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Indonesian Economy: Liberal Economics or Pancasila Economics By: Asdi Kurniawan Toba 321553

There are three Economics systems in the world; Liberal economics, Socialist Economics, and Mixed Economics ideological. Alternatively, it is the set of principles by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources. An economic system is composed of people, institutions, rules, and relationships. Economic theory that developed in the 18th century was born in a desire of freedom (liberalism) in the western world. Negate the role of religion and ignoring the role of other social sciences. The philosophy of Liberal economics was spread among the people in enlightenment era and formulated by Adam Smith, which advocates minimal interference of government in a market economy, though it does not necessarily oppose the state's decision of a few basic public goods with what constitutes public goods originally being seen as very limited in the field. Smith claimed that if everyone is left to their own economic devices instead of being controlled by the state, then the result would be a harmonious and more equal society of ever-increasing prosperity. This underpinned the move towards a capitalist economic system in the late 18th century, and the subsequent demise of the mercantilist system.

Liberal economics is an ideological that stands on giving an economic freedom to the all of the people, and such as permit the citizen with more foundations in the society to control their own lives, choices, and even furthermore make their own mistakes. The philosophy of Liberal economics is based on the supports and promotes to the Individual liberty and choice in Economic matters and Private property in the means of Production. Economic liberalism emphasises that people have to make their own choices with their money, as long as it doesn't annoy or disturb the liberty of others. Economic liberalism opposes government intervention on the grounds that the state often serves dominant business interests, distorting the market to their favor and thus leading to inefficient outcomes. While economic liberalism markets unrestricted by the government, it maintains that the state has a role in providing public goods. For example, Adam Smith argued that the state has a role in providing transportation roads, canals, schools, public places and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption. In addition, he advocated retaliatory tariffs to bring about free trade, and copyrights and patents to encourage innovation.

In Economy, Indonesia implements Pancasila economics, which is can be regarded as Mixed economy system (the bundle of both Liberal economics and socialist economics philosophy), where the economy life being is run by Society, Government, and Cooperatives. The economics system is based on 5 points of Pancasila, where the Pancasila itself has been living in Indonesia from hundreds of years ago. Although

Indonesia had ever implemented Liberal and socialist economics system, finally the system that is appropriate and used until now is Pancasila economics. This concept was born in Indonesia earth, excavated from the philosophy of the Indonesian nation is considered the most appropriate and then directs the nations journey toward Indonesia just and prosperous . The economics system adopted by each nation is different. This is consistent with the philosophy and ideology of each country. As with Indonesia, the economic system adopted by the Indonesian people will differ with the economic system adopted by the United States or other countries. In this economics system, society holds the economically active, while the government creates a healthy climate for growth and development of business. Pancasila economy is defined as an economic system in jiwai Pancasila ideology which is a joint effort and mutual cooperation that berasaskan kekeluagaan nationwide. This economic system has the following characteristics: 1. Based on fair market mechanism with the principle of fair competition, with stimulation of social and moral drive the economy 2. Noting the economic growth, the value of justice, social interests, and quality of life. 3. Ensure equal opportunity in trying and working. 4. Able to achieve environmentally sustainable development.

5. The protection of consumer rights and fair treatment for all citizens ,the existence of a clear and firm balance between planning at national level with the implementation of the decentralization of economic activities to ensure the national justice.

In my opinion, Pancasila economics system is appropriate to Indonesia, because the system itself was excavated from our philosophy; Pancasila, which has emerged from hundreds of years ago. Because of this, the philosophy itself must have undergone the change of era, but now, it keeps existing in Indonesia. Next, this economics system is a mixed type of economics system, that blend two system: Socialist and Liberal economics system, thats why the negative sides of both economics system can be reduced and eliminated, but on the other hand the positive advantages from two economics system can also be improved. Indonesia ideas are basis of Pancasila and the constitutional basis of the 1945 Constitution. Therefore, any form of activity society and the state must be based on Pancasila and 1945 Constitution. Economic system existing in Indonesia must also be based on Pancasila and 1945 Constitution. National economic system is based on Pancasila and the 1945 Constitution are prepared to realize economic democracy and made the basis for economic development. Indonesias economic system is based on Pancasila and the 1945 Constitution referred to the

economic system of democracy. Thus the economic system of democracy can be defined as a system of national economy which is a manifestation of the philosophy of Pancasila and the 1945 Constitution which is based on kinship and mutual cooperation of, by and for people under the leadership and supervision of the government. Indonesia had ever implemented both two other economics system, socialist and liberalist. But then, as the time gone, they were not appropriate with this country. For example is The liberalization in Economy Banks. When in 80s there were just 88 banks existed in Indonesia, but in 90 the number of banks were highly increased to 240 banks. It wa exactly a big problem when the Government with its Liberal economic system couldnt control the growth of the banks. This is one of the examples of the impropriate liberal system in Indonesia. In this case, the faults is not located on the system, but it is located on how appropriate is the system to the country. For example is United States that successfully implemented the Liberal system to its country and now it has one of the powerful economy influences in the world. Or so is China that implemented Socialist that now becoming one of the greatest economy countries in the world. In conclusion, whatever the system, as long as the system is appropriate with the country, and run correctly and rightfully it can be a useful system and effective system. In Indonesia, the appropriate system is Pancasila economics system, in one hand, it has an appropriate side with this country. But in contrary, the faults is located on the implementation in the reality, where there are so many deviations and misuses happen, such as corruption in the markets, the misuses of Power, and the other problems that cant be overcame as easy as turn our hand into another side.

Finally, if Indonesia could implement and run the economic system correctly I think Indonesia could be in the same position with another biggest economy country. With legions of resources, Human resources and Natural resources, the possibilities to be a Great country is very big. The minus weakness is just from Morale sides when there are too much divergence, corruption, collusion, and nepotism in the economy. What Indonesia really needs is believe and then economy will do it. Next is aware that Pancasila is an ideology that has united us that finally could release us from the 350 years of colonization, then Pancasila must can be relied on as a source of ideology to arrange the national economy. In Pancasila economics, the economy is arranged based on togetherness of family, means that all of the factor of productions is used together, by all people, for all people, under the supervision of the society and the government. The welfare of society is the main purpose instead of the individuals interest. Recently, in economy, the most common thing that happens is Globalization in economy. People say that Globalization is unavoidable, so, we should not submit to the situation, and accept the rules that the other country has implemented. We have to stand and implement in our Pancasila economics, then globalization is not becoming a scary thing as long as we hold on the Pancasila principles. Indonesia has undergone globalization and trades since couple of decades ago, with many countries, such as India, China, an another Western countries. At that time, Indonesia had regarded as the center of the worlds commerce and reached the glory under some of the kingdom in Indonesia, such as Sriwijaya, that succeed to bring the welfare and prosperity to the citizen.

It proves that we dont have to embarrasse and than make a inferior sense with the situations . What we have to do is believe that Indonesia could do it again, taking back the welfare and the pride of a big economy country and bring the prosperity to all of the people. Pancasila economics system is a morale, humanity, nasionalism, civilized principles that can bring social justice for the whole of the people of Indonesia in economy into reality, as long as the system is run correctly with integrity from the chiefs and the leaders from the village to the capital city, from the constitutional to legislative, with high responsibility toward the openness and extraversion to the entire Indonesians.