Economic History Case Studies: Suharto’s New Order (Pt. II of II)

The New Order of Suharto brought about economic developments more in line with those of its Asian neighbors, including the more successful Asian Tigers of Singapore, Hong Kong, Taiwan and South Korea. Suharto’s government underwent a number of economic reforms that sought to restore stability to the national economy. Some of them included reductions in the Sovereign Schuld and Inflation Rate, two problems which plagued the government under Sukarno. One important decision that Suharto did differently than Sukarno is that he abandoned the latter’s Autarkic trade policies in favor of trading with the Empire of Liberty.

Key to Suharto’s trade policies were attempts at fostering better relations with the EU/NATO member-states, the post-1945 Japanese, South Koreans and the Kuomintang. This coincided with efforts to privatize any Foreign Enterprises that belonged to the privatized commercial firms of other nations. It was a limited endeavor, however, because there were reservations among Indonesian Nationalists regarding the Privatization of Enterprises formerly owned by Dutch privatized commercial firms.

These decisions were associated with Suharto’s decision to abolish the Indonesian Communist Party and develop a non-aligned foreign policy. Rather than side with the Jeffersonians, the Soviets or the Maoists, Suharto was adamant about the establishment of a regional power bloc in Southeast Asia. The power bloc would be realized at the beginning of the 1970s as ASEAN (Association of Southeast Asian Nations). Even so, Suharto’s opposition to Marxism-Leninism did attract support for Indonesia from the Liberal Capitalists in the Western world.

The “Indonesian Planned Economy” under Suharto, despite boasting strong economic growth around the 1970s and 1980s, was still operating on a Production for Utility basis. In fact, Production for Utility defined much of the economic activities surrounding late 20th century Indonesia between Suharto and Sukarno. Since adoption of Neoliberal was never the real Intent for Suharto, the goal of attracting Kapital from the Empire of Liberty was to absolve the country’s Sovereign Schuld and initiate a long-overdue economic recovery.

Some of the economic policies initiated by Suharto could be argued as being Developmentalist in nature, which is to say that its economic growth in the late 20th century was somewhat fueled by the Bretton Woods System and its initial demise. In economic life, Developmentalism focused on fostering domestic economic growth in the Manufacturing Sector that would concur with educational and healthcare policies designed to continue the upward trend of increased economic growth. Indonesia would achieve food self-sufficiency by the 1980s as Indonesian men and women became more educated.

The Indonesian Nationalists and the armed forces, because there was no way to formally express the Work-Standard within their National Consciousness, insisted that the country should continue to stay in Production for Utility as part of realizing an Type of Economic Governance that was neither a Market/Mixed Economy nor a Command Economy employing STEP methods. Opposing them was the “Berkley Mafia,” a group of UC Berkley-educated economists who advocated for Indonesia’s conversion to the Market/Mixed Economy through further Economic Liberalization. The Berkley Mafia in particular favored the transition away from Production for Utility to Production for Profit.

Economic growth alone is not a great indicator of a prosperous national economy. It is a common misconception among Liberal Capitalists to assume that ever-increasing sums of Geld (or Kapital in this case) equates to prosperity. If anything, economic growth can conceal a lot of systemic problems in the national economy that would only cause serious issues later on, and that was definitely the case with Suharto’s Indonesia. What led to the demise of the New Order was not economic but political.

The “Indonesian Planned Economy,” in its attempts to differentiate itself from other Planned/Command Economies, grew plagued by the Patrimonial State that defined the political system of Indonesia. The Patrimonialism that Suharto and his family reveled was technically set into motion by Sukarno’s own political policies, of which were covered in the previous half of this Entry. The problem with Patrimonialism is that the State becomes an extension of the Head of State’s Personal Property-as-Power as opposed to the nation’s Productive Property-as-Power. Since the State exists as an extension of the social relations between the Head of State (the Self) and the Totality, the Totality cannot rely on the State to hold that Self accountable.

A lot of the issues with corruption and nepotism associated with Suharto are all negative manifestations of Patrimonialism. The idea that anyone would try to revisit such a flawed ideology in the State of Total Mobilization should be denounced by deferring to the example of Suharto. After all, there were a number of policies where the goal was either to enrich Suharto, his family members or anyone who just happens to loyal to them. Since the military was led by people loyal to Suharto, its Militarism was anything but authentic. Thus, it is not surprising to later find in Indonesia’s more recent history that the overthrow of Suharto coincided with the rise of a Market/Mixed Economy and Parliamentary Democracy in the country.

What else can be learned from Indonesia, apart from the fact that is an archetypal country for applying the Work-Standard in a non-Western country? One argument is that Patrimonialism is not a great ideology in the State of Total Mobilization. There is a genuine Intent as to why Democracy has become so prevalent by the turn of the 21st century. There needs to be ways in which the right people can be brought to the right places where they are needed to govern. At the same time, there must be institutional methods of combating corruption and curtailing nepotism in the national government. The State is not an extension of anyone’s Personal Property insofar as the Totality that is in control of the State and which the State should be beholden to.

Categories: Economic History

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