Democracy within the economy is clearly mandated by Article 33 of Indonesia’s 1945 Constitution concerning the national economy and social welfare. Paragraph 4 of the article states that the national economy is organized based on economic democracy. This should be a normative reference for developing practical policies to materialize democracy in the economic field.
The problem is, however, that it is not easy to materialize this normative principle in the context of interdependence between market economic systems in the era of modern globalization. The market system does offer efficiency in the administration of the “social economy,” and justice in the distribution of welfare resulting from the market economic process is not necessarily facilitated to meet the principles of people’s sovereignty as demanded by democracy. The economy of society and democracy are two separate fields not easily united.
The meaning of democracy refers to how people are sovereign to themselves, similar to how an individual is sovereign to himself or herself. The people are a collective of a group of individuals who live in an institutional entity that is defined as a state or nation. Democracy will be meaningful if the collective really acts as ruling themselves collectively. Democracy deals with how collective the rulers are, how collective the ways in which the rulers are in power and how collectively the people play an active role as objects of control. In short, it concerns government of the people, by the people and for the people. As a result, the problem of democracy lies in the level of inclusiveness, the level of individual participation and the level of equality between individuals ( justice).
The implementation of democratic principles to facilitate all individual citizens to play the role of sovereign collectivity becomes problematic in the representation-based democracy system that is currently applied in Indonesia. The level of inclusiveness may be high but fake, because elected representatives are skilled at manipulating popular issues for their own interests. In developing countries, such manipulation often occurs because individual citizens have not yet realized
their own right to be sovereign over themselves. Each individual tends to be the object of manipulation by the authorities rather than being the subject of their own interests.
Meanwhile, the level of citizen participation in collective decisionmaking is certainly not perfect because its representative nature makes the method of taking the most votes and having a bigger role, rather than the method of deliberative democracy. The level of equality between individuals, especially in relation to distributive justice, becomes an intrinsic problem of any democratic system because collective decisions do not always meet the interests of all citizens. When collective decisions only accommodate the interests of the majority, thus excluding minority interests, the argument that can be used as a basis for minority parties not questioning it is the continued guarantee of the equal rights of every citizen to be the subject of their own interests in the decision-making process.
Democracy must not violate the rights of minority citizens to have an interest, including the right to an interest in the public property that they share. From the three problems of democracy, it can be concluded that democracy will be more meaningful if each individual becomes more and more consistent in their role as the subject of their interests at each stage of the transmission of interests into the collective decision-making process. Democracy becomes meaningful when the locus of control – the degree to which people believe that have control over the outcomes in
their lives – of individual citizens is always
internal, not external.
The economic sphere
Different circumstances apply to the economic field of society. The economic field deals with how humans in society meet their needs and desires. This field always involves three activity segments: production, distribution and consumption, so that social aspects or interactions between individuals cannot be ignored. Therefore, the problem of economic efficiency is a common one in society due to the limited resources available to all individuals within society. Whatever economic system being implemented is the result of a collective decision by society, while the power that works to maintain the integrity of the system becomes an external force for a series of three segments of economic activity. Thus, the locus of control in economic life is more or less on the external side of individual citizens.
The choice of economic system illustrates which of the three segments of economic activity is treated as more important than the other two. The extreme left economists following Karl Marx (1818-1883) emphasized the central role of production and the active intervention of the authority of collective representation (the government), because the work of people in production activities was perceived as the actualization of the natural potentials of the person as a human being.
Whereas extreme right economists inspired by the thoughts of Adam Smith (1723-1790) placed the central role of the market as a vehicle for product distribution without the need to require active intervention by the collective representation authority (the government), because business transactions (trade) between people were perceived as natural paths for humans to increase their wealth.
In subsequent developments, neoclassical economists led by William Stanley Jevons (1835-1882), Carl Menger (1840-1921) and Leon Walras (1834-1910) mathematically modeled the market economy system based on the assumption of rational mind-sets of individuals toward preferences whose central characteristic is consumption.
When one segment is placed in a central role, other segments are subordinated or placed as derivative segments of the central segment. The clash of ideologies of socialism-communism versus capitalismliberalism lies behind the struggle for influence between a production-based economic system and a market-based economic system. History then proves that almost no country applies purely either a production-based economic system or a market-based economic system. The commonly implemented economic system is a combination of the two – market-based economic systems that still provide space for collective representation authority (government) to intervene so that the system not only efficiently improves people’s welfare but also facilitates social justice. The problem is that any economic system works as if it were an external locus of control and has the potential to suppress the internal locus of control required through a meaningful democracy in the economic field.
Materializing democracy in the economic sphere?
Since a meaningful democracy requires the survival of the internal locus of control of each individual citizen to remain the subject of their interests, the economic sphere demands individual citizens submit to the control, or act as objects of, the economic system outside of themselves. Economic democracy seems impossible – or at least not easy to develop. Such a situation is common when the democratic process takes place separately until an election of a collective representation authority, which then determines the economic system and practical economic policies to be obeyed by each individual citizen.
In the context of Indonesia, which applies a market economic system where the government still has the authority to set practical economic policies, the challenges in realizing meaningful collective sovereignty in the economic field arise in at least three cases.
The first case is related to the level of inclusiveness. Is it true that people are collectively sovereign over their economic life? In the current era of globalization, the boundaries of one country’s market economic system and other countries’ market economic systems are unclear.The economic life of citizens is subject to a market mechanism where the power of capital, especially capital controlled by both national and international corporations, determines the economic life of citizens rather than the will of the citizens themselves. Although the government, as an authority that represents the people, can set economic policies, in most cases these policies must accommodate the “voice” of the power of capital rather than the will of the people they represent. So the level of inclusiveness within a democratic society in its economic life tends to be depressed due to external factors outside of society itself.
The second is related to the level of participation of individual citizens to
uphold collective sovereignty in the
economic sphere. In connection with
limited available resources, the rational
goal of collective sovereignty is the welfare
of all citizens by utilizing resources as
efficiently as possible. In a market economy
system, the prevailing doctrine requires
each economic actor to maximize their own
interests, while the collective interest of
the welfare of all citizens is a matter of “the
invisible hand” that automatically brings
their individual interests into the maximum
collective interest. But in reality it is naïve
for each economic actor to participate in
upholding collective sovereignty by denying
his or her involvement to ensure the role
of the invisible hand. The total passivity
of economic actors as objects of the
invisible hand actually means the absence
of individual participation of citizens as
subjects in upholding collective sovereignty
as required in a democracy.
The third case is related to the level of
equality between individual citizens in the
process of economic activity, consisting of
production, distribution and consumption.
The separation of the democratic process
from the economic process results in
the level of equality being dependent on
economic policies set by the government
as a collective representation authority.
The problem is that monetary policy and
fiscal policy set by the government are often
very technical, based more on predictions
of national and global market economic
indicators than participatory equality
among individuals. In addition, the process
of setting these policies is vulnerable to
political lobbying by economic actors
seeking privileges, and their application
is not always welcomed positively by the
active participation of all economic actors.
Without the active participation of every
individual citizen within the economy, the
level of equality between individuals is not
The spirit of gotong royong
Democracy within the economic sphere is clearly difficult to materialize if the democratic process is separated from the economic system. Such a separation is known as the “separation thesis” – a product of the modern tendency of specialization that is always promoted together with the development of modern science in its various forms. The problem is that the life of a human being is not a fragmented life in various fields with different spirits connected to one another, but one life with the same spirit. Therefore, designing a democratic economic life based on the thesis of separation carries the risk of failure.
A meaningful democracy in the economic sphere will only materialize if the separation thesis is rejected. This means that individual life, socioeconomic life (relations between individuals) and political life (collective relations) are not separated from one another and are driven by the same spirit. This spirit underlies the awareness of citizens that their existence cannot be separated from their existence in every socioeconomic relationship that needs to be made with other citizens, and their existence as a member of the collective that is composed of all socioeconomic relationships. The maximum effort of a citizen for their own welfare cannot be separated from the collective effort to ensure that shared welfare is also maximized. Such a spirit is nothing but the spirit of gotong royong, a unique spirit that, according to the late Indonesian founding father Soekarno, reflects the crystallization of Pancasila, the state ideology.
There is a high sense of mutual care in the meaning of gotong royong so that collective life is inseparable from individual life. But this sense of mutual care does not eliminate the uniqueness of individual life as well as volunteerism that arises from expressing care. The uniqueness or specialization is maintained, but it is based on a spirit that upholds collective interests. The meaning of gotong royong also differs from kinship or closeness of relationships between individuals because it contains elements of work or an element that has a dynamic connotation for a common goal. Therefore, three aspects inherent in the meaning of gotong royong are work, volunteerism and togetherness. If the spirit is developed and maintained at the individual level, the corporate level,
the market institutional level and the national collective level, then this spirit will undoubtedly give way to the materialization of democracy in the economic sphere.
At the individual level, the spirit manifests in the character of a person of integrity. The character of integrity is reflected in the individual’s self-concept, which in its structure contains ideal communities such as the ideal corporation, the ideal market and the ideal state. A person of integrity has a disposition to realize these ideal communities when expressing himself or herself. The values referred to in an ideal community are autonomy, care and justice. Thus, a person with integrity must have a democratic character because they will always have concern for the shortcomings and potentials of other parties (inclusive), respect the rights of others to participate (respect for equality) and consistently invite other parties to autonomously participate. Education that develops the integrity of individual citizens has the potential to shape the democratic character and culture needed for the realization of democracy in any field of life, such as socioeconomic life (relations between individuals) and political life (collective relations).
In socioeconomic life, the spirit of gotong royong incarnates at the corporate level and at the market institutional level. These two levels are interrelated because in addition to individuals, corporations are
members and must play a role in creating a democratic market. The difference between these two is obvious: socioeconomic relations at the company level emphasize the production segment or are a joint production effort, while socioeconomic relations at the market institution level emphasize the distribution segment or are a joint distribution effort. The rule agreed to at the company level is cooperation, while the rule agreed to at the market institution level is competition. Therefore, the spirit at the corporate level differs from the spirit at the market institution level. The former intends to uphold cooperation as perfectly as possible, while the latter intends to uphold competition as perfectly as possible. Since this cannot be achieved without transparency, the growth of gotong royong requires the development of transparency in each scope of socioeconomic relations.
At the corporate level, the spirit is an expression of a double-edged culture first strengthening internal cooperation with a corporation, and second, strengthening the corporation’s competitive advantage in the market. Such a culture is only owned by corporations with integrity. The governance of a corporation with integrity is such that it is able to facilitate all stakeholders with integrity to participate in creating corporate excellence when competing in the market. Such a corporation will truly act as a moral agent responsible to all stakeholders, especially to shareholders.
Important decisions are always the result of a direct or indirect deliberative consultation process, a process that provides opportunities for contributions by each stakeholder. There are five principles of good corporate governance: transparency, accountability, responsibility, independency and fairness.
They are reflected in the three reference values of integrity and transparent communication among stakeholders that must be developed as a condition for the emergence of the spirit of gotong royong. The value of autonomy expresses the principle of independence, the value of caring expresses the principles of accountability and responsibility, and the value of justice reflects the principle of fairness. It is not easy to build a deliberative consultation process among stakeholders for important company decisions. If a general meeting of stakeholders appears to be utopian in nature, establishing a directorate that handles stakeholder considerations for corporate decision-making processes may be more appropriate for the corporation to implement.
At the market institution level, gotong royong is needed to enforce fair and healthy competition, not to transform competition into cooperative practices that are counterproductive in nature. In a fair, healthy market, every market participant is facilitated to make the right decision so that the transactions they make always provide maximum benefit. Every market participant does indeed think about their own welfare and does not have to think about collective welfare, but if they embrace the spirit of mutual cooperation, they must bear the burden of responsibility to participate in upholding fair and healthy competition.
Transparency is a prerequisite to ensure fair, healthy or perfect competition, because only through transparency can every market participant make the right decision for themself. Every market participant is obliged to participate in developing and upholding transparency in the market. A market that is described as such is called a market with integrity. A market with integrity provides an environment for all market participants, individual citizens and corporations, to develop their own integrity and participate in upholding fair, healthy or perfect competition that consequently maximizes the function of the market to materialize the collective interests of improving people’s welfare. A market with integrity is a democratic market, because every market participant has the right to conduct transactions (inclusive), has an equal opportunity to take the right decision (participatory) and is guaranteed the same success in making the right decision (equality between actors). There may indeed be members of society who do not have a product or service worthy of trading, even though they have the right to trade. This problem cannot be ignored and must be anticipated through decisions and policies at the national collective level.
At the national collective level, the government as a collective representative authority must enforce regulations and policies whose purpose is to develop and maintain the spirit of gotong royong in the economic sphere. Through enforcement of these regulations and policies, individual integrity, corporate integrity and market integrity are promoted. In other words, through the enforcement of regulations and policies, the democratic character of citizens, corporations and markets is developed. The government must prevent potential violations of citizens’ human right to participate in economic activities. If there are citizens whose ability to produce goods or services that can be transacted in the market is hampered, the government must empower these citizens to the maximum extent possible.
However, if due to certain factors there are citizens who may not be effective in undergoing empowerment again – for example citizens with disabilities and the elderly – then government must take over the role of these citizens in production activities and market transactions using taxes paid by other citizens who have successfully been facilitated. The takeover of roles must also be carried out by the government for citizens who have not been effectively empowered. For example, children, the unemployed and victims of natural disasters. Thus, gotong royong at the national collective level is aimed at upholding the human rights of citizens, empowering citizens and taking over the role of citizens who have not or may not be effective in empowerment.
An example of the role of Indonesian regional governments in upholding citizens’ rights is the establishment of a regional minimum wage policy, so that citizens do not become victims of unfair market competition, which results in very low wages. Wages that are too low do not allow citizens to pursue their life goals.
The spirit of gotong royong basically goes from the individual level to the collective level, bottom up, precisely as democracy requires. Therefore, the main role of the government as the representative authority of the national collective level is to empower citizens, corporations and markets to embrace integrity. Promoting integrity education for citizens is the first policy that must be applied to develop the
spirit of mutual cooperation. Regulations and policies on transparency also need to be applied in promoting company integrity and market integrity, because without transparency the potential for misunderstanding and abuse of power would make gotong royong ineffective. Thus, in addition to integrity education and development, a Private Information Disclosure Act would be very useful to support the program for developing the spirit and making economic democracy possible.