Ivan Hadar

Development Takes Investment in the Poor

Currently, about 37 million Indonesians are living below the poverty line. In order to decrease the poverty rate, several programs have been launched by the current administration. This year, for example, through the National Program for Community Empowerment (PNPM), the government has allocated Rp 10.4 trillion ($1 billion) to every district and Rp 1.7 billion for employment-related development activities.

It is hoped that the management of this enormous fund, which has its origins in foreign debt, comes with high levels of transparency and supervision. Worries of corruption aside, budget allocation can also be politicized by particular groups or political parties. This was obvious when 22 local governments led by opposition parties rejected the PNPM.

This is not surprising, given that 2009 is an election year. The people are longing for a president — and other leaders of the country — who can be role models and show empathy and solidarity for the difficulties faced by the people, especially the poor.

Jean Ziegler, the United Nations Special Rapporteur on Right to Food from 2000 to 2008, described such leaders in his 2002 book “Les Nouveaux Maitres du Monde.” Writing on corruption, he elaborated on Sweden, Finland, Norway and Denmark, where the high-ranking officials go to the office by walking, riding a bike or even taking public transportation. A minister or president who goes to the office in a car guarded by police motorbikes with sirens blaring faces decreased opportunities for re-election, especially if public and vital roads are closed for his own affairs, like attending a wedding or visiting his family.

Many famous European leaders live in ordinary homes, too, places they have lived for most of their life. This stands in obvious contrast to the “palaces” of most leaders of developing countries, including Indonesia. Ziegler concluded that the poorer a nation is, the richer and weirder the leader’s lifestyle is.

Still in vivid memory is the appeal from members of the House of Representatives for a salary raise when they are already earning tens of millions of rupiah. They would allow themselves to go on a “field study” in foreign countries at an expense of billions of rupiah. Their parking areas are often satirized as showrooms for their luxurious cars.

Not willing to be pinned down as the only ones guilty, House members point their fingers at the current president’s accompanying staff when travelling overseas, an entourage that reaches 75 people. Put that in contrast to other foreign leaders who only bring five of their staff with them. Such a waste! 

Among the three principles of the French Revolution — freedom, equality and eternity — that inspired the democratic system, the tendencies are as follows: When political “freedom” is globally spreading, its equivalent, equality and fraternity, tend to be forgotten. A welfare state that obliges the state to provide protection for its poor citizens and assistance for health is regarded as a “deviant path” of democratic socialism. Even distribution, under the paradigm of “market fundamentalism,” is regarded as an ineffective tool to eradicate poverty, and instead worsens the situation.

First, the even distribution will reduce the investment quota. Because for every rupiah that is productively invested by the rich, the poor will only consume them. Second, most of the financial assistance will not reach the target recipients because it is corrupted by the bureaucracy. And third, which is an assumption of the World Bank, the even distribution will endanger the political stability and may lead to violent conflict because it will anger the “elite.”

But, for Erhard Berner, a sociologist who has specialized in urban development and poverty in South and Southeast Asia, all of these arguments are theoretically weak, empirically false, and when practiced, invite cynicism. Because what is wrong if the poor spend the financial assistance to buy food, pay tuition and redeem medicines? The assumption that the elite will get angry and destabilize the developing countries’ governments that implement pro-poor development strategy may be realistic. However, is it ethical to limit the policy?

For development, more important than “productive investment” is investment in the poor, in particular for the children’s health and education. Many countries which have applied this are currently reaping the results, such as Malaysia and South Korea. Without it, a vicious circle will only take place and to increase the number of cheap labor will lower the income that makes them impossible to be healthier and smarter.

Through economic development (including pro-poor growth), this condition could not be solved. For Michael Lipton, a poverty researcher at Sussex University, “extreme inequality is a major obstacle to growth.” Mass poverty, according to him, is not just a result of economic stagnation, but it also a substantial source of economic stagnation itself.

Lipton helped introduce a smart strategy known as Pro-Growth Poverty Reduction. In this framework, public spending on education and health is not a waste on money, but rather a productive investment and a pillar of economic policy. Success stories in Brazil, Vietnam and some new industrial countries seem to bear out Lipton’s assessment. Without equality and fraternity — when even distribution has yet to be an adopted paradigm — the implementation of laissez faire policies and a plague of corruption will occur again. 
 
Ivan Hadar is a social-economy analyst with the United Nations Development Program.