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The Modern Political Economy
New York
1993
In 1965 Indonesia experienced political violence on a scale without parallel in its history and of a kind unknown elsewhere in the late twentieth century. Hundreds of thousands of people, most of them rural supporters of the Communist party, lost their lives. No other nation has experienced a more violent and broadly based reaction to the political Left in our time. The accompanying destruction of the party, then the third largest Communist party in the world, marked a turning point in the history of communism globally. The meaning for Indonesia itself was profound.
In the same year the economic and social deprivation of the Indonesian population reached unprecedented levels. Indonesia was already among the poorer countries of Asia at the time it achieved its independence in 1949. Subsequent civil war and foreign adventure left it poorer still. Amid the chaos of 1965, gross national product fell to only $30 per capita per year, and the food supply to only 1,800 calories per capita per day. These were among the lowest levels in the entire world at the time. Every other country in Asia, including China, India, and what is now Bangladesh, was better off. 1
More than twenty-five years later Indonesia presented a greatly altered political, economic, and social aspect. Power resided exclusively in a strong central executive; a single army general had filled the office of president uninterruptedly since 1966. Many other government offices were also filled by armed forces personnel, and criticism of official conduct was sternly and sometimes severely repressed. At the same time the population was considerably better off in other respects than it had been a generation earlier. Average life expectancy had risen from forty-five years to a remarkable sixty years. Primary education was virtually universal. The average Indonesian was better fed than the average person in China, Indochina, India, or the rest of South Asia. Many of Indonesia's economic and social development indicators were approaching those of the Philippines, long its wealthier neighbor in island Southeast Asia. 2
What is one to make of these developments? How is one to explain and assess them? Was the violence of 1965 in some sense inevitable for its time and place? Was the authoritarianism and militarization that followed a necessary eventuality? Why has opposition not been more effective over the quarter century since? And how is it that such great economic and social changes have occurred? How significant have external factors been, such as foreign aid and the international price of oil? How significant have domestic factors been, including institutions and individual leaders? Most important, how significant have policies been? And how significant to the policies has been the character of the regime? Was authoritarianism necessary for Indonesia's economic and social development over the past generation? Is it still? Or is Indonesia, at the beginning of the 1990s, like so much of the rest of the world, moving toward a more open political future?
These are the principal questions with which this study is concerned. They are seldom answered with regard to Indonesia. Indeed, it is among the least known of the populous nations of the earth.
Indonesia is particularly remote—for reasons of geography, culture, history, and policy—from the English-speaking world. Lying midway between the Asian land mass and Australia, the Indonesian archipelago is almost as far away from the North Atlantic nations as it could be. Culturally, the Indonesian people are related principally to the other Malay peoples of peninsular Malaysia and the islands of the Philippines, to the ancient Hindu/Buddhist world of the subcontinent of India and of mainland Southeast Asia, and, as a result of more recent contact, to the Islamic thought and devotion centered in and around the Arabian peninsula. The colonial period of Dutch domination did little to bring the Indonesian people into a significant cultural relationship with the West, and the rejection of that domination, achieved by force of arms and diplomacy at the end of World War II, set the seal on a disposition by the nation's elite to make their own way, so far as possible, on their own terms. Policies adopted at one time or another over the years of independence with regard to language, education, religion, agriculture, industry, trade, and foreign relations have tended to reinforce the disposition to be a nation apart.
Indonesia is little known even to itself. Its population, estimated at 186 million in mid-1991, is the fourth largest in the world after China, India, and the United States, and is distributed among several thousand islands and among dozens of ethnic groups that have their own identities, speak their own languages, and are large enough to dominate one or another of the nation's administrative units. Unified administratively in modern times by the Dutch, the Indonesians themselves have only begun the process of exploring the great diversity of history and culture within their own society. This process has been delayed by indigenous traditions that are more oral than literary; by the limited modern education made available to the native population during the colonial period; by fears among national leaders since independence of dangers, both real and imagined, to the integrity of the state; and by a resulting political orientation that has given greater emphasis to the unity that is desired than to the diversity that is ever-present.
An analyst of the Indonesian political economy faces two problems as a result of these circumstances. One is the limited quality of available data. A large volume of quantitative data has been made public by various government authorities, and a large body of reportage has been published by the Indonesian periodical press. At the same time, given the deference traditional to much of Indonesian society and the repression of expression endemic to a military-led regime, little qualitative data are available from Indonesian sources on many issues of political and economic consequence. As a result, one is in constant danger of being overwhelmed by information and at the same time starved for authoritative expressions of what has been thought and felt about major national events, even by those who have participated most directly in them.
A solution to this problem has been sought through confidential interviews with more than a hundred members of the Indonesian elite, beginning in 1983 and repeated, in some cases annually, up to and including 1991. The interviews were conducted with members of the Indonesian cabinet from 1965 on; others who reported directly at one time or another during the same period to General, later President, Soeharto; military officers of flag rank; Muslim religious leaders; heads of state enterprises; leaders of the private business community; leaders of student and other dissident groups; and intellectuals with positions in the major universities, the research institutes of the capital, and the mass media.
The elite thus described has much in common with that already functioning in the 1920s and 1930s. 3 Only the category of military officers is entirely new. Two other significant differences should be noted, however. Many more private business firms of some scale existed by the early 1990s than had existed even in the 1950s and early 1960s. And intellectuals, who before independence were largely employed in the civil service, were now employed in a variety of institutions with varying degrees of independence from the political authorities. The elite has thus been undergoing a long-term process of privatization, increasing the heterogeneity of experience, creating an economic base for a middle class outside the bureaucracy, and encouraging an increasing independence of thought, if not yet of expression.
The interviews provided new information about events since 1965, as well as much commentary on the large volume of materials already published domestically and abroad. The interviews also led to copies of numerous unpublished papers, reports, and other documents. Indonesians have been seriously underrepresented among the writers of their own history, but they are by no means lacking in interest in how it is done.
The analyst of Indonesia's political economy faces a second problem: conveying one's findings to a readership unfamiliar with the country. The problem is particularly acute since few books dealing with Indonesia are published in the English language. Few readers can come to a new work with prior knowledge of the subject, as is the case with China or India. One thus runs the danger either of overwhelming readers with more information than they can absorb, or of traversing the ground so quickly that they have no opportunity to weigh the evidence and draw their own conclusions.
With this problem in mind, I decided to limit the present work to a manageable series of chapters concerned with major political and economic events. The study begins with an account of the failed leftist coup of October 1, 1965, the most significant political event in Indonesia since the declaration of its independence on August 17, 1945.
Each of the nine chapters that follows is a case study of a major event that occurred in the ensuing twenty-five years. These events are taken up in chronological order, but they have been selected for the light they shed on leading personalities and their ideas; key elements of the political structure, including the presidency, the army, the civil bureaucracy, students, and Islam; and central factors of the economy, including rice, oil, manufacturing, and foreign aid, trade, and investment. The chapters also explore issues that recur during the period, including corruption, foreign influence, the state's role in the economy, and the distribution of power and wealth in the society. Each case is described in sufficient detail to convey a firm sense of the immediate environment in which the event took place, its proximate causes, the personalities and ideas most centrally involved, and the group interests at issue as seen by participants themselves. Earlier history is recounted only to the extent it is essential to an understanding of the particular event under discussion.
An epilogue, in which the questions posed in this introduction are recalled and some answers are advanced, follows the case studies.
Note 1: World Bank, Social Indicators of Development: I989 (Washington, D.C.: World Bank, I989). Pakistan was an exception in one respect; its daily supply of calories per capita rivaled that of Indonesia in I965. Back.
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