Three years before John Maynard Keynes published his Magnum Opus, “General Theory,” in 1933 two economists shared their views on the imperfections of free market competition. Whether coincidentally or not, Joan Robinson (an English woman, wife of a professor who was ever rejected to continue her studies in economics) and Edward Chamberlin (US) both published books with the same tone that year. Economists call them the Cambridge duo. Joan from Cambridge University, follower of Keynes and Alfred Marshal, while Edward from Cambridge, Massachusetts, Harvard University. Joan published the book “Economics of Imperfect Competition” and Chamberlin published the book “Theory of Monopolistic Competition.“
The tone of the two books is the same, although the approach is different. Both of them see the phenomenon of monopoly that occurs in a free market where big companies try to produce almost all goods in one field, regardless of whether the competition is healthy or monopolistic, such as the Cocacola company which produces very many brands in the beverage sector or Unilever in the United States in the field of daily necessities (durable goods).
Joan Robinson did not emphasize the use of a mathematical approach in the economics that she applied, while Edward Chamberlin was the opposite. This is very understandable because both are oriented to two different characters. John Stuar Mill brought Adam Smith-style economics to political economy, while William Stanley Jevon took it to Newtonian economics (mathematics). The two figures distinguish the approaches of the two economists. Until now, these two approaches still exist (previously economics was called Political Economy, Alfred Marshal standardized it into Economics)
So before John Maynard Keynes officially matured his flow, there had been several objections to the concept of perfect competition (Pareto’s Curve/Vilfredo Pareto) which started from the “Natural Liberty” hypothesis of Adam Smith and John Locke’s “Property Right”. In America, Alexander Hamilton was an accomplished critic of Adam Smith’s concepts. He criticized the minimal role of government which was introduced by Adam Smith in the book “Wealth of Nation” in 1776 and proposed the proper roles of government to be taken to help advance the economy. And US at the beginning of its birth was not a “Champion of Globalization” and “free trade,” but instead was very protectionist, which was one of the causes of the civil war (Donald Gibson, 2011).
North America at that time was just starting the industrialization process where the manufacturing industry (which was still vulnerable/infant industry) needed protection via imposition of import tariffs on products from the UK, while South America was based on agriculture, the results of which were exported to England. South America refused to impose tariffs on imports, because of the risk that Britain would retaliate against the same tariffs on agricultural products from South America. And because it is based on agriculture, South America is also pro against slavery (slaves working in the agricultural sector), which is another cause of the civil war.
Besides Alexander Hamilton, there are economists John Rae, Friederick List, and Hendry C Carey, who even gave another name to Adam Smith’s version of “free trade” as “imprealism free trade” aka free trade is economic colonialism, by proving British behavior during the Mercantilism era . Britain pressured Ireland and India not to produce products that were already manufactured by Britain. The King of England forbade the sale of machinery abroad which would cause other countries to produce the same goods as England.
In short, even in a free market, competition is never perfect. Free market proponents such as Milton Friedman admit that the free market cannot fully reach the level of “Full Employment.” For that, Friedman introduced the term “Natural Unemployment” as a justification. While followers of John Maynard Keynes (Keynesian) argue, if the market can only absorb seven thousand workers from the existing 10,000 workers, then there is nothing wrong with the government trying to find a way so that 3000 (natural unemployment) can get jobs, or at least 1000-2000 scattered workforce. With that idea, the New Dealer (the initiator and supporter of the New Deal policy) in the Franklin Delano Rosevel (FDR) era initiated many public employment projects to absorb 25 percent of unemployment in US due to the Great Depression.
In Indonesia, no different with Russia, the absence of free competition in the economic field and the high costs of contesting have given rise to its own economic pathology, namely oligarchy. The post-New Order Indonesian government, as written by Jeffrey Winter (Oligarch, 2011), has indeed experienced a transition from the oligarchic model from the “sultanic oligarch” that Suharto had successfully tamed to the “ruling oligarch” model that roams at will in the national political economy system. This transition actually endangers the democratization process in Indonesia because, as Jefrey Winter wrote, it plunges Indonesia into a “criminal democracy,” aka not a transition to democracy as understood in liberal-electoral democracies in the west.
Jeffrey Winter wrote his views in the book “Oligarch” published in 2011, by referring to the development of the Indonesian political economy from Suharto, Gus Dur, Habibie, Megawati, and SBY. However, in 2018 when John West published the book “Asian Century on the Knife Edge,” he actually saw the development of the oligarchy in Indonesia getting worse. Today, said John West, Indonesian democracy remains only as “a democracy of the few, for some, and by some, not of the people, for the people, and by the people, as is the general adjunct of democracy.
On the one hand, the rulers (or potential rulers) increasingly need alternative sources of funds to win the increasingly expensive democratic contestation. On the other hand, the dilemma is that political power over the dynamics of the economy is relatively constant, sometimes even decreasing, but on the other hand, economic actors (entrepreneurs, conglomerates, oligarchs) enter the political arena to offer alternative sources of funds to finance democratic contestations (political financing) which is increasingly expensive. It is in this kind of symbiotic mutualistic relationship that barter and political economy concessions are born (Stein Ringen, Journal of Democratization, vol.11, April 2004).
Furthermore, under such an agenda setting, in the end, capital agglomeration will only be centered in the circle of a few economic elites (conglomerates/oligarchs) who are able to guarantee the availability of funds to cover the super expensive cost of democratic contestation. It is certain that such corrupt political economic relations will be the cause of the slowdown in development and increase the disparity between the haves and the have no, aka the lack of equity. And now, in Jokowi’s second term, oligarchs are no longer providers of political funds, but have invaded the political world by occupying many ministerial seats.
In other side, thepainful income disparity is certainly not a figment. More and more, the list of Indonesia’s 50 richest people is competing to increase their wealth to pursue the highest ranking according to Forbes magazine, for example. The rate of increase in their wealth is more than the increase in the salary of workers or the standard of living of the common people. It is as if they are competing to occupy land after plot of Indonesia’s national wealth in the name of prestige and pride, including for conspicuous consumption (to borrow a term from Thorstein Veblen) along with the government which is increasingly inclined to position itself as guardian of the growth of the wealth of the oligarchs for the smooth financing of politics in one side and contribution to state revenue on the other.
Even the government tends to have a “socialist” character when business magnates begin to experience “market failure,” but is very “liberal capitalist” to the people at the same time, by releasing protection valves in fields and products that should be protected in the name of the public interest. The BLBI scandal is one example of how “socialist” the government is to business leaders, or the state’s investment in SOEs from year to year whose nominal is almost always greater than the direct contribution of SOEs to state revenues, or the allocation of economic recovery funds which is much larger for entrepreneurs (oligarchs) rather than for the people, allocating hundreds of trillions for the megalomaniac ambitions of a new capital rather than dealing with the stomachs of the people, plus new laws (omnibus bill) that tend to increase the confidence of business magnates rather than the confidence of the common people.
