Coping employment as the Invisible Economy of Rural Java

1

Heri Hermawan

Coping Employment as the Invisible Economy of Rural Java Introduction

High population density has long been associated with persistent poverty in Java.

White (1981) illuminates this perennial overpopulation problem by emphasizing

the extraordinary resilience of Javanese village society to withstand its growing

poverty. Having started since the dawn of capitalistic economy at the turn of the 19th

century, this enduring resilience was seen as a “self defeating process”: the process

of agricultural expansion that solve the Malthusian problem by increasing output

per hectare but not output per capita (White, 1981: 131).

Historically, the study of persistent poverty in Java can be associated with the two

pioneers in Javanese peasant studies: Boeke (1953) with his “static expansion”

thesis and Geertz (1968) with his “agricultural involution” theory; both lead to the

idea of shared poverty as the resilience mechanism in rural Java (White, 1981).

Explicit in their assumptions were the existence of a dualistic economy. While Boeke

(1953: 8) understood this theory as a co-‐existence of – the traditional and the

modern – “dual societies”, Geertz (1968: 9) saw Javanese rural economy as a split

between “capital-‐intensive Western sector and labor-‐intensive Eastern one.”

Drawing this hypothesis into contemporary economy, this dualistic view finds its

relevance in the economic dualism theory of neoliberal capitalism. Peattie (1987:

852) observes different modes of economic dualism and argues that the divergence

is basically a manifestation of two broad themes: the modernist view that saw

informality as a transitory phase before “modern capitalist enterprises” engulf labor

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market and “transform the backward society”, and the post-‐modernist view that

saw economic dualism as “one expression of the uneven development everywhere

characteristic of capitalism”.

Extending on the post-‐modernist view, this paper argues against the widely

accepted dichotomy of formal and informal sector to emphasize the

interdependence of both economies as reciprocally supportive. Peattie (1987) sees

the dichotomy as rarely useful for analytical purposes, as it masks the contradiction

inherent in the informal sub category. She views the over-‐generalizing definition of

informal sectors to be problematic, as it leaves this concept to be easily coopted by

different actors – from neo-‐Marxist to neoliberal economist -‐ for different (even

conflicting) purposes without meaningful policy implications.

In order to address the poverty issue, this paper confines the scope of informal

economy in the boundary of rural poor’s coping strategies, to avoid generalization

and problem diffusion. This is in line with Peattie’s argument against using informal

framework to address poverty. She thinks it is “factually incorrect and politically

obfuscating” because it “is not necessarily a category within which to locate the

poor” and it implicitly contains “the notion that the more highly corporatized the

economy, the better will be the positions of working men and women" (Peattie,

1987: 858). Therefore, to avoid similar contradiction, this paper utilizes the

framework of coping employment to focus on the bottom segment of the informal

economy on which rural poor depend and deal with their difficult socioeconomic

condition. This is the economic segment on which rural poor can be genuinely

located in such ‘insignificant’ occupations as petty traders, petty producers, and

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minor services such as street barbers, scavengers, or domestic workers. At present

in Indonesia, this economic segment is out of the state’s surveillance; to be invisible

because it is unfit for the economic governance. Borrowing from Mitchell (2008),

this economic segment has no sufficient endowment and network to move up the

economic ladder hence lose its traction in the prevailing economic narrative; the

neoliberal narrative that saw entrepreneurships as the turnstile of the self-‐

regulating market to transfer surplus rural labor into urban commercial sectors.

Without such operational endowment, coping employment as the important part of

both ancestral and contemporary economy in Java is rendered invisible to operate

on their own and by their own risk.

What is Coping Employment?

I coin the term ‘coping employment’ to tie together two strands of literature:

informal economy and rural livelihood diversification, in the light of rural poor’s

strategies to cope with rising socioeconomic difficulties (Peattie, 1987; Ellis, 1998).

This is my attempt to avoid using the framework of informal economy, due to its

implicit connotation to the neoliberal idea of labor improvement as essentially

formalizing the informal sector (Peattie, 1987). Moreover, I aim to spotlight the

bottom segment of employment in which rural poor reside.

Different terms are used in the literature to describe this segment of employment.

Marks (2007; 2009) uses the term ‘by-‐employment’ within the service sector to

describe a diversity of peasant’s supplementary employment. Peemans (2013) coins

the term ‘hybrid peasantry’ to define diversifying strategies of rural poor in order to

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subsist on ever-‐smaller plots of agricultural lands; by adopting a hybrid

employment strategy such as peasants-‐workers (who combine farming with paid

working in rural or urban areas) or peasants-‐merchants (who combine farming with

direct marketing of their agricultural production).

Coping employment is one among different “livelihood strategy portfolio and

pathways” on which rural poor try to get through the dynamical socioeconomic and

political changes in their environment (Scoones, 1998:9). Figure 1 describes the

sustainable livelihood framework that connects overarching socioeconomic and

political dynamics with resilience and sustainability of rural livelihood. For this

discussion, the most important part of the framework is livelihood

pathways/portfolio on which rural poor adapt to the dynamics through continua of

agricultural intensification/extensification, livelihood diversification, and migration

(Scoones, 1998). In this sense, coping employment is part and parcel of rural

adaptation to socioeconomic stresses through livelihood diversification.

Rural livelihood diversification theory is developed to refute the core assumption of

neoliberal ideology that sees peasant’s diversification strategy as a transitory stage

of employment before all rural labor are transferred into commercial urban

employment, as emphasized in the deagrarianization theory (Yaro, 2006; Peemans,

2013). Niehoff (2004) and Ellis (1998) disprove neoliberal prediction by showing

that livelihood diversification is a permanent strategy employed in both distressful

and improving economic situations. Moreover, Peemans (2013) refutes

deagrarianization theory by arguing that the network of off-‐farm and on-‐farm

activities shows the interconnectedness of rural and urban areas. He points out that

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even migrating peasants are still maintaining their social ties with their original

villages, sometimes even retaining double identity as both rural and urban villagers.

Figure 1. Sustainable Rural Livelihood Framework Source: Scoones, 1998

Transformation of Coping Employment in Rural Java

It would be incomplete to analyze economic transformation of rural Java without

mentioning Clifford Geertz’s seminal work on “agricultural involution”. While this

work provides valid representation of penetration and detrimental effects of early

capitalism to rural economy in Java, critics questioned validity of his central thesis,

based on his omission to capitalistic relationships between many layers of

landholding and landless classes in Javanese rural society (White, 1983). By this

omission, Geertz misleadingly depicted village society in Java as homogenous entity

on which pre-‐modern social structure functioned to isolate rural society from the

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market while containing the ever-‐increasing population in the intensification of

agricultural sector, hence masking the existence of capitalistic relationships

between different social classes in early Javanese rural society (White, 1983).

Alexander and Alexander (1990) provide evidence on the existence of capitalistic

relationships in rural Java during the late colonial time, as shown by the significant

portion of livelihood derived from trade and petty commodity production that

supported the Javanese dwindling subsistence economy. They even redraw the

historical line to pre-‐colonial time, when international commodity trading of rice,

clothing and cash crops flourished in the south coast of Central Java. However, the

colonial rulings had an important role to stifle indigenous trade development by

changing the terms of trade to the benefits of the colonial government and Chinese

traders. This had been done through “fav[o]ring imported commodities, heavy

direct and indirect taxes, and high interest rates” (Alexander and Alexander, 1990:

42). Still, these institutional measures “did not insulate the Javanese economy from

market relationships; on the contrary, villagers were forced into land, labo[r] and

markets in which prices were fixed by the other participants” ” (Alexander and

Alexander, 1990: 42).

Marks (2007) evidences the detrimental effects of unfavorable colonial and post-‐

colonial policies on indigenous trade by highlighting peculiarity of occupational

structure in Indonesia since the colonial era to more recent time (figure 2). Other

than discriminative colonial trade policies above, Evers (1991) points out post-‐

colonial agricultural intensification as the primary driver of rural excess labor since

1970s. Marks (2007) observes that the structural change in Indonesian economy

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does not follow standard neoliberal economic theory of labor mobilization from

agricultural sector to industry, and finally to the service sector. In Indonesia, as he

illustrates in figure 2, “the service sector turns out to be already a large labor-‐

absorbing sector in early stages of development” and its proportion continues to

expand in conjunction with the dwindling contribution of agricultural sector and the

stagnating proportion of the industrial sector (Marks, 2007: 21).

Figure 2. Occupational Structure in Indonesia: 1905 – 2000

Source: Marks, 2007

It is worth noting, however, what it means by the service sector is far from what the

standard neoliberal economic theory would define. In Java, this service sector is

dominated by low income-‐earning activities that act as safety valves for open and

disguised unemployment. Marks (2007: 13) describes this phenomena as by-‐

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3. Labour force statistics, 1905-2000: Structural change?

As can be seen in figure 1 only a modest number of people was employed in either the

industrial or the service sector at the start of the 20th century. Not surprisingly, the majority of

the labour force was occupied in agriculture. However, one has to be careful when analyzing

these 1905 data. The share of the category „others‟ in 1905 was namely substantial with 17.1

per cent. This share is most likely not evenly distributed over the primary, secondary and

tertiary sector, and probably biased towards the tertiary sector. These problems can distort the

picture.

Figure 1: Occupational structure, 1905-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1905 1930 1961 1971 1980 1990 2000

Services Industry Agriculture Sources: 1905: Koloniaal Verslag 1907, appendix A; 1930: Volkstelling 1930; 1960, 1971, 1980, 1990 and 2000: Sensus Penduduk Note: The category „Others‟ mainly consists of „activities not adequately defined‟.

The 1930 census is considered to be of quite a high standard. However, the category

„activities not adequately defined‟ is still large with 9.6 per cent. Nevertheless the 1930

employment figures give a fairly accurate picture of the occupational structure. Therefore it is

promising that this census seems to support the findings for 1905: During the colonial period

agriculture is by far the most important sector with more than 2/3 of the labour force

employed in this sector. During the first decades of the 20th century there seems to be a

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employment on which “weaker peasants had to earn a supplementary income…to

deal with the increasing cost of living.” These weaker peasants include the landless

farmers and farmers with very small land holdings that were no longer able to

produce enough food for their families. This “[peasant] by-‐employment can be

categorized into rural manufacturing industries, petty trade, transport, and

services” (Marks, 2007: 16).

Among these categories of by-‐employment, petty trade seems to have enduring role

to absorb large amount of excess agricultural labor in Java. Manning (1998: 96)

observes that “employment growth of non-‐wage earners was especially rapid in

petty trade.” Hidayat (1978 in Marks, 2009: 155) estimated that in 1977, 50% of

labor in informal sector was working as traders. Observing these figures, Marks

(2009: 155) sees similarity with the process of structural changes in Latin America

that leads him to conclude “that relative levels of productivity in the Indonesian

trade sector, as opposed to other service sectors, will show a tendency in future to

decline as well.” This declining productivity of trade sector means that the majority

of petty retailing will still grow smaller in scale, not transforming into more

profitable wholesalers or moving progressively into formal/corporate sectors.

Ironically, Marks (2009) uses Geertz’s term of involution to describe this cancerous

growth of retail trade to safeguard the growing amount of people pushed out of

agriculture and unable to find jobs in formal sector. Further, he underlines the two

features of trade involution in Java, as reflected by: 1) a transformation into “an

internally more complicated organi[z]ation, in which an increasing number of

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people share the crumbs”; and 2) “a relative decline in labo[r] productivity” (Marks,

2009: 155).

Marks (2009) also provides historical accounts on this trade sector’s transformation

from the colonial era to more recent time, to describe the increasing importance of

petty trading and its involutionary growth. He points out that retail trade has

existed since colonial time. Alexander and Alexander (1990:38) approve it by

noting, “In 1905 there were 2,800 official marketplaces (pasar) in Java and at least

28,000 village stores (warung).” However, Marks (2009: 151) argues

transformation had occurred at the scale of transaction: from “profitable wholesale

trading” into “low-‐value added retailing”.

Marks (2009) shows that the trend of increasing population employed in trade

sector in Java and Madura since 1930 signifies the process of trade involution. The

proportions of trade had increased steadily from 2.2% in 1930 to 7.1% in 1990 in

Java, and 9.0% in 2000 nationally (table 1). He highlights that “between 1971 and

2000 the trade sector became the most non-‐agricultural employer with 1 out of 5

workers having a job in the trade sector in 2000” (Marks, 2009: 151).

Table 1. Employment in trade sector in Java & Madura: 1905 – 2000*

Population (x1,000) Employed in trade sector (x1,000) Number per 1,000

Men

Women

1905 29716 275

358 21 1930 40891 325

584 22

1961 62993

1666

26 1971 76102 1756

1521 43

1980 91217 2507

2519 55 1990 107526 3914

3733 71

2000* 205843 9686 8813 90 Note:*) National figure Source: Marks, 2009

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It seems reasonable to think that agricultural intensification in Java plays a

significant role to overcrowd population engaged in petty trade, hence intensifying

trade involution in the periods after 1970s. Evers (1991: 2) views the major impact

of green revolution technology is to reduce employment opportunities in

agricultural sector as the result of limited “scope for additional employment in

Javanese agriculture.” He also sees this impact had extended into the 1990s, as rural

wage labor had continued to decline to exacerbate rural-‐urban income differences.

As the result, “rural-‐urban migration and urbanization is on the increase” and

determine the fate of rural population through “the development of non-‐agricultural

employment opportunities” (Evers, 1991: 2).

Still, Evers (1991) has a very positive insight for the growth of petty trade in Java,

based on his research in Jatinom Village in Klaten District, Central Java in 1988. He

views “that the growth of Javanese small-‐scale trade shows” (Evers, 1991: 12):

• the very strong adaptive capacity of trade to changing economic and social conditions;

• the efficiency of supplying a very rapidly growing population, especially in urban areas, with fresh food and even remote villages with other consumer items to satisfy their daily basic needs; and

• that trade and off-‐farm employment reduce rural-‐urban migration and the rate of urbanization.

Coping Employment and Rising Capitalism in Rural Java

Some early authors argue that trade involution grows as an escape strategy to the

socioeconomic pressure that stemmed from integration to the capitalistic market

economy. DeVries and Cohen (1937, in Marks, 2009: 151) view “that the need for

petty trade grows in proportion to the increase in the number of native business

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and small industries, such as for example that of sugar, change the society from

subsistence farming to a more market-‐oriented one in which income can be

augmented.”

Evers (1991) differs slightly. He argues that off-‐farm employment has always been

essential part of rural household economy in Java, as a resultant reaction to

population dynamics and socioeconomic change. Coping employment – such as

petty trade, petty household production and services – has always been integral part

of peasant economy, even before the arrival of colonial capitalism. He, however,

agrees that the emergence of colonial capitalism destroyed many of these activities

to create a structural change to Javanese peasant economy. The major impact was,

to convert “the pull of Javanese court and peasant culture that creates off-‐farm

employment” into the push of survival strategies that seek to provide “basic needs

in a situation of declining rural income” and force “the members of Javanese peasant

households to look for income and employment elsewhere” (Evers, 1991: 11).

Alexander and Alexander (1991) concur with Evers. They prove that market

economy existed long before the establishment of the Dutch Colonial government in

Java. Therefore, they revise the history of trade in Java to underline the detrimental

impacts of colonial policies to control domestic trade (Alexander and Alexander,

1991: 371-‐372):

Increasingly convincing evidence suggests that at the beginning of the nineteenth century, before the Dutch had established political and economic control over the entire island, the Javanese economy was expanding under the influence of market relationships: The population was growing rapidly; increasing areas of land were being planted in staple and cash crops; there was extensive petty commodity production based on the processing of locally produced raw materials; and indigenous trading networks distributed these

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products locally and to other regions …. But during the ensuing century of colonial rule, the wider economy relentlessly tightened the boundaries of this local economy, and the rationality of economic decisions within it was increasingly determined by the wider economy of which it became subordinate part. Export agriculture’s priority for the use of land, labo[r], and irrigation not only governed the opportunities for cash cropping and the methods of subsistence farming, but its labo[r] demands combined with the terms of trade favo[r]ing imported commodities, especially cloth, to restrict petty commodity production. The Europeans monopoli[z]ed the import and export trade to Europe, and Chinese immigrants, encouraged to take control of interisland and interprovincial commerce, established an export trade with other Asian countries without encouragement.

These historical accounts entirely undermine claims of both Boeke (1953) and

Geertz (1968) on the dual modes of economy existed hand in hand during the

colonial time in Java: the modern capitalistic economy of the colonists and the

backward subsistence economy of the colonials. Factually, rural Javanese had been

engaged in commercial production and trade way before the arrival of the Dutch

colonialism. This commercial sector continued its presence under the Dutch control;

only the feature had shifted from income-‐enhancing commercial trade to income-‐

supplementing petty trade.

In reality, the colonists use discourse of cultural marginalization to construct moral

and economic rationalities for their economic predation to the indigenous trade, and

this discourse shaped the way on how the scientific ‘truth’ is reproduced. Alexander

and Alexander (1991: 370) explain that the Dutch scholars portrayed indigenous

Javanese limited engagement to commercial trade as a cultural backwardness in

entrepreneurial skills, which was later extended to other scholars who cited their

works (e.g. Geertz and Boeke). They invariably linked the invisibility of indigenous

Javanese in trade with their resistant cultural traits and incompetent personal

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acumen. Alexander and Alexander (1991: 370) describe this prevailing cultural

prejudice among the Dutch scholars:

The Javanese were characteri[z]ed as essentially subsistence-‐oriented wet-‐rice agriculturalists with limited needs, who placed a very high value on leisure and social obligations and preferred to share resources rather than compete for them. Protected by the colonial state from the detrimental effects of capitalism, the Javanese chose to intensify traditional agricultural practices rather than develop new crops, new cultivation techniques, or new market. Freed from Malthusian checks of war and famine, they multiplied their population, gaining short-‐term benefits at the expense of their descendants.

In the light of prevailing literature on capitalism, Wallerstein’s (2011) framework of

modern world-‐system can better explain this cultural prejudice and colonists’

economic predation. Wallerstein (2011: 349) argues that the world-‐system is

basically a geographical division of labor, on which “political structure” links

“culture with spatial location”. The dominant players within this world-‐system are

“the core states”, in which “a national culture…serves both as a mechanism to

protect disparities …within the world system, and an ideological mask and

justification for the maintenance of these disparities” (Wallerstein, 2011: 349). On

the other end is the periphery, whose characteristic “is that the indigenous state is

weak, ranging from its nonexistence (that is, a colonial situation) to one with a low

degree of autonomy (that is, a neo-‐colonial situation)” (Wallerstein, 2011: 349).

Wallerstein (2011) also argues that class-‐based differentiation of labor is the source

of profit maldistribution -‐ dominantly to the benefit of the capitalist class

(bourgeoisie) -‐ while the state’s structure within the system cannot function to

correct it but exacerbate it.

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This core-‐periphery relationship can be best described by the economic structure of

colonial Java during the late nineteenth century, which was ethnically stratified and

politically restrictive. As to Alexander and Alexander (1991: 37)’s accounts, the core

was

[t]he Dutch [who] controlled large-‐scale agricultural production and processing and the sale of these products in European markets. They also monopoli[z]ed the import of European manufactured commodities, such as cloth. [In the periphery, the] Javanese provided lab[or] for the cultivation and processing of export crops, maintaining themselves by subsistence farming and subsidiary occupations, such as petty trading and handicrafts. The Chinese [-‐probably act as semiperiphery-‐] linked the other two groups, providing supervisors and skilled workers in export agriculture, bulking peasant crops for interregional trade and export to other Asian countries, and wholesaling the imported and manufactured commodities that the Javanese required.

Coping Employment and Neoliberal Economy

The previous discussion on the trade’s role to support rural and urban employment

(or unemployment) has a degree of conformity with the grand narrative of

neoliberal ideology. Neoliberal economic theory postulates free movement of labor

and flexibility of wage for unskilled labor in the commercial sector to create a

market clearing effect in the equilibrium of labor supply and demand. Hence, petty

trade and other coping employment are only viewed as a transitory phenomenon on

which rural poor adjust to declining labor productivity in agricultural sector by

seeking off-‐farm employment; when urban commercial sector is not mature enough,

or wage policies are not flexible enough, to absorb all the excess labor (Peattie,

1987).

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Ranis (2003) describes succinctly this neoliberal stance on labor mobilization,

which is based on his insistence on the explanation power of dualistic economy. He

defines dualistic economy as coexistence of asymmetrical sectors in the economy,

such as the relationship between rural agricultural sector and urban commercial

sectors, which he thinks is the most relevant economic model to explain the

inequality of multi-‐sectoral development in poor countries. He claims that “the

dominant assumptions of neoclassical micro theory – full employment, market

clearing and perfect competition – seemed to have little relevance for the segmented

commodity, labor, and credit markets of poor countries” (Ranis, 2003: 1), even

though one may argue that it might not be relevant for the developed countries

either. Moreover, he argues that this dualistic economy underwrites the famous

Kuznets’ inverted U-‐shape relationship between growth and the distribution of

income. Kuznets emphasized the virtue of sequential shifts in modern economy

from the dominant agriculture to manufacturing and then services, which

sometimes is not empirically accurate (see figure 2). More importantly, this model

does not explain the perennial existence (even growth) of coping employment in the

developing countries such as petty trade in Indonesia, or open unemployment in the

developed countries, despite the expanding commercial sector.

In reality, implicit in neoliberal economic theory is the need to maintain high rate of

excess labor to keep the commercial wage low, under the stiff competition with the

unemployed and underemployed in labor market. Therefore, this sectoral

asymmetry is in fact the source of profit that supports capitalistic economic growth.

In this situation, the dualistic model thrives to mold reality into the established

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virtue of neoclassical theory. In this effort, the dualistic model obscures the growing

number of unemployed and underemployed in such terms as “reallocation process”

and “excess labor”, while emphasizing the utopian “turning point at which dualism

atrophies and the economy becomes fully commercialized or neo-‐classical” (Ranis,

2003: 4). This attempt to obviate the obvious and highlight the obscure fits well to

what Mitchell (2008: 1120) pins as “the narrowness…of the economic explanation”.

Moreover, in order to thrive, an economic model needs to produce its own facts or

exclude “other kinds of facts and connections” to rule out other competing

explanations (Mitchell, 2008: 1120).

Other strand of neoclassical economics that deals with the allocation of labor is the

flexible specialization theory. Harvey (1990) elaborates this practical theory as

basically flexible business arrangement that is aimed at assisting smooth

transmission of labor and products/service in an array of flexible production

system. He states that this business practice “is characterized by the emergence of

entirely new sectors of production, new ways of providing financial services, new

markets, and above all, greatly intensified rates of commercial, technological, and

organizational innovation” (Harvey, 1990: 147). However, the way this business

practice is reinforced once again depends on the availability of excess labor. Harvey

(1990: 150) underlines that in this system, the employers have more opportunities

to press on “more flexible work regimes and labo[r] contracts” due to “weakened

union power and” the availability of “the pools of surplus (employed and

underemployed) lab(o)rers”.

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Interestingly, Harvey (1990) connects differential levels of job security within this

system with the core-‐periphery relationships. Based on the illustration by the

“Institute of Personnel Management’s Flexible Patterns of work (1986)” in figure 3,

he elaborates labor structure as basically consists of three layers: the “steadily

shrinking” core consists of the secure, full-‐time, permanent employees; the first

layer periphery consists of less secure, commonly skilled -‐ hence dispensable -‐ full-‐

time employees; and the second layer periphery as the least secure “part-‐timers,

casuals, fixed term contract staff, temporaries, sub-‐contractors, and public subsidy

trainees” (Harvey, 1990: 150).

Figure 3. Labour market structures under conditions of flexible accumulation Source: Flexible Patterns of Works, ed. C. Curson, Institute of Personnel management

c.f. Harvey (1991: 151)

From Fordism to flexible accumulation 151

significant growth in this category of employees in the last few years.Such flexible employment arrangements do not by themselves engender strong

worker dissatisfaction, since flexibility can sometimes be mutually beneficial. Butthe aggregate effects, when looked at from the standpoint of insurance coverage andpension rights, as well as wage levels and job security, by no means appear positivefrom the standpoint of the working population as a whole. The most radical shifthas been either towards increased sub-contracting (70 per cent of British firmssurveyed by the National Economic Development Council reported an increase insub-contracting between

18

This core-‐periphery arrangement of labor market seems to fit perfectly with the

current labor condition in Indonesia. As to the coping employment that becomes

focus of this paper, it will be perfectly arranged in the second layer of the periphery

as depicted in figure 3. This coping employment can be lumped together into two

categories, which are sub-‐contracting households (who are involved in such

occupations as home industries and probably the domestic workers also, as they in

some degrees work under contract); and self-‐employed households (who are

involved in such occupations as petty traders, petty producers, and minor services).

While this core-‐periphery relationship has its theoretical footing in the world

system theory proposed by – among others – Andre Gunder Frank and Wallerstein

(Frank, 1990; Wallerstein, 2011); in flexible specialization, this ‘core-‐periphery’

relationship is principally another version of economic dualism and another type of

economic exploitation by the core to the periphery.

Still, for the proponents of this system, this is not the case. Pollert (1988: 68) claims

that this is “the benign version of economic dualism.” Without much deliberation to

the negative side of this economic system, she celebrates this “labor market

dualism” as contains “a much wider ideological message of social integration”, so

that “the question of underprivilege fades into silence” (Pollert, 1988: 67, 68). There

is a little truth, though, for this positive side of flexible specialization. Harvey (1990:

151) points out that this “flexibility can sometimes be mutually beneficial” for both

workers and employers “from the standpoint of insurance coverage and pension

rights, as well as wage levels and job security”.

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However, Pollert (1988: 61) concedes that this system does not necessarily offers

“new opportunities for small firms”, because they cannot compete with large firms

on high-‐profit production, due to high capital requirement to invest in new

technologies. In my opinion, this technological constraint constricts the peripheral

group to dwell forever in low-‐tech productive activities and marginal production

that offer low profit margin with restricted opportunity to grow larger. Much worse,

in such condition as sub-‐contract, the workers-‐contractors can be drawn into a

‘production threadmill’ situation that made them lose their productive freedom for

miniscule profit (e.g. contract logging in Vail, 1993; contract farming in Watts,

1994).

In Indonesia, statistical evidence – and anecdotal example -‐ shows that this flexible

specialization has gained traction to transform the structure of manufacturing

industry for the last two decades. Tambunan (2007: 111) provides historical

evidence of government’s promotion to this system through the introduction of a

program called “Foster Father” in 1992, on which “all state-‐owned enterprises and

large private companies (LEs) are required to assist SMEs [Small and Medium

Enterprises] in capital, training and technical assistance, marketing, procurement of

raw material and many other areas.” He points out that despite the economic crisis

in 1998, many large enterprises continue their program until recent years (table 2).

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Table 2. Percentage of Small Enterprises (SEs) and Microenterprises (MIEs) having/not having the Foster Parent scheme in manufacturing industry by type of facilities in 2000 and 2003

Source: Tambunan, 2007

Upon analyzing the data in table 2, there was almost threefold percentage increase

of SMEs’ involvement in this program only in three-‐year period of 2000 – 2003, but

it applied to manufacturing industries only. This data prove that apart from its

origin as a government initiative, there is enough incentive for large enterprises to

continue the program without government encouragement. Moreover, their

operation strictly in manufacturing industry shows that this sector provides

considerable benefits for large enterprises to meddle in; in contrast to other SME

sectors such as trade and service, due to its wider connection with export market

and larger integration with international trade.

To make my point clear, an anecdotal example of wigs and fake-‐eyelashes’ nucleus-‐

plasm industries in Banjarnegara District, Central Java can best describe this

situation, as reported by the Public Relation Bureau of Central Java’s Provincial

Government (translated from Biro Humas Provinsi Jawa Tengah, 2015):

Purbalingga’s wigs and fake eyelashes’ industry is the second biggest in the world after Guangzhou, China. In this district, there are 31

April25,2007

14:57W

SPCW

S-JDE

SPI-J07600057

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Table 13. Percentages of SEs and MIEs having/not having the FP scheme in manufacturing industry by type of facilities in 2000 and 2003.

2000 Figures Not Having (% of Total) Having (% of Total) Type of Facilities (% of Total Firms Having the Scheme)∗

Capital/Loan Procurement of raw material Marketing Technical assistance & training Others

Total SEs & MIEs 95.5 4.5 40.5 54.8 53.5 4.4 0.6MIEs 95.5 4.5 42.2 29.4 53.2 5.1 0.0SEs 95.5 4.5 40.2 59.8 53.6 4.3 0.7

2003 Figures Not Having (% of Total) Having (% of Total) Type of Facilities (% of Total Firms Having the Scheme)∗

Capital/Loan Procurement of raw material Marketing Technical assistance & training Others

Total SEs & MIEs 87.9 12.1 21.5 47.3 52.9 3.1 2.4MIEs 88.9 11.1 22.02 48.7 50.8 2.7 2.6SEs 77.7 22.3 18.9 39.9 63.2 5.5 1.03

∗One firm may get more types of facilities.Source: BPS (2000, 2003).

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enterprises of this kind, of which 18 enterprises are foreign direct investment (FDI) from South Korea, whose biggest export markets are in the United States and some parts of Europe. Moreover, those enterprises develop plasm-‐producers deep into the interior villages of rural Purbalingga to fulfill the export quotas. To the present, at least 250 wig plasm-‐industries have spread all over Purbalingga region. Some enterprises have even opened up their branches as well as plasm-‐industries to Banjarnegara, Cilacap, and Banjar Patroman (Banjar City, West Java). Data collected by Purbalingga’s Department of Industry, Trade and Cooperatives show that total export value of the wig industry to the United States alone have reached IDR 3.8 billion per month.

Hidden from the statistics, however, are laborious conditions the contractors have

to endure in order to earn meaningful income under the exploitative contracts.

Rejeki and Finesso (in Kompas.com 06/02/2014) reported in detail workers’

perseverance to make fake eyelashes. Sometimes working until 10 pm, they rely on

their keen eyes and nimble fingers in a production line that consists of 10 separate

stages. Majority are female workers who obtain per pieces wage of IDR 285 – 333

(approx. USD 3 cents/piece), even though these are high quality products worn by

celebrities and luminaries in western countries. These fake eyelashes are made of

real hair, unlike cheap synthetic ones made in China and sold in Walmart. These

eyelashes are exported unlabeled to western countries, on which the importing

companies put their brand labels to be sold in manifold prices. The irony is, those

workers have never seen the end forms of their craftworks, let alone to ever wear

them.

On women’s participation in labor market, Harvey (1990: 153) underlines that they

are highly susceptible to domestic exploitation, not only in terms of less secure and

lower paid sub-‐contracts, but also in terms of “resurgence of patriarchal practices

and homeworking.” This is a valid point in Indonesia, since women’s involvement in

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income-‐earning activities does not liberate them from household chores; hence the

more they involve in labor, the less they have the time for rest and leisure.

Women who work in other types of coping employment -‐ such as petty trade and

domestic work -‐ experience similar onerous condition. Tambunan (2007) provides

indirect evidence of women’s harsh labor condition in East Nusa Tenggara. He

reported that East Nusa Tenggara has “the highest ratio of non-‐primary economic

activities and educated people in the country”, even though “the majority of the

population and a larger number of micro and small enterprises are located in Java”

(Tambunan, 2007: 109). He interprets this as more women’s involvement in coping

employment than men, due to the fact that women are generally less educated and

this eastern region of Indonesia is among the poorest in the country. He further

concludes: this situation is “a reflection of survival strategy than a spirit of

entrepreneurship”, because “female entrepreneur development in [East Nusa

Tenggara] is more a “push” than a “pull” phenomenon” (Tambunan, 2007: 109).

Women who work as domestic workers suffer no less marginalization. In Bali, Arjani

(2007) underlines the impacts of patriarchal culture to create feminization of

poverty. Astiti (2005) substantiates this argument on her study in a poor village in

Karangasem District -‐ Eastern Bali, to find out that 3 out of 5 migrant workers were

women. This certainly gives further evidence of women’s disproportionate burden

to find off-‐farm employment. Astiti (2005) also accounted that on average, off farm

income was fivefold bigger than on-‐farm income among migrant households.

Moreover, she revealed that some female migrants started working as domestic

workers as early as 12 year old, even though the average age is 24 year old. Based

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on my personal observation in Bali, those young migrant workers are often deprived

of education, sometimes also their social/psychological freedom. Most often, they

have no other choice for their future but waiting until their parents ask them to

return home and get married. Much worse, Astiti (2005) overheard migrants’

involvement in illicit work as beggars, which oftentimes are involving women and

children.

Invisibility of Rural Poor’s Coping Employment

To tie together the statistics, examples and discussions above, I’d like to underline

my argument that coping employment in rural Java is rendered invisible in the

current neoliberal discourses of entrepreneurships because it does not fit the

idealistic vision of entrepreneurial development. This vision is based on the idea of

neoliberal meritocracy; “the idea that whatever our social position at birth, society

ought to facilitate the means for ‘talent’ [-‐ in this case is entrepreneurial talent -‐] to

‘rise to the top’’ (Littler, 2013: 52). This notion aims to legitimize “vast inequalities

of wealth and poverty as long as the potential to travel through them for those savvy

enough is maintained”; which actually is a pretext to “both disguise and gain

consent for the economic inequalities wrought to neoliberalism” (Littler, 2013: 62,

69).

Neoliberal discourses on entrepreneurships are discussed in length by Foucault

(2008), which are summarized succinctly by McNay (2009: 61) to be the doctrine of

‘self as enterprise’. In Foucault’s view, ‘neoliberal governance’ does not ‘delimit

individual freedom’, but places enterprising individuals into flexible “array of

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practices and values as long as they are compatible with a consumerized notion of

self-‐responsibility“ (McNay, 2009: 63). Under this notion of self-‐responsibility,

“issues of social injustice such as poverty and deprivation are separated from

determining structural factors and construed as a problem of irresponsible self-‐

management; the poor are stigmatized as the ‘other’ of the responsible, autonomous

citizen” (McNay, 2009: 64).

In my opinion, this economic stigmatization of the poor underlines the paradigm of

social/economic dualism that was first envisioned by Boeke (1953) and later picked

up by other sociologists and neoliberal economists. While the stigma lies in the

notion of cultural backwardness in colonial time, individual incompetence due to

lack of education and capital is to be blamed for poverty and inequality they

experience in the post-‐colonial era. Thereby, the social remedy for this perceived

‘incompetence’ is always encircled around micro credit, education, and training.

Ranis (2003) insists that proof of economic dualism can be seen in the universal

path of labor transition from rural agriculture into urban industry and service

sector. Nevertheless, Li (2009) repeals this belief by pointing that World Bank’s

propositions in World Development Report 2008 -‐ which encourage rural poor to

give up their lands for better waged labor elsewhere and again back to the farm in

times of urban crisis – to be historically invalid in many Asian countries. Breman

and Wiradi (2002) prove Li’s point further by showing that during the Indonesian

economic crisis in 1998 landless farmers had limited access to farm labor, and

informal employment was tied closely to the collapsed urban sectors to provide

leverage for the World Bank’s appraised rural safety net. Moreover, World Bank’s

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microcredit program failed to resurrect small and micro enterprises during the

height of 1998 economic crisis in rural Java; while trade involution – not industrial

growth -‐ signifies economic recovery after the crisis (Breman and Wiradi, 2002;

Wie, 2003; Marks, 2009).

In reality, economic dualism reinforces condition of inequality that becomes the

source of capitalistic profit. Donzelot (2008 :130 c.f. McNay, 2009: 59) argues that

the ‘game of inequality’ “is what stimulates market competition and society must be

reconfigured in such a way as to maximize the creation of inequalities”. Limit of this

game is “that of exclusion”, on which “one stays in the game so as to remain a homo

oeconomicus, an entrepreneur, that is to say, someone who is eminently governable,

unlike his liberal predecessor, the man of exchange, who had to be left to fit in

‘naturally” (Donzelot, 2008: 130). Clearly, rural poor’s coping strategies are

excluded in this game, since they are not honed for entrepreneurships, not directed

for profit but survival, hence considered ungovernable and be left invisible in the

borders.

Historically, the economic invisibility of coping employment was started since the

colonial era. At that time, rural poor in Java have been denied to involve in the kind

of entrepreneurships that offer the opportunity to ‘rise to the top’, while their

limited involvement in trade is aimed at coping with rising socioeconomic

hardships. Their coping employment was largely invisible to the government’s

purview mainly due to the lack of commercial interest attached to it. Alexander and

Alexander (1990: 32) argue for invisibility of “Javanese commerce in the late

colonial state”; which are based on two premises:

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Firstly…before the Dutch established economic control and again around 1900, trade and petty commodity were significant sectors of the indigenous economy producing perhaps thirty percent of rural income. Secondly, …the inability of Javanese traders to compete with Chinese wholesalers was not due to a lack of commercial acumen but to State policies which inhibited capital accumulation and made credit prohibitively expensive.

Arguably, this invisibility of coping employment continues to the present time. This

time around, metrics of the economics become the source of invisibility. Marks

(2007; 2009) and Tambunan (2007) show how the statistics of coping employment

are obscured in the sectoral growth and other socio-‐economic indicators. They have

to peruse the available economic indicators to infer the conditions and structure of

coping employment in Indonesia (e.g. by-‐employment and trade involution statistics

in Marks, 2009). This is in line with what Mitchell (2008: 1119) explains about

“metrological regimes”: the standardized measurements/calculations on which

economic facts and figures are produced to support certain economic theory.

Reasonably, the statistics on coping employment are not collected because they do

not fit the explanation of the prevailing neoliberal economics.

Conclusion

Coping employment is one strand of livelihood strategies being wielded by the

bottom segment of rural population to deal with their difficult socioeconomic

conditions. In Java, coping employment had started as commodity exchanges way

before the arrival of the Dutch colonial government, which have grown into

involutionary trade in the colonial time and beyond due to restrictive colonial

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policies on indigenous trade, and later implementation of green revolution

technology and neoliberal economy.

The history of capitalism in Java shows its conformity with the core-‐periphery

relationships within the world-‐system. These predatory economic relationships can

be extended to more recent time, shown in the insistence of economic-‐dualism

paradigm and flexible specialization system. Increasingly in manufacturing sectors

in Indonesia, flexible specialization has gained traction to exemplify these core-‐

periphery relationships with global market under sub-‐contract arrangement.

My central argument is that coping employment in rural Java is rendered invisible in

the current neoliberal discourses of entrepreneurships because it does not fit the

idealistic vision of entrepreneurial development. Rural coping employment is not

compatible with neoliberal idea of meritocracy, because it is directed as a survival

strategy rather than honed for profit maximizing entrepreneurships. Moreover, it

does not fit the metrics of entrepreneurial development that support the theory of

neoliberal economics, or neoliberal metrological regime, hence rendered invisible in

the margins of the world economy.

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Coping employment as the Invisible Economy of Rural Java

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