Suharto: A Case Against Authoritarian Capitalism?

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Although there are few modern cases of authoritarian capitalism, they are very prominent. China, Russia, and Singapore spring to mind, and are clear examples of economically successful yet repressive regimes. However, why these countries grew so quickly and whether there are limits to their growth remain undetermined. The case of Suharto’s vicious 31-year rule of Indonesia could be key to answering both these questions.

Born in the hamlet of Kemusk on 8 June 1921, Suharto had a tumultuous childhood. His mother, Sukirah, suffered a nervous breakdown five weeks after his birth, resulting in Suharto being placed in the care of his great-aunt. He was only returned to his mother at the age of three, by which time she had remarried to a local farmer, whom Suharto helped by working in the rice paddies. However, Suharto’s childhood would continue to be bereft of stability, and after multiple movements to different households, he ended up living with his sister in the town of Wuryantoro, at the age of 10. This humble upbringing is what distinguished Suharto from other political figures later in his life; he had little interest in anti-colonialism and matters beyond his immediate surroundings, instead focussing on domestic issues, such as the economy, which he was far more familiar with.

Following Japan’s occupation of Indonesia in March 1942, Suharto decided to enlist for the Japanese-organised police force, where he received valuable training as an officer. Following Japan’s withdrawal from the country three years later, Suharto joined the guerrilla forces seeking independence from the Dutch. By the time Indonesia became a republic in 1950, Suharto had distinguished himself as a capable commander and had achieved the rank of Lieutenant Colonel. Over the next 15 years he rose steadily through the ranks of the Indonesian army, eventually being promoted to Major General in 1960.

The series of events that led to Suharto coming to power in 1967 were characterised by bloodshed. The President, Sukarno, faced the difficulty of balancing the two dominant but antagonistic forces of the country: the army and the Indonesian Communist Party (PKI). In April 1965, Sukarno endorsed the PKI’s proposal for an armed force consisting solely of peasants and workers. The endorsement was tantamount to Sukarno supporting the PKI, and thus when it was rejected by the army, the President was left in a very precarious position.

On 30 September 1965, six senior military generals were killed by a group of left-wing officers within the armed forces. Fingers were immediately pointed at the PKI, and at Sukarno, who was suspected of being complicit in ordering the massacre. Opinion turned against the communists and throughout the country people began a large-scale purge of PKI members. Within a year, 500,000 people were murdered, and the PKI was destroyed. Simultaneously, the army grew in power, and Suharto was promoted to chief of staff. The army took advantage of Sukarno’s weakened political position and forced him to appoint a new cabinet of Suharto supporters. Moreover, they removed the Sukarno supporters in the Parliament. Then, in 1967, the Parliament impeached Sukarno and named Suharto president. In 1968, this was officiated.

Initially, Suharto did not hold complete political power, as other generals and anti-communists were still popular. However, he would soon outmanoeuvre his opponents and establish himself as an authoritarian. First, he passed a law that nominally set up elections, but gave Parliament the power elect the president. Then he consolidated his power by systematically removing any threats and rewarding supporters: he forced the chairman of the Indonesian parliament to retire in 1969. Generals who opposed his decisions were exiled, student activists were imprisoned, and universities were stormed by troops. In 1973, the government forced other prominent parties to merge, and planted Suharto supporters into their leadership. Having done this, Suharto secured victory for five successive elections, granting him executive power over the country.

To consolidate his authoritarian rule, Suharto pursued some means to justify his presidency, which bore positive effects for his country. For example, he instituted mandatory programs that taught nationalism and educated children to grow up to support his regime. To make sure this reached the whole population, Suharto also started a country-wide school construction program, known as INPRES, in the 1970s. In four years, more than 61,000 primary schools were constructed, drastically increasing enrolment rates among children, while also substantially reducing the education gap between boys and girls. As a result, the country’s workers became more skilled, and the country was able to industrialise, thus indicating some positive effects of Suharto’s authoritarian regime.

Through his authoritarian rule, Suharto was able to pass more far-sighted policies; he did not have to worry about elections in the short-term but rather about what his legacy may look like. An example from his achievements would be his heavy investment into infrastructure projects. Among his investments, he targeted industries which would support tourism, such as transport (including establishing a national aircraft company) and creating a theme park. These were not only nationalist and heightened Suharto’s popularity, but they also generated large amounts of income and helped to support domestic workers. More options for commute opened up jobs to workers for whom they were originally inaccessible, and the country was able to work more efficiently. Another example of his lucrative projects was Palapa a series of telecommunication satellites launched in July 1976 (which supposedly cost $1 billion), that made Indonesia the first developing country to operate its own domestic satellite system. All of these policies had extravagant opening ceremonies, which (despite demonstrating Suharto’s selfish intent) secured his legacy for years to come.

Suharto was also able to take more risks, as the political repercussions of his mistakes could be significantly reduced, while potentially garnering large rewards. For example, he announced an economically liberal program, including fiscal constraint and market deregulation, which faced fruitless opposition from several generals whose economic views were more nationalist. Suharto also welcomed foreign aid and investment, something that had been previously taboo. Moreover, an influx of aid from America in 1967 saved numerous rural areas of Indonesia from the brink of famine. Therefore, Suharto was able to revolutionise the Indonesian economy, an act only possible through his complete control of the government and policymaking.

Despite Suharto’s successful economic policies – throughout his reign the economy grew by an average of seven percent annually – his regime was increasingly marred by the inequitable distribution of the nation’s expanding wealth. Relatively small urban elites and military groups received a disproportionately large portion of the benefits granted by modernisation and development. Moreover, his children’s companies were heavily supported by the government, becoming monopolies that were shielded from market competition. Suharto’s family was also granted free shares in more than 1,000 of Indonesia’s largest companies.

Furthermore, a flaw in using Suharto’s economic progress as an argument for authoritarianism may be that much of the growth was predicated on luck; being a large oil exporter, Indonesia received windfall profits during the global oil crises, which contributed to a lot of their growth during the 1970s. However, during the 1980s, an oil glut occurred as a result of a fall in demand following the oil crises. Yet, by devaluating the Indonesian rupah, Suharto was able to easily shift away from exporting oil and towards manufacturing, displaying his proficient approach to economic affairs.

Suharto’s fall came in 1998, but not because of the mounting tensions over his extended rule. Rather, the Asian Financial Crisis disrupted the growth that had long assisted his dominance. Suharto was not completely to blame – Thailand was forced to float the baht following attacks on the currency, and it began to freefall, leading to the collapse of several major Thai companies. This spread speculation around the south-east Asian region. Despite Suharto’s attempts to keep the rupiah high, Indonesian GDP fell drastically during 1997, while fuel prices increased by 70%. Riots, which were becoming increasingly violent, spread across the country calling for Suharto to resign, only heightening resentment against the country’s leadership. Following this, Suharto loyalists implored him to step down, leading to his resignation on 21 May 1998.

Suharto’s rule shows us that the success of an authoritarian capitalist state is volatile. When life is improving for most people, they care less about politics. However, when there is a sudden U-turn, citizens become outraged, and the leader’s power crumbles. Overall, both improvements and downturns in Indonesia had some dependency on luck. However, it was due to his lack of political risk and his aim for a good legacy that Suharto took measures to capitalise on the good luck, and it was due to his personal failings that he could not steer Indonesia out of recession. Hence, Suharto’s reign can be used to determine the limits of authoritarian capitalism. The personal character of the leader and the ability of the parliament to control losses are vital to whether a government can stay in control, while luck is often required to help such regimes flourish. These things ring true, even if we look at the modern-day cases of authoritarian capitalism. Therefore, despite the possibilities of economic growth, it is the inequity and corruption perpetrated by authoritarian regimes that leads to their widespread condemnation, and often, their downfall.

Acemoglu, D., and Robinson, J., 2012, Why Nations Fail, Crown Business

Duflo, E., and Banerjee, A., 2011, Poor Economics, PublicAffairs

Elson, R., 2001, Suharto: A Political Biography, Cambridge University Press