world will be able to sustain long-term prosperity. Interestingly, based on my limited observation, politicians and legislators in both Indonesia and the US have “lost interest” in performing their caretaking responsibilities. 

Many political decisions are based upon short-term solutions and quickly increasing the bottom line – which oftentimes means the 1-percenters’ bottom line.

Must we place our future in the hands of short-sighted politicians and legislators? Aren’t there other options? The economy is global; we can’t live alone. 

One small mistake in policy-making can create a gigantic calamity causing social destruction on a massive scale. Yet, it is on human nature and our own behavior that we must rely. 

I long for many things these days: security, prosperity, trust and optimism.[]

The Jakarta Post, January 3, 2012

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