Managing Indonesia

The Modern Political Economy

John Bresnan

New York

Columbia University Press

1993

Epilogue

The Indonesian political economy in the late twentieth century was shaped by a complex array of events, personalities, institutions, interest groups, resources, ideas, and policies. It was a product of the nation's own unique history. Yet, the resulting product, in the early 1990s, was not altogether unique. Prominent features of Indonesia's political economy were quite comparable with those of the political economies of other nations. The political structure was highly authoritarian, dominated by the army, and resistant to change. The economic structure was highly productive, rooted in tropical agriculture, moving toward a new emphasis on manufacturing, fueled by oil and innovation. Social policy was relatively progressive. The very juxtaposition of such elements in a single political economy raised significant questions. Were these necessary parts of a whole? Why had they come to exist together at this time and in this place? To what extent were they the result of peculiarly Indonesian factors? To what extent were they the result of larger forces at work in Southeast Asia and beyond? Were they mutually supportive? Was the system stable? Or did it have within itself the seeds of its own destruction?

Our discussion begins with an assessment of why the Indonesian government experienced a growth in authoritarianism in the first place, and why the army became increasingly dominant; why opposition arose to this praetorian political regime; and why this opposition failed to effect any significant change up to the early 1990s. We will go on to assess the sources of Indonesia's development, its record of economic growth and social equity. We will then consider how significant the authoritarianism in government was to the economic and social policies pursued, and to what extent economic and social change was, in turn, creating pressures for political change. Finally, we will note problems that still remain for the next generation of Indonesia's elite to resolve.

Sources of Authoritarianism

It was not difficult, in the early 1960s, to see that some degree of authoritarian government was a likely prospect for Indonesia for some time to come. The country's precolonial history had been largely one of authoritarian, often autocratic, rule. The Dutch, unlike the British, had made no preparations for self-government in their East Indies colony. Indeed, by attempting to hold onto power after World War II, the Dutch left the Indonesians with no alternative but armed revolution, which, although it was a leveling experience, was hardly a prelude to successful civilian governance. Politicians and their parties did form a series of representative governments in the 1950s and eventually created an elected Parliament, but even this last did not establish a national consensus, and civil war led to its collapse. Sukarno himself pressed the attack on political parties, creating in their stead a Guided Democracy--more accurately, a soft authoritarianism, led by himself. By 1965 only three significant centers of power remained--Sukarno, the army, and the Communist party--and these last two were mutually antagonistic. Events seemed to be leading to an inevitable end.

The violence of 1965 nevertheless was unanticipated in its scale and ferocity, and it changed Indonesia's political landscape in several fundamental ways. The Indonesian elite was left even more conservative than it had been, mistrustful of what remained of the Left, and doubtful of the nation's ability to be governed by popular means. The destruction of the Communist party reduced the institutional sources of power to the presidency and the army. In March 1966, after months of uncertainty about who controlled the government, after continued harassment by student demonstrators, and eventually in the face of physical threats by army units, Sukarno conceded executive authority to General Soeharto. Although much has been made of the letter in which Sukarno made this concession, the handover was a coup d'état in the ordinary meaning of the phrase.

Need the transfer of power have led to a continuation of the authoritarianism already in place? Some army officers favored the rehabilitation of political parties Sukarno had banned. This would have restored to national political life at least some elements that had obtained in the mid-1950s. It was significant to the eventual outcome, however, that Sukarno had not been alone in judging the political parties a failure. The parties were in general disrepute among the elite. Leaders of the banned Socialist Party, among them some of the nation's most prominent intellectuals, did not even seek the renewed legal recognition of their organization. Soeharto and the army leadership were under no great pressure to restore the nation to the status quo ante.

The mass violence influenced this thinking. Routine life in Jakarta had been upset for months as demonstrations were mounted on behalf of the Right and the Left. Many individuals had felt themselves in genuine danger. Even before the enormity of the killings in rural areas seeped through, the elite of the capital city had reason to be shaken in its attachment to popularly based politics. As the extent of rural killings became known, civilians and military men alike urged that political parties be banned from the villages.

In these circumstances it would have required a highly self-confident successor to Sukarno, and one deeply committed to popular government, to have aimed at something other than a restoration of order. No such person existed among the potential presidential candidates. Soeharto himself was by nature a wary man, averse to taking risks, and unsure of himself among an elite that had not taken to him readily. He also seems not to have understood the thinking that lay behind the political institutions of the modern industrial democracies. Soeharto was grounded by birth and rearing in a traditional, rural Javanese view of politics. Some thought he was also heavily influenced by the Japanese occupation army, which had given him much of his military training during World War II and also had a strong sense of the army's role in a nation's preservation.

So there was little debate. The country needed a strong hand to make something positive emerge from the trauma of 1965, and it would have one.

The Increase of Militarism

The means to "a strong hand" was obviously the army. Neither Soeharto nor any of the other potential presidential successors had the ability to mobilize mass opinion as Sukarno had had. Other than the presidency, the army was the sole institution that remained capable in 1966 of uniting the nation in a course of action.

The Indonesian army of 1966 was not the creature of a former colonial power; it was not an army led by men trained to serve as apolitical officers, as was the case in the Philippines, Malaysia, and Singapore. The Indonesian army was the creature of revolution; it was led by men who had joined to fight for national independence and stayed on to fight for national unity, as in Burma and Vietnam. The Indonesian army claimed a role in the management of public affairs based on its role in achieving national independence. The army claimed it had a "dual function": to defend the nation against enemies from within and without, by force of arms if necessary, and to assure wise and effective public policies. This latter claim was strengthened by the declaration of martial law during the outer island rebellion of the 1950s, and was institutionalized still

further with the founding of Guided Democracy in 1959. By the time Sukarno fell, the army and the other armed services already held numerous appointed positions in the cabinet, the Parliament, the governor-

ships of provinces, and the directorships of state economic enterprises.

Indonesia's armed forces were not large relative to the population as a whole. On the contrary, they were small by regional standards, that is, in terms of the number of armed men per thousand persons in the general population. Only the Philippines had a smaller army in the mid-1960s. But Indonesia's armed forces comprised a large part of the national elite. They appear to have outnumbered the country's central civil service at the time. And given strong central leadership, the armed forces could be overwhelmingly present in selected locations. After 1965 the "green shirts" of the Indonesian army seemed everywhere in Jakarta.

A massive infusion of military men into civil posts occurred at every level from the presidency to the villages from 1966 on. As late as 1986 the armed forces held 40 percent of the top positions in the entire central bureaucracy, and this did not include the state economic enterprises where they were believed to be almost universally in charge. This military involvement in nonmilitary affairs had more in common with the contemporary experience of Burma and Vietnam than with that of other countries of the region. Even in Thailand, where the army continued to play a significant role in the rise and fall of governments, the civil service remained separate and independent, owing perhaps to its own long history in the service of the monarchy. The result was to sustain a flexibility in Thai politics that was lost to these other countries, including Indonesia.

Taking control of the civil service was only the beginning of army expansionism in Indonesia. The eventual need to contest and win a national election occasioned a further extension of army power. It was at least possible that Soeharto might have won a free and fair election in 1971. But he and his military associates did not intend to risk a loss. The army literally overran what remained of the country's political terrain.

The Army as Government

At the outset many military officers undoubtedly thought they represented the best hope for the country. Civilian leaders had failed the nation. Politicians had quarreled ineffectually for years. Civil servants were inefficient and corrupt. Imbued with the ideology of their "dual function" and with the strong interpersonal ties that came with their years of close association, many officers had no higher loyalty than to each other. The army was not homogeneous by any means. It was divided along ethnic, divisional, generational, and other lines. But service loyalties ran deep, and in the early years after 1965 there were no stronger bonds in the nation.

Corporate and personal financial interest also was a powerful incentive for military dominance. Driven to raising funds by extralegal and illegal means to finance their own units, many armed forces officers had a strong interest in financial affairs. The state corporations, and new enterprises established after 1966 by the armed forces themselves, were the principal source of extrabudgetary subsidies. The government rice agency and the state oil corporation demonstrated amply the extent to which the armed forces, beginning with the office of the president, could divert state funds to their own corporate purposes. Nor was personal interest absent. With no external accountability functioning, some officers became deeply corrupt. An official commission said as much as early as 1970.

Over time, as the regime grew increasingly out of touch with the mood of the people, the concern for security fed on itself. A measure of paranoia already infected the security agencies at the time of the 1974 riots, when a grand conspiracy against the government was suspected, and thinly veiled charges were made against prominent citizens. Errors of judgment grew increasingly easier to make and harder to correct, as in the financial mismanagement of the state oil corporation, which reached crisis proportions before it came to light in 1975. The army had to be called in to support, in a highly visible fashion, the reelection of Soeharto in 1978. As no means of political expression remained that were permitted by law, the populace was driven increasingly to illegal acts, as when Muslim sermons and pamphlets led to arrests in 1985, and these in turn to demonstrations, and thence to firing on crowds, and eventually to acts of arson and bombing, only to be followed by more arrests and trials. The regime's political record grew exceedingly dreary, from the viewpoint of civil rights that were to be protected by the Indonesian constitution, not to mention that of human rights enshrined in international law.

The armed forces' continuing need to protect the government by force of arms raised the question of whether the Indonesian armed forces ever should have gone so far as they did in the first place in dominating public affairs, whether they should have remained in that position so long as they did, and how they were to remove themselves when that could not be avoided at an acceptable cost. These questions were not only a concern of Western liberal scholars, journalists, and politicians; some Indonesians shared the concern as well.

Sources of Opposition

The Indonesian army's domination of so many institutions of national life in the late 1960s was accomplished without much resistance at the time. But it was not accepted uncritically by three significant elements of the elite, and in time opposition arose from each of these.

Students played a role in Indonesia's history from the beginning of the national movement in the early part of the century. They were an important factor in the Indonesian revolution. Students and soldiers, working closely together, brought Sukarno down in 1966. On the other hand, students failed to attract either civilian or military support for their efforts to halt the Soeharto government in 1974, and again in 1978. They attacked the government's economic policies, official corruption, and the regime's authoritarian nature; their efforts failed, and student leaders went to jail. Many in Indonesia believe that the nation's students have since grown apathetic about national politics, that they are concerned only with their personal careers. The largest student outburst in recent years, one recalls, was aroused by a regulation requiring motorbike riders to wear helmets. Otherwise the principal demonstrations have had to do with local abuses of power. Moreover, students have been precluded for years from organizing themselves for political action by the pervasiveness of the internal security apparatus. Nevertheless, it is still possible that students will play a role in any significant reordering of military-civilian relations in the future. Given favorable conditions, namely a socially significant issue and a divided army, the student role in Indonesia's history might well be repeated.

Islam also has been historically at the heart of Indonesian politics. The Islamic Union was the country's first significant nationalist organization in the early part of the century. The Masyumi Party, the independent-minded party of outer-island Muslims, played a central role in the rebellion of the 1950s. Ansor, the youth wing of the Nahdatul Ulama, the major Muslim organization of Java, was the principal ally of the army in the killings in rural East Java in 1965. The Islamic Student Association provided the manpower for the anticommunist and anti-Sukarno demonstrations of 1965-66 in Jakarta. All these Muslim groups were considerably removed culturally from Soeharto and his chief military associates, who had strong attachments to the pre-Islamic religion of Java. (Soeharto himself finally made the haj only in 1991.) Yet, Islam was a major bulwark against communism, and the country's major Islamic organizations expected, after 1966, to receive Soeharto's approbation. All were seriously disillusioned.

The Masyumi Party, which Sukarno had banned from public life, lobbied strenuously with Soeharto for the legal right to return under its own name and leadership. Its failure to achieve its aim left a large number of Muslims, especially in the islands of Sumatra, Kalimantan, and Sulawesi, disenfranchised and disaffected. The Nahdatul Ulama vigorously protested the official conduct of the 1978 elections; walked out of the People's Consultative Assembly over references to non-Islamic beliefs in legislation proposed just before Soeharto's reelection in the same year; walked out of Parliament over an election bill in 1980; and finally withdrew from national politics in 1985. Thus, the nation's two most prominent Islamic organizations of the last half of the twentieth century were pushed beyond the margins of official politics. But it did not mean the marginalization of Islam from Indonesian society. Indeed, Islam was enjoying something of a renaissance in Indonesia in the mid-1980s. A fundamentalist element existed, which was not insignificant among the urban poor, as the Tanjung Priok incident made clear. An elite Islamic element was becoming noticeable in the upper bureaucracy. But mainstream Islamic organizations were caught up in the dakwah (missionary) movement, promoting greater personal devotion among those who were Muslims from birth, recruiting a younger generation of leaders, and leaving national politics for another day.

Opposition to Soeharto's leadership also arose from time to time within the armed forces themselves and among retired military leaders. These were not a homogeneous group. Service rivalries existed between the army and the rest. The army itself was divided ethnically, between Javanese officers who comprised the majority, even though the Javanese did not comprise a majority of the population, and non-Javanese officers. The Javanese themselves were further divided between those who had served with Soeharto in the Diponegoro Division and those who traced their military service to other units. The general officer corps also was divided between those of Soeharto's generation, who had fought in the revolution, and those who were younger and had not. These latter came to be divided in time between those who had seen combat service in East Timor and those who had not. So the military was not of a piece by any means.

The protests by students and Muslim party leaders in 1978 came close to dividing the army. Soeharto asked the armed forces to give him their visible public support, and, after some hesitation, they did so; he was reelected in a city that resembled an armed camp. Many officers, both serving and retired, were deeply disturbed by these events. Had the army leadership not acted as it had, its units might well have stood for either side and found themselves in a civil war. The experience raised the question of how responsible the army must be for the protection of the government of the day, when this involved the risk of either dividing the army internally or alienating it from the population at large.

In May 1980 former national Islamic leaders and retired senior military men, including figures who had been on both sides of the civil war in the 1950s, joined together in two extraordinary petitions to the Indonesian Parliament, calling for an end to the "transition" government that had ruled since 1966; declaring that only honest general elections could provide the country with a legitimate government; and accusing Soeharto of using the armed forces dishonorably against his critics. The petitions reflected the former leaders' desire to put themselves on the historical record. The petitions had no chance of effecting any early practical change; even news of the petitions was kept out of the daily press. More than a decade later the signers of the 1980 petitions were still routinely denied their civil rights. Only in 1991 did they receive their first hearing by a parliamentary committee, and their names were permitted to appear again in the press.

Thus, significant national interest groups--students, Muslims, and retired military officers--failed to reverse the course of events in spite of their obvious desire to do so.

The Failure of Opposition

One possible reason for the opposition's failure was the small number of individuals in Jakarta and other major cities capable of independent political action. Indonesia's urban population as a whole was small in comparison with most countries in the region in 1965--half that of the Philippines, for example--and still lagged well behind most countries of the region in 1990. What might be regarded in other countries as the middle class--readers of a daily newspaper, for example, or people with access to a telephone--numbered exceedingly few in Indonesia, on the order of 2 or 3 percent of the population even in recent years, which was the lowest in the region except for Burma and Vietnam where the military also remained powerful. ₁

On the other hand, a large portion of this middle class resided in Jakarta. The situation could not be compared to Bangkok, which accounted for more than half of Thailand's entire urban population; that was unique. But a third of all the telephones in Indonesia in the late 1980s were registered in Jakarta. And while the number was low--only 300,000 in a city of nine million--each telephone probably was available to an average of no fewer than five persons. Moreover, the number of citizens on the waiting list for a telephone was larger than the number already being serviced by the inefficient state telephone company. It was thus possible that Jakarta's "middle class," defined as the portion of the population that had access to a telephone or could afford to have one, constituted about 30 percent of Jakarta's population by the beginning of the 1990s, or some 2.7 million persons. In short, by the end of the period of this study, Jakarta's "middle class" was by no means negligible in size. ₂

Many members of this middle class belonged to the civil or military service. In some Indonesian cities and towns government employment provided jobs for as much as 25 percent of the labor force. In Jakarta's case the portion might have been not much less. Soeharto reduced the size of the armed forces over time, but he vastly increased the civil service. The central bureaucracy grew faster than the national population from 1967 on as government development programs increased in number and scale. The largest increase was in the educational system; a large part of the civil service came to be composed of teachers in the primary and secondary schools. This was probably the single biggest contribution the government made to the growth of the middle class. But it was a politically dependent middle class. Even professors at the leading universities were civil servants. Independent professional people--physicians, engineers, and the like--were late to develop in Indonesia compared to those in Thailand or the Philippines, and their number was still relatively small in proportion to the population in the late 1980s; Indonesia would have had to increase its supply of physicians by 50 percent to match these neighboring countries. ₃

Most members of the newspaper-reading public, if they did not belong to the military or civil service, nevertheless depended on the regime for their economic survival. This was particularly true of private businessmen, whose ability to function depended heavily on bureaucratic patronage. Government regulation of the economy had been expanded, from independence on, by a series of nationalist politicians, martial law administrators, and leaders of the Guided Democracy period. The latter was especially favorable to the central bureaucracy, which, like the army, was heavily Javanese, and was culturally attuned to the view that the society was in need of its direction. The growth of economic regulation therefore resumed after a brief respite in the late 1960s.

Some sectors, notably oil and rice, involved high political and financial stakes, and their regulation was pursued as much for political purposes as for economic ones. These sectors involved large sums of state funds; powerful state enterprises that reported directly to the president; dealings with foreign governments and multinational corporations; and domestic armies of private suppliers and contractors. Their power was unquestioned; foreign oil companies could fire politically suspect individuals at the direction of state oil corporation officials. The manufacturing sector also was governed by a plethora of government regulations, which were increased still further in response to the recession of the early 1980s. That the vast majority of the larger private firms in all these sectors were owned by ethnic Chinese, an extremely small minority numbering less than 3 percent of the population, and one frequently harassed in times of social stress, contributed still further to the regime's ability to override its critics.

But the business environment was not static. As oil prices on the international market fell throughout the 1980s, the need for an alternate source of foreign exchange became urgent. Much of the trade regulation in manufactures was undone by the late 1980s, reducing production costs and encouraging exports. By the same time private capital was playing the major role in domestic investment, and foreign private investment was growing rapidly as well. Banking also was deregulated, spawning an explosion in the number of private money managers. All these developments increased considerably the freedom of private citizens. The very rich continued for the most part to be of Chinese descent or, by now, members of the presidential family and their circle of friends. But as their enterprises grew in size and number, the class of professional managers, engineers, accountants, and other specialists, especially in and around Jakarta, expanded broadly.

As these developments suggested, the better-off classes, especially in Jakarta, were experiencing many positive economic and social benefits as a result of the country's development. A significant urban middle class was in the process of formation during the 1970s and 1980s, especially in the capital city. A large part of this middle class was caught up in new kinds of productive activity, and was enjoying new levels of income and consumption. This was a class that was clearly benefiting from the management of the nation's affairs. It had a stake in the economic and social progress that had been achieved. It had a stake in the status quo, in continuity. It did not rush to oppose government policies and practices, even when it did not like them. But it was also a class that was growing in its economic independence of the government, and that had political implications for the future.

Sources of Development

The growth of the middle class reflected economic and social policies characteristic of the Soeharto regime. Most significant was the reorientation of economic policy toward the United States, Japan, and Western Europe. This represented a radical shift from the late Sukarno period, when the Indonesian president was declaring the founding of a new axis linking Pyongyang, Beijing, Hanoi, Phnom Penh, and Jakarta in a counter-United Nations of what he termed the new emerging forces. Had the leftist officers who initiated the attempted coup in 1965 succeeded, it is entirely possible they would have led Indonesia into a much more closely integrated relationship with these Marxist-Leninist regimes. Had this occurred, the Indonesian political economy probably would have become mired in the same loss of productivity and incomes that has been experienced by all these regimes in recent decades.

The Soeharto regime had another alternative. It might have chosen, like Burma's military-led regime, to turn inward, cut itself off from the rest of the world, and concentrate on consolidating its own internal control. This seems never to have been seriously considered. Many members of the elite fully expected that the industrial democracies would come to Indonesia's aid in the wake of the Communist party's destruction. The few trained economists among them had, in any case, been urging the need to reestablish ties with the country's traditional economic partners, and these were the industrial democracies. This strategic choice was made cumulatively by a small number of officials in the course of six months between March and October 1966. They included Soeharto himself; two of his subsequent vice presidents, Sultan Hamengkubuwana and Adam Malik; and the country's leading university economists, who at the time were advisers to the Sultan. Their collective decision was crucial to Indonesia's subsequent rapid development, for it committed Indonesia to an integral role in what was soon to become the world's most rapidly growing economic region. Between 1965 and 1988 Japan emerged as the second largest economy in the world, and South Korea, Taiwan, Hong Kong, and Singapore accounted for half the manufactured exports of all developing countries.

Soeharto's role in this and subsequent key economic policy decisions was substantial. He played a significant part in appointing to his personal staff, and in time to his cabinet, a group of academic economists who were to be the main source of economic policy for more than two decades. He was also the final arbiter in accepting or rejecting their advice, usually accepting it in times of financial austerity and ignoring it when resources were plentiful. In this capacity Soeharto earned much respect within the international financial community. He conducted the meetings of his economic subcabinet personally for years, and members of this group regarded him as having a good head for economic issues. He was sympathetic to every program aimed at serving the interests of the Javanese rice farmers among whom he lived as a boy. He backed the government-sponsored program to promote family planning in the face of possible religious opposition. He shared the nationalism of the army officers and civilian engineers who pressed for expansion of the state enterprises in high-technology sectors, such as petrochemicals. He was, like many other chief executives elsewhere in the world, more an arbiter than a source of economic ideas. Long-time cabinet officers tended to view Soeharto as the chairman of the board, not the chief executive. Nor was there an alter ego of this very private man. Indonesia lived under a collective leadership of technocrats during most of the Soeharto years.

The chief source of economic policy was a group of economists, initially five in number and extending over time to several times that number, most of them drawn from the Faculty of Economics of the University of Indonesia, who have filled key economic positions in the government from late 1966 until the present writing. They were the first group of Indonesian economists of any size ever to be trained to the doctorate, many at the University of California at Berkeley at least in part, most in the United States, and some elsewhere in the West. Led by a brilliant strategist, Widjojo Nitisastro, they loomed large on the Indonesian intellectual horizon, and their collective confidence in the fundamental rightness of mainstream economic theory made them a force to be reckoned with. They provided Soeharto with two essential ingredients to economic policy: the confidence of the international financial community, and policies and programs that produced demonstrable results.

The International Monetary Fund and the World Bank were consistent in their strong support of the Indonesian government from the late 1960s on. They were joined by the governments of Japan, the United States, and Western Europe, making Indonesia the principal recipient of foreign economic assistance in Southeast Asia for more than two decades. The Japanese government gave more economic aid to Indonesia than to any other country in the world between 1967 and 1990. The Indonesian economists' reputation and the support of governmental and intergovernmental agencies helped to make the Indonesian economy highly attractive to the private international banking community during the 1970s and 1980s. One result was to make Indonesia the most highly indebted economy in Asia in 1990. But that was only another way of saying that the Indonesian economy was expected to be a high-performing economy in the decade of the 1990s. That Indonesia's ranking in terms of indebtedness had earlier been held by South Korea tended to reinforce this interpretation.

Oil also was a factor in attracting foreign grants, loans, and investments, and in boosting confidence in the performance of the Indonesian economy, from the late 1960s to the early 1990s. American oil companies were the main producers of Indonesia's oil from the 1950s on, and Japan was the chief consumer from at least the late 1960s. Oil held out the promise that Indonesia would be able to repay its foreign debts and make it possible for foreign investors to repatriate their capital. The sharp increases in the world oil price in 1973 and 1979 greatly enhanced these expectations, and even the financial crisis of the Indonesian state oil company in 1975 did not greatly alter them. Oil represented some two-thirds of Indonesia's export earnings, and financed as much of the government's spending, between 1974 and 1984.

Few nations managed the oil bonanza well. Some experienced costly inflation, as Venezuela did. Some borrowed hastily on the future, running up an unmanageable debt, as Mexico did. Still others wasted the opportunity altogether, misallocating the new resources in favor of short-term benefits, and contributing to a long-term deterioration in the economy, as Nigeria did.4 Oil was no panacea. On the contrary, managing the windfall seems to have been much more of a challenge than an opportunity. Oil or no oil, policy mattered. In Indonesia, from the mid-1970s, oil financed a massive program of economic and social development, especially in rural Java.

From the mid-1980s, as the price of oil declined, occasionally to quite low levels, and as the growing Indonesian economy needed access

to more and more foreign exchange, Indonesian policymakers were pressed to find an alternative to foreign aid and oil. The obvious alternative, in light of what was occurring in the rest of the region, was the export of manufactured goods. Manufacturing had begun late in Indonesia, relative to the other noncommunist economies of Southeast Asia. Nevertheless, it had been enjoying rapid growth under the protection of the government, which kept foreign competitors at bay until well into the 1980s. Then, with their backs to the wall, Indonesian policymakers began the painful process of deregulation. The results were highly positive. Together with traditional exports, manufactures outpaced oil exports after 1988.

If these trends continued, the Indonesian economy could complete a major restructuring before the 1990s were out.

The Record of Growth

The outcome of this process of decision making has been a record of growth in the Indonesian economy that has been impressive by regional and world standards. The total Gross Domestic Product (GDP) of Indonesia in 1965 has been estimated variously at $3.8 billion to $5.9 billion, compared with $6.0 billion for the Philippines, $4.3 billion for Thailand, $3.1 billion for Malaysia, and $0.9 billion for Singapore. By 1990 Indonesia's GDP was by far the largest in the region at $107.2 billion, compared with $80.1 billion for Thailand, $43.8 billion for the Philippines, $42. ₄ billion for Malaysia, and $34.6 billion for Singapore.5 The GDPs of Burma, Laos, Cambodia, and Vietnam, for which data were not available, were assumed to be dramatically lower.

The Indonesian level was reached by average annual growth rates of 7.0 percent from 1965 to 1980 and 5. ₅ percent from 1980 to 1990. With the exception of Thailand, which grew more rapidly in both periods, Indonesia grew at a rate higher than other regional states and higher than average for low-income and middle-income economies worldwide. ₆

Indonesia's Gross National Product (GNP) also grew rapidly in per capita terms. The 1965 figure has been variously estimated at $30 to $55, which was lower than estimates for China, India, and the rest of South Asia, including Bangladesh and Nepal. The 1990 estimate was $570, which was higher than estimates for all these other nations. The average annual growth rate of GNP per capita between 1965 and 1990 was 4.5 percent, the highest in Southeast Asia and very high for low-income and middle-income countries worldwide. ₇

This was accomplished not only by the economy's high growth rate but also by the population's low growth rate. The Indonesian population grew at an average annual rate of 2.4 percent between 1965 and 1981, and 1.8 percent between 1980 and 1990. These rates were much lower than those of the Philippines, lower than those of Malaysia, lower than or equal to those of Thailand, and lower than those of most other low-income and middle-income countries worldwide. The Indonesian rates were also comparable to or lower than those of India, without involving such extreme measures as occurred in India's program at one time. ₈

The growth rate in Indonesia's agricultural production after 1965 was high by regional and global standards. The average annual rate between 1965 and 1980 was 4.3 percent, which was surpassed only by Thailand in the region, and only by a few other economies, most of them much smaller, in other parts of the world. The rate between 1980 and 1990 was 3.2 percent, which was surpassed by Thailand and Malaysia, but was again high by world standards for low-income and middle-income countries. The accomplishment was the more notable since the agricultural economy of Indonesia was by this time the third largest among the world's low-income countries, with all the technical complexities and management challenges that implied. ₉

The growth rate in manufacturing production after 1965 was also high by regional and global standards. Manufacturing contributed only 8 percent of Indonesia's Gross Domestic Product in 1965; only Nepal and Bangladesh, among Asian economies, reported a lower level than this. Indonesia's manufacturing grew between 1965 and 1980 at an average annual rate of 12.0 percent, surpassed in South and Southeast Asia only by the city-state on Singapore. Indonesia's manufacturing grew between 1980 and 1990 at 12.5 percent, which was unsurpassed in the region. ₁₀

A principal social benefit of this rapid economic growth was in education. In 1965 Indonesia's primary school enrollment amounted to only 72 percent of the age group, which was slightly below the level of India and well below that of China. In 1989 Indonesia had a net primary school enrollment of 99 percent, which put it one percentage point behind China and Sri Lanka among the low-income nations of Asia, and on a par with the Philippines among the middle-income nations of Asia. Secondary school enrollment meanwhile went from 12 percent to 47 percent of the age group, the latter of which was second only to Sri Lanka among all low-income Asian nations and about midway between Thailand and the Philippines among middle-income Asian nations. ₁₁

Indonesia was still a low-income country. It still had the lowest per capita income among the market-oriented economies of Southeast Asia or, when measured in current international dollars, shared that position with the Philippines, once its much wealthier neighbor to the north. ₁₂ Viewed from the vantage point of the Indonesian elite, however, the record from 1965 on was justifiably a source of considerable pride. Whether compared with the country's own earlier history or with the contemporary performance of other nations, the economic and social growth registered during the successive Soeharto administrations was demonstrably of a high order. It is difficult to imagine that this growth did not contribute significantly to the stability of the political regime.

The Record of Equity

Equity issues were among the most persistent raised by critics of the Soeharto government. The evidence did not support the critics' more extreme charges, as reflected in statements made by student leaders in 1978 in Bandung or those made by Muslim preachers in 1985 in Tanjung Priok. On the contrary, evidence clearly indicated that the benefits of growth were reaching all social classes. At the same time disparities between Jakarta and the rest of the country, and between Jakarta's rich and poor, were becoming increasingly evident.

Consumption expenditure studies in the mid-1970s showed that the Indonesian economy was broadly more equitable at that time than the economies of Malaysia or the Philippines, and about as equitable as the economies of Thailand and Sri Lanka. Similar studies in the mid-to-late 1980s showed a pattern in Indonesia that was more equitable than those in Malaysia, the Philippines, and Sri Lanka, and similar to that of India. We should not make too much of such comparisons, but the data do not support the view that Indonesia was unusual by any means in respect to its pattern of income distribution, and, if anything, was among the more progressive in its region. ₁₃

That benefits have been shared by even the population's lowest income groups was also apparent. Consumption expenditure studies between 1970 and 1976 showed per capita improvements in real terms for the population as a whole, and improvements in the levels of consumption in real terms for all income groups. Moreover, by one measure, the portion of the population living in poverty declined from more than 50 percent in 1970 to about 40 percent in 1976. The rise in real consumption levels of even the poorest groups appeared to have been sufficient to bring about a decrease in absolute numbers as well. ₁₄

This trend appears to have continued in the 1980s. Measured by the official poverty line, a substantial decline occurred in the percentage of poor in both urban and rural areas between 1984 and 1987. The absolute number of Indonesians in poverty also declined, from 35 million in 1984 to about 30 million in 1987. Income inequality also declined between 1984 and 1987, as indicated by the increase in the share of consumption of the poorest 20 percent of the population. Other poverty measures showed the same trend. ₁₅

At the same time, rural-urban disparities appear to have increased in recent decades. While rural consumption was improving at real rates of 2 to 3 percent per year in the 1970s, urban consumption was improving at real rates of 4 to 7 percent. The result was a severe increase in the disparity between the bottom four-fifths of the rural population and the top fifth of the urban population. This rural-urban disparity was particularly acute on the island of Java. Java's villages contained the vast majority of the country's poor in the late 1970s--77 percent of all poor households in the nation were in rural Java. At the same time, Java's two largest cities, Jakarta and Surabaya, contained a large number of the country's citizenry who were better off; by 1971 these two cities already contained nearly 30 percent of the total urban population. ₁₆

Regional disparities also favored Jakarta. The capital city has consistently been the only province without minerals that has been among the richest in the nation. The exploitation of mineral resources has made several provinces with relatively small populations on the geographic periphery--Aceh, Riau, East Kalimantan, and Irian Jaya--the nation's wealthiest provinces in nominal terms. But most of the income accrued to populations elsewhere, mainly in Jakarta. Jakarta in the mid-1970s not only had 30 percent of all the telephones in Indonesia, but it also had 25 percent of all motor cars and 30 percent of all medical doctors. ₁₇

Per capita consumption data also pointed to a large increase in the degree of inequality within urban areas. In addition, real wage levels showed no discernible upward movement, leading analysts to conclude that business profits and property income were growing rapidly, also benefiting upper-income groups. ₁₈

Soeharto himself speculated on national television in early 1990 that the widening "social gap" could lead to "social disturbance." ₁₉ It had been many years since any new antipoverty programs were undertaken; these had been a phenomenon of the 1970s. Official attention was drawn to other problems through the 1980s; the regime found itself heavily preoccupied with the orderly management of the economy in the face of uncertain and sometimes unfavorable external factors. This was an objective that appealed strongly to bureaucratic and business elements in the elite. That is not to say that a parallel concern to provide a measure of distributional relief did not exist. The government did protect its village-level programs, even in the 1980s when civil service salaries were frozen. But the rise of urban inequality did not generate a significant reponse.

Possibly the most significant progress in terms of equity in Indonesia was in regard to male and female access to social benefits. The achievement of virtually universal primary education, which was realized for females as well as males, was an extraordinary accomplishment. Female education has been regarded by some as a major factor in the reduction in the rate of population growth, and by others as a major contributor to the growth of rural incomes. The impact has been greatest in rural Java, where educational attainment had previously lagged behind other provinces.

Authoritarianism and Policy

The relationship between the political regime and its accumulated economic record was a matter of long-standing disagreement among Indonesians themselves. The regime's supporters argued that a high order of political stability was essential to the country's economic and social development--that the Indonesian people could not have enjoyed the benefits of the 1970s and 1980s had the government been as lacking in unity and discipline as, for example, that of the neighboring Philippines. Critics argued that the nature of the regime had led more or less inevitably to policies and practices that favored foreigners over Indonesians, senior officials over private citizens, and Chinese-Indonesians over indigenous people. A prima facie case could seemingly be made for both these positions. Was it possible to come to a more precise view?

What primarily linked the political regime to economic policy was Soeharto's long survival in the presidency and that of the university economists around him in positions of political significance. The appointment of men of such expertise did not in itself depend on the nature of the regime. Similar expertise existed in all the noncommunist capitals of the region and was represented at high levels of government in all the states neighboring Indonesia by the late 1960s. The Indonesian case differed from the others principally in the small number of economists and other highly trained personnel that existed in Indonesian society at the time, and in the lengthy period that a few of these individuals remained in positions of substantial power and influence.

The tenure in office reflected the mutual loyalty that existed between Soeharto and his chief economic advisers; it also reflected the army's long support of the economists, as well as of the president himself. It is difficult to imagine that the economists would have survived the events of 1974, or that Soeharto himself would have survived the events of 1978, had the regime depended on popular support. As it was, with strong army support, the cautious pragmatism that characterized the rehabilitation of the Indonesian economy in the late 1960s continued to be exhibited in public policy through much of the 1970s and 1980s. The extraordinary continuity of this policy orientation has to be counted the single most important contribution to the Indonesian economy's record of growth and development.

Macroeconomic policy of the kind described did not directly favor any one economic interest group over another, although the general orientation tended to protect the average citizen. Policies that did directly favor specific groups were to be found in the regulatory regime and in government spending programs. The outstanding example of regulation and spending together in the interest of a specific group was in regard to Indonesia's farming population. The protection of agriculture, coupled with spending programs to reduce the cost of agricultural production and other programs to increase the provision of physical infrastructure and social services in rural areas, was highly progressive through the 1970s and 1980s; the major benefits went to small-holder farming families, especially in Java's rice-growing regions, which also held many of the nation's poor.

It is difficult to imagine that a political regime in which policy-making was shared with a popularly elected legislature would have been able to sustain this strong rural bias for more than two decades. Given the distribution of secondary and higher education in Indonesia, such a legislature in recent decades would have been dominated by elite urban interests. This is not to say that any authoritarian government would necessarily have favored the rural sector; Nigeria was a notorious case of a contrary orientation. Personalities and circumstance also mattered. The Soeharto regime favored rural Java not only for reasons of economic theory, but also because the president and his economic advisers, in spite of their very different backgrounds, understood its needs uncommonly well; and because the Indonesian army joined them in seeing the economic and social rehabilitation of rural Java as essential to rooting out the basic cause of the earlier growth of communism there. The authoritarian nature of the Soeharto regime enabled it to pursue this rural vision without urban hindrance.

The treatment of economic interests was more complex as one moved beyond the agricultural sector, where much of the technology was in the public domain. In the case of industry, much advanced technology, whether it was in the mining of oil and other minerals, or in manufacturing for domestic use or export, was owned or controlled by foreign private corporations. Especially, from the late 1960s on, U.S. oil and other mining firms, and Japanese manufacturers of consumer goods, were the primary sources of the technology Indonesia sought, of the capital necessary to its use in Indonesia, and of access to needed markets abroad. To what extent did the Indonesian government's authoritarian nature determine or influence the policies that were enacted in dealing with these foreign economic interests?

The oil industry was a state-owned industry in most countries of the world in the 1970s, and the state interest was in extracting the maximum feasible rent from the industry. In the Indonesian case, Sukarno himself had hesitated to rein in the U.S. oil firms that were earning the bulk of the nation's foreign exchange. After 1965 Soeharto was eager to encourage foreign firms to expand their exploration and production as a way of getting the economy on its feet again, but the Indonesian policy offered nothing particularly favorable to the foreign firms. After the 1973 oil embargo, Indonesia's revenues from the industry rose and fell as a result of the production levels set by the Organization of Petroleum Exporting Countries (OPEC), and changes in the global demand for oil as economies experienced growth and recession. Indonesia's oil reserves and production capacity were not sufficient to permit it to pursue an independent course. Only once, after the state oil company crisis of 1975, did the Soeharto government demand and obtain a larger share of its oil revenues from its long-time producers. New producers were always targets of opportunism, but opportunism also had its limits. Actions unfavorable to the oil companies reduced the incentives for exploration, whereas Indonesia's oil reserves tended to be found in small, scattered fields that required a constant search. As profits were squeezed, long-term production was threatened. On the whole, the Soeharto government opted for the longer term. The nature of the regime enabled it to pursue this course.

The principal relationship between the regime and the oil industry was not to be found in how the government dealt with the foreign oil firms, but in how the ready availability of oil money acted on domestic decision making. It was recorded by an official commission on corruption as early as 1970, and was revealed more fully by official sources subsequent to the state oil company crisis of 1975, that the state oil company was for many years run as an extension of the president's office. Oil money was used to finance projects more or less as the president of Indonesia or the head of the state oil company decided. These projects included the financing of the government's victory in the 1971 elections. To what extent this continued to be the case beyond 1975 was unknown; the state oil company had still to make public a financial report as of this writing in 1992. But oil money also made it possible for Soeharto and his economic advisers to fund numerous programs that were both politically popular and economically and socially desirable from the mid-1970s on. Oil money thus tended to amplify the regime's best and worst aspects. It reduced the number of decision makers who had to be involved in public policy, reinforcing the regime's authoritarian nature. It helped to finance the co-optation of interest groups, helping to perpetuate the regime. It corrupted some of the decision makers. And, at the same time, oil money helped make possible economic and social programs that were bringing about massive changes in Indonesian society.

The nature of the regime also was significant to industrial policy. Because the regime was so closed to outside opinion in the early 1970s, it did not accurately assess the level of nationalist feeling directed against foreign investors until rioters were in the streets in January 1974. Then, very much on the defensive, the government virtually closed down foreign investment for the better part of a decade. It seems reasonable to believe that if the political system had been more open to the pressure of public opinion, foreign private investment would have been placed under a greater measure of national control from the beginning. It also seems likely that more moderate action would then have been possible. This was the case with foreign investment policy in neighboring Thailand, for example, where the flow of foreign funds into the economy was carefully modulated for most of the 1970s and 1980s. On the other hand, when oil prices receded and foreign investment was again needed, the authoritarian nature of the Indonesian government enabled it, with no great difficulty, to open the door again.

As in the oil sector, the regime's authoritarian character was etched more precisely by its industrial policy in its domestic than in its foreign dimensions. Manufacturing in Indonesia in the early 1980s involved every major economic interest group in the Indonesian elite, including the civil and military bureaucracies, the state enterprises, the growing private business community, and the president's family and friends. An import-substitution orientation of policy had made possible double-digit growth from 1968 on. As a result, in the early 1980s, as global recession set in, a large number of manufacturers were able to demand and obtain even more substantial government protection from foreign competition. This response was not at all peculiar to the political regime; governments throughout the region had done the same at one time or another in similar circumstances, regardless of their domestic political regimes. What was attributable to the Indonesian political regime was its ability to begin to liberalize trade in manufactured goods within a few years, and to accomplish a considerable liberalization of manufacturing by the end of the 1980s. This was a painful process, and it required a disciplined leadership to carry it out. The liberalization of industrial protection was the clearest example, perhaps, of Indonesia's mirroring of Korea's and Taiwan's earlier experience. And it contrasted sharply with the neighboring Philippines, where a more open political system was still being used to serve the interests of a privileged few native industrialists.

The most controversial aspect of the Indonesian case was not any of these general policies, however, but rather the specific practices they permitted. The regime was immersed in corrupt practices in the granting of licenses, lending of funds, letting of contracts, and every other form of state action that had an economic value. Comparisons were necessarily imprecise, but many observers believed that Indonesian corruption was the most pervasive in the region from the late 1960s on. Domestically, two aspects of corruption predominated the private discussions of the elite. One was that Soeharto's family and a small circle of their friends and associates were enjoying unfair advantage, enabling them to amass large fortunes in a short time. The second was that Chinese businessmen were being given unfair opportunity, enabling many of them to create corporate conglomerates that vastly overshadowed in scale the firms of most of their indigenous competitors. These allegations became increasingly public as the nation entered the 1990s and presidential succession became a matter of increasing concern. It was difficult to say which of these issues was more pernicious in its influence on the process of succession. Together they seriously threatened the likelihood of an easy transition.

In sum, the authoritarian nature of Indonesia's political regime was essential to the character of many of the policies that promoted the country's growth and development. The nature of the regime made possible macroeconomic policies marked by moderation and continuity, encouraging savings and investment. It also permitted policies that favored long-term development in regard to oil, agriculture, and industry, which, over time, and on balance, were beneficial economically and socially. The regime performed better than most and actually delivered most of the growth and equity it promised.

Managed Pluralism

Such a political economy might usefully be thought of as a managed pluralism.

To say that the Indonesian political economy is managed  carries several connotations. In its archaic sense, the term manage  refers to the schooling and handling of a trained riding horse. In the ordinary contemporary meaning of the term, what is managed  is made and kept submissive or at least tractable. What is managed  also is treated with care, directed with skill, and made successful in achieving its aims by the judicious use of limited resources. These meanings are applicable to the Indonesian political economy. The society has been relatively accepting of the leadership. With the exceptions of the 1974 "disaster" and the Tanjung Priok incident of 1985, the leadership has been able to maintain itself in power with minimal force of arms. (The current separatist movements on the political periphery, in Aceh, Timor, and Irian, are not challenges to the existence of the regime.) The economy has been directed with great skill. The welfare of the society has been greatly advanced in material terms.

In the managed  pluralism of Indonesia, the managers have been relatively few in number, even fewer than in neighboring countries. Like many of the others, those of Indonesia have been protected in large measure from independent scrutiny or accountability, and have operated principally by way of incremental change, a minimum of public discussion, avoidance of debate of high principle, the resolution of issues on a case-by-case basis, and a style of decision making that places a high value on compromise. This is not to say that the managers exhibit no differences among themselves. There is a pluralism  in the Indonesian case that begins with the managers themselves.

To say that the Indonesian political economy is a managed pluralism  is to suggest that the general orientation of the managers' policies has the result of increasing the number of units in the economy and society capable of autonomous action within the confines of the existing political system. Indonesian pluralism  has included an increase in the number of government agencies capable of autonomous action, in the levels of management within them, and in the range of economic and social tasks to which they are set. At the same time Indonesian pluralism  also has involved an increase in the number, variety, and complexity of private groups and the economic and social tasks in which these also are engaged. These policy tendencies have been leading, in turn, to an increase in the differentiation among economic and social classes, among functional specializations, and among economic and social interest groups. Indonesian pluralism  also has included a managed openness to foreign involvement in the economy and society in the form of aid, trade, investment, and intercultural communication.

It is evident that these characteristics of the Indonesian political economy have been in a highly dynamic phase over the past twenty-five years. This is apparent not only from the detailed examination of cases, but also from the comparative analysis of quantitative data. The dynamic aspect of contemporary Indonesia has been encountered in many sectors of the economy, including agriculture, mining, manufacturing, and finance, where production and productivity have been rising rapidly. Dynamism also has been a characteristic of social life, as seen in the declining rate of population growth and the rising levels of education. The observation leads to the question: How has this economic and social dynamism been impacting on the political system in which it is taking place?

On the one hand, the political system seems to have been reinforced by its economic and social output to date. The history of the last quarter-century has been largely one of success building on success. One has a general sense of events rushing forward, of the future as being open-ended. On the other hand, there is a question of how far it is possible to elaborate upon the complexity of the economy and society without modifying the political system. The widespread presumption among the elite seems to be that the process of change that has been underway for the past quarter-century still has some way to go before reaching a necessary turning point.

It does appear that the pluralism introduced in the past generation is now greatly complicating the process of public policy-making--of managing the far more complex economy and society that have resulted. Pressures exist for greater transparency in this process, and political institutions to ensure this will need to be considered. But there is a surprising lack of urgency about the matter. Many members of the Indonesian elite seem confident that having survived so many difficulties they will muddle through the political transition that lies ahead. That is not a formula for a smooth transition.

The Political Transition

By the year 1992 Soeharto had been Indonesia's de facto leader for more than twenty-five years, one of the longest uninterrupted tenures of a head of government in the world at the time. His tenure had much to say about the dilemma of authoritarianism in the late twentieth century, a dilemma that remained a feature of both communist and noncommunist regimes in Southeast Asia and in other regions of the world. Soeharto and his security aides had managed the nation's political life with a heavy hand, co-opting interest groups, controlling institutions, and repressing dissent. At the same time Soeharto and his economic aides had managed with uncommon skill the growth of the Indonesian economy and the distribution of social benefits. Politically Indonesia appeared to have much in common with countries such as Burma and Vietnam, and economically with Thailand and the Philippines. The question was this: Was Indonesia embedded in its attachments to the past, as Burma and Vietnam seemed to be, or was it, following Thailand and the Philippines, on the threshold of a political transition?

The question was highly consequential. Presidential succession was assumed to be assured before another decade had run its course. Soeharto in 1993, when scheduled to stand for yet another term, would be seventy-two years old, an elderly man by Indonesian standards. Sukarno's departure from the presidency occurred amid much bloodshed and involved a major change in the political regime and in the orientation of economic policy. Members of Indonesia's elite were quite concerned that violence should not accompany the succession again. Could the succession be managed peacefully, on the basis of a broad consensus among the elite?

A consideration that gave the succession added significance was the potential impact on human welfare in the fourth most populous nation in the world. It was not only hoped that violence would be avoided but that the country's record of economic growth and social development would continue. Not only did the elite have a stake in the continuity of policy, but in a nation in which average per capita income was still on the order of only $570 per annum, the welfare of millions was potentially at risk. The concern was widespread as to whether a change in the presidency could be accomplished without significant change in the character of economic and social policy.

Yet another consideration that added weight to the succession was the belief, widely evident among the elite, that it was time for some change in the political regime. It is true that public commentary tended to focus more or less exclusively on individuals who were potential successors to the presidency, and that these were invariably military figures. At the same time, however, much private commentary clearly indicated that many in the military and civilian elite felt it was time for a change in the balance of civil-military relations. A new generation of Indonesians saw the heroes of 1945 as a dwindling band of elderly men. Even the events of 1965 were no longer in the life experience of most Indonesians over the voting age of eighteen. And younger army officers were believed to be increasingly removed from political ambition and concerned for their own professional advancement. As these younger Indonesians looked outward on the world at large, they could not help but see that their country was lagging behind other nations politically.

A further reason for interest in the presidential succession was that Indonesia, after being preoccupied with its domestic development for most of the Soeharto years, was again seeking a larger place in international affairs. In helping to negotiate an international settlement in Cambodia, in normalizing its own relations with China, in campaigning successfully for leadership of the nonaligned movement, and in other ways as well, Indonesia was by 1992 again becoming an active member of the community of nations. At the same time serious separatist movements were occurring on the Indonesian periphery--in Aceh, Irian, and Timor. It did not require long memories for leaders of neighboring countries to see that Indonesia's role in the stability of Southeast Asia could be affected by the nature of its succession process and by the character and stability of the successor regime.

Soeharto himself could play a role in the succession process. He could retire voluntarily at the end of his term in 1993 at the age of seventy-two, when he would be in a position to shape the successor government in any number of ways. He was not expected to do this, however, for several reasons. He was thought to believe that he had come into the presidency as a result of supernatural forces, and, if this were so, he would have reason to leave his departure to the same authority. He was known to be convinced that his personal contribution to the accomplishments of his administration was of overwhelming importance. In an autobiography published at the end of the 1980s he claimed personal credit for a wide range of achievements, and was either neglectful or scornful of many who had assisted him along the way. It was entirely possible that Soeharto believed Indonesia needed him for as many years as he could give to the country. He also had grounds for concern about his personal security in the event he was no longer commander in chief of the armed forces. The treatment of former leaders of South Korea, East Germany, and Rumania in recent years, not to mention Sukarno's fate, would have led him to consider this possibility. Finally, he had to consider the security of his children and his friends, and their material assets. The experience of Marcos's relatives and friends in the Philippines was well known in Indonesia, and the comparison with Soeharto was often made. For these reasons Soeharto seemed unlikely to retire on his own initiative.

The army would inevitably play a role in the succession. The army, unlike any other institution, had a structure of command and communication that linked its leadership with all parts of the country. An army general was vice president and, under the constitution, would succeed to the presidency in the event of the president's death, pending a vote by the Consultative Assembly. Other army generals or former generals effectively controlled the Consultative Assembly. The army was strategically positioned to influence the succession.

The army also suffered several disabilities. One was a lack of unanimity among army leaders about whether the time had come for Soeharto to be replaced. Some senior officers strongly believed by the late 1980s that the issue of corruption had created a major gap between the government and public opinion. Were the situation allowed to continue, they held, it could lead to disorder on a scale the army might have difficulty controlling. But at least a few senior officers were thought not to hold this opinion, including several Soeharto protégés in key army positions in Jakarta.

Even if the army leadership were united in its opinion, it faced obstacles to taking a stand against the president. Army commanders had a formidable psychological obstacle in the loyalty they owed the commander in chief, and this was reinforced by the society's traditional deference to superiors and elders. Soeharto had successfully faced down the army in 1988 when army commanders were united in opposing his choice for the vice presidency. In 1990, as discussion of the succession surfaced in the mass media, Soeharto demanded that it stop, and it did. Army commanders were also hindered by their felt need to preserve the constitution and its formal requirements in the interest of legitimacy. If they could not nudge the president to take the initiative, they might not be able to press him to do so against his wishes either.

Even were the sense of a need for change strong enough to override these obstacles, army leaders faced serious difficulties in filling the presidency. The army had no alternate candidate behind whom it could unite. Since even discussion of the topic was seen as disloyal behavior, army leaders were inhibited from developing a consensus among themselves on this point. And that would still not be enough. Many members of the elite, including former army leaders, were generally of the opinion that army support alone would not be sufficient to enable the next president to govern. The army had no justification to fill the office on its own initiative as it had done in 1966. The army also had less interest in doing so; it was smaller, more professional, and less political. The civilian element in the elite was, at the same time, much larger, wealthier, and better educated. Meanwhile the world outside was also changing, and dictatorships were giving way to more open regimes in many regions of the globe. Many believed a national consensus was needed on a new formula for power sharing.

Such a change clearly would require both time and the freedom to debate alternative courses. Perhaps men would arise willing to stand against the president and launch this debate. Failing that, the fear was that a settled succession was problematic. It was not known when it would occur, in what circumstances, or by what process. The future could hardly be more unpredictable. The Indonesian elite's worst fear was that Soeharto's successor would be unable to hold the system together, with disastrous results. That fear was encapsulated in the prediction attributed to a Javanese mystic: Soeharto would be succeeded by a turtle. And the turtle would be succeeded by a crocodile, which would eat the turtle up.

Unfinished Business

Thus by a process that could not be foreseen the Soeharto era would eventually give way to a successor. When it did, the Indonesian elite would continue to face some long-standing challenges.

One of these was the army's role in politics and government. The challenge was assured by the high degree of army penetration of the national executive, the legislature, provincial governments, the state corporations, the government "party," and much else. The likelihood was that such a high degree of army involvement would give way only slowly with the withering away of interest on the part of army personnel themselves.

The alternate prospect, of a rapid army withdrawal, seemed undesirable. Among other reasons, a rapid diminution in army influence would run the risk of inviting continuing coups and attempted coups, as have occurred in Thailand and the Philippines in recent years, and even the danger of wholesale rejection of political change, as in Burma and Vietnam.

The army's ability to remove itself from the government even if it wished to do so would be conditioned by the environment prevailing at the time. It was widely believed that a global recession and depressed oil prices would create a situation in which such a change would be unlikely without some disorder. In an age of increasing ethnic and religious division and competition, the risk was that an army withdrawal from politics also might be hampered by controversy surrounding an Islamic minority or the Chinese minority or both.

The place of Islam in Indonesia's politics and government also remained unsettled. This did not mean that past debates had to be repeated. On the contrary, the issue of an Islamic state appeared to be of interest only to fringe elements of the Muslim community. There was also a source of optimism in the prospect that Islam and the bureaucratic elite were heading toward an amicable convergence as a result of fundamental changes within society--the raising of educational levels in devout Muslim communities and the success of Muslim missionary activities among members of the bureaucratic elite. Even so, significant problems remained.

The progressive secularization of politics, on the one hand, and the government's co-optation of Muslim functions and symbols, on the other, led to a high level of frustration within the community of devout Muslims, and to considerable unease among non-Muslim leaders. It was difficult to imagine that the next president of Indonesia could be as remote from the center of gravity of political Islam as Soeharto had been. It seemed increasingly desirable that the next president should be readily identifiable as a devout Muslim and readily understanding of Muslim perceptions and concerns. But complex issues remained to be worked out among members of the Muslim community, who were of varying cultural and spiritual traditions themselves, and between them and the non-Muslim minorities, including adherents of Javanism, Hinduism, Buddhism, and Protestant and Catholic Christianity. These were issues of a sort that were not advisedly addressed by public authorities in the first place. The real challenge was for religious-minded intellectuals in all these minority communities--for each is a minority in the end--to contribute in their own way to the development of a new national consensus on the role of religion, including Islam, in Indonesia's public life.

Another challenge for the future was the need for a social philosophy to take account of the rising role of private capital in the Indonesian economy, including the share of this capital owned and managed by the Chinese minority. It seemed impossible in 1992 to imagine an Indonesian economy without a large and vibrant private sector. Including millions of small farms, shops, workshops, and service firms, as well as millions of individuals in the informal sector, the private economy was overwhelming in its significance to the society. The spectacular growth of the private sector in the 1980s did not take place among these small units, however. The growth of big industrial conglomerates in the protected conditions of the 1980s probably would not have impinged so dramatically on national politics had it not been for the fact that the bulk of them were owned and operated by members of the small Chinese community. This occurred in a political atmosphere in which the government, in the Broad Outlines of State Policy, continued to express severe criticism of "free-fight capitalism."

It was surely one of the failings of the Soeharto regime that neither the president nor any of his principle advisers had even begun the process of developing an alternate view of the role of private capital in the society. The responsibility was primarily Soeharto's because he had set himself up as the chief interpreter of the constitution, and also because he had to be sensitive to an issue that touched on the wealth of his family and friends. His recent efforts to build a new consensus on cooperatives--including efforts to obtain commitments from business conglomerates to sell or even give shares in their enterprises to cooperatives of uncertain membership--seemed doomed to failure. How any of these vague notions would be accomplished in practice on any significant scale was never worked out.

Meanwhile, approaches well established in other countries had gone wanting for attention. No antitrust legislation was in place that would keep the large accumulation of private wealth within socially acceptable constraints. There was no assured enforcement of tax collections from the very wealthy, whether individuals or corporations; the government depended largely on voluntarism among its taxpayers, and gave awards to those who met their legal obligations, a far cry from taking action against the dilatory. There was still only grudging acceptance of the worth of private institutions in promoting religion, welfare, education, science, or the arts, and no exemption from taxes to encourage gifts for such purposes.

One could only hope that somewhere in Indonesian society a few voices would be heard that heralded a new philosophy about the social roles of private capital in Indonesia.

A Last Word

Anyone who spends any time in studying the Indonesian political economy cannot fail to acquire a deep appreciation for the Indonesian elite's ability to define its own strengths and weaknesses, and prescribe for its own future. Although this elite has been highly introspective in the main for most of the past quarter century, it has drawn deeply on the experience of other societies in fashioning its economic policy, has managed its foreign economic relations with more than modest success, and has demonstrated an earned self-confidence in its relations with outside powers.

Indonesia's domestic political system has remained impervious to change through these same recent decades, but the elite has not been unaware of the winds of change blowing through much of the rest of the world. On the contrary, the evidence indicated that greater openness was widely desired and, within the limits of a deferential culture and a highly autocratic regime, was beginning to be demanded.

Societies must learn, as individuals must, in their own way and at their own pace. The Indonesian elite is a learning community, gaining knowledge principally from its own experience, but not inattentive to the values being advanced elsewhere. Like all great nations, Indonesia will fashion its own future, with or without the benefit of our counsel or approbation.

Still, one would like to raise some cheers for the Indonesian elite. One cheer, certainly, for the economic record of growth, well conceived and impressively pursued. A half-cheer, probably, for the effort on behalf of equity, creatively shaped in the 1970s, on the defensive in the 1980s. Finally, if the Indonesian elite were able to fashion a new political consensus, providing for a measure of power sharing beyond the executive and the army, one would be very happy to raise a rousing third cheer as well.

---

Note 1: World Bank. Social Indicators of Development: I989.  Back.

Note 2: Ibid.; see also Hugo et al., Demographic Dimension in Indonesian Development , p. 99. Back.

Note 3: World Bank, Social Indicators of Development: I989; see also Hans-Dieter Evers, "Group Conflict and Class Formation in Southeast Asia," in Modernization in Southeast Asia , ed. Hans-Dieter Evers (New York: Oxford University Press, I973), pp. I22-26. Back.

Note 4: Gelb, Oil Windfalls , relevant country chapters. Back.

Note 5: World Bank, World Development Report : I99I, Table 3, pp. I82-83, and World Development Report : I992, Table 3, pp. 222-23. Back.

Note 6: Ibid., World Development Report : I992, Table 2, pp. 220-2I. Back.

Note 7: Ibid., Table I, pp. 2I8-I9; see also World Bank, Social Indicators of Development : I989. Back.

Note 8: Ibid., Table 26, pp. 268-69. Back.

Note 9: Ibid., Table 2, pp. 220-2I, and Table 4, pp. 224-25. Back.

Note 10: Ibid., Table 2, pp. 220-2I, and Table 3, pp. 222-23. Back.

Note 11: Ibid., Table 29, pp. 274-75. Back.

Note 12: Ibid., Table 30, pp. 276-77. Back.

Note 13: Ibid., Table 30, pp. 262-63; see also World Bank, World Development Report : I988, Table 26, pp. 272-73. Back.

Note 14: World Bank, Indonesia: Employment and Income Distribution in Indonesia , July, I980, p. 75. Back.

Note 15: World Bank, Indonesia: Strategy for a Sustained Reduction in Poverty , I990, pp. 27--47 Back.

Note 16: Chernichovsky and Meesook, Poverty in Indonesia , pp. 2, 5, and 89. Back.

Note 17: Republic of Indonesia, Biro Pusat Statistik, Pendapatan Regional Propinsi--Propinsi di Indonesia , I975-I979 (Jakarta, I982), Table I.2, pp. 14-15; Hugo et al., Demographic Dimension in Indonesian Development , pp. 98-99. Back.

Note 18: Chernichovsly and Meesook, Poverty in Indonesia , p. 9I. Back.

Note 19: Michael Vatikiotis and Adarn Schwarz, "Sharing the goodies," Far Eastern Economic Review , March 29, I990, pp. 2I-22. Back.