Indonesian economic development: political economy of an effective state

Abstract

Over the last four decades, the Indonesian state has effectively combined rapid economic growth with significant reductions in poverty, i.e. pro-poor growth. This paper argues that the effective reduction of poverty resulted from rapid agricultural growth. This in turn was the result of a strategy of development involving significant agricultural investment. It will be argued that the ruling elite chose this path because it was dependent on agriculture for its political survival and a backlog of agricultural technology was readily available. Without the latter, Indonesia would likely have followed an extractive strategy with respect to agriculture (similar to Africa).