The economy, inequality and populism

Umar Juoro
Senior fellow at the Center for Information and Development Studies and the Habibie Center

PREMIUM

Jakarta / Mon, June 19, 2017 / 10:57 am

One aspect that has contributed to the rise of populism is high inequality. In Indonesia, populism is largely associated with Islam. Large demonstrations in November and December last year against former Jakarta governor Basuki “Ahok” Tjahaja Purnama due to blasphemy charges shows the growing populism related to Islam in the political arena. (Antara/Akbar Nugroho Gumay)

Inequality in Indonesia is considered high with a Gini ratio at around 0.39. Inequality on the Gini scale is measured between 0, representing perfect equality, and 1, representing perfect inequality. Inequality is getting higher at a time of high commodity prices as high income groups get more benefits from the commodities boom. Meanwhile, people in the bottom quantile get a low share of the economy. High inequality is also related to the slowing down of the manufacturing sector, which many saw as a sign of deindustrialization. This is understandable as manufacturing is supposed to employ a large number of workers as an effective mechanism to reduce inequality. Inequality also shows strikingly high in the financial sector, in which practically about 0.5 percent of depositors dominate around 75 percent of total banking deposits. As only around 30 percent of the population have ac...