Utility, Morality, and Stability: Perceptions of Inequality in Indonesia

Inequality, along with its myriad manifestations and various indicators, has garnered greater attention within recent international and regional policy debates. For example, UN agencies, academic institutions, and civil society organizations are engaged in a global discussion on if and how inequality may become an explicit target within the Post-2015 UN Development Agenda. Proponents argue that striving to reach individual developmental targets (e.g., access to drinking water) without addressing structural issues will inhibit the realization of the vision behind the Millennium Declaration.

At a regional level, ASEAN and the OECD collaborated to prepare the Southeast Asian Economic Outlook, 2013 which contains a thematic focus on narrowing development gaps. The Outlook takes a multi-dimensional approach to evaluating inequality vis-a-vis a six-point matrix called the Narrowing Development Gap Indicators (NDGIs). Within ASEAN, although poverty rates and the human resource development gap have declined, they remain significant. Both the infrastructure and the trade and investment gaps grew which brings to question whether the region is economically growing at its full potential.

Under the ASEAN-Canada Research Partnership, an assessment of perceptions on domestic and regional inequality, and also the process of ASEAN integration, has been conducted in Indonesia. Overall, twenty-two interviews were held with government officials, legislators, the ASEAN Secretariat, international organizations, and civil society.

Within Indonesia, the debate on income inequality is rich, lively, and varied. As the data is analyzed, patterns on strategic preferences and effective policy mechanisms will be presented. But the current area of interest is found in what is not being said.

First and foremost, the most noticeable absence from conversations is any expression of a moralistic imperative to address inequality. The distinct lack of a Rawlsian argument is striking: the need to address inequality based on principles of fairness in order to build a society in which differences in outcome are justifiable. A utilitarian argument is the dominant narrative; inequality must be addressed in order to avoid the least desirable outcome: instability.

Secondly, the topic of taxation has not been mentioned explicitly in discussions on effective policy mechanism to reduce inequality. There is extensive rhetoric on utilizing government spending to introduce a comprehensive social safety net for the poor, yet mentioned of taxation targeted at the wealthier middle class is lacking. If taxation was discussed, it fell under the guise of economic nationalism in relation to taxation of foreign companies. Interestingly, broad and effective taxation was the first recommendation in the OECD-ASEAN Outlook.

The absence of these two topics from interview discussions may simply be the result of the survey design. But as research moves to the Philippines these issues may become interesting points of comparison. The Philippines has reduced income inequality in recent years and has been aggressive in devising inclusive growth models.

This blog post has been written by Matthew Bock. Matthew is an Analyst and Technical Advisor based in Indonesia and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.