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Creating markets: The politics of economic liberalism in Indonesia since the mid-1980s

Rosser, Andrew (1999) Creating markets: The politics of economic liberalism in Indonesia since the mid-1980s. PhD thesis, Murdoch University.

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Abstract

The purpose of this dissertation is to examine the dynamics that have shaped the process of economic liberalisation in Indonesia since the mid-1980s. In contrast to scholars working within the rational choice tradition, I argue that economic liberalisation needs to be understood, not in terms of the victory of economic rationality over political and social interests, but rather the way in which political and social interests shape processes of economic reform in both a positive and negative sense. More specifically, I argue that it needs to be understood in terms of the extent to which economic crises shift the balance of power and influence within society away from coalitions opposed to reform and towards those in favour of reform. In the Indonesian context, I argue that the main coalitions that need to be examined in this respect are the politico-bureaucrats and the conglomerates who have generally opposed reform and mobile capitalists who have generally supported reform.

The substantive chapters of the thesis use this perspective to explain the pattern of economic liberalisation in Indonesia since the mid-1980s. It is argued that economic liberalisation between the mid-1980s and mid-1997 was partial in nature because, although the mid-1980s economic crisis substantially enhanced the structural leverage of mobile capitalists and weakened the position of the politico-bureaucrats and the conglomerates, it did not threaten the latter’s political dominance. Within this context, whilst the Indonesian government forced to promote economic liberalisation, it did so only in those areas where the politico-bureaucrats and the conglomerates did not have major interests at stake or where they would actually benefit from liberalisation. By contrast, economic liberalisation since the collapse of the rupiah in 1997-1998 has been much more extensive because this time economic crisis has opened up opportunities for opposition elements to challenge the political dominance of the politico-bureaucrats and the conglomerates. At the same time, however, economic liberalisation has not been total because, although the politico-bureaucrats and the conglomerates have been severely weakened by the rupiah crisis, they have not been entirely destroyed. Furthermore, although mobile capitalists have now achieved a position of unprecedented power, they have been unable to seize direct control of the state apparatus.

In this context, I suggest that there is nothing inevitable about a transition to a fully-fledged liberal market order in Indonesia. Without a strong pro-reform coalition in direct control of the state apparatus, the country may head not in the direction of liberal markets, but rather towards one of three alternative outcomes: chaos, autarky, or Thai-style “money politics”.

Item Type: Thesis (PhD)
Murdoch Affiliation: Division of Social Sciences, Humanities and Education
Notes: Note to the author: If you would like to make your thesis openly available on Murdoch University Library's Research Repository, please contact: repository@murdoch.edu.au. Thank you.
Supervisor(s): Robison, Richard
URI: http://researchrepository.murdoch.edu.au/id/eprint/50874
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