Tom Pepinsky

Category: Politics

  • Unnamed Economist

    I met this morning with a truly fascinating character.  He is an economist and a long-time advisor of Soeharto, a 1961 graduate of UC-Berkeley in economics who was personally responsible with four other members of the "Berkeley Mafia" for showing Soeharto how to bring the country out of disaster after he replaced Sukarno as President in 1966.  I’ve decided not to just post his name up here.  If you’re curious, you’ll just have to read my dissertation.  Indonesianists could probably guess anyway; one of the five is dead, two don’t give interviews, and I’ve already spoken to the other remaining one.  Anyway, I was speaking face to face with one of the five people really responsible for putting Indonesia on a high-growth, export-oriented economy that led to the country’s rapid development and drastic reductions in poverty.

    (NB: Part of what Soeharto did, of course, was to kill between 500,000 and 1,500,000 "communists" to rid the country of the main organized political group aside from the military, but that’s not what we discussed.)

    It was so interesting to hear this guy talk about what went wrong and what went right with Indonesia’s development.  The introduction of market principles into most aspects of the economy was absolutely responsible for growth.  For example, in 1964, inflation was running at something like 650% per year, and by the early 1970s this was all under control due to what the economist liked to tell Soeharto was "debureaucratization" of the economy.  Of course, the areas of the greatest slippage and the ultimate undoing of the country’s economy was in the places where market principles ran amok–simply put, all financial systems require close supervision, and this supervision was lacking.

    The economist had some great insights.  Why was Soeharto so adamant about letting his children go crazy with corruption?  Because he felt like a bad father for always being away invading West Papua and leading the country.  Why didn’t Soeharto resign in March 1998, when he was elected to serve a seventh five-year term?  Because he was a general, and generals do not surrender when facing a crisis like Indonesia was facing.  How did you get Soeharto to listen to you?  Soeharto was a good Javanese, so the solution is to be gentle with him, to suggest ideas very softly and make him think that he came up with them himself.  All of these little tidbits really help me to give texture to the subject that I’m studying.  And thankfully, on the big important international political economy points that lie at the heart of my dissertation, his other comments on capital movement, interest rates, and exchange rate management support my own work.  That’s always nice.

    Anyway, it was a great chance to meet with a fascinating guy.  His house is also beautiful, and his servant served some great tea.

  • Ch-ch-ch-ch-changes

    My meeting at the US Embassy was very interesting indeed.  The embassy is no more secure than the one in Kuala Lumpur, although it is a LOT bigger.  The USAID compound within the embassy along is probably the size of the entire embassy in Kuala Lumpur.  Anyway, when you arrive you have to turn off your phone and leave it at the front desk, along with any sort of electronic devices like an Ipod or a laptop.  That’s annoying.  I accidentally left my notebook in my laptop bag at the front counter, and they had to send a special runner to the security checkpoint to get it.  What a pain.  Most of the people who work in the embassy are actually Indonesians with security clearance.  Everyone was extremely nice, even the five dozen guards with submachine guns and an APC (really) parked on the street in front of the embassy.  The head guard was the first Indonesian I ever met who was clearly Portuguese…his name was Raoul Endarnho, and his last name seems to be a Portuguese version of what looks to be a Timorese root (endar).  Most people with Portuguese last names in Indonesia are Timorese, but most of them live in East Timor, the country that broke off from Indonesia in 1999 after 25 years of Indonesian colonial rule.

    So what I discussed with USAID officials yesterday was the progress of economic reforms in Indonesia since the fall of Soeharto in 1998.  My dissertation focuses on events leading up to Soeharto’s resignation, but I’m also interested in post-Soeharto economic reforms for another project.  The USAID folks claim that there were hardly any real reforms at all in areas like corporate governance, macroeconomic management, and political corruption before the election of President Susilo Bambang Yudhoyono in 2004.  But now, they say that the changes are real, and they heartily support his efforts to raise gasoline and electricity prices, to implement sensible macro policies, and to reform Indonesia’s rampantly corrupt business/politics nexus.  They see signs of success.

    Which is funny because a number of other people that I’ve met are far less sanguine about reforms.  Many people talk about reforms in name that have not been matched by reforms on the ground.  Lots of corrupt officials get hauled before the courts, but very few are convicted, and the ones who are happen to be the most outrageously corrupt ones with strong Soeharto connections.  I wonder how much it is the US government’s policy to be positive or optimistic at all times.  I guess I’ll have to see what other folks think about these reforms.