silently shifted abroad to safer shores gave them an insurance against crisis, social unrest, and regime change. They had achieved a certain degree of autonomy, as their fate was neither de-
termined by, nor linked with the political elites. In the early post-crisis years, Hadiz 2001a: 131 suggested that ‘it is possible that such in-
ternationalised conglomerates have survived the recent Asian crisis’. By now, almost one decade after the crisis, it can be assessed that they indeed did – in contrast to the politico-
bureaucratic business groups that obviously failed to grow beyond the status of mere rentiers dependent on political protection. The power of Chinese big business apparently was more
substantial and structurally anchored, even though the restrictions during the New Order were comprehensive, but not absolute. Although they were necessary for the functioning of the
politico–business oligarchy, before the crisis the capitalists already managed to limit their limitations effectively, thus providing successfully for the post-Soeharto era. Eventually, this
was the ultimate reason that the crisis became the catalyst for a regime change from bureau- cratic to plutocratic capitalism, with capital claiming a position that better suited its actual
power.
3.3 The limited power of capital
The New Order was a sophisticated system based on an authoritarian, centralised, and preda- tory state apparatus that effectively secured the dominance of the state elite for more than
three decades. A pervasive ideology and the comprehensive control of executive, legislative, and judiciary powers in tandem with enormous economic success shielded the dominant poli-
tico-bureaucrats from any threats to their ascendant position. There were almost no sources of effective challenge to the Soeharto dictatorship. Most decisive was the co-optation of Chinese
capitalists through the predatory networks and their marginalisation with the help of ethnic policies, turning them into willing helpers and prospering junior partners. The compliant class
of restricted capitalists gave the politico-bureaucrats the much needed financial base to collat- eralise their rule and prevent the rise of politically more threatening indigenous businessmen.
In this chapter, I pointed out where this system of dominance had its historically rooted de- terminants. Already before 1600 the indigenous rulers established relations with Chinese
traders that bore patterns to be bequeathed for the centuries to come. During Dutch rule Chi- nese businessmen became indispensable to the colonial economy and especially to the power-
holders, who soon realised the crucial role of non-indigenous entrepreneurs for their own au- thority and economic endeavours. By the end of colonialism, Chinese capitalists became so
important that even explicitly anti-Chinese nationalist policies of the independent Indonesian republic could not – and did not intend to – do them any serious harm. Chinese big businesses
maintained their economic power since colonial times; a circumstance economic historian Thee Kian Wie interview 19 April 2004 called ‘the tragedy of Indonesia’ because of the
fateful repercussions of anti-Sinicism culminating in the May 1998 riots. The New Order regime purposefully took over the precarious Chinese position in economy
and society and further amplified the contradictions. This can be gleaned through four main trajectories: 1 The ruling politico-bureaucrats marginalised the ethnic group of Sino-
Indonesians and recruited the major capitalists out of it, thereby linking capital to an outsider group that was thus turned into a pariah business class. 2 The Chinese capitalists were co-
opted in patronage networks with the political powers, which laid the foundations for the rise of Chinese capital. 3 This symbiosis was consolidated during the 1970s, a time of immense
revenues for the state due to the oil boom. The politico-bureaucrats secured their dominance in a bureaucratic oligarchy and with an authoritarian, centralised, and protectionist system
that facilitated the emergence of the political powerholders as indigenous capitalists. 4 From the 1980s onwards, the politico–business oligarchy managed to exercise and expand class
power through a rapacious form of oligarchic capitalism, effectuating unlimited capital accu- mulation of both political and economic elites at home and abroad. At the same time, how-
ever, these successes resulted in increasing tensions and hardly concealable contradictions.
This historical overview of Chinese big business and the state before 1998 therefore re- veals the following power relations: In Indonesia, the bourgeoisie was predominantly Chinese
and relatively weak until the late 1960s. Political power was first in the hands of colonial and later ‘indigenous’ bureaucrats who managed to tame the capitalists and prevent their access to
direct executive power. Although the state elite succeeded in transforming itself into an in- digenous capital class in the latter half of the New Order regime, the politico–business ac-
commodation became increasingly unhinged in favour of Chinese big businesses through their impressive success at capital accumulation from the 1970s – paradoxically facilitated
and guaranteed by the state. The growing economic power of the Chinese capitalists thereby intensified the need to counterbalance Chinese economic strength through instigating popular
anti-Sinicism and implementing discriminatory policies. This indicated that a slow transfor- mation had taken place in Indonesia, in which the hegemony of the politico-bureaucrats stead-
ily lost its material foundations, although, as long as the New Order regime existed, the Chi- nese capitalists were not willing – and had no need – to apply their structural veto power. In
the final analysis, however, they succeeded in entrenching themselves as a ruling class-in- hibernation that could do very well with patronage, but would also survive without.
Through the crisis, as will be shown, parts of the state apparatus – before under absolute control of the administrative rulers – unravelled. Chinese conglomerates, formerly integrated
in a flourishing regime of bureaucratic capitalism and an integral part of the politico–business oligarchy, were not yet sure if they could sustain themselves without protection. The follow-
ing chapters provide some strong indications that they can. Indeed, they were very well equipped to thrive in a post-authoritarian regime in many ways, as the reforms offered a more
congruous setting for an emerging plutocracy in contemporary Indonesia in which the Chi- nese bourgeoisie was able to steadily extend its structural veto power to a more unrestricted
rule.
4 CAPITAL IN CRISIS:
THE CONGLOMERATES AND THE END OF THE NEW ORDER
The New Order accommodation between the state elite and the Chinese capitalists ended abruptly when the economic crisis hit Asia in 1997. Many members of the oligarchy were se-
riously struck by the unexpected dishevelling of the Soeharto regime. The big conglomerates,
as the financial backbone of the system, were especially affected. Threatened with bank- ruptcy, they were thought to be unable to survive without centralised KKN and the conducive
environment of a corrupt economy and authoritarian state. The aim of this chapter is to exam- ine how these times of economic and political crises affected the conglomerates and to evalu-
ate their impact. To what extent did the state-centred patronage networks disintegrate? Could the reforms help constitute a new system that would finally pave the way for an eventual dis-
solution of the oligarchy’s cling to power? Before I discuss in Chapter 5 how the conglomer- ates reacted to an unknown terrain of democracy, decentralisation, and deregulation
30
, it is necessary to analyse the unravelling of the New Order in some detail.
I will show that the crisis had indeed been a significant disruption that resulted in a break- down of the conglomerates’ collusive arrangements. They were affected considerably, many
of them so much that a recovery seemed to be unlikely. The reforms the crisis triggered were powerful enough to destabilise and temporarily paralyse the New Order oligarchy. This chap-
ter seeks to outline the resulting changes and their consequences for the conglomerates.
30
In this chapter, I use the terms ‘democracy’, ‘decentralisation’, and ‘deregulation’ merely in relation and contrast to the New Order regime, being aware that in most characteristics the post-Soeharto Indo-
nesian state remains only formally democratic, decentralised, and deregulated.
It is important to bear in mind the manifest limitations to historical change, which Marx 1960: 111 referred to in his ‘18
th
Brumaire’.
31
The ability of social actors to refashion an en- trenched social order is encumbered by the historical and structural circumstances they im-
mediately encounter. Here and in subsequent chapters, I will show that so-called ‘democratic transitions’ are by no means tantamount to transformations automatically leading to an ideal-
ised world of free markets and good governance, as expected by the IMF, the World Bank, and others in the neo-liberal camp e.g. Sen 1999. I suggest that reformasi in Indonesia nei-
ther resulted in the end of the conglomerates, nor has it been the starting point for a new and significantly different system of power relations, as the changes failed to alter the underlying
structures of power see Chapter 1.1. Instead, a regime was swept away and replaced by an- other more democratic, decentralised, and economically liberalised one, while the old power
elites managed to survive and re-establish themselves in the new post-authoritarian environ- ment.
Therefore, it is misleading to consider this transitory period as a kairos, a potential turning point where everything was possible. However, even though the modifications to the regime
were not substantial enough to entirely disempower the New Order forces, the changes in the years 19971998 were constitutive for the post-Soeharto time and relevant for the future
stance of capital in Indonesia. They thus deserve detailed elaboration.
31
‘Men make their own history, but they do not make it just as they please, not under circumstances se- lected by themselves, but under directly prevailing, given and historically transmitted circumstances’
Marx 1960: 111. Original published 1852: ‘Die Menschen machen ihre eigene Geschichte, aber sie machen sie nicht
aus freien Stücken, nicht unter selbstgewählten, sondern unter unmittelbar vorgefundenen, gegebenen und überlieferten Umständen.’
4.1 The crisis in context
