Working Paper Of English Leanguage The Limit On Economic Freedom

A.     Definition of economic freedom

Economic freedom is the condition in which individuals can act with autonomy while in the pursuit of their economic livelihood and greater prosperity. Any discussion of economic freedom has at its heart reflection on the critical relationship between individuals and the government.

Economic freedom is an essential aspect of human liberty, without which a person’s rights to life, liberty, and the pursuit of happiness may be fundamentally compromised. As Friedrich Hayek once observed, “To be controlled in our economic pursuits means to be controlled in everything.” Hayek’s keen insights on economic freedom are based on the moral truth that each person is, as a matter of natural right, a free and responsible being with inalienable dignity and fundamental liberties that righteous and effective political systems should regard as unassailable.

B.     Definition of liberal economic

Liberal economic system is also called market economy system. In a market economy system decisions on economic issues is the main result of a deliberate decision made ​​by the producers and individual consumers. In other words, the economic problems that the main left to the market. Therefore, this system is known as a free market economy or a market economy.

C.    The characteristics of a liberal economic system

•  All economic activities left entirely to the public.
• Free enterprise society, innovation, and creativity in economic activity.
• Individual property rights are recognized.
• Economic activity is intended to seek maximum profit (profit oriented).
• Government's participation in economic activities is very limited.
• The existence of competition among entrepreneurs in the pursuit of profit.
• The prices are determined by market forces occur.

D.     The advantages and disadvantages of liberal economic system

• 1.       The advantages :

a.       The presence of free enterprise, innovation, and creativity in economic activity.

b.       Competition among employers to encourage the advancement of technology.

c.       Individual property rights are recognized.

• 2.       The disadvantages :

a.     Could lead to oppression (exploitation) by man to man.

b.  The existence of the gap between rich and poor due to the absence of income distribution.

c.     Many arise monopoly practices that harm the public.

DISCUSSION

A.         The Limit of Economic Freedom

In the era of globalization as it is today, free market economy is something that can not be avoided. Countries determined to remain a closed country become unable to develop its economy, or even go bankrupt and become a failed state. Just look at what happened with North Korea and Myanmar * the economy is not growing as well as the Soviet Union broke up in 1991. Meanwhile, countries that have been running since the beginning of the free market economy has developed into a prosperous country and obtain rapid progress in technological innovation, scientific discovery, education, culture and so forth.

Likewise if we look at history, Japan can be a developed country such as current as they open market that began in the Meiji period in 1868. Since then the Japanese economy is growing rapidly and reached its peak in the 1960s that the real growth reached 10%. 1980s became the golden age of automotive and electronic goods exports to Europe and the United States. So is the case with China. While still a closed communist country of China is synonymous with poverty. As for now, after opening its markets since the economic reforms in 1978, China became the country with the fastest growing economy and the country with the second largest economy after the United States. The number of poor people in China were reduced dramatically from 53% in 1981 to just 8% in 2001. Yet what was actually a liberal economy?

B.         Liberal economic

Free market economy or liberal economics was first coined by Adam Smith in his book The Wealth of Nations . The birth of the idea of ​​the free market in the 18th century was a reaction to the growing merkantalisme system at that time . Merkantalisme is the economic system that oppresses the interests of a small group , because it applies monopoly , protection , privilage ( privileges ) granted by the state for the sake of a handful of entrepreneurs. Therefore Adam Smith argued that every individual should be free to carry out their economic activities and the state should not interfere in the economy because they would reduce the efficiency of economic activity . Thus, in this system the economy left entirely to the market mechanism and the role of the state is limited to the provision of infrastructure and government administration . In this market mechanism , Adam Smith argued that there would be invisible hand that regulates the market automatically so that prosperity be realized . But the reality is the invisible hand does not always work and  only enjoyed a handful of people. Ninety-four percent of the world income by only 40 percent of world population, and 60 percent of the world population have to share revenue from six percent of the world's remaining income. Conditions are not much different than the era of Adam Smith opposed merkantalisme. This happens because the system does not provide protection to those who are not able to compete and lead to the accumulation of enormous wealth for the winning side and monopoly.

 In addition, free-market production also handed over the affairs of merit goods (goods that are very important to the prosperity of society) and public goods to the market so that the existence and affordability of basic needs of society can not be ascertained. It would be very dangerous when volatile markets. Because it is a free market economy should be limited, or in other words the government can not simply wash their hands of economic affairs with give it to the market mechanism. It is in fact, no country is really run the free market economy as a whole. Even though Americans still provide protection to some products that are considered strategic. But excessive government intervention will also hinder the development of the economy, even to destroy. So to what extent should the government intervene? Or in other words, where is the freedom of the free market economy?

C.         UUD 1945 and the limits of economic freedom freedom

It turns out that the undang-undang 1945 would have set this clearly. In pasal 33, ayat 2 explicitly states that "The branches of production which are important for the country and which dominate the life of people controlled by the state" so it is clear that for certain items that are important to the State and the people living Haat should not be to be submitted bergitu only on market mechanisms. There should be government intervention to ensure the availability of goods proficiency level. Likewise in pasal 33, ayat 3 states that "The earth and water and the natural riches contained therein shall be controlled by the state and used for the greatest welfare of the people." So plenipotentiary state in managing the natural resources that exist in this country, including in this case oil, gas, and other mineral resources. This does not mean that we deny the existence of anti-foreign and multinational companies in Indonesia, but these companies must submit to the state as the host and the property owner. Their existence must be able to provide the maximum prosperity for the people. But in practice it is often subject to state their interests and where they actually give misery to the people. This is what we have on.

The government has just issued a number of regulations handed fields that should be controlled by the state to the market mechanism. Law meliberalisas oil and gas sector is important to the State and lives of many people. So the stock is now dependent on the national energy market. This liberalization was also willing to do the food sector through the Food Bill. Though it is clear that food is a basic need of the people. As to pasal 34, ayat 2 states that "The state shall develop a system of social security for all people and empower the weak and incapable in accordance with human dignity." I want to focus on the phrase "empower the weak and incapable in accordance with human dignity". So the state is obliged to empower those who are not or have not been able to compete in a free trade competition. Empowerment of the country can be a protection, subsidies, etc. and it is not prohibited. America and some European countries also meproteksi their food industry. But what happened in Indonesia, tap import just opened at the time of local products have not been able to compete with imported products that lead to the demise of the local industry.  Here does not mean we are anti to imports because imports are needed. However, imports are causing the demise of local products that we have to about

D.        Example Activities economic liberal.

• Agreement between the North American countries of North America Free Trade Area (NAFTA), which, if not one of up to canada and mexico american union (although mexsiko is central american country but politics geared american)   
• Agreement between the united countries of Central America Free Trade Area (CAFTA) that included ex savador, Guatemala etc.
• Agreement between the ASEAN AFTA (ASEAN Free Trade Area) agreement between ASEAN members so between members should free trade costs among fellow members
• Agreement between ASEAN and China (china asean free trade area) "if no one name" that is where all the products are exported to china will have duty-free entry, and vice versa to neagara ASEAN member

CONCLUSION

Countries that do not want to open their markets would be very difficult to develop. But in UUD 1945 has been explained that there are certain areas that can not be left only to the market. The government was obliged to empower the local industry in the global competition and not to opening of the market will destroy them. That's what must be kept in mind. Could not all are left to the market, because that freedom has its limits, as well as with the free market.