‘Anti-depresant’ economics

‘Anti-depresant’ economics Rudi Winandoko ;   A Diplomat at The Foreign Ministry

JAKARTA POST, 06 November 2012

Indonesia is growing rapidly. It is the 16th largest economy in the world today. By 2030, the McKinsey Global Institute predicts that it will be the seventh largest economy, surpassing the United Kingdom and Germany. Growth has been around 4 to 7 percent over the past 10 years. Inflation currently stable at 4 percent also adds to Indonesia’s attractiveness to investors.  The two most prominent rating agencies, Fitch and Moody’s, raised Indonesia’s credit rating to investment grade level. Many attribute the economic boost to increasing domestic consumption. Unlike other emerging economies which rely on commodity exports, Indonesia’s gross domestic product (GDP) is driven mainly by domestic consumption. Indonesia today has 45 million members of the consuming class, and is still growing at an unprecedented rate. No wonder it can prosper through the global financial hurricane. Those facts might allow us to be complacent about Indonesia’s future. Yet, I am afraid that is not necessarily the case. Being rich is everyone’s dream, but sometimes that is not enough. Being rich without contentment is worthless. From a traditional viewpoint, economic growth is essential to increase the quality of people’s livelihoods. Growth means more goods and services are available to help society fulfill its needs. For Indonesia government is the agent to facilitate growth so as to improve citizens’ prosperity. But, in such a consumer society as we live in today, people are forced to be dissatisfied with what they have in order to make the economy grow.  They find happiness by accumulating resources and measure their self-image by the assets they have. The society tends to justify environmental damage and social degradation, provided that more resources can be consumed.  Economic growth like this is simply unsustainable. The ongoing crisis that has hit the United States shows a correlation between consumerism and unsustainable growth. The financial industry there created a sophisticated and complex system to encourage everyone to own property, regardless of their ability to afford it.  Banks no longer cared about whether debtors could pay back their mortgages. Economic growth by property boom was magnificent. But, not for long, the bubble burst and resulted in the biggest recession since the Great Depression in the 1930s. Those factors of unsustainable growth have been shrouding the world and Indonesia’s growing economy. During 2006-2011, Indonesia had the highest increase in income inequality levels worldwide, from a Gini coefficient of 33 percent in 2006 to 37.7 percent in 2011. This implies the benefits of rapid economic growth are enjoyed only by a small elite. Growth has also been unable to prevent environmental degradation. Consumerism has led Indonesia to destroy 1.87 million hectares of forest every year, as estimated by the Food and Agriculture Organization (FAO) during 2000 and 2005. The damage reached 9.36 million hectares over five years, as large as the size of Portugal. Global demand for wood pulp, palm oil and timber contributed much to the damage.  Furthermore, an increasing economic power has been unable to change Indonesian attitudes to viewing their lives. In terms of citizens’ well-being, the Human Development Index still placed Indonesia in the medium development group, which means its robust growth has not yet been able to raise Indonesian life-expectancy, education or standards of living accordingly.  The Economist Intelligence Unit also ranked Indonesia 71st in its quality-of-life index that measures citizens’ subjective life-satisfaction. Indonesians are not as happy as the Vietnamese (61st ) or Filipinos (44th).  We must shift our perspective in building our nation. The economy should allocate finite resources to enrich people’s contentment, rather than to satisfy unlimited human greed.  It is not about how to make our people have more, but how to make them happy with their lives. Our purpose as a nation should go beyond material things.  Through measuring our progress by the level of happiness among citizens, we acknowledge that the pursuit of happiness is a fundamental human goal. It will support moves toward a sustainable society. Other nations have started to incorporate goals besides economic output, such as GDP, in policymaking. In Britain, Prime Minister David Cameron announced that his administration had taken steps to find ways of measuring wellbeing in addition to tracking economic output because GDP alone does not show how growth is created. In another part of the world, Bhutan has even introduced a Gross National Happiness scale to measure its citizens’ welfare. Last April, history was made when the United Nations implemented Resolution 65/309, placing “happiness” on the global agenda. Indonesia should take part in this modern practice of economic policy.  Even though challenges regarding happiness economics remain unresolved, we need to start adjusting ourselves to this perspective. Indonesia has a chance to formulate a new way to fit its desire to build a happy nation into its economic goals.  The recent World Mental Health Day may have reminded us of the danger of irresponsible economic growth. Pursuing materialism creates greed and anxiety and encourages stress for everyone in the society. Unsustainable growth also causes shocks more frequently. To overcome stress, you do not always need a pill, anti-depressant economics also helps. ●