INDONESIA'S ECONOMIC POLICIES AND CHALLENGES

Situations that originally faced Keynes is a state of depression in Europe and America. There are no factories, skilled workforce and skilled existing production infrastructure such as roads and communication lines exist, banks are also there but it stuck because of lack of effective demand. Thus, government action to increase the Effective Demand, as suggested by Keynes's theory soon managed to increase production without causing inflation. Such a situation should not be equated with the situation in Indonesia and other developing countries. Our production is still low, not because of lack of demand (demand side), but because of structural weaknesses (in terms of supply): lack of expertise, lack of infrastructure, lack of industry, and so forth. Similarly, the nature of unemployment is different. Unemployment in Indonesia is not first nature "konjunktural" (for lack of or fluctuations in demand efektit), but structural (as the lack of employment opportunities). Such a situation can not be handled by way of "increasing demand efektit origin" only. For each additional effective demand (entaih of public finance, from export credit from abroad, or from the expansion of bank credit) to immediately contain the danger of rising prices, not because demand was so excessive, but due to the production (output), left behind or lost quickly with increase demand, so because the constraints in the production sector. If the disease is different, obatnyapun must be different. Economic policy or political economy (economic policy), namely the ways adopted or actions taken by the government with the intent to regulate the national economic life in order to achieve certain goals. The goals would be achieved have been set by the representatives in the MPR, DPR and set forth in the Guidelines, which can be summarized in the "trilogy of development": stability, economic growth, and equity. Concrete problems encountered in the political economy is that these goals can not be achieved together. Because often times the effort to achieve a more or less forced to sacrifice other goals. For example, to create jobs require a considerable investment in large numbers. But massive investments easily lead to inflation and balance of payments because of burdensome enlarge imports. Similarly, efforts to stabilize rice prices are often diametrically opposed to the agricultural sector and efforts to promote equal distribution of income for farmers. To answer that challenge is necessary wisdom