Waiting for the Night Train

Note: This updates the previous, now deleted, post: Investment: Barking the Wrong Tree

Anybody who is somebody or nobody in the economic realm--ministers, authorities, economists, journalists, laypersons, etc-consciously or not, is preoccupied with growth. As we often hear, "In order to create jobs to such and such percent, we need to increase growth to such and such percent." Another variant from economists: "To contribute to growth by such and such percent, we need to increase electricity (or whatever variable) to such and such percent. This is based on our econometric modelling, which was based on empirical evidence."

Kita terlanjur harus percaya pada pertumbuhan, one would say in Indonesian. Inundated by waves of economic gospel, we have been converted to believe in growth. In today's international intercourse, we join the mainstream, albeit awkwardly and relatively safely to date.

So, in Growth we trust. We think we know well what triggers it: fiscal stimuli, consumption, and investment. In the case of Indonesia, they are fully aware that relying on fiscal stimulus is not possible "thanks" to the mounting debts to service. Dependence on consumption is unsustainable; 95% of the population barely has disposable income or the marginal propensity to consume.

Thus the belief solidifies that Indonesia has to resort to investment: specifically, foreign investment. Let's call it investment of the first degree. Through it we will get the real sector moving. This is the light at the end of our tunnel, our "only" hope. Foreign investment is a night train (and we've hoped for an express one) with bright headlight heading toward us through our dark ages.

For the express train to come unhampered conducive environment is needed. And for this conducive environment, infrastructure is needed; market sentiment, too, must be maintained.

Yet all this conducive environment, infrastructure, maintenance of sentiments, is, strictly speaking, investment in itself, which needs to be satisfied through provision of some other conducive environment, infrastructure and maintenance. Shall we not call it investment of the lesser degree?

It is the nature of capital that it is enamored to profit-excepting the rare acts of philanthropy, a concept borrowed from the spiritual world. Capital, or money--to put it bluntly, has no nationality; nor have the slightest interest in nationalism. Profit making, literally or metaphorically, is essentially the basic purpose of human economic activities: to derive or create values based on existing production factors.

Profit in the business and economic sense can be derived through profit-generating projects. The drive toward profit making, in its pure intention, has nothing to do with a country development. But in the search for profit, business entities inevitably encounter and deal with governments.

Governments are no business entities. Their conceptual and existential purposes are beyond that of the latter. It is a fatal naiveté to believe that such express night trains want to take us anywhere we want.

Who, by the way, will take care of non-income generating projects, such as public roads, hospitals, bridges? Who will fix the portholes roads in front of our houses? Government? Should be. But a cash-strapped government like Indonesia's? Only with difficulty! Where would it get the fund? Investment by the first degree? Only if it is promised profitability. Debts (the first or lesser degree)? Here we go again, to the fiscally paralyzing factor.

Amid Indonesia's yearning for investment, some key questions are left unaddressed--not even adequately asked: What if investment doesn't help? What if the express night train of the first degree only passes us by? Worse, what if it turns out to be one that will crush us? What will we have left to explain? What will be our sources of hope?