Tom Pepinsky

Category: Indonesia

  • Wealth into Power, Indonesia Style

    In preparing for my Asian Political Economy seminar tomorrow, I ran across this quote from Bruce Dickson’s Wealth into Power: The Communist Party’s Embrace of China’s Private Sector. (By the way, this is a very good book, and comes highly recommended.)

    China’s continued economic growth challenges the common assumption that a market economy leads to democracy and common prosperity. In the short run and for the foreseeable future, it seems more likely to lead to a continuation of authoritarian rule under the Communist Party, as top leaders look for ways to govern better but not necessarily more democratically. So far, economic development has led to continued authoritarian rule as the CCP finds ways to adapt itself to the new situation in China. It is doing so by incorporating the growing number of private entrepreneurs into the political system – by integrating wealth and power – and by adopting new policies to address the social tensions created by rapid growth.

    I can’t resist imagining a similar passage to describe Indonesia in 1996.

    Indonesia’s continued economic growth challenges the common assumption that a market economy leads to democracy and common prosperity. In the short run and for the foreseeable future, it seems more likely to lead to a continuation of authoritarian rule under Golkar, as top leaders look for ways to govern better but not necessarily more democratically. So far, economic development has led to continued authoritarian rule as Golkar finds ways to adapt itself to the new situation in Indonesia. It is doing so by incorporating the growing number of private entrepreneurs into the political system – by integrating wealth and power – and by adopting new policies to address the social tensions created by rapid growth.

    Don’t misunderstand me: China 2012 is not the same as Indonesia 1996. The point, rather, is that if political change of the type that we saw in Indonesia in 1998 were on the horizon in China, we wouldn’t know it. We might even comfortably proclaim that the CCP is a coherent actor, that it anticipates its challenges, that it acts independently of the whims of political elites, that it can manage the marriage of state capitalism with private entrepreneurship, etc., even if none of these things were true. Sure, political succession will be difficult, but trying times have been managed before. Even the Bo Xilai case has shades of Benny Moerdani.

    Timur Kuran has written on the challenges of anticipating political change. Here is one accessible introduction.

  • Investment Grade Indonesia?

    There’s something different about Indonesia today than there was, say, 3 years ago. Among businesspeople, I sense a new optimism about Indonesia’s growth prospects. A decade of 6-7% growth will do that for you, I guess. As will the lifting of Indonesia’s sovereign credit rating out of the “junk bond” category.

    Sure there are complaints about infrastructure, transport, and legal reforms, but the big players seem to know “how the game works” now, at least enough to make some money.

    The question is whether or not this sense of optimism, excitement, and promise about Indonesia’s future is shared by Indonesia’s 99%. Here I’m not so sure. Public opinion about the current administration is down, and the very biased sample of non-elite Indonesians I’ve talked to don’t seem particularly optimistic that steady 6% growth means a steady increase in their material prosperity. Complaints about decentralization and the lack of a perspektif jangka panjang at the center are rife. The “I miss Soeharto” syndrome is alive and well.

    Where does that leave us? Hard to say. Indonesians over the past 20 years (well, more like 45 years) have proven that they have an almost unlimited ability to absorb the inattention and the malfeasance of their country’s political and economic elites. But I stress almost unlimited (see 1965, 1998). This leaves me cautiously optimistic about Indonesia’s national economic performance, but only guarded about the prospects for continued stability under the current political architecture.