Economics and Finance in Indonesia Vol. 59 (3), Page 233 - 241 Widjojo's "Invisible Hand" Emil Salim Widjojo Nitisastro revealed for the first time his political economic view, when he unnoticeably reached his 28th birthday in September 23, 1955. He delivered a strong criticism to Wilopo's presentation on "the Interpretation of Article 33 of the Indonesian Constitution" in a debate between former Prime Minister (1952-1953) Wilopo and graduate student Widjojo Nitisastro that took place in a Symposium of University of Indonesia to celebrate the First Lustrum of the Economic Faculty of University of Indonesia, and was focused on the topic of Article 33 of the 1945 Constitution, stipulating that "the economy is arranged as a joint endeavor based on the principles of family-like mutual cooperation." • 1. UNDERSTANDING WIDJOJO Wilopo has been an influential leader in the Indonesian Nationalist Party (PNI), who has won the 1955 general election. As one of the outstanding leaders of his party, he has been Minister of Labor (1949-1950), Minister of Economic Affairs (1950-1952) and Prime Minister (1952-1953). As a graduate from the Faculty of Law and Social Science during the Dutch colonial period, Wilopo was considered an "intellectual politician", who was open for rational criticism. Widjojo on the other hand has joint the Indonesian 1945 revolution as member of the "Indonesian Student Army" in the battle of Surabaya (1946). When the physical revolution was over (1949), Widjojo became one of the first students of the newly established Economic Faculty at the University of Indonesia (1950) in Jakarta. He was already recognized as a brilliant student and as young graduate student was chosen by the Dean of the Economic Faculty, Professor Sumitro Djojohadikusumo, to become not only his teaching assistant but also his trusted "deputy" to assist him in "running" the Economic Faculty when he was occupied by his duty as Minister of Trade and Industry (1950- 1951), Minister of Finance (1952-1953 and 1955-1956). The seeds of Widjojo's intellectual thinking were sown during encounter. Wilopo was interpreting "article 33 of the 1945 Constitution" as anti-liberalism, not emphasizing individualism but collectivism. © 2011 LPFM 233 Emil Salim Economic activities should not be based on the motive of obtaining individual private gain, but on the motive of serving the community for the betterment of all. "Joint endeavor" as stipulated in the constitution is different from "private endeavor". The goal is "to strive for the enhancement of cooperative joint endeavors" for the enhancement of the whole society and not for "private individual profits". The government must promote these kinds of economic activities, in particular those traditional practices that can be adjusted to these principles of joint endeavors. It is in this context that cooperatives must be promoted to live up to the spirit of article 33 of the 1945 Constitution. Widjojo brought in his rebuttal the macro-economic perspective. The issue is not pro versus anti liberalism or state versus private enterprise per se. The main idea is to get the process of the economy moving to raise national income. All productive forces must be engaged and not limited to economic institutions and cooperatives. Furthermore, how does cooperatives organized by farmers, small producers, small traders and credit institutions lose their private features if "private enterprise" is rejected? Or are they being subordinated to states enterprises or state institutions? Widjojo detected confusion and mixing up of anti-liberalism with anti-private but pro cooperatives. Ernerging in this debate was Widjojo's concept to develop a coherent macro-economic structure that serves to raise GDP but by the same token device rational economic policies to interfere in the market to enable equitable distribution of income and to eradicate poverty. Whether through public or private enterprise becomes irrelevant, since the basic notion of article 33 is to strive for a growing economy with social justice, poverty eradication, and welfare for the people at large. The development policy concept of Widjojo was not clear yet in 1955, but it started to grow together with his maturing intellectual ability affected by the economic and political challenges that he had to endure during the turbulent years of President Soekamo's guided democracy. The first half of the fifties was full with political and economic turbulences. Indonesia was implementing parliamentary democracy with political parties forming the coalition cabinet and parliamentarians were chosen through free election. For a young nation like Indonesia however, the period of parliamentary democracy was combined with frequent changes of cabinets. Many cabinets lasted only 1 to 2 years. This squabbling between political parties makes economic development very difficult. It was only during the Burhanuddin Harahap's Cabinet (August 1955 - March 1956) that effective rational economic policies were implemented, such as reducing budget deficits, dismantling the system of import certification and.stopping discrimination against businesses 234 Widjojo's "Invisible Hand" from Chinese Indonesian. Rational economic policies were drawn with the aim to get the price mechanism working right. The driving force behind all this was Professor Sumitro Djojohadikusumo, who was in charge as Minister of Finance. And as Sumitro's assistant at the Economic Faculty, Widjojo got his first encounter with the "reality of economics in action." However, this experience gives him also the feel of the grim reality behind economics. Widjojo was confronted not only with theories of economics as written in textbooks and taught in classes, but also with economics as it is guided and influenced by real social and political forces operating in real society. In such an environment, economic policy must be based on a clear notion of "what do you want to achieve not only IN economics, but also WITH economics." ' | Widjojo was convinced that most import is to understand fully the theories of economics, to understand the inner logic in economics guided by the "invisible hand" in the market. This is why Widjojo urges all his young colleagues to reach for the Ph.D. degree. It is not the degree as such that is important, but the ability to develop the inner logic of economics, to obtain the methodology of deductive and inductive rational thinking. In brief the ability to use at its maximum our ability of critical and creative scientific thinking. But these features are also what Widjojo imposed upon himself. He obtained his graduate degree with top honors. And he completed his study and obtained his Ph.D. in economics from University of California (1961), Berkeley Campus, also with high distinction. Widjojo has proven to be a top graded scholar and intellectual. Meanwhile Widjojo was also aspiring for an ideal type of intellectual. Not the type of "intellectual worker that offers his intellectual ability to the highest bidder." But for a quality of intellectual with social conscious to perform the task of social critics, when means of criticism have been silenced, and to fight for the interests of the weak, the poor and the vulnerable group. This explains why Widjojo devoted his energy to lead the "Indonesian Institute for Economic and Social Research" or popularity known as LPFM. In his capacity as director of LPFM, several research projects were launched involving undergraduates and graduates students on subjects of transmigration in Lampung, urbanization into Jakarta with impacts on the informal sector in "becak-transport", informal trading in Pasar Benin, village commimity development nationally (that became the embryo for the creation of "Community Development Ministry or Kementerian Pembangunan Masyarakat Desa), family plarming and survey on 59 villages throughout Indonesia. * 235 Emil Salim Widjojo's has steered research into digging real data and facts in the fields where practically no reliable statistical data are available, not only in finance, banking, trade, production, but also in social statistics. Widjojo insisted that any responsible policies must be based on reliable data from the field. In due course of Widjojo's intellectual development, he became fully aware that social factors affected by population become a crucial determinant in Indonesian development. And the only most reliable statistical data available at that time was the Population Census. This was than intensively analyzed in Widjojo's Ph.D. dissertation on "Population Trends in Indonesia (1961) published by Cornell University Press, Ithaca in 1970. In his thesis, Widjojo also draws an analysis of Indonesian Population trend 1961-1991. 2. WIDJOJO'S DEVELOPMENT POLICY PRINCIPLES By then Widjojo's has a realistic view on the Indonesian economic and social conditions, supported by statistical data. Through his role as Dean of Economic Faculty and his wide connections with intellectuals of all walks of life, Widjojo soon became the major brain-power of the National Plarming Bureau, which is attached to the Office of Prime Minister Juanda. Together with Secretary Ceneral of the National Planning Bureau, All Boediardjo, the office was assisted by graduate students and graduates from Economic Faculty under the leadership of Widjojo. A rational 5 year National Development Plan (1965-1961) was drawn and agreed by the government. Unfortunately, the political development was not conducive and the Plan was not made operational. But the ability to draw a comprehensive Five Year Development Plan was the beginning of Widjojo's major say in Indonesian Five Year Plans when President Soekamo was replaced by President Soeharto in 1966. In economic planning, Widjojo recognizes the crucial role of price as the invisible hand in the market. But this invisible hand needs to be working for "development with equity", taking care of the poor, the weak and the vulnerable group. It is in this context that Widjojo believes that the "invisible hand" must be actively steered by the government through development policies into the direction of serving social justice, striving for equity within and between nations.