Breakthrough Policies and the Vicious Circle of Poverty: A Case Study of Indonesia

Abstract

Poverty in Indonesia persists as a multidimensional challenge reinforced by cyclical traps in which low income restricts access to education, healthcare, and productive capital. Despite periods of steady economic growth, progress in poverty reduction has remained uneven, hindered by deep structural inequalities and recurring external shocks, most notably the COVID-19 pandemic. This study examines the effectiveness of breakthrough, targeted, and high-impact policy interventions in addressing the fundamental drivers of poverty, comparing their outcomes with conventional growth-led development strategies that often overlook distributional issues. Employing a mixed-methods approach, the research integrates qualitative policy analysis with an ARDL model, utilizing national data from 2000 to 2023. The empirical results reveal strong and significant negative relationships between poverty levels and key human development indicators, including literacy, life expectancy, and innovation capacity, emphasizing the centrality of human development in long-term poverty alleviation. Conversely, macroeconomic variables such as GDP growth and foreign direct investment show limited short-run impacts on reducing poverty, suggesting that growth alone is insufficient without accompanying structural reforms. Based on these findings, the study recommends prioritizing investments in education and healthcare, strengthening governance systems, and promoting inclusive employment opportunities. It further proposes a dual strategy that focuses on empowering individuals while simultaneously dismantling structural constraints to ensure sustained reductions in poverty. Thus, the study highlights the need for transformative and inclusive policies that can break Indonesia’s entrenched poverty cycle and support equitable development.