Meaningless Rants

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Gasoline price is slated to increase in 2 days (?). From 4,500 rupiahs per liter, it would be increased to 6,000 rupiahs. That would be an increase of 33%, which is pretty sickening to imagine, especially for the people who barely make enough money through the day.

Look, I can’t say that I’m against this price increase. The reality is that the crude oil price at international level is US$120 per barrel. The government have to subsidize oil to the amount of, what, 200 trillion rupiahs? Someone needs to check my math, but here’s the data I got: in 2007, the government subsidy is 90 trillion Rupiah, for annual usage of 38.2 million kiloliters. This means a Rp 2,356 subsidy for each liter sold, and this was when oil was $72 per barrel. Now it’s $120 per barrel, means that the crude oil price increase per liter is Rp 2,760. This means that the total subsidy (assuming the same level of consumption) is 90 trillion + 105 trillion rupiah, which is about 200 trillion rupiahs. That’s mighty crazy, because that would make it almost half of the government’s budget!

Yes, government can and do have deficits in their budgets sometimes. But a sensible deficit is for spending that will invest for the future of the nation, i.e. things that will increase the productivity of its people. The most basic of them would be education, health, and infrastructure. Of course, there are other things that the government needs to spend on such as security (military) and bureaucracy. But to have a large deficit without investing for the future is pretty much foolish, and this oil subsidy is one big foolishness.

But I’m talking about the macro economic theories. In other words, I’m just an armchair warrior espousing a really painful decision made by the government. Yes, it will probably hurt our business as prices increase, but I will still have something to eat tomorrow, the day after, and the day after that. And I will not profess to know and understand how painful this would be for the millions barely making it for the day. All I can do is imagine how pinched they are by this. It will not be just the oil price that will increase: everything else will. Rice, cooking oil, flour, any other food stuffs, the extent of inflation will surely eclipse any wage rise for many people.

I see no way out on this. Keep on subsidizing a $120 per barrel oil, and the govenment will commit useless deficits that will only weaken Rupiah and in return create a more indirect inflation everywhere. Meanwhile, the consumption will not be reduced no matter how many corny slogans they can produce. But if they reduce the subsidy, the poor people will feel the inflation more directly. Of course, the government can now use the money saved to invest in education, health, and infrastructure. But how likely are they to do that? And how soon can the effect be felt by the poor millions?

What makes this worse is that it seems there are several political players who want to make use of this and launch some kind of demonstrations against the government. You see, if the poor people who couldn’t grasp the concept of economy are angry, I would very much understand them. But these politicians who profess to have PhDs, or Masters degrees, or whatever, why must the inflame the anger of the people to make it worse. If they were in the position of power, wouldn’t they do the same? They really are a bunch of hypocrites, and we must remember their names for the future to figure out their duplicitious nature.

Already there are talks of riots to the like of 1998. I pray that it will not come to pass. It takes a lot to assuage the poor’s anger. The government needs to help them immediately with other methods, perhaps in school fares or direct cash payment to the poor. The politicians must help make the people understand about the reality of global forces. And the better off (most of you) need to hold back and stop being snobs. Now, what that means exactly, I can’t tell because I myself am a snob - though I try hard to correct that. But one thing is for sure: Adinda Bakrie is a fucking snob!

And THAT is for my next blog post.