The death of Mohammad Sadli on 8 January is a sign of the fading into history of the technocrat economists – the so-called Berkeley Mafia - who shaped the macro-economic framework of Indonesia from the early days of the Suharto regime. Sadli was one of the original members of that group. He held key official positions at critical periods, including Chief of the Investment Co-ordinating Board and Minister of Mining and Industry and was active in the private sector, serving as the General Secretary of the Indonesian Chamber of Commerce (Kadin) from 1983 to 1986. His prominence in international policy circles was reflected in membership of several committees of the Asian Development Bank, the World Bank and the UN.
In the big picture, however, Sadli’s contribution will be linked with the larger impact of the technocrats upon Indonesian economic and political history. Together with a small group of foreign-educated economists including, among others, Wijoyo Nitisastro, Emil Salim, Ali Wardhana and Johannes Sumarlin, Sadli became a founding member of a tradition of professional economists wielding critical influence over macro-economic policy and banking. That tradition continues to the present day.
In many ways, Suharto’s willingness to hand over considerable authority in key economic ministries to technocratic ministers in the mid-1960s was a daring departure from existing practice in the region and preceded the relationship between Pinochet and his ‘Los Chicago Boys’ in Chile by several years. Although he was to become one of the great kleptocrats of contemporary history, Suharto was clear about the potential threats to his rule posed by social unrest and prolonged economic distress. He was willing to hand over monetary and fiscal policy to the technocrats as the price for dealing with the endemic inflation and galloping public debt inherited from the late Sukarno years. He also realised that economic rehabilitation meant that foreign investors had to be drawn back into Indonesia as the experiment with central planning and economic nationalism had proven so incapable of generating economic growth. The rise of the technocrats was intended to address these issues.
For their part, the technocrats used their authority over the macro-economic arena to enable a prolonged period of economic stability based upon the management of public debt and the control of inflation. A balanced budget law was introduced and the door slowly opened to foreign investment. They were important intermediaries in negotiating vital loans and aid packages with the World Bank and other international financial and development organisations. Western governments and the World Bank were particularly well-disposed to Indonesia, not only because it was a new ally in the Cold War at a difficult time for the US. At the level of personal contact, the technocrats were also people who talked the same language and held the same values on a range of issues as their Western counterparts.
Nevertheless, it would be wrong to regard Sadli or the other technocrats as narrow market fundamentalists, at least in the 1970s and 1980s. They were not inherently opposed to maintaining state enterprises for specific purposes. Nor were they against some industrial policies aimed at encouraging new economic enterprises in Indonesia, particularly in the upstream sector. In some cases they reacted critically to World Bank reports on the Indonesian economy.
However, we began to see different types of technocrats in the 1980s. One group, including the old core of Wijoyo, Sadli and others, became increasingly influenced by neo-liberal ideas and market values. Others, with support from different power bases, pushed various nationalist approaches, including those that gravitated around Habibie and his plans for a high technology path to development.
Suharto’s ‘Berkeley Mafia’ preceded Pinochet and his ‘Los Chicago Boys’ in Chile by several years
But the defining aspect of the technocrats was increasingly their relationship with the system of cronyism that pervaded the Suharto regime. It is true that Suharto was willing to back the technocrats where the macro-economy collided with vested interests. This was the case in the so-called Sumarlin shocks of the late 1980s where efforts by Sumarlin to keep a lid on a rapidly expanding money supply and an overheating economy involved a credit squeeze that was extremely costly to some of the biggest and best-connected conglomerates.
However, the technocrats were never able to contain the vast system of monopolies and privileges, selective tariff protection and the massive flows of foreign and state bank credit into private hands for projects of doubtful commercial viability. Perhaps most galling of all, some of the major victories of the technocrats that came with the reforms of the 1980s, including the deregulation of the financial and banking sector and the privatisation of many former public monopolies, were actually hijacked by new oligarchies to sustain new centres of private power based on political support and intervention in the market. Such was the pervasive grip of these groups that former sanctuaries of technocrat power - the Finance Ministry and Bank Indonesia - were heavily implicated in activities that precipitated and worsened the debacle in Indonesia following the 1997 economic crisis.
In any case, by late 1980s, the influence and cohesion of the technocrats had basically been severely diluted and most of the original core had retired, at least from high office. By the late Suharto era and in the early governments of the post-Suharto period, the key economic ministries were occupied by a more varied and eclectic range of figures reflecting the proliferating centres of political and intellectual influence that were emerging.
Nevertheless, new technocrats in the mould of the old core continue to occupy important economic ministries in the Susilo Bambang Yudoyono government. Once again, Indonesia has regained a respectable reputation for fiscal and monetary management after clawing its way back from the abyss of the crisis. The question is whether we are seeing the same model repeat itself. In the present case it is not a question of whether the technocrats can expand their influence and authority beyond the macro-economic arena into the heart of a powerful authoritarian state but whether they are able to extend their influence where political and economic power is dispersed, fragmented and seemingly unconstrained. ii
Richard Robison (R.Robison@murdoch.edu.au) is Emeritus Professor at Murdoch University, Western Australia. His books include Reorganising Power in Indonesia: The Politics of Oligarchy in an Age of Markets (co-authored with Vedi R Hadiz) and The Neoliberal Revolution: Forging the Market State (edited, 2006).