Pursuing Equality in Distribution of Wealth in Indonesia

Topics: Monetary policy, Poverty, Economics Pages: 60 (23243 words) Published: March 12, 2008

Wealth inequality is an economic challenge faced by all countries in the world. In every country, there will always be high income and low income people. Unless a country implements full communism doctrine, there will always a high variance in the income of the society of a country. However, the practice of communism to eliminate inequality is not justifiable because the costs of doing so are bigger than the benefits. Indonesia has been trapped in the world of inequality for so long. This is not a trivial inequality that we are talking about here. There is a huge gap between the rich and poor people in Indonesia. For example, the richest person in Indonesia based on Forbes December 2007; Abu Rizal Bakrie has Rp.50.22 trillion of net worth. It is greatly contradictive if we contrast his financial condition to that of the poverty in Indonesia. World Bank states that people with daily living expenses less than $2/day falls below the poverty line. Using that definition, approximately 60% of Indonesians are in the category of poor people. I constantly see children around the traffic light begging for money, just to have enough pennies to buy their next lunch. They wear weary clothes and education is merely a dream for them. This is happening all the time, in every part of Indonesia. Indonesia has an income per capita of $1,640. It seems like okay compared to Burundi's per capita income of $119 (which is the lowest in the world). However, when we take a closer look, we will notice that the income per capita does not consider the great discrepancy of income between rich people and poor people. Moreover, the trend is that rich people get richer while poor people get poorer. The recent Merrill Lynch research done shows that the number of rich people in Indonesia (have more than $1 million) increases 19.2% in 2007. This is the third fastest growth in Asia-Pacific region, just below Singapore and India. On the other hand, the number poor people in Indonesia as in 2007 increases to 16.58%. It is very difficult to promote welfare proportionally for all citizens. Inequality is a terrible problem since it triggers tunnel effect, impedes future growth, and destroys a country's political stability. Inequality is a major economic problem that a government has to solve. This paper deals with our hypothesis, analysis, conclusions and suggestions to solve inequality.


Inequality and poverty are the concern of many countries around the world. Inequality is due to a condition where not everyone has the same access or opportunity in gaining income. In some countries, inequality has become so severe that it will impede the country's growth. Inequality can be easily seen by the gap between poor and rich people in a country. In Indonesia, the amount of rich people is only 0,001% of total population while the amount of the poor people is 16.58% of Indonesian people. In our analysis section, we finally managed to find out that the causes of severe inequality in Indonesia are vicious circle of poverty (which exists because poor people do not have enough access to education, loan and healthcare), SMEs' weak competitiveness, unbalanced regional development (particularly in the area of infrastructure) and poor fundamental of Indonesians. Last but most importantly, we point out several recommendations to the government, businesspeople and society respectively. We recommend the government to do several things, such as promoting political and regulatory stability, limiting product subsidies, intensively developing infrastructures, promoting the implementation of micro credit, eliminating governmental frauds, etc. On the other hand, we recommend businesspeople to put more attention on the Corporate Social Responsibility, micro credit and determination to fight authority misuse and frauds. We also put some recommendations pointed to the society to remove their dependency on product subsidy, utilize direct subsidy responsibly and...

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#8 Mudrajad Kuncoro – Unbalanced Growth
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