Suharto and the IMF – A Marriage of Convenience

The New Statesman’s Sholto Byrnes is wrong to suggest that all of General Suharto’s crimes “cannot take away from Suharto that he reduced Indonesia’s inflation rate from 650 per cent in 1966 to under 20 per cent within three years”. Suharto’s crimes were indeed horrific – from anti-communist purges to the death of at least 100,000 following the Indonesian invasion of East Timor – and he did succeed in reducing hyper-inflation, but it is historically inaccurate to divorce these two issues and see them as mutually exclusive. Indeed, it was only brutal authoritarianism which allowed Suharto to force through unpopular economic reforms.

Suharto’s predecessor – President Sukarno – attracted the scorn of the US because he focused on wealth redistribution and threw the International Monetary Fund (IMF) and the World Bank out of Indonesia. From the off, Suharto was the CIA’s man in Indonesia. The CIA furnished him with lists of prominent leftists and Suharto used the army to cleanse the country of communists. As Kathy Kadane, former reporter at the Washington Post, noted, this was done with the explicit support of the CIA and the US Embassy received regular reports on their progress. The army’s cruelty was echoed by state-sponsored religious groups which swept the country massacring hundreds of thousands of left-wing sympathisers.

In exchange for supporting Suharto in the liquidation of leftist opposition, the United States expected certain economic favours. Suharto surrounded himself with graduates of the University of Berkeley who supported the liberalisation of the economy. According to the Shock Doctrine:

They passed laws allowing foreign companies to own 100 percent of resources, handed out “tax holidays,” and within two years, Indonesia’s natural wealth – copper, nickel, hardwood, rubber and oil – was being divided up among the largest mining and energy companies in the world.

Suharto’s subservience to the American economic agenda ensured more favourable treatment from international bodies such as the IMF and this allowed for the reduction in inflation – but it was only achieved through the violent suppression of opposition. This model of foreign intervention – combining support for fierce repression, populating sympathetic governments with economic acolytes and using supranational bodies to promote favourable domestic policy – continues to be replicated by America across the globe. Hence, Suharto’s “crimes” were an intrinsic part of reducing hyper-inflation.

Byrnes concedes that it was not Suharto’s human rights abuses which eventually brought his regime down but “his government’s catastrophic response to the Asian financial crisis of 1997”. However this conclusion is again misleading. A more satisfying explanation is that the alliance between Suharto and the IMF fragmented. From being the first country in the region to open its doors to unregulated foreign capital, Suharto became increasingly obstinate and unwilling to comply with IMF controls. One crucial trigger was the IMF’s insistence that Suharto raise the price of gasoline – he did and the Indonesians rose up and pushed him from power. The IMF’s marriage of convenience with Suharto had been terminated in a messy divorce.

Byrnes’ article urges us to use Asia as a model for what might happen in the Arab world following the fall of Gaddafi and Mubarak. He is right to seek historical parallels with the fall of autocratic regimes in Asia, but it is wrong to equate these with principles of freedom and liberation whilst ignoring the role of supranational bodies – such as the IMF and World Bank in Asia and NATO in Libya – in enforcing their agenda. What we can learn from the Indonesian experience is that these international bodies will support governments – either democratic or autocratic – when they acquiesce to selling natural resources – such as oil reserves or mineral wealth – to foreign corporations.

Let’s not kid ourselves that the West is concerned with liberation and national sovereignty. Our history is riddled with support for despots, dictators and murderers. Gaddafi and Mubarak are two prime examples of this. The British left-wing press shouldn’t be espousing what is, at best, historically inaccurate, or, at worst, cynical historical revisionism.