The Political Economy of Poverty, Equity, and

This volume analyzes and compares economic growth in Nigeria and Indonesia during the period from 1950 to 1985, addressing questions as to why one country was so much more successful than the other. Providing some surprising answers for those who believed that the divergence would be found in deeply rooted, long term trends, the authors also offer insight into what has become a reversal of fortune in the late 1990's, as Indonesia has experienced decline, and the Nigerian economy has stabilized.

David Bevan is a lecturer in economics at Oxford University.

Introduction 1

I Nigeria 7

1 The Colonial Period

9

(15)

The Colonial Economy and the Growth of Agricultural Exports

10

(3)

Instability: Trade Shocks before 1945

13

(2)

Constitutional Change

15

(3)

Economic Conditions and Policies

18

(5)

Conclusion

23

(1)

2 From Independence to Chaos: 1960-66

24

(11)

Political Developments

24

(2)

Exogenous Economic Changes

26

(1)

Macroeconomic Developments

27

(3)

Agriculture

30

(1)

Industry

31

(1)

Trade Policies

32

(1)

Wage Employment

32

(1)

Social Services

33

(1)

Conclusion

33

(2)

3 Civil War and Reconstruction: 1966-73

35

(11)

The Role of Civilians in the Military Government

39

(1)

The Economy

40

(4)

Conclusion

44

(2)

4 The First Oil Cycle: 1973-79

46

(22)

The Magnitude of the Oil Shock and Asset Choices

47

(3)

General Equilibrium Effects of the Foreign Exchange Influx

50

(5)

The Politics of Oil Revenue

55

(6)

Pattern of Federal Expenditure

61

(3)

Beneficiaries of Public Expenditure

64

(2)

Conclusion

66

(2)

5 The Second Oil Cycle: 1979-87

68

(32)

The Magnitude of Shocks and Asset Choices: 1981-90

68

(20)

General Equilibrium Effects 79

88

(12)

The Politics of the Second Oil Cycle

6 Economic Growth and Living Standards: 1950-92

100

(17)

Living Standards, Poverty, and Inequality

100

(17)

Growth Outcomes 111

117

(1)

7 Factor and Product Markets

The Capital Market

117

(4)

The Labor Market

121

(17)

The Land Market

138

(2)

Product Markets

140

(7)

Import Licensing

147

(3)

8 Government Finance and the Political Economy of Public Policy

150

(34)

Trends in Public Sector Revenue and Expenditure

151

(13)

Rents, Interest Groups, and Policy Decisions

164

(11)

Model of Public Sector Employment Rents

175

(9)

9 Explaining the Outcomes

184

(9)

Growth Outcomes

184

(3)

Distributional Outcomes

187

(1)

The Evolution of Policy

188

(7)

II Indonesia

193

(182)

10 The Colonial Period

195

(14)

The Emergence of an Independent State

199

(4)

Obstacles to National Unity

203

(4)

Economic Conditions

207

(1)

Economic Interventions

207

(2)

11 Parliamentary Democracy: 1950-57

209

(17)

Political Developments

209

(5)

Economic Policy

214

(12)

12 Guided Democracy: 1957-66

226

The 1957-58 Expropriations and the Move to State Ownership

229

(6)

Macroeconomic Policies 230

235

The Squeeze on Civil Service Incomes

233

(1)

The Overthrow of Sukarno

234

13 Stabilization and the New Order: 1966-

-73

(317)

Fiscal Policy 235

239

Financial Reform

237

(2)

Trade and Exchange Liberalization

239

(1)

Stabilization, Growth, and Income Distribution

Rice Policy

240

(1)

Economic Policy and the Technocrats

241

(3)

14 The First Oil Boom: 1973-79

244

(15)

Bappenas versus Economic Nationalism

246

(5)

Pertamina

251

(2)

Industrial Policy: Rising Protectionism

253

(3)

The 1978 Devaluation

256

(3)

15 The Second Oil Cycle: 1979-88

259

(22)

The Boom Phase: 1979-81 260

281

The Oil Slump: 1981-83

266

(5)

The 1983 Crisis

271

(3)

Postcrisis Reforms: 1984-88

274

(5)

Conclusion

279

(2)

16 Long-Term Trends in Poverty and Equity

Evidence on Mean Living Standards

281

(2)

Poverty

283

(6)

Inequality

289

(13)

GDP Growth

302

(4)

17 Factor and Product Markets

306

(31)

The Labor Market

306

(14)

Financial Markets

320

(2)

The Market in Land and Rural Credit

322

(2)

Product Markets: Institutions and Interventions

324

(8)

Food Policy

332

(5)

18 Government Finance and Public Policy

337

(31)

Fiscal Policy

337

(10)

The Political Economy

347

(21)

19 Explaining the Outcomes

368

(7)

The Evolution of Policy

368

(5)

Growth and Equity Objectives

373

(4)

III A Concluding Comparison

375

(58)

20 A Comparison

377

(56)

Poverty and Equity

378

(8)

Economic Growth

386

(3)

Macroeconomic Policies

389

(16)

Markets

405

(6)

Agricultural Performance

411

(6)

Why Policies Differed

417

(7)

Conclusion

424

(2)

Appendix 20A Construction of the Protection Index for Indonesia

426

(5)

Appendix 20B The Geometry of Open-Economy Macroeconomics

431

(2)

Notes

433

(8)

References

441

(12)

Index

453

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The Political Economy of Poverty, Equity, and Growth Nigeria and Indonesia

Summary

Author Biography

Table of Contents

Supplemental Materials