By: Winarno Zain
When Widjojo Nitisastro entered the classroom, he asked us, the students, to put our homework on statistics on our desks.
It was in 1964, and we, the second-grade students in the Faculty of Economics of the University of Indonesia (FE-UI), had to take statistics as one of the required courses.
Widjojo, the statistics teacher, and the dean of the faculty, then walked to each student’s desk to check their homework. He then proceeded to the front of the class and continued his lesson.
He taught with clarity, his words and sentences were systematically organized in such a way that listening to him was an enjoyment in itself.
Widjojo might not have realized it but that morning, as far as my studies at the university was concerned, was the only time that a teacher ever cared to inspect students’ homework. This speaks volumes on the quality of teaching at the Faculty of Economics at that time.
Ironically this did not prevent the FE-UI from playing a critical role and exerting influence in the great transformation of the country that was about to take place.
While explaining statistical figures in the classroom, Widjojo sometimes explained the importance of statistics for economic planning. Widjojo himself was a demographer. His undergraduate thesis on disguised unemployment in Indonesia, and his book on the Indonesian population that he wrote together with a Canadian economist, Nathan Keyfitz, from Harvard University were testimony to his expertise in this field.
But by this time his interest was shifting to economic planning. He wanted economic planning to be developed into a separate discipline taught at the university.
A book on socialist economic planning by a Polish economist Oscar Lange became a standard text book at the faculty. Widjojo’s speech in his inauguration as professor at FE-UI in 1964 dealt with the theory of economic planning.
It was a comprehensive analysis of the subject, a highly technical presentation that it was difficult for the average economics student to understand. Widjojo himself must have had difficulty in explaining to the audience the complexity of implementing consistent inter-industry and inter-regional planning.
Economic planning at that time was closely associated with the socialist economic system. The left-leaning president Sukarno and the powerful Indonesian Communist Party (PKI) were dragging the Indonesian economy into a socialist system modeled after the Soviet Union and the People’s Republic of China.
These were centrally planned economies where the role of the state was dominant in allocating economic resources, and where the private sector and market mechanisms had only marginal roles.
FE-UI leaders realized that the growing anti-American campaign conducted by the PKI in their bid to seize power in Indonesia would sooner or later target FE-UI, long considered to be the bastion of American economics teaching, for “intellectual cleansing”.
Understandably, some FE-UI academics led by Widjojo started to make scientific justifications for socialism in their lectures. To this day, it is not entirely clear whether their embrace of socialism was a genuine scientific endeavor or political expediency.
However, the economic system that emerged after president Soeharto took power and appointed Widjojo as his top economic official was not particularly socialist.
Private sector and market mechanisms played bigger roles in the economy, but Widjojo still believed in the importance of economic planning. The result was that Indonesian economic development during the Soeharto years was based on four successive Five-Year Development Plans (Repelita).
As the economic czar during the reign of president Soeharto, Widjojo strictly guarded the oil bonanza reaped during the oil boom of the 1970s. Unlike other oil-exporting countries that wasted their oil revenues, Indonesian economic policy-makers under Widjojo’s leadership used oil revenues prudently.
Most oil revenue was channeled into expanding infrastructure, especially irrigation. In many occasions, Widjojo stressed the importance of a strong agricultural sector as the basis for industrialization. Widjojo saw the agricultural sector both as the supply of raw materials for industry and as a market for its output. In other words, Widjojo believed that if farmers become more prosperous, they would consume more industrial products.
In one of his lectures, Widjojo reminded his students that economic development needed not only capital investment but also human investment. Human investment?
It was a strange concept for students in those days but it showed Widjojo’s foresight. He believed that economic development would suffer drawbacks if not accompanied by properly qualified human resources.
He must have been dismayed to see how education in this country was neglected by the government for so long. The physical condition of schools and other facilities has been deteriorating tragically.
The fate of schoolchildren and their teachers has become a political football between central and regional governments. The soft spoken and mild-mannered economics teacher could be uncompromising and angry when a basic principle of good corporate governance was violated.
This happened in the mid 1980s when Pertamina (Indonesia National Oil Company), the state oil company, and the most powerful business in the country almost went bankrupt under Gen. Ibnu Sutowo, a close companion of president Soeharto, and one of the most powerful generals in the country.
Because of a loan mismatch — Pertamina used short-term loans for long-term projects — it defaulted on its US$I0 billion loan from foreign creditors. To forestall bankruptcy the government was forced to bail out Pertamina by digging out from its own reserves. It was a bitter and painful experience for Widjojo.
He and his team came to Soeharto and persuaded him to replace Ibnu Sutowo as the head of Pertamina. It was unprecedented: The head of powerful Pertamina, a state within a state, could finally be replaced.
The fall of oil prices in the mid 1980s was not allowed to inflict a disaster on the Indonesian economy. A prompt and painful response was initiated through rupiah devaluation and austerity measures.
Widjojo and his team used the opportunity to introduce wide ranging economic reforms through deregulation of trade and investment.
The reforms and liberalization of the economy, accompanied by prudent and disciplined monetary and fiscal policies designed by Widjojo and his team laid the strong macro foundations that have supported high economic growth up to now.
Notice: This opinion article is available at an online newspaper, The Jakarta Post, in Jakarta, Indonesia, on March 13, 2012. It is also able to be reached at: www.thejakartapost.com [accessed in Bandung, West Java, Indonesia: 27 March 2012].
The writer is an economist, former student of Prof Dr Widjojo Nitisastro, and alumni of Economics Faculty UI (University of Indonesia) in Jakarta.