Caution – GREED

Greed has made the “free market” of America fell apart. Government of the US has to make a similar move of Indonesian in 1999 to rescue its economy. US government has to deny its own economic principles: against nationalization and regulation of market. US government is now nationalizing some private financial firms (so that no foreign capital eats it) and regulating the market. This has showed the failure of liberal economy theory. This has shown the danger of liberalization and total privatization without limits. Greed, once again greed, can make everything collapse.

Islam says stop when you have enough. As far as I know, last year the Pope also says that one of the dangerous things in the world today is super wealthy people that are greedy. I think all religions agree about this. Someone has to limit and control his/her greed. I say this is the bad sign of materialism. Greed comes from materialism root.

So what’s for Indonesia? Liberalization of electricity market was once a hot discussion when Law No.20 of 2002 exists. At that time, the main opposition was coming from PLN’s worker union. There was no further discussion about the good and the bad thing of full liberalization of electricity sector. The constitution court was finally annulled the law based on the argument that electricity is influencing to people’s livelihood therefore it should not be privatized. The law is in principle against the principles of Constitution 1945.

I am not against liberalization as long as there is a limit and it does not involve gambling. Liberalization can bring efficiency and finally bring the cost down. Lower cost means lower price for customers and it is certainly beneficial for them. That liberalized market has to have limits so that there is no “gambling” option for market player. I think the fell down of the US economy is because this “gambling” actions. I believe, derived market (options, futures etc.) is very much supporting “gambling”.

The annulment of Law 20 of 2002 was in time. At that time, the market infrastructure was not available, supporting regulations were not available (e.g. coal market regulation etc.) therefore, the continuation of the law might bring chaos. Constitution court has made a correct decision. However, monopoly should be stopped. PLN is now monopolizing the sector and the worst thing is that PLN does not have clear identity (either being fully private entity or public service entity). PLN being in the monopoly has create difficulties in developing electricity sub sector for example the implementation of small renewable energy generation decree (PSK Tersebar Decree of 2002).

The conclusions are:

• Man made things are not perfect (including the free market economic theory
• Government has to be strong and act as needed. Free certain part of the market and regulate necessarily
• The important conclusion is: do not become a greedy person. It is just bad for you and for other people.

Have a nice day. It is very hot now in Jakarta.