A rise in global demand for coconuts and their by-products over the past decade led to a surge in coconut farming in Indonesia, especially in Sulawesi. However, the rise in supply ultimately depressed demand and, with it, prices. The situation for Indonesian farmers has been exacerbated by greedy middlemen seizing the vast majority of profits. Now, unable to make ends meet, many Indonesian coconut farmers have simply given up farming.
The United States faced a similar issue during a similar point in its development, in the late 18th Century. At this point, farmers were becoming disillusioned with farming when international markets started growing and the global supply of crops increased. As in Indonesia, the farmers were squeezed by greedy middlemen, such as railroad operators and merchants.
To solve the issue, the U.S. government assisted helped the farmers, giving them warehouses to store excess crops and paying farmers not to grow on part of their land. These moves were aimed at keeping supply contained and demand high.
For the U.S., this period from the late 1800s until the early 1900s came smack in the middle of industrialization. In 2013, Indonesia is growing rapidly, fueled largely by low wage industrialization created by investment from foreign firms. As such, the situations in both nations are similar, and the case of industrial America’s policy towards farming can serve as a precedent to Indonesia.
Indonesia should not take the same path as the U.S. The U.S. eventually became a post-industrial society. However, its steps in incentivizing farming, if anything, hindered its development.
Indonesia has the capacity to reach post-industrial much quicker than the U.S. did if it can get a greater percentage of its work force into the cities. In the most successful post-industrial societies, agriculture has a very small role and the role it does play is largely negative; that is to say, the average wages of farmers are well below mean and drive down figures such as GDP. Till date, agriculture plays a huge role in the U.S. economy. Though, even in the U.S., farming probably hurts the economy. It is no coincidence that the most rural U.S. states provide their citizens with lower qualities of life than urban ones.
Additionally, the circumstances that give farming relative benefits in the United States would not apply to Indonesia. Indonesia is more densely populated and does not face the same levels of unemployment at present at least; Indonesia’s low labor costs and pro-business measures will attract enough jobs for the foreseeable future to allow its population to be much more urbanized and industrial.
Therefore, instead of veering off on the much less efficient U.S. policy of farmers during and post industrialization, Indonesia should continue stimulating business and industry at the expense of agriculture. After all, like any nation, Indonesia’s long term goal should be the long-term welfare of its citizens, not preserving its farming culture. This welfare can best be achieved with an urban population.