Indonesia has single-handedly recovered from dire economic straits and famine in the 60s to become a booming international economy. President Joko Widodo optimistically predicts that Indonesia will become the world’s fourth largest economy by 2045.
Now, as the largest economy in South-East Asia and the world’s third largest democracy, Indonesia has gained global attention. However, with the spotlight, comes scrutiny.
The informal and relationship-based business which forms the foundation of the Indonesian economy has created discernments of a corrupt and flawed democracy. According to Transparency International’s Corruption Perception Index, Indonesia is highly corrupt with a score of 37/100.
The practise of corruption has permeated every level of society from judiciary, parliament, businesses, through to bartering on the streets. Everyone in Indonesia has seen or conducted corrupt practices, but does it rise to the sentiment? The grease the wheels hypothesis suggests that the patronage and distributive nature of corruption in Indonesia is in fact, beneficial.
Democracy and Corruption
Conventional wisdom is that corruption hinders economic growth. Much of the traditional literature suggests that the only way to combat corruption and promote economic growth is the introduction of democracy. Suharto’s New Order Government, which reigned from 166–98, saw significant economic development, resulting in admirable poverty reduction. But, was tainted with mass corruption.
After decades under authoritarian tyranny, Indonesia managed to overthrow Suharto and his crony’s, making way for democracy. A period of Reformation followed, under the slogan “Abolish corruption!”, as Indonesian politics were to be reformed in an attempt to give the Indonesian people more power in the process of political and economic decision making.
The people instituted major structural reforms such as decentralisation of power and limiting the power of presidency. Nevertheless, a new form of corruption prospered.
Although organised corruption had withered, disorganised corruption flourishes with sustained economic growth making it at odds with the conventional wisdom of corruption.
Poststructuralist scholars suggest that the effects of democracy in relation to economic development has shown very different experiences in Asia. In the case of Indonesia, corruption is not deplorable, on the contrary, there is evidence to suggest it has been beneficial.
Grease the Wheels
The grease the wheels hypothesis is the economic theory that justifies the beneficial effects of corruption, therefore, supports the case of Indonesia’s disorganised corruption. Grease the wheels hypothesis suggests that corruption augments the administrative efficiencies of government agencies and diminishes transaction costs leading to burgeoning economic development.
Inefficient bureaucracy impedes investment which grease money can alleviate. Weak institutions with inefficient provisions of public services, merciless bureaucracy, and unyielding laws can be soothed through bribes. As a fairly young democracy, Indonesia’s governance is still malfunctioning and requires the grease of corruption in order to achieve economic development. Institutions are weak so, inefficient provision of public services, stark bureaucracy, and excessively rigid laws by paying bribes.
Put simply, queues are inefficient and adding grease shortens the process. If bribes are regarded as legitimate payments, the mechanism becomes a useful auctioning procedure when a queue is involved. Bribery gives bureaucrats an incentive to speed up government processes such as getting an identity card. When bureaucracy is elaborate and inefficient, the provision of corruption is the only method to ameliorate the quality of civil servants.
Corruption in Indonesia customarily involves bribery, seen as an effective arrangement to curtail wait times through administrative delays. Corruption in Indonesia is seen as a trouble and time saving device, thereby raising efficiency hence investment and, eventually, growth.
Democracy was seen as the cure to corruption but as seen through experiences in East Asia, it has shown otherwise. Corruption is permeated through the nooks and crannies of the Indonesian society from buying a food to getting an identity card. The grease the wheels hypothesis indicates that corruption is remunerative when the government institution is impaired. Corruption in Indonesia has steered economic development which disputes the conventional wisdom of corruption as flawed.
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