Prior to the third wave of democratisation, regimes considered to be democratic were a minority in the world stage; fast-forward five decades, and more than 50 per cent of today's states are considered democratic (Coppedge et al. 2019). Experience with democratic transition has not been smooth, however. During periods of democratic transition and consolidation, political and economic reforms often stagnate, breeding widespread disappointment. Even where democratic transitions appear relatively successful, the threat of backsliding often remains: the past decade has seen a global decline in the health of democracy (Bermeo 2016; Mounk 2019). Increasingly, democratic regimes have deteriorated under the stewardship of democratically elected leaders—in Hungary, Turkey and the Philippines, to name a few—rather than falling to the types of authoritarian takeover so readily conjured in the popular imagination (Aspinall and Berenschot 2019; Bermeo 2016). As this book demonstrates, Indonesia is quickly catching up to this global trend as it backslides into an increasingly illiberal form of democracy.

Among the many theories that explain why some democracies consolidate while others regress, economic arguments—and especially variants of modernisation theory—have been especially influential. Przeworski et al. (2000), for example, contend that income per capita is the strongest predictor of whether democracy or dictatorship prevails. Indeed, a cursory glance around the world suggests that many authoritarian countries are poorer than the wealthy democracies of Europe and North America. Within democracies, a lack of economic progress can also reduce public satisfaction with the political and institutional status quo. For example, a 2018 poll by Pew Research Center conducted in 24 countries, including Indonesia, revealed that respondents with negative views of the economy are on average 36 per cent points more likely to be dissatisfied with democracy, compared to those with favourable views of the economy (Wike et al. 2019). A large body of research also suggests that a high level of inequality has negative implications for democratic participation and support (e.g. Solt 2008).

This chapter explores the economic dimensions of Indonesia's democratic quality. Our main goal is to analyse how economic conditions—specifically, income per capita, income inequality and unemployment—correlate to variations in democratic quality in Indonesia over the past decade.