Democracy, economic recovery and human development in Indonesia

Prior to the Asian crisis, Indonesia has been one of the miracle economies which managed to grow rapidly with reasonably low income/expenditure inequality. But the cost has been the suppression of human and labour rights, and environmental degradation. The crisis of 1997-98 has unleashed a systemic transition from an autocratic regime to a democratic polity, from a relationship-based to a rule-based market economy and highly centralised government to a decentralised system of government. This is a daunting task, especially when the economy is till recovering from the worst down-turn in history. This paper argues that rekindling the miracle will entail much more than a mere replication of past growth trends. It further argues that the policy environment has fundamentally altered under the triple pressures of globalisation, democratisation and decentralisation. The focus of public policy will have to shift to the quality of growth by making a renewed commitment to human development. Human development plays a critical role in both consolidation of democracy and sustaining economic recovery.