SOUTHEAST ASIA SERIES Vol. XXV No. 9 ()

THE POLITICS OF INCOME DISTRIBUTION IN INDONESIA by Brewster Grace

July 1977

Introduction

Since Independence in 1949, Indonesia has been percent of the nation's land mass. Population den- through a number of traumatic economic and sities on Java average 600 persons per square kilo- political crises. The fifth largest populated nation meter. In relatively productive areas, with good irri- in the world has seen inflation soar to 600 percent, gation and fertile soils, densities run as high as has had perhaps 200,000 Indonesians (mostly 2,000 persons per square kilometer. However, since Javanese and Balinese) killed in an anticommunist such densities are only supportable as long as food purge in 1965 and 1966, lives with a per capita and work satisfy the needs of the population, income of $90, and currently sustains a foreign in Indonesia can generally be defined by debt of over $10 billion. the unavailability of these two basic necessities.

Yet the nation survives economically, due largely Over two-thirds of Indonesians work in agricul- to its vast natural wealth and, for the past ten years, ture-most of them engaged in extremely small- has maintained political stability under the scale production or as laborers on larger but still authoritarian rule of President . tiny farms. In either instance their livelihood almost never rises above subsistence. The limita- Suharto's success, however, has recently come tions of the physical environment keep both their under serious question. Riots in in 1974, expectations and their consumption levels low. and the heavy debts of , the national oil company, point to major problems of distribution The average size farm in Java is roughly half an and management of the nation's wealth. The fol- acre. Many farmers, of course, own less, and a third lowing attempts to describe a number of these of Java's farmers own no land at all or, at best, a interrelated issues with which the Suharto regime minute garden plot around a tiny house. Thus, the must soon deal if it is to sustain the same measure poorest in Java will sell labor to those in the village of stability without increasing resort to repression. who do have land. In return, the laborer tradi- tionally receives a share of the harvest. This so- Poverty called "bawon" system has met traditional culti- vation needs, the demands of village comrnunality, Poverty in Indonesia is overwhelming. It is esti- and the work and food requirements of poor mated that of the nation's 130 million people, farmers. nearly 80 million, or close to two-thirds of all Indo- nesians, live below a level of poverty defined by a The practice of sharing represented by the minimum standard for basic food intake. It is fur- bawon-what Clifford Geertz calls "shared ther estimated that fully 22 percent are without suf- povertyH-goes to the root of Javanese ethics. The ficient work or income to secure even half these basic principles of village communality dictate that nutritional needs. the wealthier farmer gives some source of livelihood to poorer farmers, regardless of profit margins, and Most of the poor live in Java; an island with 65 the labor-intensive nature of traditional rice cul- percent of the entire population, it contains only 6 tivation has allowed more and more people, as

Copyright @ 1977, American Universities Field Staff, Inc. [BG-4-'771 population pressures and food needs increase, to Ironically, Java's rural poor may become a casualty join in harvests. Shared poverty through shared of modern economics: while increased productivity harvesting has sustained the growing number of makes more food available to the growing number poor in Java for centuries. of poor, reduced demand for labor decreases their opportunity to earn the wherewithal to obtain a These traditional provisions for Java's rural poor share of the new bounties. have been affected recently by a number of demo- graphic and economic changes. First, in some Migration from rural areas to more urban areas instances or areas, population growth may have and to the major cities has become substantial as reached Malthusian limits beyond which shared large numbers of Indonesia's poor are seeking work poverty practices cannot go. Over the past decade outside agriculture. Much of this migration is efforts to relieve this pressure through relocation of seasonal-farmers looking for jobs during dry, people-or so-called transmigration-to the less nonfarming periods-but it also reflects the satura- densely populated outer islands have, for financial tion of employment in the traditional sector and the and environmental reasons, achieved only marginal painfully slow growth of alternative work oppor- success to date. Second, in spite of rapid rates of tunity. population increase, theoretically land can absorb new labor and provide more income if productivity While under- as well as unemployment is com- is increased. But in those areas of Java where pro- mon in the countryside, absolute unemployment in ductivity is increasing, there are indications that urban areas is statistically low-only 4 percent, the technical and economic changes which have according to Indonesian government sources. But increased the yields have decreased the demand for much low-income urban employment, such as labor. pedicab driving, cigarette butt collecting, street vending, etc., produces little remuneration for extremely long hours. In the 1960s, fertilizers and access to credit for farmers' surplus production, and market orienta- With virtually no cash income, people fashion tion brought them closer to a new economic frame- work exclusive of communal obligation and village makeshift shelters in crowded squatter settlements and along canal banks. Such deprived living con- welfare. Given new considerations of profit and ditions are possibly more prevalent in Indonesia loss, the value of increased production for markets than anywhere else in Southeast Asia. The situation may have taken precedence over the value of tradi- in Jakarta, Indonesia's capital and largest city, has tional obligations. become so desperate, in fact, that the city admin- istration has banned migration. Unless persons can The importance of these economic calculations prove en~ployment,entry to Jakarta is forbidden has only begun to be apparent within the last few and those residing in the city illegally are forcibly years, as Indonesians are experiencing the full removed. impact of the Green Revolution and its high-yield varieties of rice. Government schemes to introduce Underemployment-similar to shared poverty in the new seeds, provide credits, and create mar- villages-is widely apparent in urban areas. Obvi- keting opportunities seem to support the emerging ously, the continued expulsion of unemployed rural landlord and commercial incentives while reducing migrants does nothing to resolve this poverty; only the sense of obligation to village welfare. Some of the creation of new jobs can-both in rural and Java's poor are beginning to lose traditional har- urban areas. At present, Indonesia needs 10 million vesting opportunities to village landowners who sell new jobs, mostly in Java, and approximately 1.2 an entire rice crop before harvest to a middleman. million additional jobs annually to absorb incre- The new owner of the crop is capable not only of ments in the labor force. There are few indications marketing production to the landlord's advantage, that the number of jobs is increasing at anything but can also harvest the crop using hired profes- like the required rate. It may be, in fact, that the sional work teams at much lower costs than number of jobs available to the unskilled or land- occurred in the traditional production sharing less laborer turned migrant is actually decreasing methods. Thus commercial production is tending with the use of more capital intensive production to replace traditional, labor intensive production. methods. The Middle Class responsible for the administration of a proliferating array of nationalized state activities. By 1975 there Indonesia's middle class has essentially three were approximately 1.4 million civil servants. foundations-Muslim traders, Chinese entrepre- neurs, and bureaucrats-all created from different While the bureaucrats' salaries would barely historical situations. qualify them to be in the middle class, their aspira- tions do. Some still have links to the traditional Its first foundation was built by Arab traders nobility, having evolved from the colonial court who as early as the fourteenth century brought not bureaucracy to the contemporary government ser- only trade but Islam. Over the centuries, as the vice. Most entered the civil service after indepen- religion spread from Java's and 's coastal dence when it became the key niche for high school ports to inland areas, its adherents formed rela- graduates without any prospects for employment in tively coherent social and economic institutions. the private economy. This quick expansion of the Thus an important portion of trade and an even bureaucracies and government spending deflated more important portion of landed wealth became the value of money and thus of salaries. Today, the identified with Muslim institutions and interests. bureaucracy is composed of underpaid, often In rural areas, these interests have tended to disillusioned, and frequently inefficient individuals support orthodox religions and conservative polit- who commonly engage in corruption to make ends ical movements, while urban Muslim businessmen meet. have tended toward reform, modernization, and more liberal politics. Middle class wealth historically has been built by these three groups. Excepting the Chinese com- Over the past few centuries, the early Muslim munity, however, education and skills have been traders were progressively overshadowed by Chi- limited and many indigenous Indonesians have nese entrepreneurs, who had been encouraged by consequently been unable to compete with Chinese. the Dutch to settle in Indonesia to develop colonial No matter how "modern" the Muslim businessman trade and commerce. The Chinese were enormously may be, such basic economic skills as accountancy successful in capturing the bulk of domestic com- have not been widely acquired. Thus, given open mercial activity, becoming the virtual sine qua non competition for middle class incomes, Chinese have to the entire economy. Since Indonesia gained invariably come out ahead. Perhaps the only independence, however, Chinese fortunes have indigenous group with the potential to so compete variously waxed and waned as nationalist political would be the increasingly skilled corps of military pressures have been brought to bear on the eco- officers. They, however, are more often cooperating nomic activity they control. with Chinese enterprises than establishing their It is impossible to estimate the size and shape of own competitive ventures. the Chinese middle class, but certainly its economic importance is greatly disproportionate to the num- The Rich ber. The Institute for the Promotion of National Unity estimates that in 1971, of a total population Historically, before the arrival of Dutch corpora- of 121 million Indonesians, there were 1.4 million tions and the Chinese, the rich upper class con- Chinese with Indonesian citizenship and close to sisted only of traditional princes and sultans. They 1.2 million still with foreign citizenship. How many were a small elite with wealth based on revenues of these have incomes above a subsistence level is from peasants. Today, however, they are much hard to determine. more traditional than wealthy, as a result of the Dutch regime's profound alterations of the rural Besides Muslim and Chinese businessmen, economy. They have been allowed to maintain all of bureaucrats have recently come to constitute an their appurtenances: courts (or memories of important part of the middle class. The Dutch had courts), patronage of the arts, and loyalty from created a small indigenous bureaucracy, essentially their traditional clients. Today the aristocracy still from the former nobility, which remained subservi- exists, albeit crippled economically, more as a ent to Dutch interests. With independence, how- symbol of the nation's past than as part of the ever. bureaucrats, including the military, became administration of its present wealth. Under the Dutch, the former feudal wealth was to secure government cooperation for their ven- rechanneled and transformed into substantial tures. Thus, many of the military rulers are also profits mainly to Dutch companies. Domination of earning fortunes in business. While the precise de- domestic trade passed almost completely into tails of the personal fortunes of the generals who Chinese hands. How much of this wealth supported have thus profited are not known, their conspicu- a wealthy elite in the or was re- ous consumption, along with that of the Chinese, patriated from the colony is unclear. With inde- symbolized by new homes and Mercedes, is widely pendence, however, it made little difference as noted by poor Indonesians. nationalization of foreign-controlled assets became a central economic objective of the Sukarno era. In Another source of personal wealth under a sense, Indonesia's new leaders subjected the Chi- Suharto came from refurbished state enterprises- nese and the Dutch to a fate similar to that which especially the national, oil company Pertamina. they had dealt to the traditional princes and sul- Depoliticized and allowed to function on market tans. Under Sukarno's rule, Chinese capital fled bases, they were turned into highly profitable en- and Dutch assets, mainly plantations and other deavors. Ibnu Sutowo, the dynamic president of properties, were seized. To replace them a few Pertamina, became the most important single favored Indonesian traders became wealthy in a figure in the nation's economy. The company's vastly reduced international trade while top control over Indonesian oil, its greatest marketable bureaucrats and military officers were given the asset, allowed for diversification into such enter- barely marketable plums of mining and plantation prises as tanker fleets, airlines, hotels, rice planta- facilities. tions, and a steel mill. Sutowo was, by 1974, chair- man of the 184th largest corporation in the world. Since Sukarno, however, new sources of wealth and high incomes are increasingly visible in Indo- And finally, enormous incomes have been nesia. Under Suharto, who has tried to make the gained-and much wealth lost to the state- economy both stable and dynamic after years of through corruption. It is rampant among the economic mismanagement, private capital has bureaucratic and commercial elite as among junior been given a free hand and investment has been officials, although its scope is impossible to encouraged. Foreign business started returning by measure, and one might make assessments based 1967; and with its executives came refurbished on discussions with knowledgeable Indonesians suburbs and plush hotels as Jakarta attempted to and occasional press and government reports. Re- upgrade itself accordingly. In perhaps five years cently, for example, a few officials of the East what had been a financial backwater, if not a Kalimantan Logistics Board were charged with basket case, had become a fast-moving interna- having sold privately $2.4 million worth of rice. tional market and marketer. Even more incredible (and it is hoped exaggerated!) is the current prosecution of a leading Muslim edu- cator accused of having stolen about $100 million from the Religious Affairs Ministry. Suharto not only tried to encourage international interest in Indonesia's potential wealth, but he also made an effort to stimulate local capital invest- ment. The problem was that most of the local capital had fled under Sukarno for fear of nation- The distribution of wealth in Indonesia today is alization. Suharto encouraged this money to return extremely uneven. With the new economic policies by cancelling back tax liabilities. The Chinese re- of Suharto it may be getting worse. Even if agricul- sponded and have once again become the engineers tural incomes are improving slightly, and more of domestic investment: the Chinese elite has been Muslims are being brought into the economy, the resurrected with substantial income from such disproportionate gains by a few Chinese business- basic industries as food processing and textiles, as men and military and civilian officials raises seri- well as such services to international interests as ous questions about the nation's continued stabil- hotels, airlines, and trade in luxury goods. In doing ity. The disparity between rich and poor has this, the Chinese became partners both with foreign become, consequently, the fundamental political capital and the new military rulers (and their wives) problem of Indonesia today. The Politics of Distribution minerals, and some plantation agriculture. In a substantial reversal of Sukarno's nationalist eco- The key elements of Indonesia presenting polit- nomic policies, under which many of these re- ical problems are the rapid rise of a post-Sukarno sources were state enterprises, badly managed economic elite, the unequal development of the either by government ministries or military com- rural economy, the continued failure to create mands, Suharto returned some production of enough jobs outside agriculture, and the continued natural resources to private ownership (e.g., rubber failure of indigenous, largely Muslim, businessmen plantations) and encouraged exploration and ex- to acquire new economic skills and thus capitalize ploitation under existing production-sharing agree- on opportunities. It is argued that to a certain ments between private firms and government extent such disparities, and the resulting frustra- corporations (e.g., petroleum). Productivity and tions, may have been inevitable given Suharto's government revenues increased dramatically. efforts to stimulate the post-Sukarno economy. Yet income disparities in the urban areas have become To promote industrial development, Suharto's so great that resentment erupted first in minor foreign and domestic investment policies offered rioting in Bandung in August 1973 and then in such standard incentives as tax holidays and off- major riots in Jakarta in January 1974. Subse- shore production, while Indonesia represented, in quently, political restrictions have limited the the eyes of some investors, cheap labor and, for opportunities for similar public expressions of dis- others, markets for expensive machinery. Capital content. was invested largely in textile production and packaging and assembly of light consumer goods, In the aftermath of the political frenzy and eco- and factories began springing up around major nomic chaos of Sukarno's era, the quiet, seemingly urban areas. Much of the local capital was, in fact, well-considered, and downplayed economics and the repatriation of Chinese money which had fled politics of Suharto were deemed heaven sent. To Indonesia during the Sukarno era. achieve recovery, however, Suharto, the military, and his economic planners had to implement The military has played an important role in rigorous and relatively austere economic and polit- facilitating both foreign and local investment. Im- ical policies. The rioting must be considered in the portant military officers (and their wives) seized light of these policies and their impact on Indo- investment opportunities, sometimes openly, nesian society. although it often resulted in public controversy. On other occasions they gave only their names or facili- First, the new government had to balance the tated investment procedures which secured them budget to reduce the soaring inflation of the first directorships or partnerships with little or no equity half of the 1960s. Following a period when budgets in Chinese-owned enterprises. Thus the Chinese had been used to finance unproductive symbols of have worked closely with the military, and also with national unity, expensive military equipment, and a foreign investors, to finance the rehabilitation and sprawling bureaucracy with large numbers of new growth of Indonesian industries. sycophants and vast corruption, a tight budget was needed and desired. To implement it seemed to As a result of these policies the country reduced require the degree of political authority that only a inflation from 600 percent in 1965 to 15 percent Suharto, backed by disciplined military authority, within a few years while achieving a real GNP could provide. The task of harnessing the bureauc- racy to make it an effective instrument of develop- growth of 8 percent by 1973. ment was enormous. In a closely related move, Suharto brought Indo- nesia back into the fold of the International Mone- With the budget under tight wraps, however, tary Fund (IMF), World Bank, and Western eco- money for development had to be borrowed or nomic aid. Whereas Sukarno had largely severed acquired from private sources, foreign or local. To these relationships, Suharto's government collabo- attract foreign capital, natural resources were the rated with the Intergovernmental Group on Indo- first assets offered. Multinational companies re- nesia (consisting of 13 industrialized creditor sponded by investing heavily in petroleum, timber, nations) to renegotiate Sukarno's foreign debt of $2.7 billion. It also received important aid to no time in unproductive political activity. They finance public development programs in food, have become, in the political jargon of Indonesia, family planning, transmigration, and general re- the "floating mass." Obviously fearful of former habilitation of infrastructure. The result has been a times when the communists organized the poorer commitment of substantial funds from govern- farmers, Suharto has neutralized opposition influ- ments which Sukarno had repudiated and ence in villages while enhancing his government's- harassed, substantial progress in infrastructural and therefore Golkar's-influence through village development, some progress in increasing produc- development programs. tion of food, less in reducing population growth, but hardly any in transmigration. Downtown The third, quite subtle, element in Suharto's business Jakarta has had a face lift, suburban in- power has been ability to sustain consensus among dustrial estates have begun to appear, and rural military and civilian leaders-at least up to January dams, irrigation schemes, good roads, and electric 1974. Assuming that coups and countercoups are power are increasing continually. as much a threat to stability as are revolutions, leaders of regional commands, powerful central These three economic achievements-stabiliza- commands, and colonels and generals with popular tion, promotion of investment, and the financing of appeal, have to be kept content and obedient. To public development programs-have occurred encourage their cooperation with civilian planners stability within the context of relative political and administrators requires a sharing of perqui- brought about by Suharto's military government. sites as well as participation and agreement in But in order to carry out the policies from which policy-making councils by all senior military offi- these achievements result, and to secure his own cers. Some contention has surfaced from time to power, Suharto has engaged in both authoritarian time but generally important personages have been rule and subtle politics. kept more or less content while those too far out of line have been moved aside without creating a Authoritarian rule has been and, to a lesser critical level bf dissension. extent, continues to be highlighted by the incar- ceration without trial of former communists and members of communist front organizations who These politics along with economic policies may were captured rather than killed in the 1965-66 have contained and even resolved some of the lega- bloodbath. The government is slowly releasing cies of economic chaos and political frenzy of the those it considers least dangerous, bringing a few to Sukarno era. Overall, economic and political sta- trial, but keeping those still deemed dangerous in bilization is a success. But the problems of mal- distribution of economic benefits and political remote self-sufficient prison communities. power persist and awareness of the inequities seems to be intensifying in certain quarters. The Jakarta Suharto has also reshaped political parties. riots in 1974, for example, were in large measure an While a few radical and other parties have been expression of perceived injustice over the way banned, the rest-christian, Muslim, and foreign and domestic private investment has been grouped into two parties: re- brought high incomes to some Chinese and military ligious and developmental. third, Golkar, is the A officers and their wives, while leaving out the government party and has become Suharto's Power digenous'' businessmen-a key element of the base. It commands the vote of the civil service, middle class. The appearance of discrimination is various social and cultural groups,and the military. confirmed by statistics, for in that year alone, 95 With the last having granted to them one-third of percent of all investment credits went to 66non- the seats in parliament, Golkar does not have to indigenous" businesses, The "indigenous" busi- win too many a parliamentary nesses are owned predominantly by Muslims, who majority. have traditionally lost in the competition with Chinese. More recently many Muslims have also In a more overtly authoritarian move, the felt the keen political competition of Golkar and Suharto government has prohibited all forms of the Suharto government when their most important political organization in villages, insisting that party was banned and others forced to amalga- farmers should work to grow more food and spend mate. Orthodox Muslims, who consider Islam to be Indonesia's religious destiny (approximately 60 factions within the military (including Suharto's percent of Indonesians are Muslims), may have own lieutenants) played important roles. But who seen in their collaboration with the military in the led the riots is less important than the reasons they crushing of the Communist Party in 1965 and 1966 occurred. The original student protest focused on an era of Muslim political ascendancy. This has the influence and control foreign interests-espe- clearly not happened; and Muslims and "indige- cially Japanese-had over Indonesian resources nous" businessmen (many of whom perceive them- and production. The riots were the protests of low selves to be both) have rankled under their exclu- and middle income groups against the economic sion from the new wealth and power. advantages enjoyed by the Chinese and the mili- tary. Urban poor have also sensed injustice, although traditions of "shared poverty" (rather than the Frustrations similar to those provoking the competition with Chinese experienced by the Jakarta riots are not so openly evident among the Muslim middle class) may take some of the edge off poor in rural Java. There are a number of possible their hostility. Such sentiments are hard to describe reasons for this. First, agriculture has been given precisely. There is accumulating evidence, however, highest priority in Indonesian public development that urban employment-especially in small indus- programs since 1966 and much has been accom- tries where investment tends to be capital inten- plished. Rice production has increased nearly 50 sive-is not absorbing the expanding work force. In percent in seven years and a substantial number of textiles, for example, it is thought that the new farmers have clearly gained. mills in West Java have forced some traditional cottage industries out of business, and dis- Second, poor Javanese may feel subdued by a placed more workers than they have created jobs. number of forces. The army is present throughout The passions of such unemployment may have been rural areas and within earshot of any disturbance. responsible for the Bandung anti-Chinese rioting in And, assuming there were grievances, they would 1973. Most of the new textile mills in West Java are be felt by the poorest peasants who tend to be only located in and around Bandung. nominally Muslim, being attuned instead to tradi- tional Javanese animism. They often have clear memories of Muslim and army collaboration in the The Jakarta riots were more serious. There the bloodbath and destruction of the Communist grievances of the indigenous businessmen com- Party, which had been given substantial support by bined with the hardships of the urban poor to give poor farmers in the late 1950s and early 1960s. the two groups a sense of common cause with students protesting Japanese Premier Tanaka's Third, the vast discrepancy of wealth seen in visit to Indonesia. Crowds of poor and youth ran- urban areas is not apparent in rural Java. Most sacked and looted Chinese establishments. Most people are poor while the rest are only barely notably, the rioters destroyed small Chinese shops comfortable. There are no rich to flaunt "vulgar" in the new Senen shopping complex in western affluence. Jakarta, which had been built on old market grounds formerly occupied by small "indigenous" At best, parts of rural Java can be optimistic. At traders. According to one report, these traders had worst, grievances can simmer. If conditions deterio- not been able to afford the rents in the new rate it will not be a result of food shortages per se shopping complex. The rioters also attacked many but in reaction to decreasing employment oppor- shops selling Japanese goods-clearly suggesting in tunity. There are real prospects that commercial the minds of the rioters a link between foreign rice production along current lines will ultimately Japanese and "nonindigenous" Chinese interests. have this impact. Some reports from the recent agro-economic survey show substantial reductions Who rioted is clear: the poor and marginally in labor requirements where the new high yield middle class Jakarta youth, whose grievances varieties are being grown. ' The 30 percent who are against Chinese were strong. Who organized the riots is less clear. Suharto's lieutenants claim 1. See Collier, et al., "Agricultural Technology and Institu- former Masjumi and Socialist Party elements were tional Change in Java." (New York: Agricultural Develop- behind the rioters, while foreign observers claim ment Council, 1975). landless will inevitably suffer if present trends con- Third, the enormous new incomes of the current tinue. political and economic elite need to be held to more modest proportions. While these may have been an Conclusions unavoidable by-product of Suharto's policies for economic stabilization, they are becoming increas- In both rural and urban areas, therefore, crea- ingly intolerable given the obviously widening gap tion of more low-income jobs for persons with little between rich and poor in the cities and the increase education and few skills and more opportunities for in the number of landless and unemployed in the indigenous businessmen are of critical importance. countryside. Substantial changes, particularly in investment policies, may be necessary to bring this about. Effective taxation could remove some of the dis- parity, but that too requires an improvement in the First, as the recent collapse of Pertamina demon- administration of tax collection, which at present is strates, major Indonesian enterprises have ven- no better than any other civil service sectors. The tured too rapidly and far too deeply into high-tech- problem is exacerbated by the fact that much of the nology, capital-intensive projects. The enormous wealth, including high personal incomes, is earned debt of over $6 billion incurred by Pertamina is in through Pertamina or non-Indonesian enterprises the most important sense a direct loss for Indo- and businessmen. Not only are many of the indi- nesia's un- and underemployed, large numbers of viduals thus hard to tax, but there is always the risk whom would have benefited greatly if a similar that increased taxation will reduce investment in- amount had been invested in local level, labor- centives. intensive projects. The rural and urban poor share their poverty Second, and related to the Pertamina tragedy is and will increasingly expect the wealthy elite to the corruption and maladministration. Develop- share their wealth. Similarly, indigenous business- ment financing does not reach enough projects with men likewise expect to acquire their share. Neglect employment benefits, either because the bureauc- of this accumulating and collective sense of injus- racy does not function in implementation, fails to tice will pose a growing threat to the economic and stress such projects in the first place, or, along the political stability of the Suharto government. lines of the East Kalimantan Logistics Board, simply siphons off resources. National confidence is shaken by these experiences. NOTES ON THE DISCUSSION, JANUARY 13,1977

by Brewster Grace

While recognizing the nation's enormous size The second issue, the Green Revolution and and the complexity of its economic, social and general economic growth, gave rise to substantial political problems, the Study Group identified and debate. First, it was argued that the evidence in the discussed four major issues in contemporary Indo- paper regarding the impact of new harvesting and nesia: marketing techniques arising from the adoption of new high yielding varieties of seeds did not ade- quately support the contention that these new tech- 1. Changes in relationships between Java and niques were costing the Indonesian sharecroppers the outer islands of the archipelago; their jobs. In defense of the argument, the author cited the works of William Collier, an agricultural 2. The "Green Revolution" and agricultural economist who has published widely on the issue. growth in the specific context of Java; These articles give substantial data indicating serious labor displacement. Collier's analyses, in 3. The evolution of political trends over the past turn, were criticized by another member for not two decades and their implications for contem- having gone far enough, failing to note that power porary Indonesian politics; and prerogatives in villages give political elites control of much village land. For them not to seize and 4. Indonesia's current foreign debt. control the opportunities of the Green Revolution would mean a loss of their well established eco- Revolt against Jakarta rule by outer island nomic advantages. So even beyond the problem of groups has marked much of Indonesian history jobs and new varieties of rice lies the prospect of since independence. While the specific causes of all disproportionate benefit by village elites. rebellions have had in common the desires of groups on Sumatra, , and others to protect their substantial natural and economic resources The types existing among several key groups over against Jakarta's attempts to tap them to meet the past two decades were considered to be of equal Java's enormous economic welfare needs. The political importance to the effects of the Green Study Group considered whether this was an Revolution. important and recurring theme in the politics of distribution in Indonesia. This led directly to a discussion of the nature of power relationships among several key groups At one time, perhaps less than a decade ago, during the past two decades, and here the group regional inequality might well have been an impor- found itself more in accord. Three basic political tant issue. But the group believed that the Suharto forces were identified: traditional or only nominally government had minimized centrifugal resistance. Muslim Javanese, the military, and organized Loyalties to Jakarta have decidedly increased. In Muslim social and political groups. The first were part, this may have resulted from a substantial the losers to the latter two in the 1965 bloodbath. migration from "outer" to "inner" by some specific Since then the Muslims have been consistently out- groups. Many elite from Sumatra are now in flanked by the military, as argued in the paper. It Jakarta, along with many more poor working as was noted that today, while the military dominates servants in Jakarta homes. Of greater importance, most national and even much regional and local however, is the vastly expanded control the politics, Suharto-the key political power-is has of outer islands through its increasingly isolated from the military. Ali Mutopo, command structures. One member of the group the creator of Golkar and top aide to Suharto, was called this control repressive and argued that this credited with having made himself and his political accounted for much of the apparent decline in re- organization the only basis of Suharto's power. bellion. This removes Suharto from political collaboration with the main social forces in the country: rural international credibility. It was noted that one villagers-as inert as they may be-and Muslims. should not be overly optimistic about rapid This is not only a trend toward authoritarian rule, economic growth because most wealth to be gen- but also portends more political instability. erated within the next few years is already claimed by foreign creditors. This point was contested, One member of the Study Group, who had lived however, by the argument that "If you owe your in Indonesia in the 1950s, observed that Indonesia banker one thousand dollars, you are in his power; had not changed very much, although much had but, if you owe him one million, he is in yours." The "happened." The problems remain essentially the point was well taken; but not to the extent that same: Muslim dissatisfaction, the dual economy, there was complete agreement that Indonesia had and so on. Perhaps the military in the 1950s could the power to indefinitely reschedule and restructure not have been expected to become so powerful. Our its debts. While the international banking commu- view of Indonesia, however, has changed. We know nity was not entirely comfortable with the size of more about the country, its culture and values, and the debt, it was argued that Indonesia was not over this, combined with continued failure to resolve its its head. Rather, there was some optimism that the most basic problems, gives less reason for opti- stiffer terms imposed by Indonesia's creditors and mism. the Ibnu Sutowo-Pertamina debacle were eliciting a greater willingness and ability on the part of the Optimism or the lack of it, in a sense, became a Suharto government to resecure its loans and to focal point for the final discussion on Indonesia's meet repayments.

PARTICIPANTS IN THE STUDY GROUP ON SOUTHEAST ASIA

Dr. Milton Barnett Dr. Richard Franke Department of Sociology Research Fellow, School of Public Cornell University Health, Harvard University (on leave from Montclair State Dr. James R. Basche, Jr. College) Senior Research Associate The Conference Board Dr. Clifford Geertz School of Social Science Mr. Konrad Bekker Institute for Advanced Study The Asia Society Dr. Frank Golay Mr. Robert Bordonaro Southeast Asia Program The Asia Society. SEADAG Cornell University

Mr. J. Brewster Grace Dr. William Bradley AUFS Scholar-in-Residence President, The Hazen Foundation The Asia Society

Mr. Mark E. Buchman Mr. James P. Grant, President Senior Vice President Overseas Development Council Manufacturers Hanover Trust Co. Dr. Robert Gurevich Dr. Ralph W. Cummings, Jr. Assistant Professor of Anthropology Director of Economic Analysis State University College at Brockport and Planning International Agricultural Dr. Dorothy Guyot Development Service Member Malaysia/Singapore Council