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April 04, 2017

The Persistence of Poverty: The Case of Indonesia

By Madiha Shekhani

‘There is no ‘stock’ of poor who can be understood and treated in a uniform, singular manner’.

(Rigg 2016, p. 7)

A ‘poverty free world’ has become a global buzzword. According to dominant narratives the percentage of the world’s population living under $1.90 a day fell from 42.5% in 1981 to 10.68% in 2013 (World Bank 2016). Undoubtedly, considerable leaps have been made in decreasing poverty levels. Yet, it still rigidly persists in several regions, with trends of increasing intensity.

Research has fallen short in identifying why regardless decades of relentless effort, poverty still persists. The experience of poverty is complex and intersectional, hence, the discussion needs to shift from merely correlates to causes of poverty and ‘reveal the social and political processes that make people poor and keep them in poverty’ (Green & Hulme 2005, p. 868).

Indonesia has been hailed as one of the Southeast Asian economic miracles almost to a point of redundancy. The region not only provides an intriguing model for growth, but also one for the case of poverty and inequality. A rather stable and economically successful middle-income country, Indonesia defies general assumptions about how the poor mostly reside in low-income countries (Rigg 2016). According to latest data, out of a population of roughly 257.6 million people 8.3% live under the international poverty line at $1.90/per day (World Bank, Poverty and Equity). As per national poverty lines, 10.73% of the population lives under the poverty line set at 200,262 rupiahs per month or $22 (Central Bureau of Statistics 2017; Nooteboom 2014, p. 2).

Is Definition Part of the Problem?

How guilty have dominant representations of the poverty been in contributing to the magnitude and intensity of poverty? Scholars have established that the choice of a definition of poverty bears crucial importance for its measurement and resulting socio-economic policies (Booth 1993; Hagenaars & de Vos 1988; Laderchi, Saith & Stewart 2003).

‘Poverty analyses continue to be dominated by income/consumption conceptions’, argue Green and Hulme (2005, p. 867). Perceiving poverty as caused by a dearth of immediate assets, whereby monetary income is all one needs to ‘graduate to being non-poor’, fails to explain why certain ‘factors become precipitating for certain people in certain situations and contexts’ (Green & Hulme 2005, p.869). Such an outlook ‘encourages the conceptualization of the poor as a single homogeneous group whose prime problem is low monetary income’ (Hulme & Shepherd 2003, p.403). Policies to combat poverty emerging from this framework only address the monetary causes of the issue and fail to erode away the larger structural causes; thereby a large portion of the problem remains unengaged with and continues to solidify.

The dominant measures of poverty in Indonesia — the World Bank, BPS and Sajogyo poverty lines — are largely restricted to income and consumption measures. Poverty lines seem to have fallen short in several aspects. The first is the alarming variance in the number of poor it identifies. According to the $1.90/day poverty line 8.3% Indonesians are poor; however, the number rises to 36.4% when switching to $3.10/day (World Bank, Poverty and Equity). The gap between the two figures is startling. Since the $1.90/day poverty line is ‘official’, it appears that the people living between the two poverty lines are essentially marginalized. Moreover, according to the national poverty line, only 11.3% of the population is counted as poor (World Bank, Poverty and Equity). According to these poverty lines, Indonesia is branded to have fared quite well in eradicating poverty. The residual poor or those who do not fit within these restricted, politicized lines are not small in number, and so ignorance of their condition is essentially one of the basic causes of why poverty persists in the country. Additionally, poverty lines fail to identify the spatial diversity of poverty across rural and urban divisions. Since experiences and causes of poverty within urban and rural areas are quite different, policies based on these statistics lead to a misallocation of resources. Along similar lines of discounting the heterogeneity of poverty, dominant methods do not take into account the distinction between transient and chronic poverty. Within Indonesia, there is a noteworthy number of chronically poor — statistics from 1999 depict that the crisis resulted in a tripling of the proportion of chronically poor (Suryahadi & Sumarto 2003, p.52).

Within Rigg’s (2016) framework of poverty ‘the persistence of poverty in the middle-income economies of Asia lies largely in the uneven and unequal nature of economic expansion’ (p.10). Therefore, dominant measures can also be critiqued for not being indicative of inequality along different divisions, not just between the poor and non-poor but also within the poor. If the affected population is not identified correctly, policies and solutions will be misplaced and largely superficial, leading to a persistence of the original problem. Persistence of poverty in Indonesia could be seen partly as a result of one-dimensional definitions of the problem which restrict combatting the multitude of causes that lie beneath the problem.

Contributions of Colonial Legacies

The relevance of colonial legacies for both economic and social development of a post-colonial state has been spoken of widely within literature (see Booth 2007; Grier 1999; Nunn 2007; Nunn 2009). Poverty within Indonesia existed long before the arrival of colonists so they cannot be blamed for giving birth to the phenomenon in the region. However, they can be credited with solidifying and exacerbating the condition and leaving behind structures that have enabled it until today.

Inequality across regions and within groups is arguably the most enduring structure that the Dutch embedded within the Indonesian economy. Under the guise of concern for poverty in the region, an imbalanced amount of development in Java transformed it into the economic hub at the expense of progress in cities such as Sumatra and Kalimantan (Booth 1998). Regardless of visible growth in Java, poverty persisted within the region, signifying the frail nature of the link between economic growth and poverty (Booth 1998). Since some regions were not permitted to develop, the repercussions are still felt today.

Rapid economic growth in colonial Indonesia particularly weakened the society and the economy because it was accompanied by exploitation by the colonists (Booth 1998). A key example of Dutch exploitation in the region was the system of forced cultivation of export crops. Such policies were combined with forceful migrations to export zones, which essentially disrupted household dynamics (Booth 2007). Initially what comes to light is the unsustainable and detrimental nature of rapid growth for the poor. Colonialism worsened the conditions of the poor while simultaneously creating structures that reduced their capability to control their income, labor, and life. Systematic devaluation and exploitation of already poor laborers further solidified their poverty, and can be said to have led to the persistence of the collective poverty of certain regions and groups of people.

Dutch policies not only secured regional inequalities and poverty, but also those within certain groups; there were some ‘gainers and losers, and gainers were often concentrated in particular ethnic groups and regional locations’ (Booth 1998, p. 89). While favoring some groups over the others, the colonists essentially set the stage for poverty along lines of ethnicity and class, trends of which are persistent in Indonesia today. They embedded structures that contributed to poverty, and further weakened institutions of health and education that could have possibly been part of the solution to poverty.

Manifestations of Colonial Legacies

The economic sector in Indonesia conforms largely to prevailing explanations of poverty, and to trends established within the colonial period. Influential scholars from the region such as Abuzar Asra (2000) confidently assert that economic growth has been highly beneficial for the region. Interestingly, in order to highlight this trend, evidence is mainly drawn from organizations such as the World Bank or USAID. Thereby, indicating that such claims often emerge from and are restricted to the bounds of dominant paradigms, and must be viewed with caution. Under the narrative of the success story, the experience of the ‘individuals, sectors and regions that have been left behind’ is ignored (Rigg 2016, p.3). Additionally, explanations of how the unequal nature of growth and an imbalanced focus on monetary measures have contributed to the problem are often glossed over (Rigg 2016).

There has been an excessive focus on rapid economic growth throughout colonial times, the Suharto era, and the post-crisis era. The continuous coexistence of economic expansion and poverty should act as an indicator that the former could possibly be contributing to the problem. Assumptions regarding the ‘trickle down’ nature of economic growth fail to take into account the inherently unequal structures upon which growth has been predicated. A key example of this can be found in Irian Java in the 1980s. In terms of GDP and World Bank estimates the province was ranked sixth in the country. However, these measures failed to represent the context — most of what was produced in the region was not invested or consumed there, leading to one of the highest incidences of rural poverty in Indonesia (Booth 1993).

Patterns of disparate focus on some regions over others are still largely visible. Concentration of growth in Java and Bali has continued at the expense of areas such as Kalimantan and Eastern Islands who ‘despite being rich in natural resources, account for only 17% share of national GDP’ (Henstridge, De and Jakobsen 2013, p.iii). Stagnation along regional lines mirrors the specializations that were set within previous eras. Patterns of inequality have also persisted along lines of class and employment sectors based on disparate allocation of resources. Benefits of recent growth — as with previous growth in Indonesia — have accrued to groups such as the Sukanto Tanoto families who form ‘0.02% of the population and hold 25% of the country’s total wealth’ (Leigh & van der Eng 2007; Tabor 2015, p.5).

How to Tackle Persistent Poverty Then?

The importance of economic explanations of and solutions to poverty must not be marginalized, and the arguments presented in this piece in no manner advocate a disposal of mainstream explanations of poverty. Rather they call for a critical examination of the weight placed upon monetary deprivation as a cause of poverty, and on economic growth as a solution to it. Poverty persists when the causes of the issue are misinterpreted or reduced to isolated ideas.

Not enough attention has been paid to the structural explanations of the persistence of poverty in Indonesia. By bringing to light the origins of the problem, it is easier to identify the foundations that fuel the stickiness of the issue. Although such foundational causes are much harder to deconstruct and counter, the result of doing so can plausibly be predicted to yield more long-lasting and qualitative results. The persistence of poverty is not just economic but historical, social and political, and to fully explain it, the definitions of poverty must mirror this multidimensionality.


Asra, A. (2000) ‘Poverty and Inequality in Indonesia’, Journal of the Asia Pacific Economy, 5(1-2), pp. 91–111. doi: 10.1080/13547860008540785.

Booth, A. (1998) The Indonesian economy in the nineteenth and twentieth centuries: A history of missed opportunities. Basingstoke: Palgrave Macmillan.

Booth, A. (2007) Colonial legacies: Economic and social development in east and sSoutheast Asia. Honolulu, HI: University of Hawai’i Press.

Central Bureau of Statistics (BPS) (2017) Badan Pusat Statistik. Available at: (Accessed: 1 January 2017).

Green, M. and Hulme, D. (2005) ‘From correlates and characteristics to causes: Thinking about poverty from a chronic poverty perspective’, World Development, 33(6), pp. 867–879. doi: 10.1016/j.worlddev.2004.09.013.

Grier, R.M. (1999) ‘Colonial legacies and economic growth’, Public Choice, 98, pp. 317–335. doi: 10.2307/30024490.

Hagenaars, A. and de Vos, K. (1988) ‘The definition and measurement of poverty’, The Journal of Human Resources, 23(2), p. 211. doi: 10.2307/145776.

Henstridge, M., De, S. and Jakobsen, M. (2013) Growth in Indonesia: Is it sustainable?. Oxford Policy Management. Available at:

Hulme, D. and Shepherd, A. (2003) ‘Conceptualizing chronic poverty’, World Development, 31(3), pp. 403–423. doi: 10.1016/s0305-750x(02)00222-x.

Laderchi, Caterina Ruggeri, Ruhi Saith, and Frances Stewart (2003). "Does It Matter That We Do Not Agree On The Definition Of Poverty? A Comparison Of Four Approaches". Oxford Development Studies 31.3: 243-274. Web.

Leigh, Andrew and van der Eng, Pierre (2007) 'Top Incomes in Indonesia,1920-2004', Social Science Research Network. (Available at SSRN:

Nooteboom, G. (2014) Forgotten people: Poverty, risk and social security in Indonesia: The case of the Madurese. Netherlands: Brill

Nunn, N. (2007) ‘Historical legacies: A model linking Africa’s past to its current underdevelopment’, Journal of Development Economics, 83(1), pp. 157–175. doi: 10.1016/j.jdeveco.2005.12.003.

Nunn, N. (2009) ‘The importance of history for economic development’, Annual Review of Economics, 1(1), pp. 65–92. doi: 10.1146/annurev.economics.050708.143336.

Rigg, Jonathan (2016) Challenging Southeast Asian Development: The Shadows Of Success. 1st ed. Oxford: Routledge. Print.

Suryahadi, Asep and Sudarno Sumarto (2003) 'Poverty And Vulnerability In Indonesia Before And After The Economic Crisis', Asian Economic Journal 17.1: 45-64. Web.

Tabor, S.R. (2015) 'Constraints to Indonesia’s Economic Growth', Asian Development Bank. Paper No. 10. Available at: (Accessed: 1 January 2017).

World Bank (no date) Poverty and Equity. Available at: (Accessed: 1 January 2017).

World Bank (2016) Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population). Available at: (Accessed: 28 December 2016).

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