Power Game (1): How to be Hero Even If You're Not

Think about a hypothetical country (do it at your own risk) whose top leaders (incumbents, oppositions, and former losers) are all in trouble because a former, dismissed minister just leaked out to the press that these VIPs used illegal money from the state budget for their campaign funding in the last election.

Suppose the ruling president and his vice president plan to run for the next presidential election to be held less than three years from now, either together as a team like before, or separately as competitors. Suppose that another hopeful who also ran in the last election is still high on the polls’ lists. But this third person just confessed that he did accept the dirty money and that he would be happy to stay in prison for that – as long as he takes the others with him (he thought he knew too well that those others were equally guilty).

The confessor, long known as a heroic reformist and a strong xenophobic, is gaining a good momentum. The public, instead of feeling betrayed by his misusing their tax money, regard him as none but a braveheart. His interviews in TVs offering himself to the prison and his famous nationalistic tones are as heroic as Evo Morales of Bolivia in confiscating foreign-owned properties or Hugo Chavez of Venezuela in building his own World Bank of the South. Even the head of the country’s Honorable Assembly is doped – he calls for the public not to take the respected national icon to jail, because he is, well, a respected national icon. A respected law professor even claims that he gives enlightenment to the study of law. Media editorials praise him not less. Chances are, the confessor will run again (and the odds are good). His confession turns out to be just great. By admitting his wrongdoing, and by admitting it in the right time, he might as well get a very generous ‘punishment’: freedom (plus overwhelming votes may be). Or, at worst, say an only one year in prison – just enough not to completely ridicule the whole judicial system.

So what happens to the president and the vice president?

(To be continued...)

Tale of Two Presidents

In his first dispatch from Istana Negara/Cikeas, MT writes about the somewhat comical behind the scene reactions of (now former) cabinet members during the highly anticipated non-event otherwise known as the cabinet reshuffling. In his second post as a guest blogger for the Cafe, MT writes about some similarities between SBY and Soeharto (they just keep coming, don't they) which include SBY's ability to make people cringe, instead of laugh, with his jokes. - Manager

Tale of Two Presidents
by MT

Days before former president Soeharto resigned -I think its around November 1997- Cornell’s Ben Anderson gave a not-so-famous interview about Soeharto’s intention to resign (in high Javanese language as Lengser Keprabon, Madheg Pandhito for whatever that means). Anderson talked at length about the hypocrisy of Soeharto and how alluded much to Javanese olden day epic (Babad) to justify his action. But that I don’t want to talk about.

In one part Anderson spoke about his coldness (he could order the killing of thousands of people, borrowing Capote’s words in cold blood), in spite of (or may be because) his being Javanese. Anderson said that when Soeharto resorts to cruelness it is not something from his nature, but something that has been calculated, it is part of his strategy. He is an extremely cautious, suspecting and never acts spontaneously. One demeanor that rings true to me more
than ever watching Soeharto’s pictures and news footage was that when he tried to be friendly and warm, we barely feels the warmth he exudes. And if he is being warm and friendly, Anderson said that we have to be very cautious about what he hid behind the smile. (well, he is indeed a Javanese par excellence that way).

Much has been said that Yudhoyono have the potential to follow Soeharto’s footprints. Hey, he’s a Javanese, an army general (albeit U.S. educated and holds Ph.D in economics), married also to a Javanese woman, and much as stoic as Soeharto. And the most worrying sign that is however difficult to corroborate is Yudhoyono’s dalliance with Javanese mysticism (very Soeharto-like indeed). The most famous being his fixation with figure nine. The combination of his date of birth is nine so he does almost anything based on that number (well, not always) but the most famous example is that he broke several big news when the date strikes nine. One other thing that could show his Javanese mind set is his penchant for looking for guidance from the other side. In several occasion he made a visit to both his father’s and father in law (the famous general Sarwo Edhi Wibowo) ’s tomb before making important announcement. Well, of course there is nothing wrong about visiting your parent’s grave, but it’s the timing.

But if you think that this country is at risk of being led by another cruel and humorless general, think again. However dour he might be, Yudhoyono is at the very least an amiable person to go by. In fact, he likes jokes too, however dry. OK, he might be pale in comparison with Abdurrahman “Gus Dur” Wahid in this joke affairs. In out-of-palace functions, Yudhoyono frequently tells us jokes.

The day when he was about to break the news that a cabinet shake-up would take place in the early May – in the now famous durian plantation in Bogor – he cracked a joke about nutmeg and durian. He told us that during a visit to East Nusa Tenggara he inspected a nutmeg plantation when he stumbled upon a pile of that spice. And as he inspected the pile, he told us, one of fresh nutmeg fruit fell upon his head and he said “this is not fair, a fruit this useful only has a tiny size” and he strolled ahead.

Later in durian field, he discovered a pile of durian skin and while he observed it, a durian fell close to him. To us he said, “God the merciful, if only nutmeg is as big as durian then I would be dead when it fell upon me,” he said to a confused laughter among the audience. It’s not a funny joke (I read this joke in some obscure jokes book before and we all know that durian doesn’t grow in East NusaTenggara) but at least he tried.

The visible hand(set)

Will information and communication technology help the poor? It is tempting to say ‘yes’ to the question. The ‘how’ part is more difficult to explain. Studies on this issue tend to be macroeconomic (an x percent increase of phones or internet per capita is associated with a y percent of income per capita, or the likes).

Others are anecdotal evidence, although doesn’t mean that they are flawed. In a seminar, C.K. Prahalad of the Ross Business School, University of Michigan, mentioned that internet-literate wheat farmers in India examine the world price fluctuation through the Chicago Board of Trade website before deciding how much they should sell to the market. (Our fellow Rizal once said, “How internet helps the poor? Sell the computer, buy them food!)

A forthcoming paper by Robert Jensen (was my advisor at Harvard, now at Brown) provides a deeper analysis. The paper will be published in the Quarterly Journal of Economics next August. A review of the paper is available in the Economist. His work showed that the penetration of mobile phone had increased the average profit of fishermen in Kerala, South India.

At any given day, Kerala’s fishermen have to make a difficult choice: to sell their catch at the local market, or to go to another market along the coast. Whatever the decision is, you need to hope that your fellow fishermen go to the other market so that you would face fewer competitors. This is a one-off decision. Once you come to a certain market, it is almost impossible to move even if the market is full. You need fuel and time to travel. As the result, in a certain market there are plenty of fish that are thrown away (you can not keep the fish). In another market fifteen kilometers away, however, some buyers have to leave the market empty-handed.

This was the situation before 1997. Starting in 1997, mobile phones were available in Kerala. With mobile phones, fishermen were able to call around to find the best price, or to decide to which market they should go while they were still at sea (within 20-25 km from the coast).

The paper was more than just anecdotal. The gradual introduction of mobile phones provided a pseudo-randomization. So the author can divide the population into ‘treatments’ (the early birds) and ‘controls’ (the late comers). The result was very interesting. Once coverage became available in a region, fishermen who ventured beyond their home markets jumped from zero to 35%. The number of excess supply (wasted fish) or excess demand (unlucky buyers) went down to almost zero. Price disparities among markets fell in a typical ‘law of one price’ movement. And, more importantly, fishermen’s profits rose by 8%, and consumer price fell by 4%, on average.

This study provides more insights than that. It shows that the market, when it works, helps the poor instead of exploiting them. True, sometimes the market doesn’t work. The introduction of (information) technology makes the market work. And, beautifully, it was the profit-maximizing mobile phone companies who eventually helped the poor. Not the government, nor charity organizations.

Reshuffle Kerfuffle (by MT)

Hi there. This below is a dispatch from a friend, MT, a journalist from a leading newspaper. From now on, we'll bring you guest posts like this, occasionally. Enjoy! (The Manager).

Reshuffle Kerfuffle
by MT

As we all know that Yudhoyono finally made up his mind and make the announcement just now, and it's barely surprising (the only surprise being he finally have the guts to fire Yusril and Hamid) but its predictable given his penchant for maintaining the public image. Yusril and Hamid has been the lightning rod for a media-driven corruption allegation.

My fellow journalist (a female) was barred from entering Setneg today as Yusril has instructed his staff to bar her entry (the last policy he made during his stint anyway). And when contacted on the phone the only words he (Yusril) was that

"Congratulations, you [journalists] finally managed to bring me down."

Yusril was so furious with his dismissal that he declined to meet Yudhoyono when he was required to meet him in the morning. Well, I was wrong for overestimating him and Hamid in our last conversation. It seems that Yusril had finally stumbled this time.

Abdul Rahman Saleh -- one of my favourite officials in Yudhoyono cabinet (simply because he sided with me when my article on ban on communism book was published and he attended a book launch of Ruth Mc Vey's book on Communism held by Jakarta-based publisher Equinox--he also came to the function partly also because of my article) -- reportedly broke down in tears when a letter dismissing him got to his hand.

"What have I done wrong to deserve this" he said.

Abdul Rahman dismissal is a little bit of a surprise, especially as his replacement Hendarman Supandji is his confidante. But anyone who know the going-ons in the AGO knew very well that Abdul Rahman is not an effective Attorney General. Some of his policies has been sabotaged by his corrupt underlings to the point when he had to hire his own PR company and brought own lunch from home. Not to mention, regular attacks initiated by the House of Representatives Law Commission (which is no less corrupt). But this morning when he was summoned by Yudhoyono he appeared alright and joked with us about the possibility of accepting new post offered by the President. He also admitted that Yudhoyono showed him the door because of the tremendous pressure exerted upon him. "I lost eight kilograms while I was the Attorney General," he told us.

As for Hamid, as usual he always ran away from us whenever we asked anything and the only consolation that he got from being fired was seeing Nagabonar Jadi 2 at Setibudi One 21 organized by Kalla on Sunday. Some say they expected to see Spiderman 3 but as all poor Spidey fans, no tickets were available.

Syaifullah Yusuf's downfall is a bit tragic. Until Friday night, he was in dark over whether or not he would be fired. When we called him, he just said "Masih Gelap nih" (the expression is better in Bahasa Indonesia). But, I think Syaifullah's position is beyond saving. The United Development Party (in which Syaifullah is now a member) could not get more seats even after losing Sugiharto.

Hatta Radjasa maintained his position thanks to endorsement from PAN (which has become Yudhoyono's lap dog since Amien Rais was toppled and this is what we can get when businessman is in charge of party).

The worst choice however was over Lukman Edy for Minister for Disadvantaged Regions. I mean, who is this guy, judging by his name alone he is not at all convincing and he had no experience beyond the PKB secretary general and working for a construction companies. It seems that PKB can only produced mediocre politicians as ministers (Erman Soeparno is another bad example).

The whole reshuffle thing, however, give us another compelling reason why Yudhoyono in his military career was never in charge of important posts and relegated only to administrative duties. If he was a TNI chief and the country is at war we will be doomed as it will take him more than a month just to decide whether an assault force should be deployed. It took him seven-long months before he finally have the guts to do the cabinet shake-up.
(MT).

Don't miss this!

One of the best debates ever in the blogosphere: Dan Drezner, Dani Rodrik, Greg Mankiw, Tyler Cowen, Alex Tabarrok, Paul Krugman, and others. Of course, usefully summarized by Mark Thoma of Economist's View. Thanks to Dede who first alerted me to all this.

Ah, just say it, Mister!

I couldn't help laughing as I was reading Kompas this morning. It has a new section named Klass, supposedly a derivative of Klasika, its ads section. Today it runs a head titled "Opportunity Behind Consumerism" written by its chief, Suryopratomo.

Suryopratomo basically said consumerism is only for developed countries, not for developing countries. It's a bad idea if people from the latter group join this wave of consumerism.

Nevertheless, Klass is promoting it, yes the consumerism. What do you think if a newspaper displays ads and features of prestigious Banyan Tree property, Colnago bike, Nokia's Sirocco 8800 (yes, it has diamonds), Convergent Audio JL3, Flybook Dialogue, and of course Gc watches?

But, Suryopratomo said,

If Kompas now brings to you these high life style products, is that part of consumerism? Of course not. Kompas is only capturing the phenomena around us.

Yeah, right.

(By the way, the picture in the background of Suryopratomo's note is Lexus).

Sex or econ?

I've been a big fan of Steven Landsburg -- even way before the Freakonomics frenzy (by the way, I don't think Levitt is ruining economics). So when I heard Landsburg's third pop-econ book was out, I asked Anna to buy one for me.

Of course Anna knew that the book was about economics (she had read my Landsburg's Armchair Economist and Fair Play). Apparently so did the Borders guys in London, only they didn't have it. But not the bookshop-keeper in Changi airport. Anna was in a hurry so she didn't have time to look herself. She instead asked the guy at the info desk. And the guy said, "I don't think we have it anew, but just in case, if we do have it, it should be there" -- he was pointing to a label board read "Sex and Marriage", or something like that.

When Anna told me this, I remembered my own experience with Undercover Economist.

So I thought, this Landsburg's third pop-econ book would not be a big success like Armchair. Because even the shopkeepers didn't know where to put it correctly.

But on the second thought, maybe it's just the opposite. Because after all, sex books are more selling than econ books, don't you think?

On Being Socialist

This is from touching yet hilariously funny Lewycka's novel A Short History of Tractors in Ukrainian, a dialog between Nadhezda and her big sister Vera on becoming socialist --or its opposite side

Of course she remembers. She hasn't forgotten the smell of diesel, the swish of the windscreen wipers, the unsteady sway of the bus as it churned newly fallen snow into slush; coloured lights outside the windows; Christmas Eve 1952. Vera and I, muffled against the cold, snuggling up against Mother on the backseat. And a kind woman in a fur coat who leaned across the aisle and pressed sixpence into Mother's hand: 'For the kiddies at Christmas.'

'The woman who gave Mother sixpence.'

Mother, our mother, did not dash the coin in her face; she mumbled, 'Thank you, lady,' and slipped it into her pocket. The shame of it!

'Oh, that. I think she was a bit drunk. You mentioned it once before. I don't know why you go on about it.'

'It was that moment -more than anything that happened to me afterwards- that turned me into lifelong socialist.'

There is silence on the other end of the telephone and for a moment I think she has hung up on me. Then: Maybe it was what turned me into the woman in the fur coat.'

If you come to think of it, for one to be a socialist or capitalist can come from similar trauma, or event, you may want to call it --and they share quite similar imagined ending. But in between, the process, the method, is extremely different. And it is what matters, I guess.

Oh, and the book. It is a very recommended weekend reading by the way --an English wit poking on technology, immigration, European future, politics and class consciousness.

The Last King of Africa

In a lunch interview with FT in Central London, this is rock star economist Jeff Sachs' take on Africa and policy replicability:

We move on to talk about a specific project Sachs is currently involved in, Millennium Villages, where his ideas on fertilisers, malarial bed-nets and the like are tried on the ground. My less- than-ecstatic reaction to his reports of their success is clearly the same as that of many aid agencies. It instantly raises his hackles. I suggest there are many examples where success in pilots does not translate into something that can be replicated on a large scale, and that you don't necessarily need to try something to know it won't work. "I'm sorry," he is almost shouting now. "That, I disagree with completely. That's preposterous."

I realise I have exaggerated for effect, and counter that it is equally preposterous to insist they will work. "I know," he says, "but how do you actually do something in life? Do you list all the things that may go wrong and then decide we won't do it, or do you actually try?"

Then I remember a thrilling scene of The Last King of Scotland. Oscar winner Forest Whitaker playing Idi Amin scolded his Scottish private physician, Nicholas Harrigan, in his masterful African accent:

Africa is not a game. It is real

Cool, eh?

Market? What market?

There are those who completely in denial of market existence and there are those who dismiss any non-market solution. Even the most ardent supporters of market sometimes slip: they think market is so powerful you don't need to do anything. On the other extreme, the market deniers think people are all too stupid, there is a call for government in virtually everything.

We are not in either group. (Despite the accusation that we are free market diehards).

Letting a problem in the hand of market has its own cost. If that cost is greater than the cost of managing it under a controlling command, you want an organization. Or, in business lexicon: firm. In a firm you have a manager who assign you and others, tasks. Think about a small firm with one manager and three workers. It is less likely that the manager knows all of you too well, she pays each of you wage exactly worth your contribution to the firm. Furthermore, it is less likely that he knows you perfectly, that he can assign you a work that really exploit all your potential to the limit (and pay you accordingly). Why not and not? Because the cost of getting the right information for those questions is too much.

Yet, firm exists. It should then be true that the cost of letting the market handle it (the matching of your pay and your do and your being) is even higher. Just imagine you go around telling everybody on the street that you can do this and that. And somebody else goes around asking people if one happens to match exactly what she needs to work for her. And imagine this is not just you and her. But everybody, all people. Why this is not happening? Because it's too expensive.

So it leaves us with firm or market. Or more accurately: a particular firm, other firms, and the market. If the particular firm happens to be able to manage things most efficiently (that is, with the least cost), then it will prevail. The others, gone.

You should now understand why some firms are big, some small. Or, why that thing called government still exists today.