Poverty and Income Distribution Inequality in Indonesia – Analysis and Statistics
At the beginning of July 2024, Indonesia’s Statistical Agency (Badan Pusat Statistik, BPS) released the latest poverty statistics of Indonesia. We consider it worthwhile to take a close look at the data as poverty is an important indicator for assessing the country’s socio-economic situation. After all, economic activity affects society, but at the same time the economy is shaped by social processes.
So, in other words, when people escape (near) poverty, implying their purchasing power improves, then they typically start consuming more products and services or higher-quality products and services. This means more needs to be produced, hence there emerge new business and job opportunities, turning into an (upward moving) vicious cycle that drives overall economic growth that pushes others out of poverty.
A Quick Step Back in Time
After Indonesia achieved its independence in 1945 the nation still experienced very turbulent and unstable economic and political times. As a consequence, poverty was a structural problem that didn’t show any positive development. In 1970, there were an estimated 70 million people living in poverty in Indonesia, which in relative terms was 60 percent of the population. Those are staggering numbers, indeed.
When President Suharto took over from his predecessor Soekarno in the mid-1960s, it implied significant changes for Indonesian society. Suharto, himself an army man, imposed a military-backed authoritarian regime (1966-1998) that on the one hand was ruthless (and corrupt), but on the other hand brought huge social and economic development to Indonesia.
During Suharto’s rule, a significant decline in poverty, both urban and rural poverty, occurred on the back of robust economic growth and effective poverty eradication programs. The number of Indonesians who lived below the poverty line eased from 60 percent of the population in 1970 to a low of 11.3 percent in 1996. This truly was an amazing achievement. And, one could certainly argue that the decline in poverty and increase in the number of educated Indonesians (allowing Indonesian society to become richer, overall) would in the end actually accelerate the collapse of Suharto’s New Order regime as the younger generations of Indonesians wanted to have more say in politics, economy and business.
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