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Economic plans versus political realities Kahlil Rowter, Jakarta Are the government's economic goals and reality converging? Certain macroeconomic variables appear to be doing so. But at the same time, indicators such as unemployment and poverty are off. But what goals would we prefer be reached? And what efforts are being made to achieve them? There has been no shortfall of government budgets, meetings and edicts. Yet the results of these have either been missing or not felt. At this point, a new perspective is needed. What is the use of regulations when they can be routinely violated? The effectiveness of a government should be measured not in how many regulations it puts out but in how many of these are followed. Presumably, policies are meant to suppress the interests of the few in favor of those of the many. But in politics, small groups have a natural incentive to subvert regulations. This is because they can often benefit massively, while the majority of people scarcely notice. Take the case of inflation. A small hike in the prices of key commodities accrues massively to producers and traders but only marginally adds to individual expenditure. But this is not the case when the few become greedy and the marginal increment they gobble up is no longer negligible. When this happens, it cannot be ignored. An example is the toning down of transportation safety protocols in the interest of cost savings. Even taking into account the recent severe weather, our transportation safety record of late has been disastrous. We all want more, and we want it now. Unfortunately, short-term economic policy can only allocate pieces of the same pie. It's only in the longer term can we can actually grow the size of that pie. However, looking at how intimately economic policymaking is interwoven with political processes it is difficult to expect that long-term growth will become the government's priority. An example of this is the government's annual budgetary process. Parliaments everywhere hold government purse strings. Both governments and parliaments are short-lived institutions. It's only natural that they can't look beyond their terms of office. And when it gets close to election time, attention shifts more to self-preservation than representation. It's therefore natural for governments to focus only on monetary and fiscal policies, both of which are subject to short-term tinkering. Other longer-term economic analyses and considerations are pushed aside because they are beyond the political horizon. This has been the complaint of economists both inside and outside the government. I contend that this complaint is not only incorrect, but that it also misses the point. Aside from the fact that economics is a social science, and therefore infused with values, logic does play a major role in the discipline. Economics, in it's basic essence, assists decision making. But who sets objectives? Politicians do. As they lump together public needs, governments and parliaments -- as repositories of collective power -- dictate what needs to be achieved. It is the role of economists to interpret these goals and formulate workable plans to achieve them. But economists must also recognize the constraints that politicians mostly ignore. One major constraint is time. For example, it is simply impossible to build a network of roads overnight. So what is the use of making plans if the results cannot be seen in one political lifetime? It is here that the economist must play a unique role. He must not only be a creature of the government but must at the same time prepare economic plans beneficial to the majority of people. He must convince the leadership that his plans are the way to go. In such a process, economists usually prepare a menu for politicians to choose from. In this menu, costs and benefits should be made explicit. It is, therefore, the economists' role to guide the leadership to choosing the best option. Next, a policy choice must be sold to parliament. As often is the case, the best policies only bring optimum output in the long-run. To make these choice appealing economists must do two things. First, they must sprinkle short-term projects among long-term ones. Second, and most importantly, they must not only put a political sheen on those long-term projects but also convince parliament that the economic logic of these projects is so tight that the policy is an inevitability. In this light, politicians will then easily see that such projects can actually help them get re-elected. If the above are the methods, what about the goals? Most policies fail not only due to poor execution but for a more deeply rooted reason: they may not be what people want. Rhetoric by leaders inspired by so-called objective criteria often raises expectations beyond what can possibly be delivered. Mostly these are abstract goals inspired by ideologies which are not understood by people, or not what people really aspire to. An often cited example is the goal of improving macroeconomic stability while industries fail and unemployment rises. Leaders need to go down to the grass roots, tap people's needs and then reflect upon them. Only then can leaders know what their people really want. At the same time they can get close to people, formulate goals and ask for continuous feedback. Miss this chain and the result will either be polarization or disappointment. Feedback can be done through national debate forums, which are set up not to make decisions but simply to listen to what people have to say. These forums can also become a platform to test and sell ideas and programs. Ultimately, taking the pulse of the people periodically gives valuable feedback on their subjective take on policy. So we now have completed the circle on what to do. The objective must be taken from our own citizens' consciousness, not taken from some textbook or copied from documents made in New York. Don't let a standardized "how" dictate "what" to achieve. This is the job of the government leadership and parliament. Economists should then translate these into a workable economic program, even if it spans several administrations. After guiding the leadership to choose the optimal path, economists must then sell the program to parliament and help them see the light. Only then can long-term economic objectives be made compatible with the political sphere, and only then will politicians want to push these objectives along. Such is the responsibility of economists working for the government and those commenting from the outside. It shouldn't be hard. After all, good economics should be good politics. The writer is Chief Economist at CIMB-GK Indonesia. This is his personal opinion. printer friendly
