Andrew Rosser

Escaping the Resource Curse

Prior to the late 1980s, the conventional wisdom was that natural resource abundance was a blessing for developing countries. In the 1950s, for instance, geographer Norton Ginsburg argued that ‘the possession of a sizable and diversified natural resource endowment is a major advantage to any country embarking upon a period of rapid economic growth’. Similar views were also expressed during this period by mainstream economists such as Jacob Viner and Arthur Lewis. In the 1960s, the development theorist Walter Rostow argued that natural resources would enable developing countries to make the transition from underdevelopment to industrial ‘take-off’, just as they had done for countries such as Australia, the US and Britain. In the 1970s and 1980s, neoliberal economists such as Bela Balassa, Anne Krueger, and P. J. Drake argued that natural resources could facilitate a country’s ‘industrial development by providing domestic markets and investible funds’. A few radical and structuralist economists challenged these views during the 1950s and 1960s but they were in a minority. Since the late 1980s, however, numerous studies have presented evidence to suggest that natural resource abundance – or at least an abundance of particular types of natural resources – is in fact a curse for developing countries. More specifically, they have suggested that natural resource abundance increases the likelihood that developing countries will experience poor economic growth, high levels of poverty, authoritarian rule and civil war. There are good reasons to treat these studies with caution: their findings may not be robust with respect to differences in the measurement of natural resource abundance; while these studies have provided evidence that natural resource abundance – or at least an abundance of particular types of natural resources – and bad development outcomes are correlated with one another, they have not proven that the former causes the latter; and some evidence suggests that in certain respects the development performance of resource-abundant countries has actually been better than resource-poor countries. Nevertheless, the overall weight of evidence so far is clearly in favour of the resource curse hypothesis. New Political Economy, Vol. 11, No. 4, December 2006

Contesting reform: Indonesia's new order and the IMF

This paper examines the origins and outcomes of the currency crisis in Indonesia. On the question of origins, we argue that the crisis is best understood as the product of important shifts in political and social power which took place in the 1980s and which gave rise to the problems of debt and overextended banking systems. On the question of outcomes, we argue that, given the nature of political and social power in Indonesia, there is nothing inevitable about a transition to liberal markets. Other outcomes including maintenance of the status quo and complete chaos represent strong possibilities.

Escaping the resource curse: The case of Indonesia

Abstract Numerous studies have suggested that natural resource abundance is bad for development. In this context, Indonesias rapid growth during the 1970s and 1980s seems remarkable. Why was Indonesia able to grow strongly and what are the implications of its experience for other resource abundant countries? I argue that its rapid growth was not simply a matter of policy elites making rational economic policy choices, but rather reflected two more fundamental factors: (i) the political victory of counter-revolutionary social forces over radical nationalist and communist social forces in Indonesia during the 1960s; and (ii) the countrys strategic Cold War location and proximity to Japan. Accordingly, the main implication of its experience is that improved economic performance in resource abundant countries requires shifts in structures of power and interest and the emergence of external political and economic conditions that provide opportunities for growth.

Indonesia: The politics of inclusion

Abstract Much commentary on Indonesian politics since the fall of President Suharto in May 1998 has suggested that Indonesias political system has remained just as exclusionary as it was prior to his fall, despite becoming much more democratic and decentralised. In contrast to this view, we argue that Indonesias political system has become more inclusive, if only somewhat more so. The fall of Suharto and the subsequent process of democratisation have removed key obstacles to organisation by poor and disadvantaged groups and their NGO allies, making it easier for them to engage in collective action aimed at achieving pro-poor policy change. By making attainment of political office dependent on the support of the voting public, many of whom are poor and disadvantaged, these developments have also created an incentive for politicians to pursue policy changes that favour these groups or at least that appeal to them. At the same time, however, we argue that poor and disadvantaged groups have not become major players in the policy-making process. Despite the fall of Suharto and democratisation, these groups continue to lack the resources possessed by other participants in the policy-making process. Whereas the politico-bureaucrats and well-connected business groups have been able to exercise influence over policy by buying support within representative bodies such as parliament and mobile capital controllers, the IFIs and Western governments have been able to exercise influence by virtue of their structural power, poor and disadvantaged groups have had to rely on less potent ways of exercising influence such as holding demonstrations, engaging in lobbying activity and participating in public debates. We illustrate these points with reference to two policy issues: land reform and mining in protected forests. The article concludes by considering the future prospects for inclusive policy-making in Indonesia.

The politics of corporate social responsibility in Indonesia

Abstract In July 2007, Indonesia became the first country to introduce mandatory legal requirements for corporate social responsibility when the Indonesian parliament passed Law 40/2007 on Limited Liability Companies. This paper examines the political dynamics that shaped this and subsequent regulatory developments related to corporate social responsibility and assesses the likely future direction of Indonesias corporate social responsibility policies. We argue that policy debates over corporate social responsibility in Indonesia have reflected a struggle between the dominant sections of Indonesias capitalist class, local communities that have been negatively affected by corporate activity and their allies in the non-governmental organization movement, and predatory elements in the political parties and bureaucracy for control over the economic resources generated by the activities of major corporations in that country. We argue that the dominant sections of Indonesias capitalist class have so far won this struggle in large part because of their instrumental connections to senior Golkar figures within the government. With respect to the future direction of corporate social responsibility policy, we argue that much will depend on the outcome of future presidential elections. If these elections produce a political leadership that supports a mandatory approach to corporate social responsibility, there is some chance that mandatory requirements for corporate social responsibility in Law 40/2007 will be implemented. If they result in the election of a leadership that does not support a mandatory approach to corporate social responsibility, by contrast, such a change is unlikely.

Coalitions, convergence and corporate governance reform in Indonesia

This paper argues that Indonesias corporate governance system is unlikely to converge on the outsider model of corporate governance, at least in so far as this means an exact replication of this model. While the Indonesian government has introduced a range of corporate governance reforms aimed at bringing in key elements of the outsider model since the mid-1980s, and especially since the onset of the Asian crisis, there have been serious problems with the implementation and enforcement of these reforms. Underlying this outcome, it is argued, has been the structure of power and interest within Indonesia: the balance of power between the main coalitions of interest has been such that the political preconditions for the proper operation of the outsider model have not yet been established.

Democratic Decentralisation and Pro-poor Policy Reform in Indonesia: The Politics of Health Insurance for the Poor in Jembrana and Tabanan

This paper explores the conditions under which democratic decentralisation has contributed to pro-poor policy reform in Indonesia by examining the politics of health insurance for the poor in two Indonesian districts, Jembrana and Tabanan, both located in Bali. Governments in these districts have responded quite differently to the issue of health insurance for the poor since they gained primary responsibility for health policy as a result of Indonesia’s implementation of decentralisation in 2001. We argue that this variation has reflected differences in the nature of district heads’ political strategies — particularly the extent to which they have sought to develop a popular base among the poor — and that these in turn have reflected differences in their personal networks, alliances and constituencies. Comparative research suggests that pro-poor outcomes have only occurred in developing countries following democratic decentralisation when social-democratic political parties have secured power at the local level. In the Indonesian case, we suggest, political parties are not well defined in ideological and programmatic terms and tend to act as electoral vehicles for hire and mechanisms for the distribution of patronage, while local-level politics is increasingly dominated by the executive arm of government. Hence the pathway to pro-poor policy reform has been different — namely, via the emergence of local executives who pursue their interests and those of allies and backers via populist strategies with or without the support of parties.

From User Fees to Fee Free: The Politics of Realising Universal Free Basic Education in Indonesia

Abstract Several developing countries have recently introduced policies supporting universal basic free education (UFBE). Experience suggests such policies often fail to increase access and quality of education, and illegal fees are widely prevalent. The literature identifies several reasons including the lack of replacement funding in place of fees and the loss of quality due to overcrowding and subsequent high drop-out rates. This article, using evidence from Indonesias experience, argues that the underlying problem is political. We suggest that fee-free education is an attainable goal, but only if pro-UFBE interest groups are empowered to influence policy, demand accountability and seek redress against illegal fees.

Realising free health care for the poor in Indonesia: the politics of illegal fees

Abstract This paper examines why illegal fees persist at public health facilities in Indonesia. It suggests that their persistence reflects the political dominance of a coalition of interests consisting of politico-bureaucratic elements in the state apparatus and major business groups and the implications this has had for government spending on the health sector and programmes aimedat providing free health care to the poor in particular among other determinants of the level of illegal fees. Accordingly, the paper concludes that eliminating illegal fees from Indonesias public health system requires not simply better funding of public health facilities and better change management, as much of the comparative health economics literature suggests – although these are certainly part of the solution – but also efforts to empower the poor and their allies vis-à-vis this coalition of interests.

Neo-liberalism and the politics of Australian aid policy-making

The main driver of Australian aid policy has always been the government’s foreign policy and security objectives (Davis 2006). But to the extent that the Australian aid program has had development-related objectives, neo-liberalism has provided the framework for how these are to be achieved. As noted in the Introduction to this special section, the principles of neo-liberalism have permeated key government reports on aid policy, key ministerial statements on the Australian aid program, and a range of other aid policy documents since the late 1970s. This paper examines the politics underlying this situation. It suggests that the dominant influence of neo-liberalism on Australian aid policy reflects two factors: the interests and structural power of Australian business and the institutional context within which aid policy-making in Australia occurs. The interests and structural power of Australian business, it is argued, have made the Australian government, whether under the Australian Labor Party (ALP) or the Liberal-National Coalition, predisposed towards neo-liberal aid policies while the institutional context has enabled the government to exclude groups who oppose these policies from meaningful participation in the aid policy-making process. In presenting this argument, I begin by addressing some theoretical concerns. I then examine the agendas and interests that have shaped aid policy debates in Australia, the way in which the two aforementioned factors have contributed to the ideological dominance of the neo-liberal agenda, and the implications of the recent change of government in terms of the future influence of neo-liberalism on Australian aid policy.