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Will the Dollar Survive the Rise of the Yuan and the End of the Petrodollar?
View Preview. Learn more Check out. Abstract In an effort to prevent further widespread economic collapse, the U. Many fear the result will be runaway inflation, with the cost of goods and services soaring out of control If this happens, how can companies manage cash to compensate? Related Information.
Close Figure Viewer. The lack of a state system for social support means that official statistics greatly underestimate the problem, but even these calculate unemployment and underemployment to have doubled in recent months to 8. Most industrial workers worked for low wages in poor conditions, but in most cases city jobs represented an improved standard of living over rural semi-employment, especially with the steady increase in wage levels over recent years. Today, however, job losses, falling wages and the spiralling cost of essential commodities have thrown many urban workers back into a struggle for basic existence.
For the millions of people drawn into employment in the modern sector of the economy in recent years, the crisis has cut short the promise of being freed from the poverty which had ruled their families' lives for generations. In rural areas, drought, rice shortages and price increases are also bringing a return to serious and widespread poverty.
World Bank estimates suggest that the number of those below the poverty line will increase from 23 million to 40 million.
For the middle class and salaried employees, the crisis has meant a sudden end to the relative affluence which they had begun to accept as normal. Many small business people have been bankrupted or confronted with a drastic decline in business and salaried employees have either lost employment or have had their often fixed salaries eroded by inflation. These groups were also the greatest consumers of imported goods and services and of public goods such as transport, electricity, education and health services, all of which have become much more expensive in the wake of the crisis.
The effects of the economic crisis in Indonesia have clearly been felt differently by different sections of Indonesian society. But the common impact of the crisis has been the shattering of what appeared to most Indonesians to be the promise of improving prosperity. Notwithstanding a number of setbacks in the s and s, stemming mainly from problems in the important oil industry, Indonesia experienced sustained economic growth under the New Order, with an average of about 7 per cent annual growth in the last decade.
This growth created unprecedented opportunities for large numbers of Indonesians, with the prospect of continued improvement. The economic crisis, with its inflation, food shortages, widespread bankruptcies and loss of jobs, has threatened to end the recently-acquired affluence of some Indonesians or to bring a return to poverty for many more. The New Order regime based its legitimacy on a capacity to bring sustained improvements in the standard of living of the mass of Indonesians and to meet the aspirations of an expanding middle class and working class.
The apparent end to this success will have grave implications for the political stability of the entire Indonesian state. But even before the onset of the economic crisis, serious pressures were beginning to build up within Indonesia about the lack of progress towards political liberalisation. Many Indonesians were beginning to argue for the development of institutions which might overcome the domination of political life by a small elite around the President and the Army and allow greater mass political participation.
From its very foundation in , the New Order has depended for its stability on the leadership of President Soeharto. Soeharto's tenacious grip on the presidency has come to symbolise the personalised nature of New Order politics and the difficulty the regime appears to have in adapting to the changing face of Indonesian society. Paradoxically, the pressure for change has been created by the very success of the New Order in bringing about three decades of economic growth.
This development has transformed Indonesia from a country with a tiny social elite and a mass of impoverished peasants to a rapidly urbanising society with new social groups who are gradually becoming less willing to trade political rights for personal prosperity. There is growing resentment about corruption in public life and the domination of economic opportunities by a select few.
This is particularly directed against members of President Soeharto's family, most of whom have gained tremendous private wealth from their family connections. With the elevation of the President's daughter to the Cabinet, they appear to be provided with privileged access to political power as well.
There is also a feeling of exasperation that not only does the ageing President Soeharto show no sign of retiring from his post, but he is also unwilling to even discuss the issue of his successor or how a transition of power might take place.
Despite the clear current of subterranean discontent, however, there is little indication of moves within elite elements of Indonesian society to remove President Soeharto or to press strongly for reform. The beginnings of unrest in the streets and universities of major cities and regional towns have yet to gain sufficient momentum to be anything resembling a significant challenge to the Government. Given the crucial role of the Armed Forces of Indonesia ABRI as the bulwark of the New Order, much recent commentary has focused on the possible actions of ABRI leaders as agents for political change, either to persuade Soeharto to step down or to oust him from power.
It is unlikely, however, that ABRI officers would move against Soeharto unless the economic or political situation were to deteriorate drastically. While most observers consider that most of the ABRI leadership think it is time for Soeharto to step down, they are reluctant to express such a view publicly because of their immense respect for Soeharto's achievements as President and because of their close personal relations with him. Members of the current generation of ABRI leaders were trained and rose to prominence under Soeharto and are personally indebted to his patronage.
The recently appointed Chief of the Armed Forces, General Wiranto, was a personal adjutant to President Soeharto and rose from the rank of colonel to four-star general in four years. Soeharto's son-in-law, Prabowo, was appointed commander of the elite Strategic Reserve. Although there have been periods of disagreement between Soeharto and the Army, notably during the late s and early s, Soeharto has since used his power to appoint ABRI officers to ensure that his own supporters hold the key positions.
This prerogative was exercised again in February when he reshuffled the ABRI leadership to strengthen his closest associates. Soeharto has also skilfully manipulated rivalries amongst the top leaders, creating such factional enmities that it would appear to be difficult for many leading ABRI officers to cooperate with each other in any move against the President.
Moreover, there is little sign that ABRI leaders have alternatives to the policies being pursued by the President. Most would also be aware that any move by the Army against Soeharto would only weaken international confidence in the Indonesian economy still further. There was widespread concern amongst observers in the international financial community when one of Soeharto's closest confidantes, B. Habibie, was made Vice-President. As one of the leading figures associated with the economic nationalist faction of Soeharto's advisers, known for their sponsorship of prestige high-technology projects of questionable economic benefit, Habibie's appointment was interpreted as a sign of Soeharto's unwillingness to reform and regularise Indonesia's economy.
But there was also consternation about the appointment within the ranks of ABRI because, according to the Constitution, Habibie would take over as President in the event of Soeharto's death. Habibie's appointment was symptomatic of the relative decline of ABRI influence compared with the situation in when the Army, against Soeharto's wishes, was able to have its candidate for Vice-President, General Tri Sutrisno, appointed to the office.
Habibie is unpopular amongst the ABRI leadership because he is a rival from a technocratic rather than a military background and because of his sponsorship of the Association of Muslim Intellectuals ICMI which, as a mass organisation, gives Habibie a potential political base outside of Army control. Habibie has also earnt the resentment of many ABRI officers because his organisations have moved into traditional areas of ABRI influence such as defence equipment procurement. Habibie was the main supporter of the purchase of a number of vessels of the former East German navy which most defence professionals considered were inappropriate for Indonesia's strategic requirements.
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ABRI's loyalty to Soeharto has ensured that no public criticism of Habibie's appointment has been aired, but it is an open question whether the ABRI leadership would countenance Habibie's assumption of the office of President should Soeharto die or be forced to retire due to ill-health. The possibility that a key institution such as the Army might not accept the person who, in constitutional terms at least, seems most likely to succeed Soeharto underscores the seriousness of the uncertainty surrounding the transition from Soeharto's rule.
The New Order was born out of the bloody suppression of mass politics, with the killing of an estimated people, mostly supporters of the then-powerful Communist Party. The dominance of official politics has been challenged on a few occasions, during student riots in , Muslim riots in Jakarta in , workers' riots in Sumatra in and by the clashes which followed the takeover of the headquarters of the Indonesian Democratic Party PDI in July , but these never amounted to a real challenge to the status quo.
Similarly, regional secessionist movements in East Timor, Aceh and Irian Jaya have been largely contained. There have been periods during which the Government appeared to be loosening political control, particularly during the period of 'openness' in the early s, but these have always been followed by a renewed crackdown on free public expression and independent political activity. The closure of the newsmagazine, Tempo , and the ousting of Megawati Sukarnoputri from the leadership of the PDI one of the three officially-sanctioned parties in shattered any illusions that President Soeharto was willing to allow movement towards democratisation.
A leading dissident academic, Ikrar Musabhakti, was recently quoted as saying:. Our openness is like a rubber ring. It can be opened quite wide sometimes, but the Government can also close it very quickly if it becomes dangerous. The current economic crisis and its attendant social effects have, however, raised the possibility that many ordinary Indonesian people may join in spontaneous or organised movements of protest which turn out to have a major impact on the course of Indonesian politics.
There have been riots in a number of regional towns in Indonesia, particularly in the period following the major price increases of January Many of these riots were directed against ethnic Chinese-owned businesses. Ethnic Chinese make up less than 3 per cent of Indonesia's population, but are said to control 70 per cent of private business activity. There have also been a number of apparently middle class protests in cities such as Jakarta, but these have also been easily contained by the security apparatus. It could be argued that the most important development has been the rise of student demonstrations calling for democratisation and the end of President Soeharto's rule.
To date, however, riot police have prevented the students from taking extending their movement outside the campuses or from joining together with protests organised by middle class or labour organisations. Nevertheless, the situation on many campuses remains volatile and recent reports of the disappearance of students after being beaten and arrested by police can only serve to intensify feelings. An increase in reports of human rights abuses will also focus international criticism on the Indonesian Government.
There may be limits to the extent to which the security forces are able or willing to maintain control over popular protest, especially if the economic situation continues to deteriorate. Urbanisation and other changes in Indonesian society have meant that there are now many more people who could be drawn into a mass movement than might have been the case even a decade ago.
Recent years have seen the growth of a large number of non-government organisations NGOs committed to social and political change and the emergence of independent labour unions and farmers' organisations. Many middle class people have also been drawn into mass Islamic cultural organisations such as Nahdlatul Ulama NU and Muhammadhiya. Megawati Sukarnoputri daughter of the famed leader of the Indonesian independence movement, Sukarno has, since her ouster from the PDI, arisen as something of a symbol of opposition to what many see as a repressive system.
Some analysts have discussed the possibility of the emergence of some kind of 'people's power' movement in Indonesia, along the lines of the movement responsible for the downfall of President Marcos in the Philippines in The situation also has parallels with the circumstances prevailing before the overthrow of the Shah of Iran in , in that a development-oriented, economically successful regime created an urbanised, increasingly politicised society which lost patience with its government's capacity to guarantee prosperity or create space for political dissent.