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An Indonesian Version of the Minimum Income Guarantee?

January 16, 2015

by J. Andrew Zalucky


There are many interesting things about Indonesia’s new president, Joko Widodo, even if you exclude his excellent taste in music (he apparently loves Megadeth, Metallica and even Napalm Death…nice!). But one recent news item caught my attention, one dealing with a topic of great interest to me and many other left-leaning libertarians: a guaranteed minimum income.

As part of his fight against poverty in Indonesia, Widodo has eliminated oil subsidies, while transferring the newly freed budget line-items to checks cut out to many of the country’s poorest citizens. According to The Economist:

On November 3rd his government began issuing cards that will give poor Indonesians access to three programmes—two expanding publicly funded health care and education, and one giving cash handouts of 200,000 rupiah ($15.75) per month. The income top-up scheme is planned eventually to cover 86.4m people in 15.5m households—a third of Indonesia’s population.

Poor Indonesians were already eligible for various social programmes, including some scholarships and health care. But Jokowi, as he is known, has something his predecessors lacked: money. Like many countries, Indonesia has long wasted vast sums on subsidising fuel (see chart). But on January 1st Jokowi ended petrol subsidies, which will, according to the finance minister, save the government 200 trillion rupiah per year.

The article goes on say how the oil subsidies disproportionately helped the rich and that cash handouts can immediately lift millions of Indonesians out of poverty:

In the long run, making Indonesians healthier and better educated will help them become more productive and richer. But the country’s poverty line is 300,000 rupiah per person per month. Cash transfers of two-thirds that amount will lift millions above it.

So why should this be of interest to left-libertarians? Isn’t this just an expansion of statism in the form of subsidized government handouts? In one way yes. But in another way, it’s a correction for past injustices of statism itself, that of money wasted on commercial, competition-eroding subsidies. A friend of mine, when arguing for a minimum income guarantee, often describes the policy as “reparations for thousands of years of statism.” Though the cards are only available to people of a certain class, this program does indeed feel like a righting of a certain wrong.

But its also an issue budget-hawks can get behind. In the current economic environment, the subsidies are money wasted. In the hands of Indonesia’s poor, the funds will immediately be used and will help release pent up demand, thus giving the economy a jolt. And for a President who wants to bring the country back to 7 percent economic growth, doing so in a way that helps the poor looks very smart indeed.

He’s also appointed Indonesia’s first female foreign minister, and is the first Indonesian president with no connections to the military or other elite groups. His centre-left party, Indonesian Democratic Party-Struggle, is a member of the Council of Asian Liberals and Democrats- who cooperates with the Liberal International (yes, there is such a thing- I feel like our own Libertarian party should join up with it, but they probably won’t).

Anyway, it will be interesting to see where things go with his anti-poverty initiative, and whether any portion of it proves useful to those who wish for a simplified, non-bureaucratic social safety net.

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