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This paper is about Indonesia
as it seeks to manage the fall out of the global financial crisis. It is
Indonesia’s second major economic challenge in less than ten years. The first brought
about systemic collapse and the advent of its second wave of democracy.The current global economic crisis may also have both immediate and long term
ramifications on the social and political landscape which are often not well
understood or deliberately ignored.
Above all it may hold
important lessons of how to protect the most vulnerable segments of a country’s
population in times of economy wide crisis and business uncertainty. These
lessons, and the policy responses that they call for, can be an important
contribution to the furtherance of human development.
The worrying aspect of the
government’s policy response to the unfolding Global Financial and Economic
drama is the way in which it seems to have slipped into self reassuring
optimism without having made contingency plans to continue removing long term
structural weaknesses of the economy.
In the case of countries with
stable institutional systems, good social and physical infrastructure and a
diversified economy, even severe economic shocks are unlikely to lead to
systemic collapses. In Indonesia the picture is quite different. Its economy if
any thing is even less diversified than before the 1998 crisis, its political
systems are new, its social cohesion is threatened by high levels of
unemployment and its decentralization politics is still in evolution.
The real danger of the Global
Financial Crisis is not just that it will lead to slow growth or economic
recession but that even in the context of moderate growth policy makers will
continue to weight macroeconomic stability and financial indicators higher than
the underlying needs of the real economy. If the current policy response to the
Global Financial situation is anything to go by, that danger is more real than
it might seem.
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