Pancasila Economic Inspirations from the Nature of the Human in Economic Philosophies

But a gotong royong personality also contradicts pure socialism. Since in socialism no individual has private property and no private income, mutual help in the material sense is impossible. Mutual help is only possible when individuals have private property and use their private property with social responsibility. After all, neither the biblical Good Samaritan nor the most famous philanthropists were produced within a socialist system. In socialism, all social assistance is part of a massive centralized plan, so there can be no mutual assistance.

The idea of gotong royong or a similar human disposition is not explicitly assumed in either extreme liberal or socialist economic thought. Liberal economics approaches everything from the assumption of self-interest, while socialism approaches everything from the assumption of selflessness. Nevertheless, the fact that stylizations of man as guided by either extreme individualism or altruism are problematic has at least a long tradition in political philosophy. A brief review of the idea of the human being in ancient Greek philosophy, medieval Christian scholasticism, and the Enlightenment will clarify this point and reveal an interesting dialectic that regularly converges on an idea similar to gotong royong.

The Idea of the Human Being in Ancient Greek Philosophy

When political philosophy emerged in ancient Greece, political ideas were generally a reflection of contemporary political events. As the city-state of Athens became a regional military power, culminating in two military victories over Persia in 490 and 480 B.C., the subordination of the individual to the state was a reality, and this reality was legitimized philosophically.

Democritus, a prominent figure, believed that individuals should put the welfare of the state first, stating that the interests of citizens were less important than the interests of the state. However, Democritus also recognized the importance of good governance alongside the subordination of citizens, noting that only a well-governed state leads to prosperity, while a corrupt one leads to ruin (Bakewell, 1907, p.65).

The rise and military success of Athens made it easy for the philosophers to justify subordination. This changed, however, when Athens' star began to fade. After the Persian Wars, Sparta, another city-state, increasingly competed with Athens for regional hegemony. Both city-states developed strong military capabilities and clashed for the first time in 431 BC, triggering the beginning of the Peloponnesian War. A peace treaty signed in 421 BC did not prevent renewed fighting six years later in 415 BC. The final phase of the Peloponnesian War led to the defeat of Athens in 405 BC, making Sparta the new regional hegemon (Bauer, 2007, especially chapter 65; Nye and Welch, 2017, pp. 17-22).

During the Athenian war with Sparta, some philosophers challenged the idea of absolute loyalty to the state. The Sophists, known for their focus on the individual, led this movement. They questioned the status quo and the legitimacy of Athenian authority. In Plato's famous dialogue "Gorgias," Callicles portrays Athenian democracy as a system in which the majority of the unproductive exploit the minority of the productive. Yet, while Sophists depicted the flaws of Athenian democracy, they did not propose reforms.

The Sophists eventually gave way to the philosophical thought of Socrates, Plato, and Aristotle. Common to all three philosophers is the idea that there must be a middle ground between subordination of the individual to the state and unfettered individualism, although all three tended to lean toward the need for a strong state. This was most impressively demonstrated by Socrates, who was fiercely loyal to Athens but certainly not impressed by its politicians. As we know from his student Plato, Socrates believed that his commitment to truthfulness would not allow him to pursue a career within the given corrupt political system. (Plato, 1892, p. 129).

Despite his frustration with the political system at the time, Socrates was also skeptical of the Sophists' call for individualism. Socrates argued that the pursuit of self-interest should not be divorced from social obligations. According to Socrates, people should not be proud of their wealth and riches unless they also show social responsibility in using them (Southgate et al, 1867. p. 224).

Socrates felt that people were generally ignorant of the value of the common good and the social responsibility of individual wealth. This important relationship is something that only the philosopher class would understand, and therefore only philosophers should rule.

The Idea of the Human Being in Medieval Scholastic

The Greek empires were eventually replaced by the Romans. With the Christianization of the Roman Empire in the 4th century, the Church became a political actor. As in ancient Greek political philosophy, the first major question again focused on the need for individual subordination, but this time not subordination to the state, but subordination to the church. The question of the subordination of the individual to the church versus the subordination of the church to the individual was largely reflected in the role of private property. Should citizens be allowed to own private property and take their destiny into their own hands, or should private property be limited? The promotion of private property was associated with the promotion of individualism, and the denial of private property was associated with collectivism.

Early Christian scholars saw private property as counterproductive to Christian values. St. Ambrose, for example, argued that the wealthy were stewards of their possessions, obligated to help the poor. However, this view probably clashed with the broader reality, and the Church concluded that private property encouraged sins such as greed and vanity. Accordingly, St. Augustine lamented the existence of two "cities": one governed by love of self, the other by love of God. Guided by this theological principle, a feudal system developed in Europe in which the church became a major landowner.

This power structure sparked a philosophical debate. The philosophical school known as "realism" argues that general ideas (universals) exist beyond individuals, meaning, for example, that a holy spirit exists outside of individuals, so that individuals must submit to it. The school known as "nominalism," on the other hand, argues that only individual things are real, and, to stay with the example, a holy spirit can only exist within individuals. Nominalists therefore saw no justification for subordination to an abstract universal such as a Holy Spirit. A third branch, called "conceptualism," argues that human beings can form universals and make them real through shared perceptions, beliefs, and convictions. With respect to the idea of the state and the role of property, conceptualism argues that subordination to a common good is necessary, but the production of the common good can be organized around private property.

The Idea of the Human Being in Enlightenment

Finally, the Enlightenment can also be analyzed from a dialectical perspective. The process began with a major attack on the Catholic Church's monopoly on knowledge. Scientists such as Copernicus and Galileo provided evidence for a heliocentric universe, directly challenging the Church's geocentric claim. Next, early political philosophers such as Hobbes, Locke, Montesquieu, and Rousseau emphasized individualism and called for a state whose monopoly of power was limited to protecting the individual from anarchy; thus, in contrast to ancient Greek and medieval scholasticism, the Enlightenment began with the thesis of the subordination of the state to the individual.

Adam Smith introduced the concept of individualism and self-interest into economic thought. Later generations took Adam Smith's work as a blueprint for laissez-faire. However, such an interpretation of his work is an extreme stylization of his idea of human nature, to which socialists responded with a not much less stylized version of human nature as one characterized by extreme selflessness. The synthesis of the two extreme positions of individualism and collectivism began in Germany during the interwar period and became known as "social market economics" or "economic humanism.

Social market economists like Wilhelm Roepke argue that while a market economy is indispensable, it shouldn't be the sole focus of society. It must coexist with broader social values that go beyond supply and demand. Laws and regulations should ensure fairness and prevent the harsh realities of pure competition from harming individuals. Ultimately, true human fulfillment comes from belonging to a community and feeling connected to others (Röpke, 1960, p. 91). Similarly, Adam Smith was not the laissez-faire economist that libertarians like to characterize him as. Smith saw a role for government that went far beyond protecting private property rights (Viner, 1991, p. 112). Specifically, Smith advocated national defense, institutions to protect individuals from injustice and oppression, certain public goods (Smith, 2007/1776, p. 444) such as canals, competition policy (ibid, p. 84), and public education (ibid, p. 508).

Social market economists assume that people assign a weight or value to both self-interest and solidarity, with the weight assigned to self-interest being greater than the weight assigned to solidarity. The implication of this understanding of human nature calls for a market economy in which people can pursue their self-interest, but also for government to provide a level playing field for all and a social safety net when vulnerable people have exhausted their means to help themselves.

The Idea of the Human being and Experimental Economics

Research in psychological and experimental economics has provided considerable support for the claims of social market economists. People's preferences for self-interest and solidarity can be tested in "ultimatum games. In an ultimatum game, a subject is offered a sum of money by the experimenter, such as ten dollars in one-dollar bills. This subject, called the allocator, must then share some of the money with a second subject, called the recipient, who is participating in the experiment. The recipient can then accept or reject the offer. If the recipient accepts the offer proposed by the allocator, the two participants in the experiment may keep the ten dollars according to the agreed-upon division. If the recipient rejects the offer, the ten dollars must be returned to the experimenter, and both the allocator and the recipient end the experiment empty-handed. These rules of the game are known to both subjects.

Under the strict assumptions of laissez-faire liberalism, one would now predict that the allocator would offer the receiver exactly one dollar and that the receiver would accept the one dollar offer. This is because both players are better off by the split. Any economic transaction that makes both individuals better off is said to be Pareto efficient, a concept named after Vilfredo Pareto, an Italian economist. Under laissez-faire liberalism, with its exclusive concern for self-interest, there is no incentive for the giver to offer more than a dollar and no incentive for the receiver to refuse a dollar. Socialists, on the other hand, would predict that the giver would offer the receiver exactly five dollars. This would be true, at least in theory, in the ideal world of a communist state.

So what do the results in experimental economics suggest? Oosterbeek et al (2004) studied 75 ultimatum games played in 26 countries and reported the average offer shares accepted and rejected by country. The results show that, on average, allocators offer close to 40% of the pie, while the average rejected offer is about 15%. These experimental results therefore suggest that the idea of human beings is indeed best captured by the assumption that human beings are concerned with both the pursuit of self-interest and concerns for solidarity and equitable socioeconomic development. According to the findings of experimental economics, it could be said that individuals, on average, give about 60% weight to the pursuit of self-interest and about 40% weight to the concern for solidarity. Regardless of the exact figures, it is probably safe to conclude that people are not completely consumed by either extreme of pure self-interest or exclusive subordination to solidarity.

So what about gotong royong?

Mubyarto's concept of gotong royong cannot be isolated from Indonesian history. Mubyarto became most outspoken at a time when he saw both the Sukarno and Suharto eras in his rearview mirror. Mubyarto was frustrated with both the leftist experience of Sukarno and the rightist experience of Suharto. Under Sukarno, too much centralized social support and planning stifled private initiative; under Suharto, too much liberalization left too many people behind.

In the grand scheme of political philosophy, Mubyarto's role most closely parallels the synthesizers of the two extreme camps of individualism and collectivism. In economic terms, he is probably closest to the social market economy and economic humanism as it developed in Germany after World War I. Interpreting gotong royong as a preference for socialism is as wrong as interpreting individualism in Adam Smith as a preference for laissez-faire. Gotong royong, of course, has never been well defined, much less served as a stimulus for public debate about how to incorporate mutual aid into a state order.