Indonesia badly needs inclusive institutions, not rhetoric

Indonesia requires inclusive institutions, not mere rhetoric, to secure lasting prosperity. The country's progress hinges on dismantling elite control to establish fair, accountable, and resilient systems. Daron Acemoglu and James Robinson's "Why Nations Fail" underscores that nations flourish when power is broadly distributed and citizens actively shape their future.

However, Indonesia stands at a critical juncture between inclusive development and entrenched inequality. While the nation has enjoyed political stability and economic growth, its institutions remain only partially inclusive. Elections are competitive yet increasingly transactional, and the rule of law is inconsistently applied.

The economy thrives but is dominated by oligopolies and rent-seeking behavior. When political elites manipulate policymaking, reforms prioritize short-term gains over long-term welfare. State-owned enterprises, unchecked, stifle entrepreneurship by lacking innovation. Normalized corruption perpetuates a low productivity equilibrium, where growth lags behind potential.

The weakening of the Corruption Eradication Commission, bureaucratic politicization, and sector-specific policy inconsistencies signal deeper institutional flaws. This trajectory, likened to an "extractive equilibrium" by Acemoglu, perpetuates inequality, stifles innovation, and erodes trust in government. Historical lessons, such as Indonesia's faltering resource boom, illustrate the consequences of trapping natural wealth in low-value export cycles.

Without institutional reform, Indonesia risks remaining a middle-income country perpetually shackled by extractive practices.