THE POL T ZATION IDEA ON ECONOMY POL C ES (Case of INDONESIAN TECHNOCRATS) By: Nofia Fitri

Moves from the basic question, where do the ideas about economic come from? They come from economists, definitely. According to Krugman, economist is someone who thinks and writes regularly about economies issues. He gave underline then, that not all econo mist are alike, in fact the genius includes two radically distinct species: the professor and the policy entrepreneurs (Krugman, 1994). Im in believed that every idea that had been promoted by economist has its own dimension to be understood. This is the complicated of economic and economist when they touch the political dimension. There is one thing that interest from economists that is among the scholars there is a common suggestion that the popular subject of discussion among economists is not so much economics as economists as Samuelson wrote within the Economists and the History of Ideas (Samuelson, 1961).

The United States and Social Darwinism

The United States of America (USA) emerged from the World War 1 (WW1) as the world most powerful economic state which its share of world trade and investment was greater than other states. During that time American policy makers had been made a little effort to open the structure of international trade (Krasner, 2008). However need to be note that within the American history before the WW1, they had been emerged as a liberal country which is showed that the years from 1870 to 1900 were the years of Laisses-Faire Capitalism with the very deep implemented ideas of Social Darwinism which emphasized that the economy would self -correct if government didnt interfere (Rogoucy, 2008). On eventually those period came to its end when President Woodrow Wilson announced several reforms that promoted the policy to defending human rights. Rogoucy wrote as well as this quotation: He introduced legislation that curbed indefensible and intolerable private monopoly, and prevented unfair methods of business competition, made strikes legal, regulated working conditions for seamen and fixed an eight-hour working day for railroad employees, (which prevented a national railroad strike in 1916) and prohibited

child labor. He equally made possible low -cost long-term mortgages for farmers and legalized womens right to vote. 1 Went from the Great Depression the dynamic of US economic policies moved to the idea of the British famous economist John Maynard Keynes who developed the Keynesian theory with the concept of Welfare State. Through the General Theory he emphasized that government intervention is important to correct the economic instability. During this period some scholars noted that US had a magic economy as Wolfe used this term. 2 Keynesian stood up until the emerged of Neo -liberalism as a creation of the Chicago School, led by one of the most American Economists Milton Friedman. History has been noted that before the Great Depression in 1930 the global economy relied on the idea of classical theory and its Lasses Faire policy prescription which emphasized that the economy would self -correct if government didnt interfere. This condition then extremely changed, when the British famous economist John Maynard Keynes developed the Keynesian theory with the concept of Welfare State which emphasized that government intervention is important to correct the economic instability. However the conception of Keynes then became a major solution for the Great Depression. Other than that as the dynamic of global economy post Great Depression several economists from the different school of thought built arguments aside of Keynes ideas, in particularly the American economists. The role of some American economists can be describe for briefly beside s to built the shape of United States (US) economic system and the established of its policies, also affected as directly or indirectly to the shapes of global system either economics or politics. Post World War I (WW1) US had implemented some restriction policies, the Smooth Hawley Tariff as a real of protection for example. Definitely, there is no doubt among scholars or academicians how far this policy affected the global world system. Thus the evidence shows that the role of US started to take a place a s an influence state. The US emerged from the WW1 as the world most powerful economic states which its share of world trade and investment was about 26 per cent greater than other state (Krasner, 2008). Krasner stated that at that time American policy makers made little effort to open the structure of international trade. Need to be note that within the American history before the WW1, the years from 1870 to 1900 were the years of Laisses-Faire Capitalism with the very deep implemented ideas of Social Darw inism (Rogoucy, 2008).

1 Rogoucy from Dr Eric Mayer, Lectures on History of the U.S from 1870, taken from internet site: http://www.emayzine.com/lectures/Gilded%7E1.htm. 2 See Paul Krugman (1994), Peddling Prosperity, page 3.

Social Darwinists viewed that market as an arena of conflict in which the fittest emerge as victors. According to this way of thinking, the market is the most natural form of social organization because the most closely resembles the natural world as it exists in dependently of human intervention (Buchanan, 1995). According to Buchanan, market usually claims that the redistributive arrangements of the welfare state ought to be dismantled, and that the market ought to be allowed t o operate freely, because such interventions in the market interfere with the natural struggle for survival and hinder the operation of the law of the survival of the fittest. On eventually that Laisses-Faire period came to its end when President Woodrow Wilson announced several reforms that promote the policy to defending human rights. Mayer wrote: He introduced legislation that curbed indefensible and intolerable private monopoly, and prevented unfair methods of business competition, made strikes legal, regulated working conditions for seamen and fixed an eight-hour working day for railroad employees, (which prevented a national railroad strike in 1916) and prohibited child labor. He equally made possible low -cost long-term mortgages for farmers and legalized womens right to vote. 3
Keynes versus Friedman

As being mentioned before, the dynamic of US economic policies then moved to the idea of Keynesian until the emerged of Neo -liberalism as a creation of the Chicago School, led by one of the most American Economists Milton Friedman. The Neo -liberalism ideas of Friedman, some of the arguments have written as a critique for Keynes theories. Based of the freedom perspective Friedman with the worked of Austrian famous economist Friedrich Hayek then changed the American economic perspective extremely. 4 One of Friedmans argument sounds: Historical experience speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity. (Friedman 1982, 9).

Friedman then argued about the need for freedom of political -economy. According to him the kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes
3 Eric Mayer. Lectures on History of the U.S from 1870. Available at: http://www.emayzine.com/lectures/Gilded%7E1.htm. 4 Hayek more influenced for the establishment of British economic system at the Thatcher era.

political freedom because it separates economic power from political power and in this why enables the one to offset the other. Then Friedman stated that the political freedom clearly came along with the free market and the development of capitalist institutions. History suggests only that capitalism is a necessary condition for political freedom. He noted: Wherever we find any large element of individual freedom, some measure of progress in the material comforts at the disposal of ordinary citizens, and widespread hope of further progress in the future, there we also find that economic activity is organized mainly through the free market. Wherever the state undertakes to control in detail the economic activities of its citizens, wherever, that is, detailed central economic planning reigns, there ordinary citizens are in political fetters, have a low standard of living, and have little power to control their own destiny. (Friedman and Friedman 1980, 46). However history has shows that the dynamic of U.S. economic policies not merely implemented the policy that support for the pure idea of liberalism as it did through protec tionism before the economy deficit because of some war cases. Those evidences show that economic policy was about where state put its interest and how much the economist stressed it ideas. For most developing countries which learned from US experiences the economists idea might be wellspring to develop their economy but for some other countries the US has failed to promote the idea of well economic policy. Roaring Nineties of Stiglitz and The Berkeley Mafia Through Roaring Nineties, Stiglitz provided the failure of US policy where this country imposed the developing countries with liberalization market that caused the worse condition like corruption (Stiglitz, 2002). This book clearly explains that one of this case happened in Indonesia. Under of Soeharto regime Indonesia has made major policy decisions that have liberalized its economy. However at the time when we mention about Indonesian economic there is one thing that always following behind, that is the Mafia of Berkeley or the Berkeley Mafia. Science might never put the term of the Berkeley Mafia as a scientific terminology for clearly even this term has known widely for world society especially for whom that concern with Indonesia issue. However for the majority of Indonesian, the justificatio n of Indonesian economists sins might be explained by using this term. University of California, Berkeley is one of the Universities in United States which produces a number Indonesians Scholars who concern with economic as their primary field.

Some others authors called those scholars as academic technocrats. 5 The relation between Indonesia and US within the establishment of variant economic policies could be started from this stuff. As Roth wrote economists have lately been called upon not only to analyze market, but also to design them (Roth, 2001). Base of that argument, this research would analysis how the decision making of US economic policy according to the roles, advices, influences, even control of the economists and how that processes put some pressure for Indonesia market to liberalize its system since US started its neo liberalization up to the emerged of global crisis in 2008 which at this time also Indonesia led by authoritarian regime of president Soeharto.
The Economists Ideas

During those times my research intention would be concentrate with the ideas and its implementation. As my analysis framework within the process the effects might be happened as directly which Indonesian government got some political diction through Washin gton Consensus, American Government political pressures or as indirectly which the American economists influenced the Indonesian government perspectives and the Indonesian economists ideas. Among the scholars there is a common suggestion that the popular subject of discussion among economists is not so much economics as economists as Samuelson wrote within the Economists and the History of Ideas (Samuelson, 1961). From other sources he has noted that many economists would separate economics from sociology upon the basis of rational or irrational behavior, where these terms are defined in the penumbra of utility theory (Samuelson, 1955). Toward this argument, Amartya Sen stated that nevertheless, Samuelson is undoubtedly right in asserting that the theory is not a technical sense meaningless. Behavior, it appears, is to be explained in terms of preferences, which are in turn defined only by behavior. Not surprisingly, excursions into circular ities have been frequent (Sen, 1976). Nowadays economists have long been a natural constituency in favor of growth, Stiglitz had argued. He added that as historically economists have questioned whether, at least in the early stages of development, growth is accompanied by societal goods such as greater equality and better environment (Stiglitz, 2005). This is the reason why economists have contributed for the establishment of healthy competitive market. Stiglitz then noted that American economists tend to have strong vision to
5

Takashi Shiraishi wrote a very clear discussion paper about the explanation of academician technocrats through Technocracy in Indonesia: A Preliminary Analysis. Published by National Graduate Institute for Policy Studies.

advocating government intervention with basic assumption that markets generally work by themselves and that there are just few limited instances in which government action is needed to correct market failure; government economic policy, the thinking goes, should include only minimal intervention to ensure economic efficiency. He argued then, that economists, like doctors, have much to learn from pathology, their see more clearly in these unusual events how the economy really functions (Stiglitz, 2009). Nevertheless before the new era of modern economic 6 began the concentration oh economists have been focused on the role to helped government solves the military and civilian policy problem. But no matter at the era of classical up to the era when International Political Economic taking place as an important issue, economists became a very important actor within the decision making policy of state. Samuelson explained that historian and economist worked side by side to make the important p olicy decisions. 7 But then however as his emphasized according to the legend, economists are supposed never to agree among themselves. For example he portrayed if parliament were to ask six economists for an opinion, seven answers would come back. Finally as Keynes believed that the biggest problem is not to let people accept the new ideas, but to let them forget the old ones, I marked this as the important of history to shapes the human perspectives. Quoted from Keynes: The ideas of economists and polit ical philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Soon or late, it is ideas, not vested interests, which are dangerous for good or evil. 8

With the confidence that history is very important like what Keynes believed, basically this research moves from the point that somet hing is missing from either American economist or Indonesian economist. They learned from history but they were missing that history also about
Gilpin uses the term of the new era of modern economic as a era when International Political Economy emerging as a new phenomenon within the global world. 7 Paul Samuelson (1958), What Economist Know. Within Stiglitz, Joseph E. (Ed). (1965). The Collected Scientific Papers of Paul Samuelson. Cambridge: The MIT Press, p. 1628. 8 The General Theory (1966).
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process, they might understand that from history we learn what is successfully and what is failure but they were missed that from the history we should also learn what would be possible and what would be impossible at the same time.

Based on that I will use historical approach to understand how the process of Economic policy being emerged. History is not theory 9 but however even history might be covered by fish stories everyone still could learn from it. The reason why I use the historical approach is to find out that something missing from the historical line. By learn from the decision making process we could find more deep basic reason why one country applied one policy and why the other did not. However the decision making process has been long a focal point for political scientist interested in analyzing the local and even global political phenomenon. How deci sion makers define situations about which they must make choices leading to action has important implications for how they perceive such choices. According to Dougherty the problem now arises as to how decision makers define the situation in relation to the problem confronting them. How do they see the objects, conditions, other actors, and their intentions? How do they define the goals of their own government? What values strike them as most important, not in the abstract but insofar as they appear to be at stake in this particular situation? (Dougherty, 2001). Why then the decision that some argument had taken by government is different one from another? Need to be underlying that good for other not merely good for another. Thus many theorists assume th at those who advise decision makers allow their conceptions of national interest to be colored by their perceptions of what is good for their own bureaucratic unit. Weber argued that in all advanced political system and economies, there arise bureaucratic structures that themselves shape both the decision making process and its outputs in the form of decisions. Modern leaders as he noted depend heavily on advisor, department, and agency heads, and their bureaucratic staffs for information that is vital to f oreign policy decision.10 That is why the process of decision making policy would need long time and there might be lots of confrontation within. Based of those statements that have been mention above, the topic of decision making process of US policy whi ch was influenced by economists as particular became interesting to be analyze, especially focuses on the effect of that process to liberalize the Indonesias system.

Dougherty, Contending Theories of International Relations: A Comprehensive Survey, p.

460. See Dougherty, (2001). Contending Theories of International Relations: A Comprehensive Survey (5th Ed). New York: Longman.
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Roth wrote that economists have lately been called upon not only to analyze market, but also to design them (Roth, 2001). Base of that argument, this research would analysis how the decision making of US economic policy according to the ideas, roles, advices, influences, even control of the economists and how that processes put some pressure for Indonesia market to liberalize its system since United States started its neo-liberalization up to the emerged of global crisis in 2008. As my analysis framework within the process the effects might be happened as directly which in one condition Indonesian government got some political diction through Washington Consensus, American Government political pressures or as indirectly which the American economists influenced the Indonesian government perspectives and the Indonesian economists ideas. According to my background study I will use the historical approach to understand how the process of American Economic policy emerged. History is not theory 11 but however even history might be covered by fish stories everyone still could learn from it. So people would know how to prepare something for future. Finally as Keynes believed that the biggest problem is not to let people accept the new ideas, but to let them forget the old ones, I marked this as how much important of history is to shapes the human perspectives.
Indonesia Development

The need for sustainability development is not the only Indonesian interests as a country that in the developing level but for most of developing countries even the developed one. Indonesian economic development in one hand might not in progress and performance if there is no emerged the idea of liberalization, but in the other hand the chronic things that have been facing as Indonesian domestic problem also shows that the liberalization process brought some negative impact. The ideas which came from the scholars (economists) or sometime politician not merely as easily accepted for society. Based of that, this study important as a positive critique to build a scientific argument why in one hand the liberalized process beneficial but in the other hand became a disaster f or some countries. Through this deep research many elements (students, academicians, economists, politicians, and policy makers) could take some stuff what was our mistakes and what should be done then for further.

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Dougherty, Contending Theories of International Relations: A Comprehensive Survey, p.

460.

This writing is my introduction (ot her version of my thesis) of my current research about Indonesian Political -Economy Policy. Every critique would be very useful to build my knowledge and analysis. THANKS
For INDONESIA for THE BETTER FUTURE