THE POLITICS of INCOME DISTRIBUTION in INDONESIA by Brewster Grace
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SOUTHEAST ASIA SERIES Vol. XXV No. 9 (Indonesia) THE POLITICS OF INCOME DISTRIBUTION IN INDONESIA by Brewster Grace July 1977 Introduction Since Independence in 1949, Indonesia has been percent of the nation's land mass. Population den- through a number of traumatic economic and sities on Java average 600 persons per square kilo- political crises. The fifth largest populated nation meter. In relatively productive areas, with good irri- in the world has seen inflation soar to 600 percent, gation and fertile soils, densities run as high as has had perhaps 200,000 Indonesians (mostly 2,000 persons per square kilometer. However, since Javanese and Balinese) killed in an anticommunist such densities are only supportable as long as food purge in 1965 and 1966, lives with a per capita and work satisfy the needs of the population, income of $90, and currently sustains a foreign poverty in Indonesia can generally be defined by debt of over $10 billion. the unavailability of these two basic necessities. Yet the nation survives economically, due largely Over two-thirds of Indonesians work in agricul- to its vast natural wealth and, for the past ten years, ture-most of them engaged in extremely small- has maintained political stability under the scale production or as laborers on larger but still authoritarian rule of President Suharto. tiny farms. In either instance their livelihood almost never rises above subsistence. The limita- Suharto's success, however, has recently come tions of the physical environment keep both their under serious question. Riots in Jakarta in 1974, expectations and their consumption levels low. and the heavy debts of Pertamina, the national oil company, point to major problems of distribution The average size farm in Java is roughly half an and management of the nation's wealth. The fol- acre. Many farmers, of course, own less, and a third lowing attempts to describe a number of these of Java's farmers own no land at all or, at best, a interrelated issues with which the Suharto regime minute garden plot around a tiny house. Thus, the must soon deal if it is to sustain the same measure poorest in Java will sell labor to those in the village of stability without increasing resort to repression. who do have land. In return, the laborer tradi- tionally receives a share of the harvest. This so- Poverty called "bawon" system has met traditional culti- vation needs, the demands of village comrnunality, Poverty in Indonesia is overwhelming. It is esti- and the work and food requirements of poor mated that of the nation's 130 million people, farmers. nearly 80 million, or close to two-thirds of all Indo- nesians, live below a level of poverty defined by a The practice of sharing represented by the minimum standard for basic food intake. It is fur- bawon-what Clifford Geertz calls "shared ther estimated that fully 22 percent are without suf- povertyH-goes to the root of Javanese ethics. The ficient work or income to secure even half these basic principles of village communality dictate that nutritional needs. the wealthier farmer gives some source of livelihood to poorer farmers, regardless of profit margins, and Most of the poor live in Java; an island with 65 the labor-intensive nature of traditional rice cul- percent of the entire population, it contains only 6 tivation has allowed more and more people, as Copyright @ 1977, American Universities Field Staff, Inc. [BG-4-'771 population pressures and food needs increase, to Ironically, Java's rural poor may become a casualty join in harvests. Shared poverty through shared of modern economics: while increased productivity harvesting has sustained the growing number of makes more food available to the growing number poor in Java for centuries. of poor, reduced demand for labor decreases their opportunity to earn the wherewithal to obtain a These traditional provisions for Java's rural poor share of the new bounties. have been affected recently by a number of demo- graphic and economic changes. First, in some Migration from rural areas to more urban areas instances or areas, population growth may have and to the major cities has become substantial as reached Malthusian limits beyond which shared large numbers of Indonesia's poor are seeking work poverty practices cannot go. Over the past decade outside agriculture. Much of this migration is efforts to relieve this pressure through relocation of seasonal-farmers looking for jobs during dry, people-or so-called transmigration-to the less nonfarming periods-but it also reflects the satura- densely populated outer islands have, for financial tion of employment in the traditional sector and the and environmental reasons, achieved only marginal painfully slow growth of alternative work oppor- success to date. Second, in spite of rapid rates of tunity. population increase, theoretically land can absorb new labor and provide more income if productivity While under- as well as unemployment is com- is increased. But in those areas of Java where pro- mon in the countryside, absolute unemployment in ductivity is increasing, there are indications that urban areas is statistically low-only 4 percent, the technical and economic changes which have according to Indonesian government sources. But increased the yields have decreased the demand for much low-income urban employment, such as labor. pedicab driving, cigarette butt collecting, street vending, etc., produces little remuneration for extremely long hours. In the 1960s, fertilizers and access to credit for farmers' surplus production, and market orienta- With virtually no cash income, people fashion tion brought them closer to a new economic frame- work exclusive of communal obligation and village makeshift shelters in crowded squatter settlements and along canal banks. Such deprived living con- welfare. Given new considerations of profit and ditions are possibly more prevalent in Indonesia loss, the value of increased production for markets than anywhere else in Southeast Asia. The situation may have taken precedence over the value of tradi- in Jakarta, Indonesia's capital and largest city, has tional obligations. become so desperate, in fact, that the city admin- istration has banned migration. Unless persons can The importance of these economic calculations prove en~ployment,entry to Jakarta is forbidden has only begun to be apparent within the last few and those residing in the city illegally are forcibly years, as Indonesians are experiencing the full removed. impact of the Green Revolution and its high-yield varieties of rice. Government schemes to introduce Underemployment-similar to shared poverty in the new seeds, provide credits, and create mar- villages-is widely apparent in urban areas. Obvi- keting opportunities seem to support the emerging ously, the continued expulsion of unemployed rural landlord and commercial incentives while reducing migrants does nothing to resolve this poverty; only the sense of obligation to village welfare. Some of the creation of new jobs can-both in rural and Java's poor are beginning to lose traditional har- urban areas. At present, Indonesia needs 10 million vesting opportunities to village landowners who sell new jobs, mostly in Java, and approximately 1.2 an entire rice crop before harvest to a middleman. million additional jobs annually to absorb incre- The new owner of the crop is capable not only of ments in the labor force. There are few indications marketing production to the landlord's advantage, that the number of jobs is increasing at anything but can also harvest the crop using hired profes- like the required rate. It may be, in fact, that the sional work teams at much lower costs than number of jobs available to the unskilled or land- occurred in the traditional production sharing less laborer turned migrant is actually decreasing methods. Thus commercial production is tending with the use of more capital intensive production to replace traditional, labor intensive production. methods. The Middle Class responsible for the administration of a proliferating array of nationalized state activities. By 1975 there Indonesia's middle class has essentially three were approximately 1.4 million civil servants. foundations-Muslim traders, Chinese entrepre- neurs, and bureaucrats-all created from different While the bureaucrats' salaries would barely historical situations. qualify them to be in the middle class, their aspira- tions do. Some still have links to the traditional Its first foundation was built by Arab traders nobility, having evolved from the colonial court who as early as the fourteenth century brought not bureaucracy to the contemporary government ser- only trade but Islam. Over the centuries, as the vice. Most entered the civil service after indepen- religion spread from Java's and Sumatra's coastal dence when it became the key niche for high school ports to inland areas, its adherents formed rela- graduates without any prospects for employment in tively coherent social and economic institutions. the private economy. This quick expansion of the Thus an important portion of trade and an even bureaucracies and government spending deflated more important portion of landed wealth became the value of money and thus of salaries. Today, the identified with Muslim institutions and interests. bureaucracy is composed of underpaid, often In rural areas, these interests have tended to disillusioned, and frequently inefficient individuals support orthodox religions and conservative polit- who commonly engage in corruption to make ends ical movements, while urban Muslim businessmen meet. have tended toward reform, modernization, and more liberal politics. Middle class wealth historically has been built by these three groups. Excepting the Chinese com- Over the past few centuries, the early Muslim munity, however, education and skills have been traders were progressively overshadowed by Chi- limited and many indigenous Indonesians have nese entrepreneurs, who had been encouraged by consequently been unable to compete with Chinese. the Dutch to settle in Indonesia to develop colonial No matter how "modern" the Muslim businessman trade and commerce.