Indonesian Economy Analysis

Rizal Ramli's Writing

IMF's myths

Interview: Sri Mulyani


Indonesian Economy

    Published by Cambridge

Supply-Side Economy


      I wish we had a better term for the great advances in economic understanding that began in the mid-1970s and became known as “supply-side economics.” One president, and not a socialist either, called it “voodoo economics,” which shows just how weird it seemed at the time. It was really an expansion of the Classical school of economics, which most people trace to Adam Smith and his precursors such as Cantillon or Hume.

      If you could sum up the insights of the 1970s and 1980s in two words, it would be that “taxes matter.” Today, the importance of this insight is still not very well understood, even by those think tank researchers who craft detailed tax reform proposals, and certainly not by academics today, or the economic hit men of the IMF or World Bank who blow up one economy after another with their “austerity” plans. Taxes really do matter, either in a negative, destructive way, or in a positive, prosperity-inducing way.

      From 1950 to 1970, the Japanese government reduced tax rates, and introduced various business-friendly adjustments such as accelerated depreciation, every single year. Every single year, by their own “static” calculations, these changes were supposed to reduce tax revenue. It won’t surprise anyone when I say that tax revenues actually went up. It might be surprising, however, when I say that tax revenues rose by sixteen times, even with the yen linked to gold, while the tax revenue/GDP ratio didn’t change much at all. Tax revenue, in 1970, was multiples of total GDP in 1950.

      This is good, but it is just one aspect of a much broader picture. In the 1950s and 1960s, economists didn’t really have any way at all of explaining this phenomenon. One popular explanation was that it was caused by the rebuilding effort after the widespread destruction of physical assets in World War II. This was Frederic Bastiat’s “broken window fallacy” on a galactic scale.

      Before 1870 or so, people discussed “political economy,” which basically meant: government economic policy. Since taxation is the government’s biggest economic policy, except for communistic central-planning regimes and those governments (rare in history; common today) who engage in fiat currency manipulation, taxation was often a topic of discussion though one that was not understood very well.

      The “marginal revolution” of the 1870s, beginning with people like Carl Menger and Leon Walras, created the modern study of “economics” – and with it, a number of gross errors that continue to the present day. Driven by physics-envy, they created new mathematical models of “pure economics” that mimicked ideal gas laws and other insights then revolutionizing engineering and physics. In the process, the elements of economics that seemed mathematical and quantifiable in nature – Prices, Interest and Money – became the focus, and everything else largely disappeared.

Paradox Indonesia

What is Paradox Indonesia?
  • Paradox Indonesia is Prabowo's view of current economic state of Indonesia. This is a very comprehensive, thorough view of Indonesia's economy. The discourse given is very pragmatic: you're not only talking about the problem, the solution is also given. This book is unlike other since it tackles the economic problem with a specific solution.
  • This book is a good start to become your launchpad when you discuss about Indonesia's political economy
Chapter 1: Building National Awareness

  • Building Awareness Together
  • After 70 years Independece, We're Heading Towards Failed State
  • Wake Up Call

Chapter 2: Great Challenge #1= Indonesia's Wealth Outflow

  • Our Wealth is Flowing Out
  • Only 1% Enjoying Independence

Chapter 3: Great Challenge #2= Indonesia's Democracy Gripped by Big Capitalist

  • Our Democracy Ruled by Big Capitalist
  • Our Leaders Are Bought because Money Rules
  • You Can Buy Party, Survey, Voters, and Media Here

Chapter 4: Preventing Indonesia's Tragedy

  • This is Our Nation Potential
  • Creating Constitutional Economy
  • Creating People's Democracy

Chapter 5: Answering History's Challenge

  • Conclusion in this chapter is very persuasive

  • This book outline Indonesia's 2 main problems, and offer the solutions for them

March 18, 2019 Notes

The Economist: A game of catch-up
  • John O' Sullivan
  • 2 Centuries

Copyright © Aristo Purboadji 2018