Thayer Watkins
Silicon Valley
& Tornado Alley

The Economic Policies of Indonesia
During the Suharto Era

The typical citizen of Indonesia is still poor, the Indonesian state now has enormous as a result of the petroleum and timber industries. That was not the case in 1965. Sukarno through absurd economic policies had driven the Indonesian state to the brink of bankruptcy and the common people were suffering near-famine conditions. Although Suharto's regime was ultimately plagued by corruption and nepotism he did some things right in the beginning.

Following the attempted coup of September 30, 1965 there followed a five month period in which the army was purged of elements which had communist sympathies or were loyal to Sukarno. In the streets there was a pogram carried out against communist elements and members of the Chinese minority. The Chinese minority were resented for their control of business in Indonesia.

There is an academic controversy about the official story of the coup. Sometimes the academic make absurd statements. For example, two academics from Cornell, B.R.O. Anderson and R. T. McVey argued that there was no reason for the Communist Party of Indonesia (PKI) to carry out a coup because they were gaining power at the local level. Given the collapse of the economy and the deteriorating state of Sukarno's health it was obvious that the political situation was unstable. Even if they were gaining power at the local level the PKI leadership had every reason to organize a preemptive coup to prevent the military from taking control of the country. Other academic show evidence that the rank-and-file of the PKI was not involved in the coup. Of course the leadership of the PKI would not involve the rank-and-file. It would have been impossible to keep the coup a secret if the rank-and-file were involved. The leadership was organizing a coup d'etat not a revolution. The target was the top military leadership; it was not Sukarno.

Suharto and the military did not directly attaack Sukarno; they marginalized him. Sukarno had high status. Suharto allowed him to retain his status by gradually took away his power. Sukarno's power was finally taken away from him and on March 12, 1966 when he signed an executive order making Suharto the Acting President. Sukarno remained nominally part of the government but in actually he had no power and was effectively under house arrest.

The New Order of Suharto

Suharto after the assassination of the five top army leaders on the night of September 30th was militantly anti-communist. He created state security organizations to ferret out the remaining communists. Those that were deemed to have been directly involved were executed. Other communists were given prison sentences. Those a the peasant level were released.

For rivals and the non-communist opposition Suharto used finesse, just as he had done with Sukarno. He co-opted them and removed any real power they had. He replaced military commanders when he doubted their loyalty to him. Military officers took over positions in government from bureaucrats.

(To be continued.)

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