6 - Rising Economic Nationalism in Indonesia

Summary

“It would be wrong to see nationalism as either an unmitigated evil or a universal virtue. It can be both, a boon and a curse.”

Amartya Sen (2008)

“Protectionism breeds monopoly, crony capitalism and sloth. It does not achieve a happy and serene egalitarian society.”

Paul A. Samuelson (2005)

BACKGROUND

The world is gradually recovering from the 2008–09 Global Financial Crisis. In 2017, for example, economic growth climbed back to 3 per cent. During this transition phase, however, the role of trade has been much smaller — thanks to the maturation of global value chains, the shift to robotization and the services economy, fluctuation in commodity prices, as well as rising protectionism around the world.

At the same time, more than 3 billion people still have to struggle to live with US$2.50 or less per day. The richest 10 per cent of the global population owns more than 85 per cent of the global wealth. Even in countries where poverty has gone down, inequality is on the rise — prompting social tensions. These factors are often seen as the main cause of the re-emergence of anti-globalization sentiments and seem to have encouraged world leaders to adopt populist, inward-looking policies. Examples of consequent surprises coming from the voting booths include Duterte, Brexit, and Trump among others. Moreover, often by riding on the back of this disdain for globalization, those in power display increasingly authoritarian inclinations — such as Erdogan in Turkey, Putin in Russia, and Xi in China, to name a few.

Indonesia is no exception. In this country, dissatisfaction with globalization has manifested itself in rising protectionism, rejection of foreign interference, and expressions of distrust of democracy — sometimes with a New Order flavour. The disappointment, nevertheless, is not totally unfounded. As in the case elsewhere, globalization — and nationalism — can bring both good and bad results, “boon and curse”, as Amartya Sen put it. Trade creates winners and losers, and in the absence of (1) wellfunctioning compensation mechanisms and (2) free movement of labour across sectors, the gains may remain concentrated in the hands of a few. And corruption only worsens this situation.

Nationalism in the economic sphere takes the form of protectionism — protecting domestic industries from foreign competition. It usually reveals itself in policies aimed at self-sufficiency in a number of commodities, including those of which Indonesia is a natural net importer.