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What Do We Learn From The Crisis? 3© 2003 Institute of Southeast Asian Studies, Singapore Introduction Economic development can be seen simply as sustainable economic growth over a long period. This is the narrowest definition of economic development, often equivalent to the concept of economic growth, which emphasizes capital accumulation. Without high economic growth, no development of social issues such as education and health can take place. This narrow definition of economic development has a special advantage as it is relatively easy to measure the dynamics of national income. Development can also be seen as structural and qualitative changes in the economy. Therefore, this concept of development covers not only monetary variables, but also social variables. Sen (1999) goes even further. He sees development as “a process of expanding the real freedoms that people enjoy”. This freedom depends on variables such as gross national product (GNP), industrialization, and technological advance, but freedom also depends on other determinants such as social and political rights. However, it is not easy to measure this kind of development. Since 1990, the United Nations Development Programme (UNDP) has advocated the concept of human development. In its Human Development Report 1991, it mentions that for a very long time the question had been centred on the growth of the economy. However, they argue that the question should focus rather on the welfare of the people. 3 WHAT DO WE LEARN FROM THE CRISIS? Insights on Human Development in Indonesia during 1997–99 ARIS ANANTA m n 1 Reproduced from The Indonesian Crisis: A Human Development Perspective, edited by Aris Ananta (Singapore: Institute of Southeast Asian Studies, 2003). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at . 4 Aris Ananta© 2003 Institute of Southeast Asian Studies, Singapore Human development involves much more than national product. It aims to create an environment in which “people can develop their full potential and lead productive, creative lives in accord with their needs and interests” (UNDP, 2001). People are seen as the wealth of the nation and development is to expand the choices available to the people, thus giving them more freedom to choose. Economic growth is very important, but it is only one of the means of increasing freedom. Every year the UNDP publishes a special report, with a different emphasis, on the progress of human development in all countries of the world. The UNDP recommends HDI (human development index) as a measurement of development, which is relatively easy to follow. HDI is defined as comprising human capital (measured by education and health) and purchasing power (measured by parity purchasing power). It suggests that HDI should replace the conventional way of measuring development, which is based on the dynamics of economic growth. This volume follows the tradition of the UNDP, in seeing development from the point of view of human development. It is hoped that this will contribute to a better understanding of human development in Indonesia during 1997–99, in the early part of the Indonesian economic crisis. It is not within the scope of this book to show the impact of the crisis on human development. Neither is it to provide the most recent information on human development and the related issues. The period 1997–99 has been taken as a base because most of the data on that period are available, and hence a more thorough analysis can be carried out. This book has also been enriched by the variety of approaches used by the authors. Part I provides an economic background to the discussion on human development and serves as an illustration of the conventional way of looking at development. Not only does it describe the overall current macroeconomic condition, but it also explains the long economic structural transformation occurring since the beginning of the New Order era. It also provides a quantitative simulation analysis, showing the social impact of the financial crisis. Parts II and III enter the core of the discussion on human development, with Part II focusing on human capital and Part III on purchasing power. One feature of this volume is the broad treatment of the concept of human capital. It includes not only education and health, but also covers labour mobility and freedom from fear. The discussion on purchasing power focuses on the Social Safety Net programme which has been...

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