ECONOMIC SYSTEM IN INDONESIA

GROUP MEMBERS:
-

Mega Savierra
Alexander Billy
Evita Nuriya R
Fawwaz Choiron

(2515100026)
(2515100064)
(2515100094)
(2515100122)

CHAPTER I
PRELIMINARY

1.1 Background of Report

There are many countries in the world. All of that countries have each of their own
dream, foundation and situation. All of that differences means that they have their own
economic system. A country needs an economic system to run their country well. The
economic system in United States of America will be different with the economic system in
China. Even if there is a country that have similar economic system with others, there must be
something that is different. Its impossible for a country to have the exact economic system
with other countries. What about Indonesia? Indonesia have their own economic system.
Indonesia use Pancasila economic system. This report will discuss Pancasila economic
system in detail.
1.2 Problem That is Discussed
- What is an economic system?
- What are the types of economic system in the world?
- What is the history of economic system in Indonesia?
- What is Indonesias economic system?
1.3 Purpose of Report
This report is made to tell us about Pancasila economic sytem in detail.

CHAPTER II
LITERATURE
2.1 Definition of Economic System
Economic system is the way a nation makes economic choices about how the nation
will use its resources to produce and distribute goods and resources. It is used to control the
five factors of production, those are man, material, machine, money, and methods with the
addition of infromation and knowledge. The primary goal of economic systems is to provide
people with a minimum standard of living.
2.2 Types of Economic System
There are four main types of economic system in the world. Even though each of the
economic systems has different methods, they have the same problem, that is to answer these
questions. What should be produced? How much? How should goods be produced? And for
whom? The four main types of economic system are traditional economy, command
economy, market economy, and mixed economy.
2.2.1

Traditional Economy
In the traditional economy system, custom govern the economic decisions
that are made. The custom is passed down from generation to generation. The
economic activities are centered around the family of ethnic unit. The traditional
economy is defined by three characteristic. Those characteristics are : It is based on
agriculture, fishing, hunting, gathering, or some combination of the above, it is guided
by traditions and it may use barter instead of money.For these reasons, people who
live in a traditional economy appears to be living in poverty, even if their daily needs
are being met. Most traditional economies operate in emerging market or the third
world countries. They are usually located in Africa, Asia, Latin America and the
Middle East. However, pockets of traditional economy is
2.2.2

Command Economy
Command economy is a reaction resulted from the development of liberal
economic system. This economic system is marked by two main feautures: productive
capital is mostly owned by the state, not by private individuals, and there is extensive
central planning or direction of the economy. The mechanism of price and market
dont have any role or have just a little bit role in this economy sytem. The method of
production is mainly based on technical consideration and the scarce of productions
tools.
In command economy, the result of productions are more evenly and not
limited to some group. Also, there is no unemployement. The gap between the rich
and the poor is gone or at least it is reudced. All of that can only obtained by the
sacrifice of indivual. And in the command economy, each individual must comply to
collectivity and they are just a collectivity tool

2.2.3

Market Economy
Market economy is often called capitalism and it is opposite of the
command economy. In market economy, the production factors are owned by
individuals or private. Indivuals can do a production without restriction and without
government interference. The only restriction is just the price in free market. Free
competitions are happened in the market which is opened for anyone and those
determine the price that will be a driving force, a catalyst or an inhibitor of production.
Market economy gives a freedom to individuals so that they can reach a
prosperity. In this economy, personal interests are harmonized with public interests,
because if each individuals reach a prosperity, society by themselves will be prosper.
But there is a thing that is forgotten, that to reach an individual prosperity, each
individual will try their best and it causes a great competition. The weak one will be
destroyed by the strong one, so the proverb of Survival of the fittest is applied.
2.2.4

Mixed Economy
In mixed economy, the state play a large role in economic life , regulating
the allocation of resources, while still allowing an important role for market forces.
Mixed economy has some characteristic, those are : a coexistence of both economy
sector (state and market), economic interaction is happened on market, competition is
allowed, and there is intervention of state. In mixed economy,the state need to prevent
big companies to affect economic and political decision. They also need to prevent
labor organization (combined) pressing business entity in deciding the goods price.

CHAPTER III
ECONOMIC SYSTEM IN INDONESIA
3.1 History of Economic System in Indonesia
Indonesia have already experienced change of economic system for several times. At
first, Indonesia adopted socialist economic system in 1959-1966. But, the system crumbled
because it was not suitable with moral of Pancasila and Indonesias pluralism. Then, the
economic system changed from socialist economy to liberal economic system.The liberal
economic system also crumbled because the understanding of liberalism and neoliberalism
became more aggressive to dominate Indonesias economy in the face of globalisation.
Monetary crisis which attacked Indonesias economic system in 1997 made the
modern banking sector fallen because this capitalistic sector was too dependent on foreign
capital. Foreign debt became more accumulates. That made Indonesias economic system in
miserable state. Monetary crisis also made Indonesias economic system dependent on the
power of foreign capitalist.
The problem that was happened because of monetary crisis made Indonesia changed
their economic system from liberal economic system to economic democracy. But after the
reformation, the government carry out economic system based on Pancasila that has a
foundation of democracy. This system is still applicable in Indonesia
3.2 Pancasila Economic System
Every nation have different economic system. They use an economic system based on
their ideal, purposes and their condition. So does Indonesia. The economic system in
Indonesia will be different with the economy system in USA or other countries. In Indonesia,
we have an ideal basis that is Pancasila and constitutional basis that is UUD 1945. It means
that all of our activities, be it government activities or daily activities are based on Pancasila
and UUD 1945. So does our economy activities. It must referred to Pancasila.In other words,
the economic system in Indonesia is Pancasila economic system.
Pancasila economic system is based on our nation dream,that is to realize a country
that is independent, united, sovereign, just, and prosperous. The foundation of Pancasila
economic system is economic democracy, because the economy is structured as a joint
venture on family principle. It is set out in article 33 of UUD 1945. This article is really
important, because its the foundation and the starting point of Indonesias economic
development.
The purpose of Indonesias economy is social welfare and prosperity for society. To
realize that purpose, society must play an active role in development activities. While
government have to give direction and guidance to economic growth and also create a healty
climate for business development, the business world is expected to give responses to
government.
Based on articles in constitution and GBHN, we can conclude that Pancasila
economic system has characteristics as follow :
- State and private enterprises coexist without excessive dominance of one against
another

The working relationship between economic institusions is based on family principle,

according to the intimacy of human relations.
- Society have central role in Pancasila economic system.
- The state control land, water, and natural reources contained within the earth for the
welfare of society.
Every economic systems have their own positive and negative aspects. There is no
perfect economic system. If there is a perfect economy system, an economy subject is not
needed. It is applied to Pancasila economic system. Pancasila economic system has positive
aspects, those are as follows:
- The economy is formed by a join venture based on kinship.
- Production branches that are important and related to society is owned by states.
- Earth, water, and natural resources that is contained in Indonesia are owned by states
and used for the prosperity of society.
- Society have the freedom to choose their desired job and also have the rights for their
job and a good life, etc
While the negative aspects of Pancasila economic system are as follows:
- There is a probability of Free fight liberalism that can ecploit human and other
countries.
- Etatism system where a state and its apparatus has a dominant position and they can
destroy the potensial and imagination of economic units that are on the outside of
public sector.
- A centralized economic power in some groups in the form of monopoly or oligopoly
that can harm society.
Pancasila economic system, as in its name, it follows five values in Pancasila. The
content of Pancasila if it is studied by each of its values are as follows:
- Ketuhanan Yang Maha Esa. It means that Indonesias economic system must
considers religious ethic and must not conflict with it.
- Kemanusiaan yang adil dan beradab. It means that practice and teachings of
capitalim and communis are banished from Indonesias economic system. It also put
greater emphasis on humane shades in doing economic activivities.
- Persatuan Indonesia. It means that Indonesias economic system open up a fair
economy activity for society, regardless of their tribe, religion, race or their locality.
- Kerakyatan yang dipimpin oleh hikmat kebijaksanaan dalam permusyawaratan/
perwakilan. It means that Indonesias economic system is based on economic
democracy and economic politic.
- Keadilan sosial bagi seluruh rakyat Indonesia. It means that Indonesias economic
system puts emphasis on social equity.
Even though our nation have already use an economic system that is suitable with our
dream, purpose, and foundation, the economic situation in our country is not good. There are
many unemployement, foreign companies dominate our market, import rate is higher than
export rate, etc. All of that problems can only be resulted by one thing, that is Pancasila
economic system has not been implemented fully enough. For example, in the fifth statement
of Pancasila: Keadilan sosial bagi seluruh rakyat Indonesia. It means that Indonesias
economic system is based on economic democracy and economic politic.But the reality
doesnt fit that statement. Because there are so many economic sector that is dominated by
some people. This means that the capitalism stiil exist in Indonesias economic system, which

is not reflects the characteristic of Pancasila economic system. We hope that the government
can makes the economic system fully reflected on Pancasila so there will be no economic gap
in Indonesia.

CHAPTER IV
CLOSING
4.1 Conclusion
Indonesia have already gone through some several changes in their economic
system. All of that changes resulted in Pancasila economic system that is still in use
nowadays. Pancasila economic system is based on our ideal and dream. But, there are
still some improvement that needs to be done in Indonesias economic system. The
economic system has to truly implemented based on the pancasila with no exception.
Everyone in this country should receive their rights, like the fifth statement in
pancasila.

References :
- Fischer, Stanley and Rudiger Dornbuch, 1983.Economics, United States of
America:McGraw-Hill,Inc.
- Soemitro, Rochmat, 1983.PENGANTAR EKONOMI DAN EKONOMI
PANCASILA, Bandung:P.T.ERESCO Jakarta-Bandung.
- Supriyanto, 2009, MEMAHAMI CARA BEKERJA SISTEM
PEREKONOMIAN, Jurnal Ekonomi dan Pendidikan, vol.6, no.2,
November,pp.9-11.
- Swasono. Sri-Edi, 1985. SISTEM EKONOMI DAN DEMOKRASI
EKONOMI, Jakarta:Penerbit Universitas Indonesia.