Islamic Economy Expert Calls for Expanding Economic Pie

Islamic economics expert Adiwarman Karim has called for a strategic expansion of Indonesia's economic capacity to ensure equitable prosperity, emphasizing that one group's welfare should not come at the expense of another's. Speaking at the Indonesian Islamic Congress VIII, Karim highlighted the potential of programs targeting low-income populations, such as free nutritious meals, to stimulate economic growth. He explained that individuals with lower incomes tend to spend a larger proportion of any additional funds they receive compared to wealthier individuals. "In economics, 1 million rupiah in the hands of a poor person is more valuable than 1 million rupiah in the hands of a rich person because the sadness of a rich person losing 1 million rupiah is far less than the happiness of a poor person receiving that 1 million rupiah," Karim stated.

Karim elaborated that this increased spending by lower-income groups creates a greater multiplier effect on the economy. "A rich person with 100 million rupiah might only spend half of it, but a poor person with 1 million rupiah will spend it all, even borrowing from others, so the money circulation among the poor is much faster than among the rich," he added. He believes that while reallocating budgets to support the poor, particularly in rural areas, can help reduce poverty, it is crucial to also consider the economic pressures faced by the urban middle class.

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In economics, 1 million rupiah in the hands of a poor person is more valuable than 1 million rupiah in the hands of a rich person because the sadness of a rich person losing 1 million rupiah is far less than the happiness of a poor person receiving that 1 million rupiah.

To foster inclusive growth, Karim proposed the concept of "pure Pareto growth," which involves creating a larger economic "pie" rather than merely redistributing existing resources. He identified at least three potential avenues for expanding the national economy. This approach aims to increase overall economic output and opportunities, thereby benefiting all segments of society without creating zero-sum outcomes. The expert's insights underscore the importance of targeted economic policies that stimulate consumption and create new avenues for growth within the Islamic economic framework.

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A rich person with 100 million rupiah might only spend half of it, but a poor person with 1 million rupiah will spend it all, even borrowing from others, so the money circulation among the poor is much faster than among the rich.