National emblem of Indonesia Garuda Pancasila

Pancasila economics (), also known as "Indonesian populist economics" (), is an

economic system An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within an economy. It includes the combination of the various institutions, agencies, entities, decision-making proces ...

which aims to reflect the five principles of Pancasila. The term "Pancasila economy" first appeared in an article by

Emil Salim Emil Salim (born 8 June 1930) is an Indonesian economist and former politician. Born of Minangkabau parents, both from the village of Koto Gadang in West Sumatra. His uncle is Agus Salim, one of the founding fathers of the Republic of Indonesia ...

in 1967. Mubyarto is one of the staunchest of the Pancasila economic theorists. Mubyarto and

Boediono Boediono (Perfected Spelling System, EYD: Budiono, pronounced ; born 25 February 1943) is an Indonesian politician and economist who served as the 11th Vice President of Indonesia, vice president of Indonesia from 2009 to 2014. He became vice pr ...

developed it the most. In essence, a Pancasila economy is a system that tries to avoid pendulum-like swings from one extreme (a

free market economy A market economy is an economic system in which the decisions regarding investment, production, and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a market ...

, known in Indonesia as ''free fight liberalism'') to the other (

state socialism State socialism is a political and economic ideology within the socialist movement that advocates state ownership of the means of production. This is intended either as a temporary measure, or as a characteristic of socialism in the transition ...

, especially of the Soviet kind). In simple terms, a "Pancasila economy" can be described as a market economic system with government control or a ''controlled market economy''. A ''Pancasila economy'' can be considered an example of a mixed economy or a ''

third way The Third Way is a predominantly centrist political position that attempts to reconcile centre-right and centre-left politics by advocating a varying synthesis of Right-wing economics, right-wing economic and Left-wing politics, left-wing so ...

'' economic system. A Pancasila economy is seen as a counterbalance to a neoclassical approach promoting individualism and free markets that is adapted the values of Indonesian society, including religious values, culture, customs and norms. The concept of Pancasila economics was first conceived in the early days of the

New Order New Order may refer to: Politics * ''L'Ordine Nuovo'' (''The New Order''), a socialist newspaper edited by Antonio Gramsci in the early 1920s * ''New Order in East Asia'', propaganda term for Japanese-dominated East Asia announced by Japanese ...

as part of the regime's

De-Sukarnoization De-Sukarnoization, also spelled de-Soekarnoization, was a policy that existed in Indonesia from the transition to the New Order in 1966 up to the beginning of the Post-Suharto era in Indonesia, Reformation era in 1998, in which some of Sukarno's ...

and "cleansing of Communist,

30 September Movement The Thirtieth of September Movement (, also known as G30S, and by the syllabic abbreviation Gestapu for ''Gerakan September Tiga Puluh'', Thirtieth of September Movement, also unofficially called Gestok, for ''Gerakan Satu Oktober'', or Fir ...

and

PKI PKI may refer to: * Partai Komunis Indonesia, the Communist Party of Indonesia * Peter Kiewit Institute, an Information Technology and Engineering school of the University of Nebraska system * Protein kinase inhibitor, a type of enzyme inhibitor t ...

remnants from Pancasila" which was aimed for what the regime claim as a "return into a pure, consequential Pancasila".

Characteristics

The Pancasila economic system is based on Article 33 of the

Indonesian constitution The 1945 Constitution of the Unitary State of the Republic of Indonesia (, commonly abbreviated as ''UUD 1945'' or ''UUD '45'') is the supreme law and basis for all laws of Indonesia. The constitution was written in June–August 1945, in the ...

. The article calls for "collective enterprises under the principle of 'familyism' ()", which is meant to be implemented through

cooperatives A cooperative (also known as co-operative, coöperative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democr ...

, the state control of the

commanding heights of the economy In Marxian economics, the commanding heights of the economy are certain strategically important economic sectors. Some examples of industries considered to be part of the commanding heights include public utilities, natural resources, and sect ...

and of land and resources. The five basic characteristics of the economic concept of Pancasila are: * Cooperative development * Commitment to equity * Nationalist economic policy * Centralized planning * Decentralized implementation The Pancasila economic system is claimed to have superiority above liberalism. Theorists claim it as "an economic system for the common people". Pancasila economic theorists also argue the system's superiority over socialism, which they claim do not recognize "individual ownership" (; the term "pribadi" is an Indonesian homonym for both "private" and "personal"). There has been much discussion about the need for a Pancasila economic system in economic development policy in Indonesia since Indonesian independence in 1945. The principles of a Pancasila economy were mandated by the

Indonesian Constitution The 1945 Constitution of the Unitary State of the Republic of Indonesia (, commonly abbreviated as ''UUD 1945'' or ''UUD '45'') is the supreme law and basis for all laws of Indonesia. The constitution was written in June–August 1945, in the ...

in 1945. These include

humanitarianism Humanitarianism is an ideology centered on the value of human life, whereby humans practice benevolent treatment and provide assistance to other humans to reduce suffering and improve the conditions of humanity for moral, altruistic, and emotion ...

economic nationalism Economic nationalism or nationalist economics is an ideology that prioritizes state intervention in the economy, including policies like domestic control and the use of tariffs and restrictions on labor, goods, and capital movement. The core bel ...

economic democracy Economic democracy (sometimes called a democratic economy) is a socioeconomic philosophy that proposes to shift ownership and decision-making power from corporate shareholders and corporate managers (such as a board of directors) to a larger ...

and

justice In its broadest sense, justice is the idea that individuals should be treated fairly. According to the ''Stanford Encyclopedia of Philosophy'', the most plausible candidate for a core definition comes from the ''Institutes (Justinian), Inst ...

Examples

B.J. Habibie Bacharuddin Jusuf Habibie (; 25 June 1936 – 11 September 2019) was an Indonesian politician, engineer and scientist who served as the third president of Indonesia from 1998 to 1999. Less than three months after his inauguration as the seventh ...

embraced this

economic nationalist Economic nationalism or nationalist economics is an ideology that prioritizes state intervention in the economy, including policies like domestic control and the use of tariffs and restrictions on labor, goods, and capital movement. The core bel ...

policies, which

called " Pancasila-based

Market economy A market economy is an economic system in which the decisions regarding investment, production, and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a mark ...

". Also

Prabowo Subianto Prabowo Subianto Djojohadikusumo (born 17 October 1951) is an Indonesian politician, businessman, and former four-star Indonesian Army, army general who is serving as the eighth and current president of Indonesia since 2024. He was previously t ...

supports Pancasila economics.

Megawati Sukarnoputri Diah Permata Megawati Setiawati Sukarnoputri (; born 23 January 1947) is an Indonesian politician who served as the fifth president of Indonesia from 2001 to 2004 and the eighth vice president under President Abdurrahman Wahid from 1999 to 200 ...

embraced the

Third Way The Third Way is a predominantly centrist political position that attempts to reconcile centre-right and centre-left politics by advocating a varying synthesis of Right-wing economics, right-wing economic and Left-wing politics, left-wing so ...

however if she embraces Pancasila economics, is not known but possible.

Differences to Suharto economic policies

While

Suharto Suharto (8 June 1921 – 27 January 2008) was an Indonesian Officer (armed forces), military officer and politician, and dictator, who was the second and longest serving president of Indonesia, serving from 1967 to 1998. His 32 years rule, cha ...

also advocated for econonomic nationalism and even

developmentalism Developmentalism is an economic theory which states that the best way for less developed economies to develop is through fostering a strong and varied internal market and imposing high tariffs on imported goods. Developmentalism is a cross-disci ...

, and also

protectionist Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. ...

( State-led economics) policies, the main differences is that besides that he embraced elements of all three economic systems, that

was mainly influenced by the

Berkeley Mafia The Berkeley Mafia was the term given to a group of University of California-trained economists in Indonesia who were given technocratic positions under the Suharto dictatorship during the late 1960s. They were appointed in the early stages of th ...

which advocated for

free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...

capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...

Characteristics

Examples

Differences to Suharto economic policies

See also

References

Further reading