Anti-globalisation, poverty and inequality in Indonesia

The 1997–98 Asian financial crisis was a turning point for Indonesia, as it was for many other East Asian countries. In addition to the economic consequences, Indonesia experienced dramatic political change, including a transition to electoral democracy and far-reaching government decentralisation. In the post-crisis period, the average growth rate of real GDP per capita has been only marginally lower than during the two decades preceding the crisis, but the rate of poverty reduction has slowed significantly. Something seems to have happened to make growth substantially less effective in reducing poverty. Simultaneously, Indonesia has experienced a huge increase in measured economic inequality. The slowdown in the rate of poverty reduction per unit of growth and the increase in inequality can be viewed as quantitative aspects of the same distributional phenomenon, in which different segments of the population recovered from the crisis at widely divergent rates. What caused this to happen? The present study marks the initial step in a research program in which the authors aim to explore competing hypotheses that might explain the change in the poverty–inequality nexus since the crisis. The hypothesis examined in this article relates to what we will call ‘anti-globalisation’: resistance to the increasing reliance on international trade that has been a characteristic of globalisation, with that resistance taking the form of tightened restrictions on international trade. At the same time as inequality has increased in Indonesia, protectionism has also risen, both internationally and within Indonesia.