POLITICAL ECONOMICS

ANALYSIS OF THE AGRICULTURAL SECTOR IN INDONESIA AS THE

WELFARE STATE

BY:

IRINE SANDRA DEWI DARMASTUTI 20180430124

INTERNATIONAL PROGRAM FOR ISLAMIC ECONOMIC AND FINANCE

UNIVERSITAS MUHAMMADIYAH YOGYAKARTA

2018

I. INTRODUCTION

In the 18th or early 19th century the main economic units revolved around
agriculture, trade, and relatively small businesses. It is also managed, run and owned
by one family. Under these conditions, people expect the creation of freedom of
activity from the dictation (control) of the government. The desire to achieve
economic freedom coincides with the development of economic technological reality.
With such conditions, the most efficient units run on a relatively small scale.

The first force that was the driving force behind the evolution of the welfare state
was political. This situation is related to the increasing public awareness of their
rights to vote. This phenomenon has accumulated in demands for voting rights that
occurred in most Western countries in the 20th century. They realize that the right to
vote is not only a matter of politics to elect representatives in parliament or congress,
but also relates to a very broad economic and social power.

The second force behind the growth of the welfare state is psychological.
Communities throughout the world, both developed and developing societies no
longer accept misery as a destiny that cannot be changed. This condition is caused by
the declining influence of religion, especially related to the concept of fate. Religion
no longer has the strong influence as in the imagination of past societies. Since then
the community has become more convinced that the welfare of life is determined by
economic welfare and social justice. This discourse is voiced in almost all countries,
both socialist and non-socialist countries.
 In developing countries, this psychological power arises in the form of political
power, especially aimed at achieving the independence of the nation. In essence, all
these events are actually motivated by the desire for better socio-economic living
conditions. A broad desire for welfare state policies is not purely based on sentiment
and psychological strength. This actually implies that in history humanity has
reached a stage when they need enough knowledge and control of nature for welfare.

The agricultural sector in Indonesia, which has a strategic role in the structure of
national economic development, does not receive serious attention from the
government in national development. From protection, credit to other policies, none
of them is profitable for this sector. Agricultural development programs that are not
directed towards, even further plunging this sector to ruin.

Indonesia's agricultural development journey to date has not shown maximum

results when seen from the level of welfare of farmers and its contribution to national
income. Whereas agricultural development in Indonesia is considered important from
the overall national development. There are several things that underlie agricultural
development in Indonesia have an important role, including the potential of large and
diverse natural resources, a large share of national income, a large share of national
exports, the size of Indonesia's population who depend their lives on this sector, its
role in community food supply and can be the basis of rural growth.

The problem of the agricultural sector from the fate of the agricultural sector of
Indonesia is still undervalued from other sectors until it has been unknowingly
caused a lot of land damage caused by agricultural exploitation on this earth.
II. ANALYSIS OF WELFARE IN AGRICULTURAL SECTOR

In the dimension of management of the agricultural sector, the lives of

Indonesian farmers are now at the forefront. If they stop as farmers, they will not
easily find other work so that their family lives will be threatened. If you continue
your work as a farmer, the results will not be profitable. The facts show that the
majority of farmers in Indonesia are sharecroppers, making it increasingly difficult to
obtain income as desired. Especially in the rainy season, the threat of flooding also
makes farmers lose money. The yields have shrunk or failed because of being hit by
the fierce water. Prices of basic necessities which from time to time continue to
increase, plus education and health costs also continue to soar. This is a threat to
farmers. In addition, the prices of fertilizers, seeds and other agricultural equipment
also soared so that it can be more difficult for farmers. This is still compounded by
harvest prices which sometimes decline and are bargained by middlemen, thereby
increasing the suffering of farmers. Therefore, it is appropriate that agriculture has a
very important role in responding to all these challenges which is complemented by
various initiatives from other national government agencies, local government that
will be at the forefront in implementing the program, producer organizations in rural
areas engaged in agribusiness , and farmers who must become important partners in
order to support the welfare process of their people.

The government's interest in advancing the agricultural sector should improve

the welfare of farmers and their families. In the case of agriculture, the form and
legitimacy of government greatly influence the significance of the role of the
government in promoting the welfare of farmers.

Indonesian agriculture is quite lagging behind other countries, whereas it should

be as an agricultural country the agricultural sector is the main sector to improve our
economy. Some indicators that cause our agriculture are quite behind, namely as
follows.

First, when studying macro indicators, Indonesia's economy before the 1998
multidimensional crisis almost always grew above 7% and at this time Indonesia's
economic growth has shown signs of improving towards pre-crisis conditions. Even
so, when considering other quantities, such as Farmer Exchange Rates (NTP),
productivity, environmental aspects, agricultural business development,
competitiveness, efficiency, and various human development index variables, we can
state that there are still many challenges that must be faced to advance agriculture,
which generally has only reached the stage of "survival".

Second, the lives of farmers, especially food farmers in Java, have not changed
much. If anything, the progress will occur in some village elites. Meanwhile, millions
of other farmers can only survive on agricultural land which is increasingly
narrowing. Conversely, there are also lands that are widening as a result of
suboptimal legal instruments in the land sector, as well as unfair market economic
law. The number of small farmers is not decreasing, but increasing.

Third, the real price of primary agricultural commodities produced by farmers is

increasingly depreciating compared to industrial commodities, the education and
health costs they need. Likewise, transportation costs, the price of production
facilities are always increasing. The wages of agricultural laborers are felt by land
owners and tenants increasing, for farm laborers is still not enough so many people
decide to work as unskilled laborers in other countries.

In Indonesia, at every harvest, farmers complain that the price of grain is always
cheap. This happened because the government was unable to maintain the enactment
of the base price set by Presidential Decree (Keppres) No. 32/1998 so that farmers
receive the price of grain far below the basic price. The objective of the government
purchase price (HPP) policy is that rice farmers receive a reasonable price of grain so
they receive incentives to increase their productivity. However, this was not carried
out properly by the government.

According to Caporaso, the market mechanism as a determinant, when the state

is not allowed to intervene, except to avoid market distortion. That is, through a
market mechanism that runs automatically as explained in the supply-demand legal
framework. The formation of profits of individuals who interact in the market will be
formed. The more intensive the process, the higher the chances of achieving
individual prosperity. Thus, in the aggregate will end, even go hand in hand with
prosperity with the community.

This will be a big problem when market prices rise, consumers are confused, but
farmers are also confused because the price increase does not affect the increase in
grain prices.

III. CONCLUSION

The agricultural sector in Indonesia, which has a strategic role in the structure of
national economic development, does not receive serious attention from the
government. From protection, credit to other policies, none of them is profitable for
this sector. The focuses on this paper is to show us how important is the role of
farmers in Indonesia. The problem of the agricultural sector from the fate of the
agricultural sector of Indonesia is still undervalued from other sectors until it has
been unknowingly caused a lot of land damage caused by agricultural exploitation on
this earth.

There is some indicators that cause our agriculture are quite behind. First, is
economic growth. Second, is the lives of farmers. And the third, is the real price of
primary agricultural commodities that produced by farmers.