Widjojo (1)

Widjojo (1)

He was loved and he was hated. Now he’s gone. No doubt, we in The Café are in the group who loves him dearly. We are aware that Kwik Kian Gie, Rizal Ramli, and the likes hate him. We don’t care. For us, Pak Widjojo is eternal. He lives in our way of thinking, way of seeing things. It’s not only economics. It’s about how one should deliver an idea. How to argue civilized way. How to respect even the unknown. We are way his juniors. Our experience is a tiny fraction of his. But if there is a model we would like to follow, that’s him.

But what really is this concept called Widjojo? Unlike that of prolific economic writers such as Chatib Basri, Sadli and Emil Salim, Widjojo’s writings were dry, almost boring. But the messages were strong and important at the same time. Read his 1963 professorial inauguration speech 1963. That was dry and dismal. But it was incisive and contemporary. At the time, Robert Solow’s 1956 seminal paper on neo-classical growth model was a big thing. One of the model’s predictions is growth convergence between rich and poor countries that share the same steady state (current textbook example: Germany and Japan in the aftermath of World War II). This is theoretically neat. But empirics do not always confirm: some poor countries remain poor, rich keeps progressing. It took some time before the profession agreed that the convergence that goes with the empirics is conditional convergence. That is, a country will converge to its own steady state. Or, if any, countries with similar starting points will meet. But what if this similar starting point is nowhere to find? What if savings rate or technological rate of a less developing country never catches up with that of the developed? Almost two decades after Solow’s paper, Krugman came along with an inconvenient truth: it is possible that a rich country keeps leaving the poor behind due to increasing returns and economies of scale. And of course, from more micro-perspective we are now familiar with poverty-trap, et cetera. Today, ground researches by members of the younger bastion like Banerjee and Duflo attest this. But Widjojo, among a few, had warned us in 1963. He wrote that a big gap in initial levels of income might not be neutralized simply by equal rate of growth in income. In order to overcome this situation, he added, less advantageous countries need a rational planning with economic analysis – and implement it vigorously and consistently. Then he explained in greater details what he meant by planning – in that inaugural speech. Two years ago, Widjojo admitted in his book, that that speech went against the tide: people were unconvinced that economic issues were important. Worse yet, people were skeptical to economics as a “text-book thinking” approach.

Now, this same person, the text-book-thinking Widjojo was no blind supporter of heavy state planning. He was actually more pragmatic. In 1955 – he was 28 years old – he debated Wilopo, the former influential prime minister. The event was the fifth anniversary of Department of Economics, University of Indonesia. Wilopo, the key-note speaker, presented an argument against economic liberalism. In particular, Wilopo disapproved private initiatives and individual property rights. Widjojo called this contradiction – that Wilopo treated private initiatives as necessary evil in development. Instead, according to Widjojo, private enterprises should be given a role in economic development. He also warned that by “private” we should not just mean big enterprises (to name a view, he mentioned a Dutch-owned oil company BPM and an American Stanvac), but also the small ones. As he put it, “the little farmers with a piece of land of no more than 0.1 hectare are also private”.  (Note that Widjojo’s stand with regards to private role in economic development had shaped even before he went to UC Berkeley in 1957).

(this might be continued).