Tuesday, April 29, 2014

The Invisible hand

As we all know in the theories of economies, there are many definition that you won’t find anywhere else, like; Industrial Policy, Zero Sum Game, Ect.. but among them, there’s one that really piqued my interest, The Invisible Hand.

So what is the Invisible Hand? Not it’s not the hand of a man who’s been engineered himself with the ability of a chameleon (obviously), the Invisible Hand in economics theories, is a metaphor created by by Adam Smith in his book “The Theory of Moral Sentiment” (1759), to describe the self-regulating behavior of the marketplace. 

“Individuals can make profit, and maximize it without the need for government intervention. individuals' efforts to maximize their own gains in a free market may benefit society, even if the ambitious have no benevolent intentions.”

The Invisible Hand itself is only a theoretical concept, but many economist try to interpreted it even further. For example, the noble prize winner, Milton Friedman says that The Invisible Hand are the possibilities of cooperation without coercion, meaning that if the buyer are free to buy what he wants, and the seller are free to sell what he want with the means to produce it, the market price will be great for everybody.

Beside Milton Friedman, there are many economist that also interpreted The Invisible Hand beyond it’s original concept D. H. MacGregor and Stephen Marglin.  And there’s also also those that criticizes this concept. Like Joseph E. Stiglitz who said, as to my understanding, that the Invisible Hand is Invisible because it almost never was there, in other word, there’s no such thing as an Invisible Hand, because the market without the help from the goverment, cannot function as much as it should.

“Whenever there are "externalities"—where the actions of an individual have impacts on others for which they do not pay, or for which they are not compensated—markets will not work well.“

So now we know at least a little bit about The Invisible Hand, and the people that support and criticizes this concept. And now to leave you guys with a little quote I heard in class, because that’s always the best way to end things.

“The Invisible Hand is usually paired with a Bloody Hand, in fact, the usually came from the same conductor” 

Achmad Rizky Aditya 1701357733

Sources are various (really sorry about that)

Monday, April 28, 2014

Understanding Liberalism

The study of International Relations has made us know many the perspectives and using them to understand and analyze the global events. In market world, we know the famous perspective like mercantilism. Mercantilism said that countries do trading simply to accumulate wealth so power could be achieved. They focused on the cycle of war and power. But, there was Adam Smith to oppose this idea of mercantilism.

Adam Smith being the forerunner of liberalism with his famous term “invisible hand” although it was just said once in his book “The Wealth of Nation”. Adam Smith was carrying Laissez-faire as his theme in which the state should not interfere market and its involvement in their market is very limited. They believe that market could find and determine their own price (equilibrium) without the help of the government. This is what “invisible hand” means. Adam Smith explained in his book that the state’s welfare could be reached if every people pursue their own interests. If you are a farmer, do that heartily. If you are a student, live it diligently.

 He also came with the idea of absolute advantage that later developed by David Ricardo’s comparative advantage. In absolute advantage, there are two countries with two commodities in which one country picks one commodity they could produce many than the latter country. While comparative advantage requires each country to compare two goods they can produce in their own country in terms of efficiency before they choose what to export and what to import. Because of that, while mercantilism believes that if one side gains a benefit means the loss for others (zero-sum game), liberalism chooses to see the life as a positive-sum game. In which it still possible for each countries to gain benefit or advantage in trading even though the amount they get is different.

To sum it up, we can conclude that mercantilism do trading to accumulate wealth and turn it into power so that the power can be used to produce wealth and turn it to power again. On the other hand, liberalism believes in freedom of individual in the marketplace to organize economic activity rather than government and view life as a positive-sum game.

Balaam, David. N, & Dillman, B. (2014). In Introduction to International Political Econom. Ch.4. United Kingdom: Pearson Education Limited.

Posted by,
Salwa Ni'matul Maula

Monday, April 21, 2014

Greatful Economy of South Korea

   Why this little country and located in northeast of Asia could be the one of strongest economy in the world? As we know about South Korea today, it was fast growing in economy after Korean Wars in 1953. The most curiosity is there was no resource that South Korea had but the growth of economy so fast in 1960 to 1980 and now. Many questions lay on its business in domestic even international market, is it true that South Korea has potential in trade or the great policy that reformed South Korea economy or is it because of growth of globalization as we know about South Korea lifestyle? The answers are yes for those questions.

      The key point lays on free trade. The fast growing economy was helpfully because the free trade is exist. The raw materials in South Korea were minim but South Korea is the sixth largest exporter and seventh largest importer in the world. So, what goods that South Korea use for trading? After the Korean Wars, South Korea helped by foreign aids to developed its economy with industrial sectors. South Korea most exports semiconductors, wireless telecommunications equipment, motor vehicles, computers, steel ships, petrochemicals,  and industrial machinery to other country mostly China. Any materials such as machinery, electronics and electronic equipment, oil, steel, transport equipment, organic chemicals, and plastics are import from China and Japan. Those are big number of exchange trade in imports and exports and beneficially hit South Korea to be the 15th largest market economy. As industrial country, domestically the market also lays on industrial goods mostly automobiles and parts and also its citizen lifestyle.

     It also supported by a great policy after Korean Wars in evolving economy. South Korean’s leader at that time was wisely to determined comparative advantage that would increased the profits. When South Korea faced crisis of inflation in late 1980s, the government intervened with reduced the imbalance between city and rural sectors, it expanded investments in public projects, such as roads and communications and other facilities. South Korea also made cooperation with trade organizations such as APEC, WTO, G-20, and OECD. Those were examples of South Korea’s great policy to got stability of its country’s economy.
      The lifestyle of South Korea has its particular influence in global economy. Its fashion, entertainment world, foods, known as hallyu wave, already involved in South Korea global market. The demands of hallyu wave were reached in big number in the world these recent years. So many albums, dramas, fashion stuffs, even South Korea’s traditional food are greatfully come worldwide. Because of this influence, South Korea could make more than thousands billion Won (South Korea currency) as the data from Korea Creative Contents Agency, a body that is a part of the Ministry of Culture, Sports, and Tourism. In this globalization era, there is no impossible way to get what is unbelievable.

      South Korea surprisingly developed its economy in fast and great structures. To growth economy, it should be wise in making decisions as South Korea did to characterized what could be take advantage more. In this point, every country should wisely compare the advantages then a great policy should be made to concrete the increase and stability of economy. As the globalization growth and the liberal world occurs where is freedom in economic activity, it opens the opportunities of free trade. Not just South Korea, it is probably could happen in developing country.

Posted by,
Safira Damayanti


Golden Age

Golden Age, maybe that term is not a new term for some of you especially as International Relations students. Why Golden Age? In the late 18th century there was a huge economic growth which opened the door to more wider global economy networks. Those days when trade was increasing, Britain overtaken by their new developing technologies and industries. But why they used the word “golden” when they could use “success” or anything else?. Yes, they’re not using “Golden” for no reason.

It is because they were using gold for transactions. There used to be a system that manage the use of gold called Gold Standard. Investopedia defines Gold Standard “A monetary system in which a country's government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies.” Gold was not forever dominating because the attendance of silver threat.

Speaking of Golden Age, did Indonesia ever taste golden age? Some people say Indonesia have tasted the golden age in the early 2013. Darmin Nasution, the former governor of Bank Indonesia claiming Indonesia’s Golden Age that our economy was growing stably after sleeping for about 10 to 15 years. He added that our economic growing even more stable than India and China with 6.2% growth by the year before. That’s why according to that fact that time, Indonesia should believe that Indonesia could be the 7th largest economy in the world in 2030.

Today, the advanced technologies are not hard to find and it keeps developed as the day goes by. Making it easy for a country to communicate, to build a relationship with another country in every aspect including trading. The industry being more creative, with all this achievement and development, can we call it the world today as golden age? you guys choose


Posted by,
Salwa Ni’matul Maula (1701315806)

Sunday, April 20, 2014

Japanese Tv Stations Statement of South Korean Government Tricked Indonesian Over KFX/IFX Fighter Aircraft Join Development Project

A Japanese tv station NicoNico through its news in 14 January 2014 state that Indonesian has been tricked by the South Korean Government over the 7,5 millions dollar fighter aircraft project.The news that 4 minutes and 24 seconds long state that South Korean authority one sidedly terminate the program in 2013 then abandon Indonesian to make their own way out over the project.The news can be accessed through [http://www.nicovideo.jp/watch/sm22672024] .In 2009 South Korean presiden Lee Myung-bak came to visit Indonesia and made an agreement of the program which is worth 8 billion USD where Indonesian have to cover 20% of the budged.

30 of Indonesian engineer were sent to South Korea for contributing in the project of 4,5 generation fighter aircraft.in 2013 the project was put in a delay,a lot of community asked for an explanation over the project including the Japanese.In Januari 2014 Indonesian Defense minister Purnomo Yusgiantoro held a press conference and stated that the project has been resumed.The vice minister of defense for Indonesia Sjafrie Sjamsoeddin state that the defense ministry of Indonesia already receive a letter from South Korean in 3 January 2014 that ensure the project is on going.In that letter it's decided that the South Korean parliament will expend 20 millions USD while the Indonesian spend 5 Millions USD over the 2015 project budged.

The South Korean Parliament clarify that the project delay on 2013 was because of the switch between parliament regime after the election.

Luthfi Hadi Arsa (1701334471)


The FTA Agreements that Tend to Put Indonesia on Disadvantage

Since FTA implemented in indonesia on 2004 FTA puts various kind of effect to Indonesian economic situation.Like the others agreement in another country,some of those agreement gave Indonesia some benefits while the other gave a negative effect,here's some of the FTA agreements that tend to put Indonesia in disadvantagous situation.

1.The FTA ASEAN economic community agreement
This agreement affect Indonesian trade scale into devisit situation,in 2004 before joining the FTA ASEAN Indonesian trade scale recorded in surplus for 1,466 millions USD.After Indonesia joined the FTA the scale turned into devisit for 0,455 millions USD into 6,234 millions USD on 2010

2.The Indonesia-China FTA agreement
at the early time of this agreement it gave Indonesia some benefits of large trade surplus.0,504 millions USD on 2004 and 1,118 USD on 2007.But the sheer amount of Chinese product entered the Indonesian market while Indonesian export,the raw materials is descending.This situation turned the Indonesian market scale into devisit for 3,631 millions USD in 2008 and 4,732 millions USD in 2010

3.Indonesia and South Korea FTA
Before this agreement took place,Indonesian market scale is in surplus position for 4,82 million USD and 4,89 millions USD in 2010.This surplus was caused by the export of raw gas material.The export of none gas raw material to South Korea was on the raise.But the surplus of non gas raw material is descending from 1,71 millions USD in 2006 to 1,28 millions USD in 2010

4.Indonesia Japan FTA
Before this FTA took place the trade surplus of Indonesia is recorded for 17,103 Millions USD.in 2010 trade surplus was descending to 8,816 millions USD.The surplus was mainly caused by the export of gas raw material,as for non gas material export was depleted,even the trade scale for non gas raw material in 2010 was on devisit for 0,129 Millions USD.Before this FTA took plate,the trade scale of non gas raw material was in surplus of 3,952 millions USD in 2007,but in other hand in 2010 Indonesia experienced a devisit of  0,129 millions USD

Luthfi Hadi Arsa (1701334471)


Habibie Engage on Debate Over the MBT Purchase Against the Army Corps

Recently the Indonesian government purchased their first MBT,the Germanian Leopard latest model the Leopard 2A4 and the Leopard Revolution.Considering the neighboring country already posses the MBT for a long time ago,this purchase is critical for the Indonesian tactical position.But the government decision to choose the leopard is challenged by the former Indonesian president and also a respected and well known engineer Mr.Habibie.Habibie argue that Leopard tank's purposed for dessert terrain operation,it's not effective at all to operate leopard in tropical terrain of Indoneisa,and leopard's massive weight of 60 tons will rip the Indonesian poor aspalt road apart.Habibie also reminding the government about the quality of the Indonesian bridge that will not stand the Leopard.

In the other side the Indonesian Army corps answer Habibies statement,that there are 20 states that currently using the same Leopard model,and only 3 of them got the dessert terrain.And the Leopard technology allow the tank to not stressed the road,the tank's massive weight only give the aspalt 0,8 kg/cm2 atau 8,9 ton/m2 of pressure.It's the same pressure given by the light tank scorpion.The leopard also designed to do a evasive action movement in a muddy terrain and even a river with depth less than 4 meters.There will be 104 Leopards MBTs in total that will delivered by the Germanian Contractors to Indonesia.

Luthfi Hadi Arsa(1701334471)


Fighter Air Craft the Modern Days State Interest Fulfiller Tool

As we know today,air force is one of the most critical factor of power in a state armed force.As far if we talking about the air force then we'll found our self to talk about the most important unit in the air force,the fighter jet.We have learned from the history over the gulf war that the air supremacy dominance is the key of the victory,where the Iraqi army which at that time was strong enough to stand head to head against the American MEU was overwhelmed.The key factor of the MEU victory is the Iraqi air forces can't do anything over the American Mc Donald Douglass F-18 which was the latest generation of fighter aircraft at that time.Judging from the importance of the jet fighter contribution over security,today fighter jet is become a political tool for the super powers,it become a forcing power over a deal to fulfill the super powers national interest that mainly regarding the economical interest.
As an example let's take a look to a case that happened to our own country,the 1999 aircrafts spare parts embargo.As we know Indonesian weapon systems at that time are all American made,where we did have the uncle sam clearance to buy those weapons but the American didn't gave us the license to produce the spare parts.at 1999 the Americans placed an embargo over Indonesia as a penalty of human rights violation over Timor Timur conflict.The embargo caused Indonesian air force to completely helpless against any threat.From 10 of Indonesian F16 only 4 of them that in combat ready situation,even those 4 aircrafts are canibalizing the other aircrafts parts in order to be operational.
The same issue happened to British made Hwak 109/209 aircraft,only 40 of them remains operational at that time.The paralyzed Indonesian airforce provoke a territorial violation from the close by countries,Like the australian F-18 that entered indonesian air space without any clarification latter on from the Australian official.The uncle sam by the way gave Indonesia a deal that in order to remove the embargo,Indonesia must sign the free port contract to be extracted by the American.In conclusion the fighter aircraft is a strong political tool through trades in order to achieve a national interest

Luthfi Hadi Arsa (1701334471)


Friday, April 18, 2014

Indonesia’s Future

We all already knew how Indonesia’s doing in international trading on the previous post. This time, we should see briefly how others see Indonesia in the past few years and years ahead. Indonesia, as everyone acknowledges is rich of its natural resources. Indonesia has a lot of potential to do trading with any resources Indonesia has. But, will Indonesia play it well in the future?

People usually judge the country for doing well is by its economic growth, the poor people it has. McKinsey&Company on 2012 explained the myths regarding Indonesia’s growth including its economy. The first myth says that Indonesian economy is not stable, which was argued because Indonesia doing really well in exporting and has a strong domestic market. Like I said before, Indonesia got advantage on resources but according to the McKinsey it is not actually the strong point to boost the economic growth of Indonesia anymore (crude oil, natural gas). Indonesian economy, according to McKinsey is likely to overtake United Kingdom and Germany and crowned as number 7 of the world largest economy in 2030.

In order to make the prediction becomes true, Indonesia better deal with the challenge well. First, Indonesia has to make an increase the growth of its labour in terms of productivity to 4,6%. Second, Indonesia has to avoid income inequalities. Third, Indonesia should manage the consumptive characteristic of Indonesian to prevent the country for running out of capital. Another challenge McKinsey shares is the need to focus on economic sectors like agriculture and fisheries, resources plus the human development. Speaking of resources, Indonesia has a few core export commodities supported by it. Oil palm to be exported to Germany, France, Taiwan and Asian Countries, etc. Forest products to Myanmar, Kenya, Egypt, Pakistan, etc. Shrimp to Thailand, United Arab Emirates, Brazil, etc. Cacao to United States, Japan, Belgium, South Korea, etc. and there’s Indonesian coffee exported to Malaysia, Netherlands, Spain, England and many more.

We should remember Indonesia has international policy doctrine says “A Million Friends and Zero Enemies”. With that doctrine, we can make a friendship and also expand our export markets, it should be beneficial if we interpret the policy well. About how well Indonesia will do in the future depends on how we see, we expect from Indonesia and what we, young people do to Indonesia.


Posted by,
Salwa Ni'matul Maula (1701315806)

Thursday, April 17, 2014

Is Industrial Revolution Okay?

    Industrial Revolution was conducted on the middle 18th century. In this era, the industrial machines were increased in development of trade. The machines were used for decreasing resources and helpful to produce goods in short time and also improved efficiency in every worker activities. The impacts of industrial revolutions always back on people. In the late of 17th century, there were so many people dying because of malnutrition, with an increased in technology in agriculture, it could decreased the rate of people dying. It was easy to control food to fed people. Not just the food but also advances in telecommunication, household, transportation, and many more are increase in today. Today, the invention of technologies keep growing and modern wave comes out. Although they all good, but there always be the bad impacts.
    If we go back to history, the negative sides of industrial revolution were laid on workers. In Britain industrial era, many labors were women and children with low payment and the salary should given to the husband under the law in Britain. It was the poor law that could not made welfare but humiliating instead. There were no laws to protect workers or compensation for injury on job in factory even it was happened a lot. The conditions in the industrial places were unhealthy and not qualified to be place to live for workers. The voices of labour were not necessary to be heard in government. So that was ironic to live in that day where was no freedom or even happiness.
    As the world growing right now, industrial drove us to illness. It is true, because of the industrial involved in the damage of ecology. The wastes of industrial were many dumped on river and also the pollution created by factory were treacherous the ecosystem and of course people. The problems of social life also continue in these days, not only conducted in industrial revolution era in Britain. The class structures as we seen today still happen, but now even the payment not given for husbands there are women and children continue to be exploited and the workers also have to face dangerous risks when working. The growth of technology in controlling food also has negative effects. Many foods that had been treated in factory did not healthy enough to consume because there’s a lot of preservatives that harm human body for 10 to 20 years later.
    In the existences of industrial these nowadays is giving many perspectives to us. Even the growth of technology in industrial could help company to produce goods and easier for workers as helper too but in other conditions it led the earth comes horrible. The effects can we feel right now as we see the global warming today that against people belong to earth not earth belongs to people. It also harms the human body and change the structure of socialism. It’s better if there are sufficient wage for workers and sufficient time to break as the rights of workers and led them to welfare not only the capital owners. Although the world comes much better right now, the conflicts of these industrial effects still be continue.

posted by,
Safira Damayanti


Sunday, April 13, 2014

The Great Dragon of Asia is Falling?

  China as one of the leading economy powerhouse has risen drastically over the decades, turning their ploughing fields into mega-cities, but can they keep it up? The country main revenue which is exportation of products seems to be falling quite drastically. As in last month, the country seem to have a decreased of 6.6% while on February they also have a drop of 18.1% making a total drop of 24,7% of export this year. 

Data shows that the dropped of export in February was caused by the Lunar New Year holiday period, which caused the factory to momentarily close down, at the time, it was predicted, by march, that the economy will increase in both export and import, but the fact is when the time comes, it shocked them to see that the trade figure shows sign of weakness amidst it poor data from the manufacturing and retail sector. The World Bank trimmed its growth forecast for China to 7.6% for this year from its earlier forecast of 7.7%. The latest trade data leaves China with a trade surplus of $7.7bn (£4.6bn) in March, a turnaround from a deficit of $23bn in February. 

Since 2009, trillions of Chinese renminbi have been lent by state-controlled banks to local government-sponsored infrastructure companies to fund questionable projects, most of which failed. And as credit growth weakened over the couple of years, the weakness China's economy has become apparent. Because their use of credit is like steroids on the body of an athlete, eventually they’ll need ever larger injections to maintain the effect. 

“It’s difficult to see Chinese consumption soaring at a time when the property bubble is deflating and construction jobs are being lost. The darkest cloud hanging over China, however, remains public corruption. Members of the governing Communist Party have used the recent era of rapid growth to amass what can only be described as dynastic fortunes. The imbalances of China's economy are not accidental but the result of this corrupt polity. Infrastructure is ripe for plundering by corrupt officials. A series of scandals have drawn welcome attention to this endemic problem which poses the greatest threat to China's long-term economic prospects.” - Edward Chancellor; Global strategist at GMO

But The Great Dragon not going to let itself fall to the ground just yet, last week, they unveiled a a mini-stimulus package to boost growth, which included more spending on rail infrastructure and tax breaks for small businesses, which, if go as planned, will increase the trade growth by 7,5%. But how this plan will fare, is anybody’s guess.


Posted By
Achmad Rizky Aditiya Witjaksono Muwardi Az (Jack)

Monday, April 7, 2014

Indonesia’s Performance in International Trade

In this globalizations era, wheres come free trade between countries to complete the needs what a country can’t produce. Indonesia our beloved country, but much of us as its citizens don’t know about what role that Indonesia takes in International Trade. First of all, we know about what we have right now, easy to go somewhere with car or wearing any brands not from local, or anything else that have been imported by another country. We can conclude that Indonesia has a big cooperations between another countries, but how can Indonesia has that big cooperations?
    Maybe Indonesia include in ‘developing country’, Indonesia has a great pilar to sustains its economy in trading in the global economy. After the global finance crisis, Indonesia had woken up with trade reforms and avoid protectionism in efforts. The cooperations that Indonesia made was also a way to created welfare in its country, unexception to deter the poverty as we seen the decrased of poverty between 1999 and 2011, fell from 23.4 % to 12.5% as the World Bank reported. In this case, Indonesia has proved to the world that Indonesia is strong in economy. Stability rate of growing ecomomy in Indonesia also prove Indonesia as good country to make a deal in cooperations.
    Because of Indonesia joined in international organizations, trade action between countries increase not just in Asia but also worldwide. But mostly Indonesia’s export partners are come from Asia like Japan, India, South Korea, China, and Taiwan. With great resources in our country, Indonesia become one of great fuels exporter. It sent to Asia and United States. Not just fuels, food production and textiles also has a big number in exporting. Indonesia potentially to explores more in trading.
    Even Indonesia has a strong economy and stable in recent years, doesn’t mean that Indonesia already performed good in international trade. There are some inefficiencies laid on its country. A good way to increase national economy is to make export higher than import. Although Indonesia has good way to cooperate in trade as the resources of its land, a problem come from the expensive costs of transporting high quality goods. It means Indonesia less competitive in efforts to make trade and the country should more concerns about integrating its ability to compete against ‘low-cost country’ like China. In other way, the problem laid on its country that couldn’t turned the raw materials to be useful goods. It makes sure that Indonesia as semi periphery country that sell the raw materials and buy goods from its raw materials but from another country. So, this is ironic because of the exports gain lower in income than the highly imports as output.
    We can conclude from this case that Indonesia’s performance in economy on its country is going well, but beyond that, Indonesia still weak in trading between countries especially the export and import gains. Even the trade itself become a way to create welfare, but it also a challenge to Indonesia. If Indonesia could get benefit more in trade, I think Indonesia could create welfare higher than now.


Posted by,
Safira Damayanti