There's no such thing as a free lunch...Or is there?

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It's official. The next president of Indonesia is former army general Prabowo Subianto. Quite how the next five years will pan out is anyone's guess but hopefully the foreign pundits who always bring up his dodgy human rights record will be proven wrong. Nonetheless, on policy making, Prabowo's popularist move to literally offer the poor 'a free lunch' every day of the week does not augur well for the future. Such a policy - if it ever came to fruition - would cost a phenomenal amount of money and likely lead to huge inefficiencies (food waste) and poor incentives (make people lazy). Another concern is Prabowo's strong nationalist bent. Thus, in the possible event that he finds himself with his back against the proverbial wall in the face of stern economic challenges, there is a big chance that he will simply scapegoat foreigners. But he will have to be careful. Construction of the new capital city, Nusantara, for example, is highly dependent on foreign in

Jakarta: life in a city where social justice rings hollow (3)

Low wages

While the rich in Jakarta spend their time shopping for designer goods made in Europe – Rolex is doing particularly good business here – the city’s impoverished are engaged in a daily battle to survive. Many workers only receive the minimum monthly wage, and as it is set at such a low level it is not even enough to allow them to meet their basic minimum needs. And foreign companies, which have built factories in industrial estates on the outskirts of the city, are more than happy to take advantage of the situation, citing low productivity as the main obstacle to higher wages. But this is a circular argument. What is the incentive to work harder, if you can barely afford to eat and clothe yourself?

In fact, the low wages for workers merely reflect a system in which the political and business elites are able to cream off abnormally high profits for themselves while denying workers their fair share. The exploits – or perhaps that should read exploitation – of the U.S. footwear producer Nike, for example, are well known. Rather than actually produce the footwear itself in its own factories, Nike instead subcontracts the production to local companies, and by doing so is basically able to absolve itself of any responsibilities since the employment conditions at the factories are determined by the local contractors and not Nike. Crafty, huh?

The hotel industry is another good example of how the system exploits the poor and powerless. In this industry, profitability is broadly determined by two variables: room rates and cost of labor. And while wages at five star hotels in Jakarta are much lower than in other countries, the room rates are nonetheless at international levels. The Hyatt Jakarta’s rooms start at 158 U.S. dollars a night, for example, which is only slightly lower than the rate at its hotel in Singapore where rooms start at 167 U.S. dollars a night. It doesn’t take a mathematician then to work out that these hotels must be making huge profits. But it doesn’t end there. A well-known luxury hotel chain once evoked the wrath of the Australian trade unions by placing Indonesian housekeepers at its Sydney hotel, paying them less than one-fifth of the wage that an Australian housekeeper would receive!

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