False Economy - Alan Beattie [118]
An army officer, Suharto seized the presidency with the support of the military in 1968. Indonesia was a mixed assortment of islands scattered around the equator rather unconvincingly masquerading as a unified country; it was large, populous, and ethnically and linguistically diverse. Colonized by the Dutch as part of their control over the spice trade, it had floundered around for its first two decades of independence. A weak and fractious parliamentary democracy was followed by the unstable dictatorship of Sukarno, the country's founding president.
As his apologists used to say, Suharto did at least bring order to Indonesia. But the collateral damage to life and liberty was heavy. On his way to power he used the army to conduct a vicious purge, killing hundreds of thousands of leftists. In a sinister echo of European fascism, Suharto then decreed that a "New Order" of Indonesian government had begun. He proceeded to use the military and state bureaucracy to impose fierce discipline and centralized control over the country.
He created a de facto state political party, Golkar; all state employees belonged to one of its constituent bodies. Although he periodically held elections, Suharto in effect controlled the resulting Consultative Assembly and ruled by decree. He appointed all senior civil servants himself and kept close watch over them. His rule was not just modeled on the military but staffed by it as well. Former senior officers were often given the role of inspector general in public institutions and would report directly to him.
But rather than entangle the economy through misguided attempts to manipulate it, Suharto used much of the rope he had to tie his own hands. He adopted relatively orthodox economic policies that ended the hyperinflation he had inherited in the late 1960s. He instituted a rule requiring that the national government's budget must balance. His approach was not quite as binding as it appeared: there were various ways to spend money that did not show up on the books. But it certainly guarded against the sort of wild spending splurges that destabilized many superficially similar military dictatorships in, say, Latin America. He managed to attract foreign investment from abroad, partly by decreeing the free movement of capital across the country's borders. This reassured businesspeople, particularly Indonesia's talented but often unpopular ethnic Chinese trading community, that they could get their money out if they needed to, which gave them confidence to bring it into the country in the first place. The presence of wrought-iron fire escapes makes even rickety buildings seem much safer.
The way such companies' interests were looked after shows how an efficient form of graft can operate. Foreign companies generally paid off a politically well-connected individual, often one of those former military officers or a senior ex—civil servant, to provide political protection for them by reporting to Suharto any concerns they might have. Bureaucrats, usually for a backhand fee, would then try to solve the problem. Corrupt, yes, but a systematic, organized form of corruption that acted as a network across which information could be passed and as an early-warning system for investor discontent.
Meanwhile, the commanding heights of the economy were generally controlled by a network of favorites, the famous cronies, who had a mutually supportive relationship with the state. Suharto handed them juicy contracts and lucrative monopoly licenses, and directed state-run commercial banks to lend to them. Few of his cronies would make it into anyone's list of the most inspiring corporate leaders of the twentieth century. But from these clients Suharto demanded, and got, benefits to the economy in return.
Suharto also undertook periodic demonstrations of presidential authority to show that he was keeping agencies and networks in check. In 1985 he disempowered the entire