There were several important consequences: the forced retirement of many officers from Sumatra and the eastern archipelago, making the officer corps proportionately more Javanese and presumably more loyal to Sukarno ; the firm implantation of central authority in the Outer Islands; and the emergence of Nasution, promoted to lieutenant general, as the most powerful military leader.
But the army's victory in suppressing regional rebellion caused Sukarno dismay. To offset the military's power, Sukarno's ties with the PKI grew closer.
He accused Washington of supplying the rebels with arms and angrily rejected a United States proposal that marines be landed in the Sumatra oil-producing region to protect American lives and property. The United States was providing clandestine aid to the rebels and Allen Pope, an American B pilot, was shot down over Ambon on May 18, , creating an international incident. Deteriorating relations prompted Sukarno to develop closer relations with the Soviet Union and, especially, the People's Republic of China.
In July , Nasution suggested that the best way to achieve Guided Democracy was through reinstatement of the constitution with its strong "middle way," presidential system. Brighton: Institute of Development Studies, Economic Growth and Public Policy. New York: Oxford University Press, Singapore: Oxford University Press, Citation Analysis Google Scholar Scopus. Citation Tools. User Username Password Remember me. Notifications View Subscribe. Article Tools Print this article.
Indexing metadata. How to cite item. Finding References. Email this article Login required. Email the author Login required. Save to Mendeley. Save to Zotero. Hide Show all. Keywords Indonesia Indonesianisasi Indragiri Hulu New Order North Sumatra Orde Baru Southeast Asia Surakarta colonial Indonesia colonialism decolonization foreign investment identity independence fighter local nationalism nasionalisasi nationalization perkebunan political activism privatisasi privatization.
Abstract Guided Democracy implemented a series of institutional reforms meant to coordinate national planning and control the civil service. Government Regulation No. Increased managerial independence from the central government, the bpu s, and the regional governments heralded efforts towards greater de-concentration. For instance, import and export administration was to be devolved from central to regional offices. Mechanisms that worked within free-market economies were to be introduced as part of the effort to increase efficiency and productivity.
That is why the nature of competition is also limited, it is a guided competition! The idea of incentives was not merely to introduce market mechanisms, but to reach overall efficiency. Within a socialist economy, efficiency lay not within a particular company but within the overall economy.
Both production-sharing and joint-venture programmes were introduced as means to allow forms of foreign direct investment within the country. Development financing had become a major problem, only made worse by inflation. Introduced in , it was hoped that it would act as a funnel for foreign investment in the extractive sectors of mining and oil.
Lastly, the ideas of social control, social support, and social participation became essential components of the reform process. If national planning had to be returned to within the central governing bodies of the Bappenas—Muppenas at the company level, the participation of social organizations should be achieved through access at the managerial level.
The creation of the company boards thus allowed for the participation of trade union organizations within the policymaking bodies of companies and was an effort to democratize managerial relations within companies.
The company boards were intended to change the labour—management relationship from one of employment to one of human and social relations, with the aim of increasing the quality of production. The beginning of the Konfrontasi with Malaysia and Singapore shifted the political focus, while austerity measures were not maintained. Popular support for the economic rehabilitation programme remained low. Bunnell has suggested that the reason for this was that the business sector represented only a small percentage of the Indonesian urban population.
The vast majority of Indonesians were farmers, whose lives were less affected by the monetary sector of the urban economy. At the same time, the bureaucracy and the military were protected from inflation through a combination of government subsidies and corruption. The pki immediately launched opposition to the May Regulations. The Youth Front Front Pemuda said that it benefited only the capitalist bureaucrats, compradors, and corruptors.
The communists wanted more government intervention, not less. In fact, they grew because their actions were no longer supervised by the government. In other words, according to the communists, the floating of the currency and the reintroduction of market mechanisms had no effect on eliminating inflation. Budiardjo argued that the only way inflation could be handled was through the structural incorporation of the working class in the economy, which would allow them to participate in the management of companies and the economy.
The international context of the Cold War was well understood by both military-leaning and pki -leaning economists and intellectuals. Aidit warned of the dangers of American neocolonialism through aid and pointed to the case of Brazil.
The shift towards seeking the advice of experts during the late Guided Democracy highlights a period of intellectual feuding between American-trained economists and pki -affiliated economists.
It included intellectuals such as F. Soerjadi, the minister for budgetary affairs. It was all about the application of what they termed a production policy that would work against the monetary stabilization advocated by feui economists. The communists supported two laws introduced in as heralding the ending of imperialism and feudalism in the country: the Regulation on the Agreement of Joint Revenue Sharing Undang-undang Perdjandjian Bagi Hasil, uupbh and the Regulation on Basic Agrarian Principles Undang-undang Peraturan Dasar Pokok Agraria, uupa.
According to the communist interpretation, the uupbh would prohibit foreign direct investment by diverting it to revenue-sharing projects. This was a victory over imperialism, as it limited the role of foreign enterprises.
The continued nationalization of British and American-owned enterprises during the period — was also part of this anti-imperial strategy. The uupa would destroy what was known as the landlord class of the agricultural community through a process of land redistribution. This land-ownership reform formed the anti-feudal strategy. This was part of the reigning Harrod—Domar model, which saw the root of poverty as being a result of the subsistent nature of the economy and the lack of reinvestment in production, that is, an acknowledgement that growth can only occur when the rate of savings is greater than the capital output ratio and the growth of the labour force.
It was an analysis that, according to the communists, lacked a social component and misunderstood the nature of Indonesian rural society. According to them, the reason for the lack of savings lay not in the lack of a propensity to save among the Indonesian farmers and labourers, but in the rent-seeking activities of bureaucratic capitalists, foreign-enterprise owners, and the landlords in the villages. The main criticism against Western-educated economists was that they harboured apolitical ideas.
This signified the triumph of the Indonesian people, because for the first time our people can directly and actively determine government policy on economic matters, a field that has long been considered to be beyond the ken of the people, a field that it was said can only be thought of and discussed by certain experts, whose expertise has failed us in dealing with the economic and monetary issues at hand.
The idea of production policy thus belittles the problems of inflation and the monetary approach. Keynesianism was the target of recrimination for both Sukarno and the communists. Yet, the attacks on Western-educated experts such as Sumitro Djojohadikusumo had a strawman-like quality.
Along with the belief in an agricultural approach to development, it represented ideas that were agreed upon across the board. The struggle was a political one for authority and legitimacy as much as one of basic economic theory. Various projects will be built throughout the regions; some are not yet explicitly detailed, and others will be built to complement other projects. Or should he consider these deviations as an unwarranted but unavoidable aspect of his economy, as part of the social cost of economic development, as a necessary waste?
The current military men have power over a wide area. Although they admit to the importance of regional development, they are often unable to collect the funds and forces needed to start this development. Despite this, because they are the most powerful group at present, their potential to play a role in development leadership is great. Of course, the mental capabilities and understanding, the tools and willpower must be attended to.
At the moment, and as has been the case for the last couple of years, they occupy a dubious position. They are in charge of security but not in direct charge of welfare. But increasingly there has been greater awareness amongst them that regional security cannot be separated from the welfare of the people and that this cannot be separated from economic development.
Thus, lately they have been more responsible for the welfare and wealth of the regions. Security is a complex issue and is not purely a military or police problem. If the problem of security has become such a complex issue then everyone is responsible for general welfare; even during times of military law SOB , it is not purely the responsibility of the military, as it is not purely the responsibility of civilians during peacetime.
It requires a collective sense of responsibility, at least between military and civilian groups on the matters of security, welfare, and economic development. Does that mean that the military and civilian, the green and white shirts should become pioneers of regional development? The concept of such leadership is autocratic and may not be effective in the long run, but such an autocratic approach may be strong enough to create a momentum to kick-start development.
The argument that military autocracy was necessary to regulate the immediate problems of a political economy was one that was openly expressed by economists during the period. Economic planning and military leadership, or at least military participation, had assumed considerable importance within the Guided Democracy state.
It was not certain whether the extent of the contribution from the military to corruption was understood amongst economists. The reports of the Bapekan, for instance, may not have been made available to intellectuals. Importantly, the idea was not purely of military rule, but of a rule shared between the green and white shirts.
Thus, Presidential Decision No. The ideas of civic action and development were thus very much intertwined. Where were the managers in this picture, then? Was there such a deep distrust of the capability of Indonesian management that economists such as Mohammad Sadli put their trust in the military men? Those who have had a formal education are educated to direct their energy and minds to the service of the state and are interested in creating the largest industrial nation on earth.
Thus, those with education as their capital form a very worthwhile corps. The series of institutional reforms that was conducted during the Guided Democracy resulted in several significant developments.
First, the failure of corporatism in national planning, as exemplified by the Depernas, led to a push for the inclusion of experts and managers in the managing of national and regional policies. Second, the Bappenas—Baperdep—Bakopda structure offered the potential for greater centralized control.
The fact that the Bakopda conformed to the Tjatur Tunggal structure meant that the regional governments were finally recreated under the authority of regional planning agencies in which managers — military and civilian — were able to partipate. Instead of decentralization, the New Order state did away with regional democracy and regional government. It instituted a form of national and regional military control with the cooperation of both the Pamong Praja and the managers.
In the early s, Western-educated economists trained their sights on studying and understanding the development of socialist institutions in communist countries. The managed democracy regime assisted Russia by limiting the power of oligarchs in the regions and the center and consolidating support for a state agenda after the s.
Despite its initially progressive nature, managed democracy could not function effectively because it rested predominantly on the popularity of a single leader. Keywords: managed democracy , public perception and support , lack of institutions. Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service.
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